UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): September 19, 2014

 

Bone Biologics, Corp.

(Exact name of registrant as specified in its charter)

 

Delaware   000-53078   42-1743430
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)

 

175 May Street, Suite 400, Edison, NJ   08837
(Address of principal executive offices)   (Zip Code)

 

(732) 661-2224

(Registrant’s telephone number, including area code)

 

AFH Acquisition X, Inc.

269 S. Beverly Drive, Suite 1600

Beverly Hills, CA 90212

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

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

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

 

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

 

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

 

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

 

 

  

 
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Current Report contains forward-looking statements. These statements are based on the Company’s (as hereinafter defined) current beliefs, expectations and assumptions about future events, conditions and results and on information currently available to them. All statements, other than statements of historical fact, included herein regarding the Company’s strategy, future operations, financial position, future revenues, projected costs, plans, prospects and objectives are forward-looking statements. Words such as “expect,” “may,” “anticipate,” “intend,” “would,” “plan,” “believe,” “estimate,” “should,” and similar words and expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Forward-looking statements in the Current Report include express or implied statements concerning the Company’s future revenues, expenditures, capital or other funding requirements, the adequacy of the Company’s current cash and working capital to fund present and planned operations and financing needs, expansion of and demand for product offerings, and the growth of the Company’s business and operations through acquisitions or otherwise, as well as future economic and other conditions both generally and in the Company’s specific geographic and product markets. These statements are based on currently available operating, financial and competitive information and are subject to various risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements due to a number of factors including, but not limited to, those set forth below in the section entitled “Risk Factors and Special Considerations” in this Current Report. Given those risks, uncertainties and other factors, many of which are beyond the Company’s control, you should not place undue reliance on these forward-looking statements.

 

Before purchasing the Shares, you should carefully read and consider the risks described under the section entitled “Risk Factors and Special Considerations.” You should be prepared to accept any and all of the risks associated with purchasing the securities, including a loss of all of your investment.

 

The forward-looking statements relate only to events as of the date on which the statements are made. Neither the Company nor Bone (as hereinafter defined) undertakes any obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future changes make it clear that any projected results or events expressed or implied therein will not be realized. You are advised, however, to consult any further disclosures the Company makes in future public filings, statements and press releases.

 

i
 

 

On September 19, 2014, AFH Acquisition X, Inc. (the “ Company ”) and its wholly-owned subsidiary, Bone Biologics Acquisition Corp., a Delaware corporation (“ Merger Sub ”), entered into an Agreement and Plan of Merger, dated September 19, 2014 (the “ Merger Agreement ”), by and among (i) the Company, (ii) Bone Biologics, Inc. (“ Bone ” or “ Bone Biologics ”), and (iii) Merger Sub. Pursuant to the terms of the Merger Agreement, Bone merged with Merger Sub on September 19, 2014, with Bone as the surviving entity, in exchange for the issuance of 19,897,587 shares of the Company’s common stock, par value $0.001 per share (“ Common Stock ”) (including 2,151,926 shares of Common Stock issuable upon the exercise of outstanding warrants and 5,648,658 shares issuable upon the conversion of debt) to the stockholders of Bone as set forth in the Merger Agreement (the “ Merger ”). After the Merger, the Company ceased to be a shell company, as defined in the rules of the SEC, and the Company officially changed its name to “Bone Biologics, Corp.” The 5,000,000 outstanding shares of Common Stock of the Company prior to the Merger were consolidated into 3,853,600 shares of Common Stock and the remaining shares were cancelled.

 

As used in this Current Report, the terms the “ we ,” “ us ,” and “ our ” refer to the Company, after giving effect to the Merger, unless otherwise stated or the context clearly indicates otherwise. The term “ AFH Acquisition X ” refers to the Company, as it was named “AFH Acquisition X, Inc.” before giving effect to the Merger.

 

This Current Report contains summaries of the material terms of various agreements executed in connection with the transactions described herein. The summaries of these agreements are subject to, and are qualified in their entirety by, reference to these agreements, all of which are incorporated herein by reference.

 

This Current Report is being filed in connection with a series of transactions consummated by the Company and certain related events and actions taken by the Company.

 

This Current Report responds to the following items on Form 8-K:

 

Item 1.01 Entry into a Material Definitive Agreement
   
Item 2.01 Completion of Acquisition or Disposition of Assets
   
Item 3.02 Unregistered Sales of Equity Securities
   
Item 5.01 Changes in Control of Registrant
   
Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers
   
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
   
Item 5.06 Change in Shell Company Status
   
Item 9.01 Financial Statements and Exhibits

 

 

ii
 

 

TABLE OF CONTENTS

 

Item 1.01 Entry into a Material Definitive Agreement   1
Item 2.01 Completion of Acquisition or Disposition of Assets   1
  THE MERGER AND RELATED TRANSACTIONS   1
  DESCRIPTION OF BUSINESS   8
  RISK FACTORS AND SPECIAL CONSIDERATIONS   18
  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   33
  DESCRIPTION OF PROPERTY   39
  SECURITY OWNERSHIP OF CERTAIN STOCKHOLDERS AND MANAGEMENT   40
  DIRECTORS AND EXECUTIVE OFFICERS   43
  EXECUTIVE COMPENSATION   48
  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS   53
  DESCRIPTION OF CAPITAL STOCK   54
  LIMITATIONS ON TRANSFER OF SHARES   56
  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS   57
  LEGAL PROCEEDINGS   58
  RECENT SALES OF UNREGISTERED SECURITIES   59
  INDEMNIFICATION OF OFFICERS AND DIRECTORS   61
  PART F/S   62
  INDEX TO EXHIBITS   63
Item 3.02 Unregistered Sales of Equity Securities   64
Item 5.01 Changes in Control of the Registrant   64
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers   64
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year   64
Item 5.06 Change in Shell Company Status   64
Item 9.01 Financial Statements and Exhibits   64
DESCRIPTION OF EXHIBITS   65

 

iii
 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

The Merger Agreement

 

On September 19, 2014, we entered into the Merger Agreement, and on September 19, 2014 we completed the Merger. For a description of the Merger and the material agreements entered into in connection with the Merger, please see the disclosures set forth in Item 2.01 to this Current Report, which disclosures are incorporated into this item by reference.

 

Indemnification Agreements

 

Effective September 19, 2014, our Board of Directors approved a form of indemnification agreement (the “ Indemnification Agreement ”) to be entered into between us and our current directors and certain executive officers. The Indemnification Agreement requires that we, under the circumstances and to the extent provided for therein, indemnify such persons to the fullest extent permitted by applicable law against certain expenses and other amounts incurred by any such person as a result of such person being made a party to certain actions, suits and proceedings by reason of the fact that such person is or was a director, officer, employee or agent of the Company, any entity that was a predecessor corporation of the Company or any of the Company’s affiliates. The rights of each person who is a party to an Indemnification Agreement are in addition to any other rights such person may have under applicable law, our Articles of Incorporation, our Bylaws, any other agreement, a vote of our stockholders, a resolution adopted by our Board of Directors or otherwise. Immediately following the closing of the Merger, we entered into indemnification agreements in the form of the Indemnification Agreement with each of our newly appointed executive officers and directors. The foregoing is only a brief description of the Indemnification Agreement, does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the form of Indemnification Agreement filed as Exhibit 10.17 to this Current Report on Form 8-K and incorporated herein by reference.

 

Effective as of September 19, 2014, our Board of Directors also approved a form of indemnification agreement (the “ Former D&O Indemnification Agreement ”) to be entered into between us, Don Hankey and Amir Heshmatpour. The Former D&O Indemnification Agreement requires that for a period of four (4) years from and after September 19, 2014, we will indemnify (including advancement of expenses) and hold harmless persons who were officers and directors of the Company (i) by reason of being an officer or director of the Company prior to the Merger, including through all transactions relating to the Merger, or (ii) is related to acts in connection with the Merger taken by the Former D&O Indemnified Persons, provided however, that the foregoing indemnity shall be excess of all any insurance coverage available to the Former D&O Indemnified Parties for any such loss. The accuracy of the affidavits executed by Mr. Hankey (the “ Hankey Affidavit ”) and Mr. Heshmatpour (the “ Heshmatpour Affidavit ”) in connection with the Former D&O Indemnification is a condition precedent to the foregoing indemnity (including advancement of expenses). The Company has no insurance coverage that would cover any claim asserted against the Company by any Former D&O Indemnified Person pursuant to this Former D&O Indemnification Agreement. This description is qualified in its entirety by the Former D&O Indemnification Agreement filed as Exhibit 10.18 to this Current Report on Form 8-K and incorporated herein by reference.

 

Item 2.01. Completion of Acquisition or Disposition of Assets.

 

THE MERGER AND RELATED TRANSACTIONS

 

The Merger

 

On September 19, 2014, the Company and its wholly-owned subsidiary, Merger Sub, entered into the Merger Agreement, dated September 19, 2014, by and among the Company, Merger Sub, and Bone Biologics. Pursuant to the Merger Agreement, Merger Sub merged with and into Bone Biologics, with Bone Biologics remaining as the surviving corporation in the Merger. Upon the consummation of the Merger, the separate existence of Merger Sub ceased, on September 22, 2014 the Company officially changed its name to “Bone Biologics, Corp.” to more accurately reflect the nature of its business, and Bone Biologics became a wholly-owned subsidiary of the Company. A copy of the Merger Agreement is attached as Exhibit 2.1 to this Current Report and is incorporated herein by reference.

 

1
 

 

In connection with the Merger, the 5,000,000 outstanding shares of Common Stock of the Company prior to the Merger were consolidated into 3,853,600 shares of Common Stock and the remaining shares were cancelled.

 

Additionally, at the Effective Time (as defined below), all of the issued and outstanding shares of Bone Biologics Inc.’s $0.0001 par value common stock (“ Bone Biologics Common Stock ”) converted into a combined total of 19,897,587 shares of the Company’s Common Stock (including 2,151,926 shares issuable upon the exercise of outstanding warrants and 5,648,658 shares issuable upon the conversion of debt) (the “ Company Merger Consideration ”). In exchange, Bone Biologics agreed to pay AFH Holding & Advisory, LLC (“ AFH Advisory ”) the principal sum of $590,000. On July 3, 2014, Bone Biologics paid AFH Advisory $250,000 of such amount and on July 31, 2014, Bone Biologics issued that certain Promissory Note, dated July 31, 2014 (the “ Note ”), pursuant to which the Bone Biologics promised to pay AFH Advisory the principal sum of $340,000. MTF has granted AFH Advisory a standby letter of credit in the amount of $340,000 for the remaining amount due under the Note. On September 19, 2014, the Note was assigned to the Company.

 

In addition, MTF converted all amounts due, $1,533,356, pursuant to a convertible promissory note dated January 18, 2008 in the original face amount of $1,107,000 entered into by and between the Bone Biologics and MTF prior to consummation of the Merger to shares of Series B Preferred Stock of Bone Biologics at $ 1.00 per share, then to shares of Common Stock of Bone Biologics at a 1:1 basis. MTF agreed to execute any additional agreements reasonably necessary to give effect to that provision. Prior to the Merger, MTF converted all of the outstanding shares of Series A preferred stock and Series B preferred stock of Bone Biologics that MTF held into shares of Bone Biologics Common Stock.

 

Prior to consummation of the Merger, the 2013 Bridge Note holders converted outstanding principal and accrued interest of $455,974 into Common Stock at a conversion price of $1.00 per share. The $50,000 that Bone Biologics borrowed from AFH Advisory pursuant to the sale and issuance of Notes and Warrants to AFH Advisory was contingent upon liquidation of the securities transferred to the Company by AFH Advisory, as describe in that certain Letter Agreement, dated September 26, 2013, by and between Amir F. Heshmatpour, an individual residing in the State of California, and the Company.

 

Each share of capital stock of Merger Sub that was issued and outstanding immediately prior to the effective time of the Merger (the “ Effective Time ”), by virtue of the Merger and without further action on the part of Bone Biologics, Merger Sub, or the Company, was converted into and became 100 shares of Bone Biologics Common Stock, which shares were the sole issued and outstanding shares of Bone Biologics Common Stock immediately after the Effective Time. After the Merger, each certificate evidencing ownership of shares of Merger Sub common stock evidenced ownership of such shares of Bone Biologics Common Stock.

 

At the Effective Time, there were no shares of Bone Biologics Common Stock that were owned by Bone Biologics as treasury stock or reserved for issuance by Bone Biologics.

 

Also at the Effective Time, all of the issued and outstanding options and warrants to purchase shares of Bone Biologics Common Stock converted, respectively, into options (the “ New Options ”) and warrants (the “ New Warrants ”) to purchase shares of Common Stock. The New Options and the New Warrants were re-issued on a 1 for 1 basis.

 

The Merger Agreement contains customary representations, warranties, and covenants of the Company, Bone Biologics, and Merger Sub for a reverse triangular merger (and accompanying transactions). Breaches of representations and warranties are secured by customary indemnification provisions.

 

The Merger will be treated as a “reverse merger,” and although the Company is the legal acquirer, Bone Biologics is deemed to be the acquirer for accounting purposes in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the Merger will be those of Bone Biologics, and the consolidated financial statement after completion of the Merger will include the assets and liabilities of Bone Biologics, historical operations of Bone Biologics and operations of Bone Biologics from the Closing Date of the Merger and in all future filings with the Securities and Exchange Commission (the “ SEC ”).

 

2
 

 

Following the Effective Time, our Board of Directors will be as identified in this Current Report under the heading “Directors and Executive Officers.”

 

Bridge Financing

 

Bone Biologics borrowed $400,000 pursuant to the sale and issuance of convertible promissory notes (the “ Bridge Notes ,” or singularly each a “ Bridge Note ”) and warrants to purchase Common Stock (as defined below) of the Company, as the successor to Bone Biologics. Prior to consummation of the Merger, the 2013 Bridge Note holders converted outstanding principal and accrued interest of $455,974 into Common Stock at a conversion price of $1.00 per share. MTF has purchased $100,000 of the Notes and Warrants. Orthofix Holdings Inc. (“ Orthofix ”) has purchased $250,000 of the Notes and Warrants. AFH Advisory purchased $50,000 of the Bridge Notes and Bridge Warrants which was contingent upon liquidation of the securities transferred to the Company by AFH Advisory, as described in that certain Letter Agreement, dated September 26, 2013, by and between Amir F. Heshmatpour and the Company. The Bridge Warrants and the amendment thereto are filed as Exhibits 4.1, 4.2, 4.3 and 4.4, respectively, to this Current Report and are incorporated herein by reference. The issuance of the Bridge Notes and Bridge Warrants are collectively referred to in this Current Report as the “ Bridge Financing .”

 

Bone entered into a Security Agreement, dated March 17, 2009, wherein it pledged certain of its assets as collateral to the Bridge Note holders. Additionally, Bone and MTF entered into a Subordination Agreement, dated April 2013, wherein the parties agreed that the security interest granted to MTF pursuant to the March 17, 2009 Security Agreement between the parties wherein MTF agreed to subordinate any rights to any payment and any security interest it may have in Bone’s assets to the holders of the Bridge Notes. In addition, Benjamin Wu, Kang Ting, and Chia Soo executed a Pledge and Guarantee Agreement, dated April 18, 2013, in favor of the Bridge Note purchasers wherein Benjamin Wu, Kang Ting, and Chia Soo pledged their shares of Bone Biologics Common Stock to secure the full and punctual payment of Bone’s obligations to the Bridge Note holders and unconditionally and irrevocably guaranteed such payment. Upon consummation of the Merger, the notes converted into notes of the Company.

 

On September 26, 2013, Bone and AFH Advisory entered into a letter agreement wherein Bone agreed to accept shares of common stock of Targeted Medical Pharma, Inc. (the “ TMP Shares ”) with a market value of $50,000 on the date of transfer as consideration for the aforementioned purchase of the Bridge Note and the Bridge Warrant for AFH Advisory. Bone agreed to use its commercially reasonable best efforts to sell the TMP Shares on the Over-the-Counter Market within 90 days of such transfer. Because the gross proceeds from the sale of the TMP Shares during such 90-day period (the “ Initial Gross Proceeds ”) were less than $50,000 (the “ Deficiency Amount ”), AFH Advisory agreed to provide the Company with a cash infusion equal to the Deficiency Amount following the Merger.

 

In addition to and subsequent to the Bridge Notes and Bridge Warrants discussed in the preceding paragraph, Orthofix, on July 1, 2014, also (A) purchased $500,000 worth of Bone Biologics Common Stock (the “ Subsequent Orthofix Shares ”); (B) was issued two convertible promissory notes (the “ Subsequent Orthofix Convertible Promissory Notes ”), each in the principal amount of $250,000 and exercisable for $333,333 worth of Bone Biologics Common Stock; and (C) was issued two warrants (the “ Subsequent Orthofix Warrants ”), each exercisable for 166,667 shares of Bone Biologics Common Stock at an exercise price per share of $1.50. Upon subscribing for the Subsequent Orthofix Shares, the Subsequent Orthofix Convertible Promissory Notes converted by its terms into a combined total of $666,666 worth of shares of Bone Biologics Common Stock in accordance with the terms of the Subsequent Orthofix Convertible Promissory Notes. The Subsequent Orthofix Warrants converted into warrants of the Company with substantially identical terms upon consummation of the Merger. Amounts received by Bone Biologics in connection with the Subsequent Orthofix Convertible Promissory Notes and the Subsequent Orthofix Shares will be aggregated towards the $5 million amount to be raised in the Private Placement for purposes of determining when various parties will be paid their fees in connection with the Merger and the Private Placement.

 

3
 

 

Subsequent Closings

 

Upon filing this Current Report, the Company will commence a private placement of securities, whether debt or equity, of up to a maximum of $10.0 million that will include an over-allotment option of 15% at AFH Advisory’s discretion or at the discretion of any investment bank engaged for such offering (the “ Private Placement ”). Private Placement proceeds in excess of $1.0 million will be used upon receipt for: (i) payment of the expenses payable to AFH Advisory for providing a publicly-reporting company for the Merger and capped at $250,000 to reduce the Note and (ii) $750,000 to the working capital of the Company to be utilized for general corporate purposes. All proceeds received between $1.0 million and $1.5 million in the Private Placement shall be used to further retire the Note by reimbursement of an additional $250,000 of the Note and to provide an additional $250,000 for general corporate purposes of the Company, split evenly on a dollar for dollar basis up to $500,000. The proceeds received over $1.5 million will initially be paid on a pro rata basis, with 50% of such proceeds being directed to the Company for working capital purposes and 50% being used to pay off other fees incurred in connection with the Merger and the Private Placement, including the final $90,000 owed under the Note. Once all such fees in connection with the Merger and the Private Placement have been paid by the Company, the Company will use any additional proceeds received in the Private Placement to first pay all outstanding principal, interest and penalties then outstanding with respect to the MTF Short Term 2014 Loan (as such term is defined herein) and second for working capital purposes. The Private Placement will be structured such that any debt issued may either be convertible into Common Stock at a fixed conversion price or repayable from the proceeds of the Initial Public Offering (as defined below), if not due sooner pursuant to the terms thereof. The Company and MTF each agree that none of the proceeds from the Private Placement will be used for the repayment of the Bridge Financing or any outstanding long-term debt of the Company. The shares offered in the Private Placement will be offered pursuant to exemptions provided by Section 4(a)(2) and/or Section 4(6) of the Securities Act of 1933 (the “ Securities Act ”) and Rule 506 of Regulation D as promulgated by the SEC. No general solicitation will be made by us or any person acting on our behalf in the Private Placement. The $1 million investment received from Orthofix on July 1, 2014 will be counted towards the amounts received in the Private Placement for purposes of determining when the Private Placement will be deemed closed and for purposes of determining when and how proceeds from the Private Placement will be allocated.

 

After the Private Placement, the Company intends to procure an investment bank to handle a private investment in public entity offering in an amount between $8.0 million and $10.0 million at a valuation of not less than the post-money valuation of the Company at the closing of the Private Placement through the sale of securities of the Company (the “ PIPE ”). The PIPE will include a 15% over allotment option at AFH Advisory’s discretion or at the discretion of any investment bank engaged for such offering. Commencement of the PIPE offering is contingent upon (i) the appointment and continued support of an investment bank, and (ii) the filing of Financial Industry Regulatory Authority, Inc. (“ FINRA ”) Form 211.

 

Following to the PIPE offering, and at such time as it is deemed appropriate by AFH Advisory and the Company, the Company intends to procure an investment bank to act as underwriter for an initial public offering in an amount up to $40 million (the “ Initial Public Offering ”) at a valuation not less than the post-money valuation of the Company at the closing of the PIPE offering. The Initial Public Offering shall include a 15% over allotment option at AFH Advisory’s discretion or at the discretion of any investment bank engaged for such offering. Both parties recognize that the Initial Public Offering is contingent upon the appointment and continued support of an investment bank.

 

The Private Placement, the PIPE, and the IPO are collectively referred to in this Current Report as the “ Subsequent Closings .” The Merger, the Subsequent Closings, the Bridge Financing and the related transactions are collectively referred to in this Current Report as the “ Transactions .”

 

Registration Rights

 

All of the securities issued in connection with the Transactions, except the IPO, are “restricted securities,” and as such are subject to all applicable restrictions specified by federal and state securities laws.

 

Effective as of September 19, 2014, the Company entered into a Registration Rights Agreement with MTF, AFH Advisory and Hanky Investment Company, L.P. (“ HIC ”), each of which have certain demand registration rights and unlimited piggyback registration rights for the Company’s shares under the Registration Rights Agreement and subject to an agreed lock up period. Pursuant to the Registration Rights Agreement, within thirty (30) days hereof, the Company will seek registration under the Securities Act of all or part of the registrable shares of MTF, AFH Advisory and HIC. Within five (5) days hereof, the Company will provide written notice of such request to all other holders of registrable securities and will include in such registration all registrable shares with respect to which the Company has received written requests for inclusion within twenty-five (25) days after delivery of the Company’s notice. The Company has agreed to pay all registration expenses relating to up to two long-form registrations or short-form registrations for each of MTF, AFH Advisory and HIC.

 

4
 

 

Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a demand registration under the Registration Rights Agreement) and the registration form to be used may be used for the registration of any registrable shares, the Company will give prompt written notice to all holders of the registrable shares of its intention to effect such a registration and will include in such registration all registrable shares (in accordance with the priorities set forth in the Registration Rights Agreement) with respect to which the Company has received written requests for inclusion within fifteen (15) days after the delivery of the Company’s notice. Pursuant to Registration Rights Agreement, holders of registrable shares and the Company agree not to effect any public sale or distribution of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the six (6) months following, the effective date of the Merger Agreement.

 

Restriction on Resale

 

None of the securities offered in the Transactions, other than the IPO, will be registered under the Securities Act and the certificates representing our securities will contain a legend restricting the distribution, resale, transfer, pledge, hypothecation or other disposition of the securities unless and until such securities are registered under the Securities Act or an opinion of counsel reasonably satisfactory to us is received that registration is not required under the Securities Act.

 

Current Ownership

 

The following table sets forth information with respect to the post-merger beneficial ownership of the Company’s common stock as of September 19, 2014, by each person or group of affiliated persons known to the Company to beneficially own 5% or more of its common stock, each director, each named executive officer, and all of its directors and named executive officers as a group.

 

Name of Beneficial Owner or Identity of Group   Title of Class   Shares (1)     Percentage  
                 
5% or greater stockholders:                
                 
The Musculoskeletal Transplant Foundation, Inc.
125 May Street
Edison, NJ 08837
  Common Stock     11,932,807       49.3 %
                     
AFH Holding & Advisory, LLC
10830 Massachusetts Ave., Penthouse
Los Angeles, CA 90024
  Common Stock     2,609,602       10.8 %
                     
Amir Heshmatpour
269 Beverly Drive, Ste. 1600
Beverly Hills, CA 90212
  Common Stock     3,609,602 (2)     14.9 %
                     
Dr. Kang Ting
115 North Doheny Drive
Beverly Hills, CA 90211
  Common Stock     2,000,000       8.3 %
                     
Orthofix Holdings Inc.
3451 Plana Parkway
Lewisville, TX 75056
  Common Stock     1,909,908       7.9 %

 

5
 

 

Executive Officers and Directors:                
Michael Schuler
175 May Street
Edison, NJ 08837
  Common Stock     -       -  
                     
William J. Treat
175 May Street, Suite 400
Edison, NJ 08837
  Common Stock     198,202       0.8 %
                     
Catherine Doll
175 May Street, Suite 400
Edison, NJ 08837
  Common Stock     12,625       0.1 %
                     
Bruce Stroever
175 May Street, Suite 400
Edison, NJ 08837
        -       -  
                     
Dr. Chia Soo
175 May Street, Suite 400
Edison, NJ 08837
  Common Stock     1,119,318       4.6 %
                     
William Coffin
175 May Street, Suite 400
Edison, NJ 08837
        -       -  
                     
John Booth
175 May Street, Suite 400
Edison, NJ 08837
        -       -  
                     
Jimmy Delshad
175 May Street, Suite 400
Edison, NJ 08837
        -       -  
                     
Steve Warnecke
1026 Anaconda Drive
Castle Rock, CO 80108
        -       -  
                     
Total Officers and Directors as a Group   Common Stock     1,330,145       5.5 %
                     
Reserve for Future Issuance:                    
Option Plan         2,444,696          

 

(1) The number of shares of Common Stock issued and outstanding that was used to calculate the percentage ownership of each listed person includes the shares of Common Stock underlying convertible debt, stock options and warrants that are exercisable 60 days after the close of the Merger.

 

(2) These shares of Common Stock are owned by AFH Holding & Advisory, LLC (“ AFH Holding ”), H&H (Hong Kong) Holdings Co., Limited (“ H&H ”) and Mr. Heshmatpour’s spouse and children. Mr. Heshmatpour is sole member of AFH Holding and has sole voting and investment control over the 2,609,602 shares of Common Stock owned of record by AFH Holding. Mr. Heshmatpour is the sole member of H&H and has sole voting and investment control over the 200,000 shares of Common Stock owned of record by H&H. Mr. Heshmatpour has voting and investment control over the 800,000 shares of Common Stock owned by his spouse and children. Accordingly, he may be deemed a beneficial owner with respect to these 3,609,602 shares of Common Stock.

 

6
 

 

Accounting Treatment; Change of Control

 

The Merger will be treated as a “reverse merger,” and although the Company is the legal acquirer, Bone Biologics is deemed to be the acquirer for accounting purposes in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the Merger will be those of Bone Biologics, and the consolidated financial statement after completion of the Merger will include the assets and liabilities of Bone Biologics, historical operations of Bone Biologics and operations of Bone Biologics from the Closing Date of the Merger.

 

Pursuant the Merger Agreement AFH Advisory and MTF have the right to appoint one individual with non-voting “observer status” to receive all board of director communications and attend all meetings of the board of directors for a period of 2 years from the Effective Time, including attending meetings of the board of directors related to engaging professional service providers and the right to review any credentials provided by such service providers.

 

Except as described in the previous paragraphs, no arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of our Board of Directors and, to our knowledge, no other arrangements exist that might result in a change of control of the Company. Further, as a result of the issuance of the shares of Common Stock pursuant to the Merger, a change in control of the Company occurred as of the date of consummation of the Merger.

 

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DESCRIPTION OF BUSINESS

 

Immediately following the Merger, the business of Bone Biologics became our business. Bone Biologics was founded by University of California professors in collaboration with an Osaka University professor and a University of Southern California surgeon in 2004 as a privately-held company with proprietary, patented technology that has been clinically proven in non-human primate models to facilitate bone growth. Bone’s platform technology has application in delivering improved outcomes in the surgical specialties of spinal, orthopedic, general orthopedic, plastic reconstruction, neurosurgery, interventional radiology, and sports medicine. Lead product development and clinical studies are targeted on spinal fusion surgery, a growing market space. The following chart provides a segment overview of bone replacement products in the U.S.:

 

 

( See O’Reilly, Sharon. Beyond INFUSE: Spine Community Searches For Answers . INVIVO. November 2011, Vol. 29, No. 10.)

 

Products

 

Bone Biologics has developed stand-alone platform technologies through exhaustive lab and small animal research over the past seven years to generate the current applications across broad fields of use. The platform technologies are UCB-1 TM , a proprietary skeletal specific growth factor in use with DBX™, a proprietary demineralized bone matrix, and UCS-1 TM , a biomaterial that potentates and regulates growth factor in use with DBX, a proprietary demineralized bone matrix, activity in bone regeneration. Together, with DBX, or in isolation, Nell-1 TM and UCS-1 TM allow regulation over skeletal tissue formation and stem cell differentiation.

 

Bone Biologics is currently focused on bone regeneration in spinal fusion using its recombinant human protein, known as Nell-1. Nell-1 is an osteoinductive orthobiologic: a recombinant protein that provides control over bone regeneration. This patent protected technology has been exclusively licensed to Bone Biologics from the University of California, Los Angeles (“ UCLA ”). Leveraging the resources of investors and strategic partners, Bone Biologics has successfully surpassed two critical milestones:

 

  Demonstrating a successful small laboratory scale pilot run for the recombinant manufacturing of the human Nell-1 protein in Chinese Hamster Ovary cells, which is a commercially established mammalian cell line for other recombinant proteins, which is well-defined and accepted by international regulatory agencies; and
     
  Validation of protein dosing and efficacy in established large animal models and Rhesus Monkey primate models.

 

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Bone Biologics is targeting spinal fusion as the first clinical indication and is currently in the pre-investigational device exemption (“ IDE ”) phase. The lead product, purified Nell-1 recombinant protein, is expected to be dried onto ß-tricalcium phosphate (“ TCP ”) bone void filler to produce a medical device, known as Nell-1/TCP (“ Nell/TCP Fusion Device ”). This device will be mixed with 510(k) cleared DBX® Demineralized Bone Putty recommended for use in conjunction with a cleared intervertebral body fusion device. The Nell-1/TCP Fusion Device is intended for use in lumbar spinal fusion and may have a variety of other applications such as cervical spinal fusion.

 

While the product is initially targeted at the spine fusion market, Bone believes Nell-1’s unique set of characteristics, target specific mechanism of action, efficacy, safety, and affordability, position the product well for application in a variety of procedures, including:

 

Spine Implants. This is the largest market for bone substitute product, representing approximately 80% of the total 2009 U.S. market. While use of the patient’s own bone, also referred to as autograft, to enhance fusion of vertebral segments remains the gold standard for this type of treatment, complications associated with use of autograft bone including pain, increased surgical time and infection limit its use.

 

Non-Union Trauma Cases. While the majority of fractures heal without the need for osteosynthetic products, bone substitutes are used in complicated breaks where the bone does not mend naturally. Nell-1 is expected to perform as well as high-priced growth factors in this market.

 

Hip & Knee Revisions. The use of bone substitutes in reconstruction surgery is generally limited to revision cases where the products are used to account for the significant bone loss that accompanies these cases. The treatment of osteoporotic patients also represents a substantial opportunity for Nell-1 use in hip and knee reconstruction.

 

Implant Coating. The use of Nell-1 as a direct coating on hip and knee implants could have a very significant impact on the market. A Nell-1 coating may prolong the life of primary implants and allow for differentiation in a commodity market.

 

UCLA’s initial research was funded with approximately $18 million in resources from UCLA and government grants. After licensing the exclusive worldwide intellectual property rights from UCLA, development was funded with additional grant funding and $6.5 million in strategic investment from MTF. Bone anticipates that it will require an additional $2 million for preclinical studies, $4 million for completion of the filing of an IDE application completion, and $4 million for initiation of human studies. An estimated $50-60 million will be required to achieve product launch.

 

Nell-1’s powerful specific bone and cartilage forming properties derive from the ability of Nell-1 to only target cells that exhibit an activated “master switch” to develop into bone or cartilage. Nell-1 is a function specific recombinant human protein that has been proven in lab bench models to recapitulate normal human growth and development to provide control over bone and cartilage regeneration through research and development work at UCLA and written in publications.

 

The search for a target specific molecule to promote normal bone formation started in 1994. Nell-1 was isolated in 1996, and the first Nell-1 patent on bone regeneration was filed in 1999. Subsequent patents and continuations in part describing Nell-1 manufacturing, delivery, and cartilage regeneration were filed in 2002, 2003, 2006, 2007, 2008, and 2009 to further strengthen the patent portfolio.

 

The Nell-1/TCP Fusion Device will be comprised of a single dose vial of NELL-1 recombinant protein freeze dried onto TCP. A vial of Nell-1/TCP will be sold in a convenience kit with a diluent and a syringe of 510(k) cleared demineralized bone (“ DBX® Putty ”), produced by MTF. An elegant delivery device will allow the surgeon to mix the reconstituted Nell 1/TCP with the appropriate quantity of DBX® Putty just prior to implantation.

 

Research & Publications

 

Bone’s leading scientists have been published in notable scientific journals and publications in its field. These publications have served to highlight the work and achievements of its members.

 

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Proposed Clinical Application

 

The Nell-1/TCP Fusion Device will be indicated for spinal fusion procedures in skeletally mature patients with degenerative disc disease (“ DDD ”) at one level from L4-S1. These DDD patients may also have up to Grade I spondylolisthesis at the involved level. The Nell-1/TCP Fusion Device is to be implanted via an anterior open or an anterior laparoscopic approach in conjunction with a cleared intervertebral body fusion device. Patients receiving the device should have had at least six months of non-operative treatment prior to treatment with the device. A cervical indication is currently under consideration. This indication for use would fill a current clinical gap, created by potentially dangerous inflammatory response caused by Infuse Bone Graft, the subject of a Public Health Notification from the United States Food and Drug Administration (the “ FDA ”) on July 1, 2008 about life threatening complications associated with rhBMP in cervical spine fusion. Bone would not expect to see the same adverse events with Nell-1/TCP as have been observed with BMP and OP-1. Bone has performed a rat femoral onlay model to compare proinflammatory response of BMP2 (Infuse Bone Graft) and Nell-1 within Helistate collagen sponges. While Nell-1 induced normal healing, BMP2 (Infuse Bone Graft) induced significant amounts of swelling and histological evidence of intense inflammatory response.

 

Description of the DBX® Putty to be used with Nell-1/TCP

 

The DBX® Demineralized Bone Putty provided in the convenience kit with Nell-1/TCP is a Class II device. The common name is “Bone Void Filler Containing Human Demineralized Bone Matrix.” The product is regulated under 21 C.F.R. §888.3045 Resorbable calcium salt bone void filler device, Product Codes MQV, GXP, and MBP. MTF is the manufacturer of the DBX® Putty. This product was cleared by the FDA under 510(k) number K053218 for spine indication in December 2006.

 

DBX® Putty is a matrix composed of processed human cortical bone. Demineralized bone granules are mixed with sodium hyaluronate to form the DBX® Putty. Every lot of final DBX® Putty product is tested in an athymic mouse model or in an alkaline phosphatase assay, which has been shown to have a positive correlation with the athymic mouse model, to ensure the osteoinductive potential of the final product.

 

The Bone Biologics instructions for use will recommend use of the Nell-1/TCP Fusion Device with a lumbar (or cervical) indication. The surgeon can therefore choose to use the intervertebral fusion device that he or she is most experienced with and in their judgment is the best option for successful treatment. Bone has three precedent products, which are also osteoinductive, with intended uses similar or the same as Nell-1, that have been cleared by the FDA as medical devices. These are as follow:

 

  Infuse Bone Graft/LT-Cage Lumbar Tapered Fusion Device (PMA)-rhBMP-2 dissolved in water and applied to a collagen (bovine type I) sponge and placed in a cage;
     
  GEM 21S (PMA)-rhPDGF-BB and -tricalcium phosphate (growth factor enhanced matrix); and
     
  DBX® (510k)-human cortical bone (ground and demineralized) and mixed with sodium hyaluronate to form a putty.

 

Based upon extensive discussions with regulatory experts and a specific communication from the FDA in response to a submission of our plan under the Exclusive License between UCLA and Bone Biologics we believe the Nell-1 TCP Fusion Device will be regulated as a Class III medical device and will therefore require submission and approval of a pre-market approval, (“PMA”). The FDA response to the submission of our plan is, “We have determined that the product is a combination product, that will be regulated under Device authorities, with CDRH (Center for Devices and Radiological Health) as the lead center.”

 

Bone’s Business Strategy

 

Bone’s business strategy has been to develop its target specific platform technology to meet a current established market with improvement in patient outcomes and reduction in costs to the healthcare delivery system. This narrowing of its focus from the research to the development stage is to allow for the approval for use of our target specific protein exhibiting efficacy and safety by matching or exceeding current market approved products. Identifying the best future strategic partners to facilitate the development through pre IDE, clinical, and ultimate commercialization is critical as Bone funds the pre-IDE work and continues achieving milestones. Bone believes that the licensing of the distribution of the Nell-1 product in the fields of use focused upon will generate sufficient funding to provide for the ongoing development of the Platform Technology across other surgical and therapeutic fields.

 

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Material Agreements

 

UCLA Exclusive License Agreement

 

On March 15, 2006, Bone entered into an exclusive license agreement (the “ Regents’ License ”) with the Regents of the University of California (the “ Regents ”). The Regents’ License provides Bone with an exclusive license to several of the Regents’ patents covering, among other things, enhanced Nell-1 bone mineralization. The grant of the Regents’ License is subject to any license obligations to the U.S. government, and the term of the license lasts until the last-to-expire Regent patent licensed under the agreement expires. Under the Regents’ License, Bone is permitted to make, have made, use, sell, offer for sale and import any products covered by the Regents’ licensed patents in a certain field of use. By a subsequent Seventh Amendment entered into on August 7, 2012, the parties modified the applicable field of use that Bone is permitted to use the Regents’ patents in, which generally comprises musculoskeletal repair and regeneration, plus some related methods of manufacture. Bone has agreed to pay an annual maintenance fee to the Regents of $10,000 as well as to pay certain royalties to the Regents under the Regents’ License at the rate of 3% of net sales of licensed products. Bone must pay the royalties to the Regents on a quarterly basis, and Bone also must pay a minimum annual royalty of $25,000 to the Regents once earned royalties commence. If Bone is required to pay any third party any royalties as a result of Bone making use of the Regents’ patents, then Bone may reduce the royalty owed to the Regents by 0.333% for every percentage point paid to a third party. If Bone grants sublicensing rights to a third party to use the Regent’s patent, then Bone shall pay to the Regents 8% to 10% of the sublicensing income Bone receives from such sublicense.

 

By a subsequent Eighth Amendment entered into on October 22, 2013, the parties agreed that Bone is obligated to pay a milestone fee of 2% of the amount raised from this Private Placement. Additionally, if the Private Placement does not close or is less than $2.5 million, then a fee of $100,000 will be due and paid to the Regents by June 1, 2014. Furthermore, the Agreement was modified in that Bone shall pay the Regents $25,000 for dosing of Phase 1 clinical trial and $50,000 for dosing of Phase 3 clinical trial.

 

Bone is obligated to diligently proceed with developing and commercializing licensed products under the Regents’ patents set forth in the Regents’ License. The Regents have the right to either terminate the license or reduce the license to a non-exclusive license if Bone does not meet certain diligence milestone deadlines set forth in the Regents’ License.

 

Under a Fourth Amendment to the Regents’ License, entered into on August 19, 2009, Bone must reimburse or pre-pay the Regents for patent prosecution and maintenance costs incurred during the term of the Regents’ License. Bone has the right to bring infringement actions against third party infringers of the Regents’ License, the Regents may join voluntarily, at its own expense, or, at Bone’s expenses, be joined involuntarily to the action. Bone is required to indemnify the Regents against any third party claims arising out of Bone’s exercise of the rights under the Regents’ License or any sublicense.

 

Milestone Side Letter Agreement

 

Pursuant to a letter agreement, dated September 7, 2014, by and among AFH Advisory, Bone Biologics, and MTF (the “ Milestone Side Letter Agreement ”), Bone Biologics has agreed to use its commercially reasonable efforts to achieve the following milestones (the “ Milestone Targets ”) by the specified times following the closing of the Private Placement:

 

  (i) Complete media screening studies of cell line within two (2) to three (3) months:
     
  (ii) Initiate manufacturing of master cell bank within three (3) to four (4) months;
     
  (iii) Initiate formulation studies for the cGMP manufacturing process once sufficient Nell-1 material is available within approximately eight (8) to ten (10) months;

 

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  (iv) Initiate a pre-clinical bioreactor production run for toxicology material within nine (9) to twelve (12) months;
     
  (v) Initiate pre-clinical toxicology studies to include carcinogenicity and reproductive within approximately eleven (11) to thirteen (13) months;
     
  (vi) Finalize refinement of the manufacturing process within approximately twelve (12) to fourteen (14) months;
     
  (vii) Initiate cGMP bioreactor run within twelve (12) to fourteen (14) months or after completion of (v), and
     
  (viii) Request an IDE meeting to review the clinical safety plan within eighteen (18) to twenty (20) months;

 

AFH Advisory and MTF will each receive restricted shares pursuant to the Milestone Targets equal to and not to exceed 2.5% of the fully diluted shares of the Company at the time of the completion of all Milestone Targets.

 

Placement Agent Agreement

 

On December 12, 2013, the Company and Bone Biologics entered into an engagement letter, which engagement letter was amended on September 22, 2014, with Forefront Capital Markets, LLC (“ Forefront ”) a registered FINRA broker-dealer, to act as placement agent for the Private Placement and the PIPE. Forefront shall be entitled to receive (i) a cash fee of 8% of the gross proceeds of the Private Placement, (ii) a warrant to purchase shares of the Company’s common stock (the “ Agent Warrant ”) equal to 8.0% of the Company’s common stock underlying the securities issued in the Private Placement, (iii) a cash fee of 3% of the gross proceeds received by the Company from any financing of non-convertible debt securities, and (iv) a warrant to purchase shares of the Company’s common stock (the “ Advisory Warrant ”) equal to 2.0% of the Company’s post-merger and financing fully diluted shares outstanding upon the closing of $2.5 million of investors on which Forefront is eligible to receive compensation. Forefront shall only be entitled to receive a management fee of 4% and a 4% Agent Warrant on the gross proceeds received from the sale of securities to investors introduced to the Company by AFH Advisory, Bone Biologics or their respective officers and directors at closing. The Agent Warrant will be issued at each closing and shall provide, among other things, that the Agent Warrant shall: (i) be exercisable at the price of the securities (or the exercise price of the securities) issued to the investors in the offering, (ii) expire five (5) years from the date of issuance, (iii) include customary registration rights, including the registration rights provided to the Investors, (iv) contain provisions for cashless exercise and (v) include such other terms that are normal and customary for warrants of this type. Forefront will serve as the Company’s exclusive placement agent in connection with the Private Placement through December 31, 2014, which exclusive period may be extended to 12 months at the discretion of the Company.

 

MTF Credit Agreement & Promissory Note

 

Bone and MTF entered into a loan agreement in 2008 and a credit agreement in 2009 (collectively, the “ MTF Credit Agreements ”), and accompanying promissory and convertible promissory notes in January 2008, November 2008, March 2009 and August 2009 to fund the development of Bone. On March 31, 2014, Bone and MTF entered into the Tenth Amendment to the MTF Credit Agreements and accompanying promisssory notes wherein MTF and Bone agreed that the aggregate principal amount of all advances would remain the same, but the maturity date of the notes would be extended to March 31, 2015. As of September 19, 2014, $5,192,684 in principal and interest was outstanding under the MTF Credit Agreements and $117,302 in principal and interst was outstanding under the 2013 Bridge Notes. On September 19, 2014, $1,533,356 of the amounts due under the MTF Credit Agreements were converted to shares of the Company. The remaining amounts due under the MTF Credit Agreements were cancelled and, as described in this Currert Report 8K under Recent Sales of Unregistered Securities, the New MTF Convertible Note (as defined herein) was issued by the Company.

 

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In 2013, Bone and MTF also entered into a bridge note in the principal amount of $100,000. On June 6, 2014, the maturity date of the 2013 Bridge Note was extended to October 14, 2014.

 

MTF Short Term 2014 Loan

 

On September 15, 2014, Bone and MTF entered into a loan agreement and accompanying promissory note (the “ MTF Short Term 2014 Loan ”) to fund the continued operations of Bone prior to the Merger. Pursuant to the MTF Short Term 2014 Loan, MTF has agreed to advance an initial $250,000 to Bone and, at Bone’s request and subject to the terms and conditions of the MTF Short Term 2014 Loan, to advance up to an additional $250,000 to Bone. The MTF Short Term 2014 Loan has an interest rate of eight and one-half percent (8.5%) accruing annually. The MTF Short Term 2014 Loan matures on the earlier to occur of (i) the date on which at least $1 million is loaned to or invested in the Company and (ii) December 31, 2014. In further consideration of the MTF 2014 Loan, Bone granted to MTF 625,000 warrants at a strike price of $1.62. The MTF 2014 Loan was assigned to the Company on September 19, 2014.

 

Competition

 

Our most significant competitor is Infuse™ Bone Graft or BMP-2 (bone morphogenic protein 2) from Medtronics. BMP-2, despite dominant market position, is suffering from bad press related to negative off label cervical fusion outcomes due to inflammatory response. Bone believes that BMP2 also suffers from disadvantageous margins due to an unfavorable revenue sharing agreement with Wyeth. We believe that our product will not suffer from these same negative factors as to date, our products have not had inflammatory response issues and we are not burdened by an unfavorable revenue sharing agreement. A second potential competitor was OP-1 or BMP-7 from Stryker and sold to Olympus, which has had significant regulatory setbacks long delaying time to market beyond humanitarian use.

 

Customers

 

The customers for the product being developed by Bone are the acute care hospitals performing spinal fusion and long bone non-union fracture repair and regeneration. This universe of customers has been identified by Medtronic, with their bone growth product Infuse Bone Graft which is a bone morphogenic protein, and has grown over the past 10 years to a greater than $800 million market share dollar volume. FDA approval pathways, reimbursement pathways, and procedure acceptance by surgeons has been established by the Medtronic product. This does not provide any assurance that the Company will be approved by the FDA on the same pathway, reimbursed by payors comparably, and accepted by hospitals and surgeons as an alternative to Medtronic or any of the less efficacious modalities of therapy. Medrontic has experienced difficulties in this market from FDA questions relative to off label use, payors on reimbursement rates, and hospitals on procedural cost which create an environment that could be unfavorable to the Company achieving current forecasts for approval, commercialization, and revenue.

 

Intellectual Property

 

Bone Biologics has an intellectual property portfolio that includes exclusive, worldwide licenses from UCLA which Bone believes constitutes a formidable barrier to entry.

 

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Additional patent applications are currently in preparation. The intellectual property is unique and comprehensively covers Nell-1 manufacture, Nell-1 compositions and Nell-1 use in wide ranging clinical and diagnostic applications. Bone Biologics protects its proprietary technology through all mechanisms including U.S. and foreign patent filings, trade secret protections, and collaboration agreements with domestic and international corporations, universities and research institutions. Bone is the exclusive licensee for the following twelve (12) UCLA issued patents:

 

U.S Patent No.   Summary   Date Issued
7052856   NELL-1 Enhanced Bone Mineralization   5/20/2006
7544486   NELL-1 Peptide Expression Systems   6/9/2009
7687462   Composition for promoting Cartilage   3/30/2010
7691607   Expression system of NELL peptide   4/6/2010
7776361   NELL-1 Enhanced Bone Mineralization   8/17/2010
7807787   NELL-1 Peptide   10/5/2010
7833968   Pharmaceutical compositions for treating or preventing bone conditions   11/16/2010
7844066   Nell-1 Enhanced Bone Minerilization   2/8/2011
8044026   Composition for promoting cartilage   10/25/2011
8048646   NELL-1 peptide expression systems   11/1/2011
8053412   NELL-1 Peptides   11/8/2011
8207120   Nell-1 Enhanced Bone Mineralization   6/26/2012

 

Government Regulation

 

The manufacturing and marketing of any product which Bone may formulate with its technologies as well as its related research and development activities are subject to regulation for safety, efficacy and quality by governmental authorities in the U.S. and other countries. Bone anticipates that these regulations will apply separately to each biotechnology product. Bone believes that complying with these regulations will involve a considerable level of time, expense and uncertainty.

 

In the U.S., drugs are subject to rigorous federal regulation and, to a lesser extent, state regulation. The Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated thereunder, and other federal and state statutes and regulations govern, among other things, the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of Bone’s products. Drug development and approval within this regulatory framework is difficult to predict, requires a number of years and involves the expenditure of substantial resources. Moreover, ongoing legislation by U.S. Congress and rule making by the FDA presents an ever-changing landscape where Bone could be required to undertake additional activities before any governmental approval is granted allowing us to market Bone’s products. The steps required before a pharmaceutical agent may be marketed in the U.S. include:

 

  Laboratory and non-clinical tests for safety and small scale manufacturing of the agent;
     
  The submission to the FDA of an IDE which must become effective before human clinical trials can commence;
     
  Clinical trials to characterize the efficacy and safety of the product in the intended patient population;
     
  The submission of a New Drug Application (“ NDA ”) or PMA to the FDA; and
     
  FDA approval of the NDA or PMA prior to any commercial sale or shipment of the product.

 

In addition to obtaining FDA approval for each product, each manufacturing establishment must be registered with, and approved by, the FDA. Moreover, manufacturing establishments are subject to biennial inspections by the FDA and must comply with the FDA’s Good Manufacturing Practices for products, drugs and devices.

 

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Non-clinical Trials

 

Non-clinical testing includes laboratory evaluation of chemistry and formulation as well as tissue culture and animal studies to assess the safety and potential efficacy of the product. Non-clinical safety tests must be conducted by laboratories that comply with FDA regulations regarding good laboratory practices. Non-clinical testing is inherently risky and the results can be unpredictable or difficult to interpret. The results of non-clinical testing are submitted to the FDA as part of an IDE and are reviewed by the FDA prior to the commencement of clinical trials. Unless the FDA objects to an IDE, clinical studies may begin 30 days after the IDE is submitted. Bone has relied and intends to continue to rely on third-party contractors to perform non-clinical trials.

 

Clinical Trials

 

Clinical trials involve the administration of the investigational product to healthy volunteers or to patients under the supervision of a qualified investigator. Clinical trials must be conducted in accordance with good clinical practices under protocols that detail the objectives of the study, the parameters to be used to monitor safety and the efficacy criteria to be evaluated. Each protocol must be submitted to the FDA prior to its conduct. Further, each clinical study must be conducted under the auspices of an independent institutional review board. The institutional review board will consider, among other things, ethical factors, the safety of human subjects and the possible liability of the institution. The drug product used in clinical trials must be manufactured according to the FDA’s Good Manufacturing Practices.

 

Clinical trials under IDE regulations are typically conducted in two sequential trials. In the Pilot trial, the initial introduction of the product into healthy human subjects, the drug is tested for safety (adverse side effects), absorption, metabolism, bio-distribution, excretion, food and drug interactions, abuse as well as limited measures of pharmacologic effect and proof of principle that involves studies in a limited patient population in order to:

 

  assess the potential efficacy of the product for specific, targeted indications;
     
  demonstrate efficacy in a limited patient population;
     
  identify the range of doses likely to be effective for the indication; and
     
  identify possible adverse events and safety risks.

 

When there is evidence that the product may be effective and has an acceptable safety profile in Pilot evaluations, Pivotal trials are undertaken to establish and confirm the clinical efficacy and establish the safety profile of the product within a larger population at geographically dispersed clinical study sites. Pivotal trials frequently involve randomized controlled trials and, whenever possible, studies are conducted in a manner so that neither the patient nor the investigator knows what treatment is being administered. Bone, or the FDA, may suspend clinical trials at any time if it is believed that the individuals participating in such trials are being exposed to unacceptable health risks. Bone intends to rely upon third-party contractors to advise and assist us in the preparation of Bone’s IDEs and the conduct of clinical trials that will be conducted under the IDEs.

 

Premarket Approval and FDA Approval Process

 

The results of the manufacturing process, development work, non-clinical studies and clinical studies are submitted to the FDA in the form of a PMA prior to marketing and selling the product. The testing and approval process is likely to require substantial time and effort. In addition to the results of non-clinical and clinical testing, the PMA applicant must submit detailed information about chemistry, manufacturing and controls that will describe how the product is made and tested through the manufacturing process.

 

The PMA review process involves FDA investigation into the details of the manufacturing process, as well as the design and analysis of each of the non-clinical and clinical studies. This review includes inspection of the manufacturing facility, the data recording process for the clinical studies, the record keeping at a sample of clinical trial sites and a thorough review of the data collected and analyzed for each non-clinical and clinical study. Through this investigation, the FDA reaches a decision about the risk-benefit profile of a product candidate. If the benefit is worth the risk, the FDA begins negotiating with the company about the content of an acceptable package insert and associated Risk Evaluation and Mitigation Strategies (“ REMS ”), if required.

 

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The approval process is affected by a number of factors, including the severity of the disease, the availability of alternative treatments and the risks and benefits demonstrated in clinical trials. Consequently, there is a risk that approval may not be granted on a timely basis, if at all. The FDA may deny a PMA if applicable regulatory criteria are not satisfied, require additional testing or information or require post-marketing testing (Phase 4) and surveillance to monitor the safety of a company’s product if it does not believe the PMA contains adequate evidence of the safety and efficacy of the product. Moreover, if regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which it may be marketed. Finally, product approvals may be withdrawn if compliance with regulatory standards is not maintained or health problems are identified that would alter the risk-benefit analysis for the product. Post-approval studies may be conducted to explore the use of the product for new indications or populations such as pediatrics.

 

Among the conditions for PMA approval is the requirement that any prospective manufacturer’s quality control and manufacturing procedures conform to the FDA’s Good Manufacturing Practices and the specifications approved in the PMA. In complying with standards set forth in these regulations, manufacturers must continue to expend time, money and effort in the area of product and quality control to ensure full technical compliance. Manufacturing establishments, both foreign and domestic, also are subject to inspections by or under the authority of the FDA and by other federal, state or local agencies. Additionally, in the event of non-compliance, FDA may issue warning letters and/or seek criminal and civil penalties, enjoin manufacture, seize product or revoke approval.

 

International Approval

 

Whether or not FDA approval has been obtained, approval of a product by regulatory authorities in foreign countries must be obtained prior to the commencement of commercial sales of the drug in such countries. The requirements governing the conduct of clinical trials and drug approvals vary widely from country to country, and the time required for approval may be longer or shorter than that required for FDA approval. Although there are some procedures for unified filings for certain European countries, in general, each country at this time has its own procedures and requirements.

 

Other Regulation

 

In addition to regulations enforced by the FDA, Bone is also subject to U.S. regulation under the Controlled Substances Act, the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other present and potential future federal, state, local or similar foreign regulations. Bone’s research and development may involve the controlled use of hazardous materials, chemicals and radioactive compounds. Although Bone believes that its safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of any accident, Bone could be held liable for any damages that result and any such liability could exceed Bone’s resources.

 

Employees

 

As of the date hereof, Bone has one part-time employee working for Bone as Bone’s President and Chief Technology Officer (“ CTO ”).

 

Strategic Partners

 

Musculoskeletal Transplant Foundation

 

Bone Biologics has formed a formal strategic alliance with MTF on the collaborative development of osteoinductive products that incorporate MTF’s current product line of natural bone graft substitutes with Nell-1™. MTF is the exclusive allograft supplier for the BIOBONE-X™. MTF has become one of the major investors of Bone Biologics. MTF is the world’s largest allograft bone supplier. It is also the country’s largest full service tissue organization dedicated to providing quality tissue through a commitment to excellence in education, research, recovery and care for recipients, donors and their families. A not-for-profit organization, MTF is a consortium of academic medical institutions and organ and tissue recovery organizations across the country. Bone anticipates that MTF, with its proven ISO 9001 manufacturing and packaging of FDA approved osteogenic carriers, will significantly accelerate the clinical development cycle of Nell-1TM related products.

 

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Katayama Chemical Industries Co., Ltd

 

Katayama Chemical Industries Co., Ltd (“KCI”) , based in Osaka, Japan, was founded in 1918. KCI focuses on the production of OEM laboratory products for many distributors such as Amersham Biosciences, Millipore, and Sigma-Aldrich Japan, the exclusive Japanese distributor for laboratory products manufactured by KCI. Under a strategic partnership with Bone Biologics, KCI is seeking to develop clinical diagnostic reagents related to bone metabolism and regeneration. KCI produced the Nell-1 protein in an insect cell line that was utilized in development work and for proof of concept validation in rodent models and large animal (sheep) spinal fusion trials.

 

Available Information

 

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”). We are not required to deliver an annual report to our security holders, but will provide one voluntarily if a written request is sent to us at our principal executive office at 175 May Street, Suite 400, Edison, New Jersey. Reports filed with the SEC pursuant to the Exchange Act, including our annual and quarterly reports, and other reports we file, can be inspected and copied on official business days during the hours of 10 a.m. to 3 p.m. prevailing eastern time at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Investors may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. Investors can request copies of these documents upon payment of a duplicating fee by writing to the SEC. The reports we file with the SEC are also available on the SEC’s website ( http://www.sec.gov ).

 

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RISK FACTORS AND SPECIAL CONSIDERATIONS

 

This Report contains forward-looking statements.

 

Information provided in this Current Report may contain forward-looking statements which reflect management’s current view with respect to future events, the viability or efficacy of our products and our future performance. Such forward-looking statements may include projections with respect to market size and acceptance, revenues and earnings, marketing and sales strategies and business operations, as well as efficacy of our products.

 

We operate in a highly competitive and highly regulated business environment. Our business can be expected to be affected by government regulation, economic, political and social conditions, business’ response to new and existing products and services, technological developments and the ability to obtain and maintain patent and/or other intellectual property protection for our products and intellectual property. Our actual results could differ materially from management’s expectations because of changes both within and outside of our control. Due to such uncertainties and the risk factors set forth in this Current Report, prospective investors are cautioned not to place undue reliance upon such forward-looking statements.

 

Risks Related to Our Business

 

Our ability to grow and compete in the future will be adversely affected if adequate capital is not available to us or not available on terms favorable to us.

 

The ability of our business to grow and compete depends on the availability of adequate capital. Bone currently has no cash flow. We cannot assure you that we will be able to obtain equity or debt financing on acceptable terms or at all to implement our growth strategy. As a result, we cannot assure you that adequate capital will be available to finance our current growth plans, take advantage of business opportunities or respond to competitive pressures, any of which could harm our business.

 

Our recurring operating losses have raised substantial doubt regarding our ability to continue as a going concern.

 

Our recurring operating losses raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firms included an explanatory paragraph in their reports on our financial statements as and for the years ended December 31, 2013 and December 31, 2012 with respect to this uncertainty. The perception of our ability to continue as a going concern may make it more difficult for us to obtain financing for the continuation of our operations and could result in the loss of confidence by investors, suppliers and employees.

 

We have incurred losses for calendar year 2013 and we expect our operating expenses to increase in the foreseeable future, which may make it more difficult for us to achieve and maintain profitability.

 

We have no significant operating history and have never been profitable. From our inception on March 9, 2004 through June 30, 2014, we have generated a net loss of approximately $8.4 million. We have negative cash flow from operations, working capital deficiencies and have not established the commercial viability of our products. These conditions raise doubts as to the Company’s ability to continue as a going concern. The Company’s December 31, 2013 audited financial statements contained a notation by our auditors regarding the Company’s ability to continue as a going concern. Although we intend to raise additional capital or financing, we will continue to incur significant expenses for development activities for our lead product Nell-1. In addition, as a public company, we will incur additional accounting, legal and other expenses that we did not incur as a private company. These expenditures will make it harder for us to achieve profitability. As a result, we can provide no assurance as to whether or if we will ever be profitability. If we are not able to achieve and maintain profitability, the value of our company and our common stock could decline significantly.

 

There may be conflicts of interest between our management and our non-management stockholders and other affiliates.

 

Conflicts of interest create the risk that management may have an incentive to act adversely to the interests of the Company. A conflict of interest may arise between our management’s personal pecuniary interest and its fiduciary duty to our stockholders.

 

18
 

 

We face a number of risks associated with the completed Reverse Merger, including our incurrence of substantial debt which could adversely affect our financial condition.

 

On September 19, 2014, we completed the Merger. Completing the Merger increased our expenses, and we incurred substantial debt in completing the business combination, which could adversely affect our financial condition. In connection with the Merger, we incurred debt that includes, but is not limited to, a promissory note issued by the Company to AFH Advisory pursuant to which the Company agrees to pay AFH Advisory the amount of $340,000 out of the proceeds of the Private Placement for the remainder of the $590,000 owed to AFH Advisory in connection with the Merger. MTF has granted AFH Advisory a standby letter of credit in the amount of $340,000 for the remaining amount due under the Note. Principal and interest under the Note is due October 24, 2014.

 

Incurring a substantial amount of debt may require us to use a significant portion of any cash flow to pay principal and interest on the debt, which will reduce the amount available to fund working capital, capital expenditures, and other general purposes. Our indebtedness may negatively impact our ability to operate our business and limit our ability to borrow additional funds by increasing our borrowing costs, and impact the terms, conditions, and restrictions contained in possible future debt agreements, including the addition of more restrictive covenants; impact our flexibility in planning for and reacting to changes in our business as covenants and restrictions contained in possible future debt arrangements may require that we meet certain financial tests and place restrictions on the incurrence of additional indebtedness and place us at a disadvantage compared to similar companies in our industry that have less debt.

 

The business combination was completed through a “reverse merger.” As a result, we may not be able to attract the attention of major brokerage firms.

 

Securities analysts of major brokerage firms may not provide coverage of our Company since there is no incentive to brokerage firms to recommend the purchase of our Common Stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of our post-merger company.

 

We operate in a highly competitive environment.

 

The biotechnology industry is characterized by rapidly evolving technology and intense competition. Our competitors include major multi-national biotechnology companies developing both generic and proprietary therapies to treat serious diseases. Many of these companies are well-established and possess technical, human, research and development, financial and sales and marketing resources significantly greater than ours. In addition, many of our potential competitors have formed strategic collaborations, partnerships and other types of joint ventures with larger, well established industry competitors that afford these companies potential research and development and commercialization advantages in the therapeutic areas we are currently pursuing.

 

Academic research centers, governmental agencies and other public and private research organizations are also conducting and financing research activities which may produce products directly competitive to those being developed by us. In addition, many of these competitors may be able to obtain patent protection, obtain FDA and other regulatory approvals, and begin commercial sales of their products before us.

 

Our limited operating history makes it difficult to evaluate our current business and future prospects.

 

We have a limited operating history, and there is a risk that we will be unable to continue as a going concern. We have minimal assets and no significant financial resources. Our limited operating history makes it difficult to evaluate our current business model and future prospects. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development. Potential investors should carefully consider the risks and uncertainties that a new company with no operating history will face. In particular, potential investors should consider that there is a significant risk that we will not be able to:

 

  implement or execute our current business plan, which may or may not be sound;
     
  maintain our anticipated management and advisory team; and
     
  raise sufficient funds in the capital markets to effectuate our business plan.

 

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If we cannot execute any one of the foregoing or similar matters relating to our business, the business may fail, in which case you would lose the entire amount of your investment in the Company.

 

Our future success is dependent, in part, on the performance and continued service of our officers and directors.

 

We are presently dependent to a great extent upon the experience, abilities and continued services of William Jay Treat, our President and Chief Technology Officer. The loss of services of Mr. Treat could have a material adverse effect on our business, financial condition or results of operation.

 

We rely upon consulting agreements with third parties to provide the services of our interim chief executive officer and interim chief financial officer.

 

We have entered into consulting agreements with MTF and The Gilson Group, LLC (the “ Gilson Group ”) to provide us with the services of Michael Schuler as our interim chief executive officer and Catherine Doll as our interim chief financial officer. If we are unable to continue to obtain the services of Mr. Schuler or Ms. Doll, from MTF and Gilson Group respectively, the loss of their services could have a material adverse effect on our business, financial condition and our operational results.

 

Acceptance of our formulations or products in the marketplace is uncertain and failure to achieve market acceptance will prevent or delay our ability to generate revenues.

 

Our future financial performance will depend, at least in part, upon the introduction and customer acceptance of our products. Even if approved for marketing by the necessary regulatory authorities, our formulations or products may not achieve market acceptance. The degree of market acceptance will depend upon a number of factors, including:

 

  receipt of regulatory clearance of marketing claims for the uses that we are developing;
     
  establishment and demonstration of the advantages, safety and efficacy of our formulations, products and technologies;
     
  pricing and reimbursement policies of government and third-party payers such as insurance companies, health maintenance organizations and other health plan administrators;
     
  Our ability to attract corporate partners, including pharmaceutical companies, to assist in commercializing our proposed products; and
     
  Our ability to market our products.

 

Physicians, patients, payers or the medical community in general may be unwilling to accept, utilize or recommend any of our proposed formulations or products. If we are unable to obtain regulatory approval, commercialize and market our proposed formulations or products when planned, we may not achieve any market acceptance or generate revenue.

 

20
 

 

Our long term capital requirements are subject to numerous risks.

 

We believe we will need an additional $8 million to $10 million to complete all regulatory requirements and complete the Pilot clinical trials in human patients which is required prior marketing or selling our products. We anticipate we will need to raise substantial additional funds for the Pivotal clinical trial prior to marketing our first product. Our long term capital requirements are expected to depend on many factors, including, among others:

 

  the number of potential formulations, products and technologies in development;
     
  continued progress and cost of our research and development programs;
     
  progress with pre-clinical studies and clinical trials;
     
  time and costs involved in obtaining regulatory (including FDA) clearance;
     
  costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims;
     
  costs of developing sales, marketing and distribution channels and our ability to sell our formulations or products;
     
  costs involved in establishing manufacturing capabilities for commercial quantities of our products;
     
  competing technological and market developments;
     
  market acceptance of our drug formulations or products;
     
  costs for recruiting and retaining employees and consultants;
     
  costs for training physicians; and
     
  legal, accounting and other professional costs.

 

We may consume available resources more rapidly than currently anticipated, resulting in the need for additional funding. We may seek to raise any necessary additional funds through equity or debt financings, collaborative arrangements with corporate partners or other sources, which may be dilutive to existing stockholders or otherwise have a material effect on our current or future business prospects. If adequate funds are not available, we may be required to significantly reduce or refocus our development and commercialization efforts with regard to our delivery technologies and our proposed formulations and products.

 

Competitors could develop and/or gain FDA approval of our products for a different indication.

 

We cannot provide any assurances that any other company won’t obtain FDA approval for similar products that might adversely affect our ability to develop and market these products in the U.S. We are aware that other companies have intellectual property protection and have conducted clinical trials. Many of these companies may have more resources than us. We cannot provide any assurances that our products will be FDA-approved prior to our competitors.

 

The FDA does not regulate the practice of medicine and, as a result, cannot direct physicians to select certain products for their patients. Consequently, we might be limited in our ability to prevent off-label use of a competitor’s product to treat the diseases we intend to commercialize, even if we have issued method of use patents for that indication. If we are not able to obtain and enforce our patents, a competitor could develop and commercialize similar products for the same indications that we are pursuing. We cannot provide any assurances that a competitor will not obtain FDA approval for a product that contains the same active ingredients as our products.

 

21
 

 

We rely on method patents and patent applications and various regulatory exclusivities to protect some of our product candidates, and our ability to compete may be limited or eliminated if we are not able to protect our products.

 

The patent positions of biotechnology companies are uncertain and involve complex legal and factual questions. We may incur significant expenses in protecting our intellectual property and defending or assessing claims with respect to intellectual property owned by others. Any patent or other infringement litigation by or against us could cause us to incur significant expense and divert the attention of our management.

 

Others may file patent applications or obtain patents on similar technologies or compounds that compete with our products. We cannot predict how broad the claims in any such patents or applications will be and whether they will be allowed. Once claims have been issued, we cannot predict how they will be construed or enforced. We may infringe upon intellectual property rights of others without being aware of it. If another party claims we are infringing their technology, we could have to defend an expensive and time consuming lawsuit, pay a large sum if we are found to be infringing, or be prohibited from selling or licensing our products unless we obtain a license or redesign our product, which may not be possible.

 

We also rely on trade secrets and proprietary know-how to develop and maintain our competitive position. Some of our current or former employees, consultants, scientific advisors, current or prospective corporate collaborators, may unintentionally or willfully disclose our confidential information to competitors or use our proprietary technology for their own benefit. Furthermore, enforcing a claim alleging the infringement of our trade secrets would be expensive and difficult to prove, making the outcome uncertain. Our competitors may also independently develop similar knowledge, methods, and know-how or gain access to our proprietary information through some other means.

 

We may fail to retain or recruit necessary personnel, and we may be unable to secure the services of consultants.

 

As of the date of this Current Report, we have one part-time employee. We also engaged regulatory consultants to advise us on our dealings with the FDA and other foreign regulatory authorities and have been and will be required to retain additional consultants and employees. Our future performance will depend in part on our ability to successfully integrate newly hired officers into our management team and our ability to develop an effective working relationship among senior management.

 

Certain of our directors, officers, scientific advisors, and consultants serve as officers, directors, scientific advisors, or consultants of other biopharmaceutical or biotechnology companies or institutes that might be developing competitive products. Other than corporate opportunities, none of our directors are obligated under any agreement or understanding with us to make any additional products or technologies available to us. Similarly, we can give no assurances, and we do not expect and stockholders should not expect, that any biomedical or pharmaceutical product or technology identified by any of our directors or affiliates in the future would be made available to us other than corporate opportunities. We can give no assurances that any such other companies will not have interests that are in conflict with its interests.

 

Losing key personnel or failing to recruit necessary additional personnel would impede our ability to attain our development objectives. There is intense competition for qualified personnel in the drug-development field, and we may not be able to attract and retain the qualified personnel we need to develop our business.

 

We rely on independent organizations, advisors and consultants to perform certain services for us, including handling substantially all aspects of regulatory approval, clinical management, manufacturing, marketing, and sales. We expect that this will continue to be the case. Such services may not always be available to us on a timely basis.

 

We rely on third parties to supply our raw materials, and if certain manufacturing-related services do not timely supply these products and services, it may delay or impair our ability to develop, manufacture and market our products.

 

We rely on suppliers for raw materials and other third parties for certain manufacturing-related services to produce material that meets appropriate content, quality and stability standards and to use in clinical trials of its products. To succeed, clinical trials require adequate supplies of drug substance and drug product, which may be difficult or uneconomical to procure or manufacture. We and our suppliers and vendors may not be able to (i) produce our drug substance or drug product to appropriate standards for use in clinical studies, (ii) perform under any definitive manufacturing, supply or service agreements or (iii) remain in business for a sufficient time to successfully produce and market our product candidates. If we do not maintain important manufacturing and service relationships, we may fail to find a replacement supplier or required vendor or develop our own manufacturing capabilities which could delay or impair our ability to obtain regulatory approval for our products and substantially increase our costs or deplete profit margins, if any. If we do find replacement providers, we may not be able to enter into agreements with suppliers on favorable terms and conditions, or there could be a substantial delay before a new third party could be qualified and registered with the FDA and foreign regulatory authorities as a provider.

 

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Clinical trials are very expensive, time-consuming, and difficult to implement.

 

Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The clinical trial process is also time-consuming. We estimate that clinical trials of our product candidates would take at least several years to complete. Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials. Commencement and completion of clinical trials may be delayed by several factors, including:

 

  obtaining an IDE approval with the FDA to commence clinical trials;
     
  identification of, and acceptable arrangements with, one or more clinical sites;
     
  obtaining Institutional Review Board (“ IRB ”) approval to commence clinical trials;
     
  unforeseen safety issues;
     
  determination of dosing;
     
  lack of effectiveness during clinical trials;
     
  slower than expected rates of patient recruitment;
     
  inability to monitor patients adequately during or after treatment;
     
  inability or unwillingness of medical investigators to follow clinical protocols; and
     
  unwillingness of the FDA or IRBs to permit the clinical trials to be initiated.

 

In addition, we, IRBs or the FDA may suspend clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if IRBs or the FDA finds deficiencies in our submissions or the conduct of our trials.

 

The results of our clinical trials may not support our product candidate claims and the results of preclinical studies and completed clinical trials are not necessarily predictive of future results.

 

To date, long-term safety and efficacy have not yet been demonstrated in clinical trials for any of our diagnostic product candidates. Favorable results in early studies or trials, if any, may not be repeated in later studies or trials. Even if our clinical trials are initiated and completed as planned, it cannot be certain that the results will support our product candidate claims. Success in preclinical testing and Phase II clinical trials does not ensure that later Phase II or Phase III clinical trials will be successful. We cannot be sure that the results of later clinical trials would replicate the results of prior clinical trials and preclinical testing. In particular, the limited results we have obtained for our tests may not predict results from studies in larger numbers of subjects drawn from more diverse populations over a longer period of time. Clinical trials may fail to demonstrate that our product candidates are safe for humans and effective for indicated uses. Any such failure could cause us to abandon a product candidate and might delay development of other product candidates. Preclinical and clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals or commercialization. Any delay in, or termination of, our clinical trials would delay us in obtaining FDA approval for the affected product candidate and, ultimately, our ability to commercialize that product candidate.

 

23
 

 

We depend on third parties, including researchers, who are not under our control.

 

We depend upon independent investigators and scientific collaborators, such as universities and medical institutions or private physician scientists, to conduct our preclinical and clinical trials under agreements. These collaborators are not our employees, and they cannot control the amount or timing of resources that they devote to their programs or the timing of their procurement of clinical-trial data or their compliance with applicable regulatory guidelines. Should any of these scientific inventors/advisors become disabled or die unexpectedly, or should they fail to comply with applicable regulatory guidelines, we may be forced to scale back or terminate development of that program. They may not assign as great a priority to our programs or pursue them as diligently as we would if it were undertaking those programs itself. Failing to devote sufficient time and resources to our drug-development programs, or substandard performance and failure to comply with regulatory guidelines, could result in delay of any FDA applications and our commercialization of the drug candidate involved.

 

These collaborators may also have relationships with other commercial entities, some of which may compete with us. Our collaborators assisting our competitors at our expense could harm our competitive position. We have been and continue to be highly dependent on our strategic partner, MTF, for technical support and administrative support. We are also dependent on the support of the founding scientists who are UCLA employees for current scientific work in transitioning development work through and to contract vendors.

 

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights, as well as costs associated with lawsuits.

 

If any other person files patent applications, or is issued patents, claiming technology also claimed by us, we may be required to participate in interference proceedings in the U.S. Patent and Trademark Office to determine priority of invention. We or our licensors may also need to participate in interference proceedings involving issued patents and pending applications of another entity.

 

The intellectual property environment in our industry is particularly complex, constantly evolving and highly fragmented. Other companies and institutions have issued patents and have filed or will file patent applications that may issue into patents that cover or attempt to cover products, processes or technologies similar to us. We have not conducted freedom-to-use patent searches on all aspects of our product candidates or potential product candidates and may be unaware of relevant patents and patent applications of third parties. In addition, the freedom-to-use patent searches that have been conducted may not have identified all relevant issued patents or pending patents. We cannot provide assurance that our proposed products in this area will not ultimately be held to infringe one or more valid claims owned by third parties which may exist or come to exist in the future or that in such case we will be able to obtain a license from such parties on acceptable terms.

 

We cannot guarantee that our technologies will not conflict with the rights of others. In some foreign jurisdictions, we could become involved in opposition proceedings, either by opposing the validity of another’s foreign patent or by persons opposing the validity of our foreign patents.

 

We may also face frivolous litigation or lawsuits from various competitors or from litigious securities attorneys. The cost of any litigation or other proceeding relating to these areas, even if deemed frivolous or resolved in our favor, could be substantial and could distract management from its business. Uncertainties resulting from initiation and continuation of any litigation could have a material adverse effect on our ability to continue our operations.

 

If we infringe the rights of others, we could be prevented from selling products or forced to pay damages.

 

If our products, methods, processes, and other technologies are found to infringe the proprietary rights of other parties, we could be required to pay damages, or may be required to cease using the technology or to license rights from the prevailing party. Any prevailing party may be unwilling to offer us a license on commercially acceptable terms.

 

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Our product candidates are at an early stage of development and may not be successfully developed or commercialized.

 

Our products are in the early stage of development and will require substantial further capital expenditures, development, testing, and regulatory clearances prior to commercialization. The development and regulatory approval process takes several years, and it is not likely that our products, technologies or processes, even if successfully developed and approved by the FDA, would be commercially available for five or more years. Of the large number of drugs in development, only a small percentage successfully completes the FDA regulatory approval process and is commercialized. Accordingly, even if we are able to obtain the requisite financing to fund our development programs, we cannot assure you that our product candidates will be successfully developed or commercialized. Our failure to develop, manufacture or receive regulatory approval for or successfully commercialize any of our product candidates, could result in the failure of our business and a loss of all of your investment in our company.

 

Any product candidates advanced into clinical development are subject to extensive regulation, which can be costly and time consuming, cause unanticipated delays or prevent the receipt of the required approvals to commercialize such product candidates.

 

The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our product candidates are subject to extensive regulation by the FDA in the U.S. and by comparable health authorities in foreign markets. In the U.S., we may not be permitted to market our product candidates until we receive approval of our PMA from the FDA. The process of obtaining PMA approval is expensive, often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved. In addition to the significant clinical testing requirements, our ability to obtain marketing approval for these products depends on obtaining the final results of required non-clinical testing, including characterization of the manufactured components of our product candidates and validation of our manufacturing processes. The FDA may determine that our product manufacturing processes, testing procedures or facilities are insufficient to justify approval. Approval policies or regulations may change and the FDA has substantial discretion in the approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed.

 

The FDA or another regulatory agency can delay, limit or deny approval of a product candidate for many reasons, including, but not limited to:

 

  the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of clinical trials;
     
  We may be unable to demonstrate to the satisfaction of the FDA that a product candidate is safe and effective for any indication;
     
  the FDA may not accept clinical data from trials which are conducted by individual investigators or in countries where the standard of care is potentially different from the U.S.;
     
  the results of clinical trials may not meet the level of statistical significance required by the FDA for approval;
     
  We may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
     
  the FDA may disagree with our interpretation of data from preclinical studies or clinical trials;
     
  the FDA may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we or our collaborators contract for clinical and commercial supplies; or
     
  the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical data insufficient for approval.

 

With respect to foreign markets, approval procedures vary among countries and, in addition to the aforementioned risks, can involve additional product testing, administrative review periods and agreements with pricing authorities. In addition, recent events raising questions about the safety of certain marketed pharmaceuticals may result in increased cautiousness by the FDA and comparable foreign regulatory authorities in reviewing new pharmaceuticals based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals. Any delay in obtaining, or inability to obtain, applicable regulatory approvals could prevent us from commercializing our product candidates.

 

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Any product candidate we advance into clinical trials may cause unacceptable adverse events or have other properties that may delay or prevent their regulatory approval or commercialization or limit their commercial potential.

 

Unacceptable adverse events caused by any of our product candidates that we advance into clinical trials could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications and markets. This, in turn, could prevent us from commercializing the affected product candidate and generating revenues from its sale.

 

We have not yet completed testing of any of our product candidates for the treatment of the indications for which we intend to seek product approval in humans, and we currently do not know the extent of adverse events, if any, that will be observed in patients who receive any of our product candidates. If any of our product candidates cause unacceptable adverse events in clinical trials, we may not be able to obtain regulatory approval or commercialize such product or, if such product candidate is approved for marketing, future adverse events could cause us to withdraw such product from the market.

 

Delays in the commencement of clinical trials could result in increased costs and delay our ability to pursue regulatory approval.

 

The commencement of clinical trials can be delayed for a variety of reasons, including delays in:

 

  obtaining regulatory clearance to commence a clinical trial;
     
  identifying, recruiting and training suitable clinical investigators;
     
  reaching agreement on acceptable terms with prospective clinical research organizations, and trial sites, the terms of which can be subject to extensive negotiation, may be subject to modification from time to time and may vary significantly among different clinical research organizations and trial sites;
     
  obtaining sufficient quantities of a product candidate for use in clinical trials;
     
  obtaining an IRB or ethics committee approval to conduct a clinical trial at a prospective site;
     
  identifying, recruiting and enrolling patients to participate in a clinical trial; and
     
  retaining patients who have initiated a clinical trial but may withdraw due to adverse events from the therapy, insufficient efficacy, fatigue with the clinical trial process or personal issues.

 

Any delays in the commencement of clinical trials will delay our ability to pursue regulatory approval for our product candidates. In addition, many of the factors that cause, or lead to, a delay in the commencement of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate.

 

Suspensions or delays in the completion of clinical testing could result in increased costs to us and delay or prevent our ability to complete development of that product or generate product revenues.

 

Once a clinical trial has begun, patient recruitment and enrollment may be slower than we anticipate. Clinical trials may also be delayed as a result of ambiguous or negative interim results or difficulties in obtaining sufficient quantities of product manufactured in accordance with regulatory requirements. Further, a clinical trial may be modified, suspended or terminated by us, an IRB, an ethics committee or a data safety monitoring committee overseeing the clinical trial, any clinical trial site with respect to that site, or the FDA or other regulatory authorities due to a number of factors, including:

 

  failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
     
  inspection of the clinical trial operations or clinical trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
     
  stopping rules contained in the protocol;
     
  unforeseen safety issues or any determination that the clinical trial presents unacceptable health risks; and/or
     
  lack of adequate funding to continue the clinical trial.

 

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Any changes in the current regulatory requirements and guidance also may occur, and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit clinical trial protocols to IRBs for re-examination, which may impact the costs, timing and the likelihood of a successful completion of a clinical trial. If we experience delays in the completion of, or if we must suspend or terminate, any clinical trial of any product candidate, our ability to obtain regulatory approval for that product candidate will be delayed and the commercial prospects, if any, for the product candidate may suffer as a result. In addition, many of these factors may also ultimately lead to the denial of regulatory approval of a product candidate.

 

Privacy Provisions of HIPAA

 

HIPAA, among other things, protects the privacy and security of individually identifiable health information by limiting its use and disclosure. HIPAA directly regulates “covered entities” (healthcare providers, insurers and clearinghouses) and indirectly regulates “business associates” with respect to the privacy of patients’ medical information. All entities that receive and process protected health information are required to adopt certain procedures to safeguard the security of that information. It is uncertain whether we would be deemed to be a covered entity under HIPAA, and it is unlikely that we, based on our current business model, would be a business associate. Nevertheless, we may be contractually required to physically safeguard the integrity and security of any patient information that we receive, store, create or transmit. If we fail to adhere to our contractual commitments, then certain of our contract counterparties may be subject to civil monetary penalties and this could adversely affect our ability to market our product. If we are deemed to be a vendor, under the Health Information Technology for Economic and Clinical Health Act, enacted as part of the American Recovery and Reinvestment Act of 2009, then we will be obligated to adopt various security measures. We may also be subject to state and foreign privacy laws under which breaches could lead to substantial fines and liability.

 

We may be subject to claims that our consultants or independent contractors have wrongfully used or disclosed alleged trade secrets of their other clients or former employers to us.

 

As is common in the biotechnology industry, we engage the services of consultants to assist in the development of our product candidates. Many of these consultants were previously employed at, or may have previously been or are currently providing consulting services to, other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may become subject to claims that we or our consultants have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of our former employers or their former or current customers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

 

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications for which there may be a greater likelihood of success.

 

Because we have limited financial and managerial resources, we are focused on one research program. As a result, we may forego or delay pursuit of opportunities with other product candidates or, for other indications for which there may be a greater likelihood of success or may prove to have greater commercial potential. Notwithstanding our investment to date and anticipated future expenditures, we may never successfully develop, any marketed treatments using these products. Research programs to identify new product candidates or pursue alternative indications for current product candidates require substantial technical, financial and administrative support.

 

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We may incur substantial product liability or indemnification claims relating to the clinical testing of our product candidates.

 

We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials, and claims could be brought against us if use or misuse of one of our product candidates causes, or merely appears to have caused, personal injury or death. While we have and intend to maintain product liability insurance relating to our clinical trials, our coverage may not be sufficient to cover claims that may be made, and we may be unable to maintain such insurance. Any claims, regardless of their merit, could severely harm our financial condition, strain our management and other resources or destroy the prospects for commercialization of the product which is the subject of any such claim. We are unable to predict if we will be able to obtain or maintain product liability insurance for any products that may be approved for marketing. Additionally, it is expected that we will need to enter into various agreements where we indemnify third parties for certain claims relating to the testing of our product candidates. These indemnification obligations may require us to pay significant sums of money for claims that are covered by these indemnifications.

 

Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing.

 

Certain laws and regulations require us to test our product candidates on animals before initiating clinical trials involving humans. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted, delayed or become more expensive.

 

We use biological materials and may use hazardous materials, and any claims relating to improper handling, storage or disposal of these materials could be time consuming or costly.

 

We may use hazardous materials, including chemicals and biological agents and compounds, that could be dangerous to human health and safety or the environment. Our operations also produce hazardous waste products. Federal, state and local laws and regulations govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our product development efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. We do not carry specific biological or hazardous waste insurance coverage, and our property and casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.

 

28
 

 

Risks Related to Ownership of Our Common Stock

 

There is no public trading market for our Common Stock, and you may not be able to resell your Common Stock.

 

There is no established public trading market for our securities. Our shares are not and have not been quoted on any exchange or quotation system. We cannot assure you that an application for listing will be approved or that a regular trading market will develop or that if developed, will be sustained. In the absence of a trading market, an investor may be unable to liquidate its investment, which will result in the loss of your investment.

 

We have no plans to pay dividends.

 

To date, we have paid no cash dividends on our Common Stock. For the foreseeable future, earnings generated from our operations will be retained for use in our business and not to pay dividends.

 

The application of the SEC’s “penny stock” rules to our Common Stock could limit trading activity in the market, and our stockholders may find it more difficult to sell their stock.

 

It is expected that our Common Stock will be trading at less than $5.00 per share and will therefore be subject to the SEC’s penny stock rules. Penny stocks generally are equity securities with a price of less than $5.00. Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our Common Stock and may affect your ability to resell our Common Stock.

 

If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.

 

Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

As a public company, we have significant additional requirements for enhanced financial reporting and internal controls. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.

 

We cannot assure you that we will, in the future, identify areas requiring improvement in our internal control over financial reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.

 

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If the SEC does not declare a registration statement effective, you may not be able to sell shares in the amounts or at the times you might otherwise wish to.

 

The Company will enter into the Registration Rights Agreement at the closing of the Merger. Pursuant to the Registration Rights Agreement, MTF and AFH may, at any time, request registration under the Securities Act of all or part of their registrable shares. Within thirty (30) days of such request, the Company will provide written notice of such request to all other holders of registrable securities and will include in such registration all registrable shares with respect to which the Company has received written requests for inclusion within thirty (30) days after delivery of the Company’s notice. Although the Company believes that it and its advisors will be able to take all steps necessary to permit the SEC to declare the registration statement effective, it is possible that the SEC may, by application of policies or procedures that vary from past policies and procedures, delay the effectiveness of the registration statement or make it impractical for the Company to respond to the SEC in a manner that permits it to declare the registration statement effective. If the registration statement is not declared effective, you will need to rely on exemptions from the registration requirements of the Securities Act, such as Rule 144. Such exemptions typically limit the amount of shares that can be sold, require that shares be sold in certain types of transactions and require certain holding periods.

 

The market price of our Common Stock may be volatile.

 

The market price of our Common Stock may be highly volatile. Some of the factors that may materially affect the market price of our Common Stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of our Common Stock. These factors may materially adversely affect the market price of our Common Stock, regardless of our performance. In addition, public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our Common Stock.

 

Because our directors and executive officers are among our largest stockholders, they can exert significant control over our business and affairs and have actual or potential interests that may depart from those of investors in the Subsequent Closings.

 

The holdings of our directors and executive officers may increase in the future upon vesting or other maturation of exercise rights under any of the options or warrants they may hold or in the future be granted or if they otherwise acquire additional shares of Common Stock. The interests of such persons may differ from the interests of our other stockholders, including purchasers of shares of Common Stock in the Subsequent Closings. As a result, in addition to their board seats and offices, such persons will have significant influence over and control all corporate actions requiring stockholder approval, irrespective of how the Company’s other stockholders, including purchasers in the Subsequent Closings, may vote, including the following actions:

 

  to elect or defeat the election of our directors;
     
  to amend or prevent amendment of our Amended and Restated Certificate of Incorporation or By-laws;
     
  to effect or prevent a merger, sale of assets or other corporate transaction; and
     
  to control the outcome of any other matter submitted to our stockholders for vote.

 

This concentration of ownership by itself may have the effect of impeding a merger, consolidation, takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for the Common Stock which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

 

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We cannot assure you that the Common Stock will be listed on NASDAQ or any other securities exchange.

 

We intend to seek quotation on the Over-the-Counter Bulletin and possible listing of the Common Stock on NASDAQ. However, we cannot assure you that we will be able to meet the initial listing standards of either of those or any other stock exchange, or that we will be able to maintain a listing of the Common Stock on either of those or any other stock exchange. This would also make it more difficult for us to raise additional capital. There are no assurances that an active market for our shares will develop even if we are listed.

 

There is currently no trading market for our Common Stock, and liquidity of shares of our Common Stock is limited.

 

Shares of our Common Stock are not registered under the securities laws of any state or other jurisdiction, and accordingly there is no public trading market for the Common Stock. Further, no public trading market is expected to develop in the foreseeable future unless and until the Company files and obtains effectiveness of a registration statement under the Securities Act. Therefore, outstanding shares of Common Stock cannot be offered, sold, pledged or otherwise transferred unless subsequently registered pursuant to, or exempt from registration under, the Securities Act and any other applicable federal or state securities laws or regulations.

 

Compliance with the criteria for securing exemptions under federal securities laws and the securities laws of the various states is extremely complex, especially in respect of those exemptions affording flexibility and the elimination of trading restrictions in respect of securities received in exempt transactions and subsequently disposed of without registration under the Securities Act or state securities laws.

 

We may issue more shares in a future financing which will result in substantial dilution.

 

Our Amended and Restated Certificate of Incorporation authorizes the issuance of a maximum of 100,000,000 shares of Common Stock and a maximum of 20,000,000 shares of Preferred Stock. Any future merger or acquisition effected by us would result in the issuance of additional securities without stockholder approval and the substantial dilution in the percentage of our Common Stock held by our then existing stockholders. Moreover, the Common Stock issued in any such merger or acquisition transaction may be valued on an arbitrary or non-arm’s-length basis by our management, resulting in an additional reduction in the percentage of Common Stock held by our then existing stockholders. Additionally, we expect to seek additional financing in order to provide working capital to the operating business. Our Board of Directors has the power to issue any or all of such authorized but unissued shares without stockholder approval. To the extent that additional shares of Common Stock or Preferred Stock are issued in connection with and following a business combination or otherwise, dilution to the interests of our stockholders will occur and the rights of the holders of Common Stock might be materially and adversely affected.

 

Our Board of Directors is authorized to issue Preferred Stock without obtaining shareholder approval.

 

Our Amended and Restated Certificate of Incorporation authorizes the issuance of up to 20,000,000 shares of Preferred Stock with designations, rights and preferences determined from time to time by the Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the Common Stock. In the event of issuance, the Preferred Stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. Although we have no present intention to issue any shares of Preferred Stock, there can be no assurance that the Company will not do so in the future.

 

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Risks Related to the Private Placement

 

Your ability to sell your shares is not assured because there are restrictions on their transfer.

 

The shares sold in the Private Placement are being sold as a private placement of securities. There is, at present, no trading market for such shares. The shares may not be sold or transferred unless registered under the Securities Act, and applicable state securities laws, or unless an opinion of counsel satisfactory to the Company is obtained to the effect that an exemption from registration is available and such transfer is approved by the Company. Each investor will be required to represent that it is acquiring the shares for its individual investment and not with a view to resale within the meaning of the Act. THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL EVER FILE A REGISTRATION STATEMENT TO REGISTER SUCH SECURITIES, THAT SUCH REGISTRATION STATEMENT WILL BECOME EFFECTIVE, OR THAT ONCE EFFECTIVE, SUCH EFFECTIVENESS WILL BE MAINTAINED OR THAT A PUBLIC TRADING MARKET CAN EVER BE ESTABLISHED OR MAINTAINED.

 

Our management has discretion as to the use of proceeds from the Private Placement.

 

The net proceeds, if any, from the Private Placement will be used as described under Subsequent Closings in this Current Report. We may spend or invest these proceeds in a way with which our stockholders disagree, and we reserve the right to use the funds obtained from the Private Placement for other purposes not presently contemplated which we deem to be in our and our stockholders’ best interests in order to address changed circumstances and opportunities. Failure by our management to effectively use these funds could harm our business and financial condition. Investors will be entrusting their funds to our management, upon whose judgment and discretion the investors must depend, with only limited information concerning management’s specific intentions.

 

We may include purchases from affiliated investors in determining whether we have sold the shares.

 

Purchases made by affiliates of the Company will be used in determining whether the maximum offering amount has been sold. Investors in the Private Placement, therefore, should not assume that investments in the Company came from a large number of unaffiliated investors.

 

There can be no assurance that the results and events contemplated by forward-looking statements will, in fact, transpire.

 

There are statements in this Current Report that are not historical facts. These “forward-looking statements” can be identified by the use of terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions. You should be aware that these forward-looking statements are subject to risks and uncertainties that are beyond our control. Actual results could differ significantly from these forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained in this Registration Statement will in fact transpire. You are cautioned to not place undue reliance on these forward-looking statements, which speak only as of their dates. We do not undertake any obligation to update or revise any forward-looking statements.

 

The price of the shares and other terms of the Private Placement have been arbitrarily determined.

 

If you purchase shares of Common Stock in the Private Placement, you will pay a price that was not established in a competitive market. Rather, you will pay a price that was arbitrarily determined by the Company. The Private Placement price for the shares may bear no relationship to our assets, book value, historical results of operations or any other established criterion of value and may not be indicative of the fair value of the shares.

 

IN ADDITION TO THE ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY OUR MANAGEMENT. IN REVIEWING THIS MEMORANDUM, POTENTIAL INVESTORS SHOULD KEEP IN MIND THAT THERE MAY BE OTHER POSSIBLE RISKS THAT COULD BE IMPORTANT.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of the results of operations and financial condition for the six months ended June 30, 2014 and the year ended December 31, 2013 and 2012 of Bone Biologics should be read in conjunction with our financial statements and the notes to those financial statements that follow the signature page to this Current Report. The financial statements should not be relied on for an understanding of the current financial status of the Company.

 

Overview

 

Bone Biologics was incorporated in California on March 9, 2004. Bone Biologics is a privately-held biotechnology company that is currently focused on bone regeneration in spinal fusion using the recombinant human protein, known as Nell-1. The Nell-1 protein is an osteoinductive recombinant protein that provides target specific control over bone regeneration. The protein, as part of the UCB-1 technology platform has been licensed exclusively for worldwide applications to Bone through a technology transfer from UCLA. UCLA and Bone recently received guidance from the FDA that Nell-1 will be classified as a combination product with a device lead.

 

We are a development stage entity. The production and marketing of our products and ongoing research and development activities will be subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any combination product developed by us must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the FDA under the Food, Drug and Cosmetic Act. There can be no assurance that we will not encounter problems in clinical trials that will cause us or the FDA to delay or suspend the clinical trial.

 

Our success will depend in part on our ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by us will not be challenged, invalidated, or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to us.

 

Pursuant to the Milestone Side Letter Agreement, Bone agreed to use its commercially reasonable efforts to achieve the following Milestone Targets by the specified times following the closing of the Private Placement:

 

  (i) Complete media screening studies of cell line within two (2) to three (3) months;
     
  (ii) Initiate manufacturing of master cell bank within three (3) to four (4) months;
   
  (iii) Initiate formulation studies for the cGMP manufacturing process once sufficient Nell-1 material is available within approximately eight (8) to ten (10) months;
     
  (iv) Initiate a pre-clinical bioreactor production run for toxicology material within nine (9) to twelve (12) months following the closing of the Private Placement;
     
  (v) Initiate pre-clinical toxicology studies to include carcinogenicity and reproductive within approximately eleven (11) to thirteen (13) months;
     
  (vi) Finalize refinement of the manufacturing process within approximately twelve (12) to fourteen (14) months;
     
  (vii) Initiate cGMP bioreactor run within twelve (12) to fourteen (14) months or after completion of (v), and
     
  (viii) Request an IDE meeting to review the clinical safety plan within eighteen (18) to twenty (20) months;

 

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Results of Operations

 

Since its inception, Bone devoted substantially all of its efforts and funding to the development of the Nell-1 protein and raising capital. We have not generated revenues from our planned operations.

 

Year ended December 31, 2013 compared to Year ended December 31, 2012

 

    Year Ended
December 31, 2013
    Year Ended
December 31, 2012
 
Operating expenses                
Research and development   $ 188,236     $ 255,575  
General and administrative     483,749       180,089  
Total operating expenses     671,984       435,664  
Loss from operations     (671,984 )     (435,664 )
Interest expense, net     (409,419 )     (279,101 )
Loss before provision for income taxes     (1,081,403 )     (714,765 )
Provision for income taxes     800       800  
Net loss   $ (1,082,203 )   $ (715,565 )

 

Research and Development

 

Bone’s research and development expenses decreased from $255,575 during the year ended December 31, 2012 to $188,236 during the year ended December 31, 2013. The $67,339 or 26.3% decrease was related to patent costs and development activities for Bone’s lead product Nell-1. We will continue to incur significant expenses for development activities for Nell-1.

 

General and Administrative

 

Bone’s general and administrative expenses increased from $180,089 during the year ended December 31, 2012 to $483,749 during the year ended December 31, 2013. The $303,660 or 168.6% increase was primarily driven by increased expenses due to professional services and transaction costs related to the Bridge Financing and pursuing the merger related transactions.

 

Interest Expense

 

Bone’s net interest expense increased from $279,101 for the year ended December 31, 2012 to $409,419 for the year ended December 31, 2013. The increase in expenses of $130,318 or 46.7% was due to interest expense on our related party promissory notes and our bridge financing.

 

Net Loss

 

Bone’s net loss increased from $715,565 for the year ended December 31, 2012 to $1,082,203 for the year ended December 31, 2013, as a result of the increase in general and administrative expenses and interest expense.

 

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Six Months ended June 30, 2014 compared to the Six Months ended June 30, 2013

 

    Six Months Ended
June 30, 2014
    Six Months Ended
June 30, 2013
 
    (unaudited)     (unaudited)  
Operating expenses                
Research and development   $ 183,111     $ 96,213  
General and administrative     307,948       215,937  
Total operating expenses     491,059       312,150  
                 
Loss from operations     (491,059 )     (312,150 )
Other expense     (9,623 )     0  
Interest expense, net     (250,533 )     (172,524 )
Total other income/expense     (260,156 )     (172,524 )
                 
Loss before provision for income taxes     (751,215 )     (484,674 )
Provision for income taxes     0       800  
Net loss   $ (751,215 )   $ (485,474 )

 

Research and Development

 

Bone’s research and development expenses increased from $96,213 during the six months ended June 30, 2014 to $183,111 during the six months ended June 30, 2013. The $86,898 or 90.3% increase was driven by development activities for Bone’s lead product Nell-1. We will continue to incur significant expenses for development activities for Nell-1.

 

General and Administrative

 

Bone’s general and administrative expenses increased from $215,937 during the six months ended June 30, 2013 to $ 307,948 during the six months ended June 30, 2014. The $ 92,011 or 42.6% increase was primarily driven by professional fees surrounding additional financing and merger related transactions.

 

Other Expense

 

Bone’s other expense increased from $0 for the six months ended June 30, 2013 to $9,623 for the six months ended June 30, 2014. The increase in expense was due to the realized loss on sale of marketable securities received in lieu of cash on our 2013 Bridge Note with AFH.

 

Interest Expense

 

Bone’s net interest expense increased from $172,524 for the six months ended June 30, 2013 to $250,533 for the six months ended June 30, 2014. The $78,009 or 45.2% increase in interest expense was due to interest expense on related party notes due to MTF and the 2013 Bridge Financing.

 

Net Loss

 

Bone’s net loss increased from $485,474 for the six months ended June 30, 2013 to $751,215 for the six months ended June 30, 2014 as a result of the increases in research and development expenses, general and administrative expenses and interest expense.

 

Liquidity and Capital Resources

 

Bone has no significant operating history and, from March 9, 2004 (inception) to June 30, 2014, has generated a net loss of approximately $8.4 million. The financial statements for the six months ended June 30, 2014 and 2013 and the years ended December 31, 2013 and 2012 were prepared assuming we will continue as a going concern.

 

As of June 30, 2014 and December 31, 2013 and 2012, Bone had cash of $163, $1,538 and $2,370, respectively. Management intends to raise additional debt and/or equity financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet our needs. We can provide no assurance that we can continue to satisfy our cash requirements for the next twelve months.

 

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In May, 2014, the Company entered into a convertible promissory note with MTF (the “2014 Note”) for $250,000 with interest at 7% per annum compounded annually and a maturity date of June 15, 2015. In the event of a financing of not less than $1 million, the 2014 Note automatically converts into Equity Securities, as defined in the 2014 Note, at a 25% discount to the price paid per share in such financing. In connection with the 2014 Note, the Company issued a warrant to purchase 166,667 shares of the Company’s common stock at an exercise price of $1.50 per share and 4 year term. The warrants had a fair value of $78,417, calculated using the Black-Scholes option pricing model with a volatility of 109%, a risk free rate of 0.39%. The Company incurred placement agent fees of $10,000 or 4% of the funds raised in connection with the financing and is obligated to issue a warrant for the purchase of 13,333 shares of common stock, which represents 4% of the common shares underlying the 2014 Note, with an exercise price of $1.00, a 5 year term and fair value of $8,181, calculated using the Black-Scholes model with a volatility of 109% and a risk free rate of 0.39%. The 2014 Note and related warrants were assigned to Orthofix in July 2014 and included in the Subsequent Orthofix Financing discussed below.

 

On July 1, 2014, Orthofix (A) purchased $500,000 worth of Bone Biologics Common Stock; (B) was issued two convertible promissory notes, each in the principal amount of $250,000 and exercisable for $333,333 worth of Bone Biologics Common Stock; and (C) was issued two warrants, each exercisable for 166,667 shares of Bone Biologics Common Stock at an exercise price per share of $1.50. Upon subscribing for the Subsequent Orthofix Shares, the Subsequent Orthofix Convertible Promissory Notes converted by their terms into a combined total of $666,666 worth of shares of Bone Biologics’ Common Stock in accordance with the terms of the Subsequent Orthofix Convertible Promissory Notes. The Subsequent Orthofix Warrants converted into warrants of the Company with substantially identical terms upon consummation of the Merger.

 

At the closing of the Subsequent Orthofix Shares and Notes, AFH Advisory was entitled to receive warrants to purchase up to 500,000 shares of Common Stock of the Company at the per share price of the shares offered or $1.00 per share, with a 5 year term and a cashless exercise provision (the “ Extra Warrants ”). AFH Advisory has normal and customary piggyback registration rights with respect to the shares of Common Stock issuable upon exercise of the Extra Warrants.

 

Forefront or its designees will receive an Agent Warrant equal to 8% of the Common Stock underlying the securities issued in the Private Placement (4% if investors are introduced by Bone Biologics, AFH Holdings & Advisory, LLC or their respective officers and directors). Such Agent Warrant will be issued at the closing of the Private Placement and shall provide, among other things, that the Agent Warrant shall: (i) be exercisable at the price of the securities (or the exercise price of the securities) issued to the investors in the offering, (ii) expire five (5) years from the date of issuance, (iii) include customary registration rights, including the registration rights provided to the Investors, (iv) contain provisions for cashless exercise and (v) include such other terms that are normal and customary for warrants of this type. In addition, Forefront or its designees will receive and Advisory Warrant equal to 2.0% of the Company’s post-merger and financing fully diluted shares outstanding upon the closing of $2.5 million of investors on which Forefront is eligible to receive compensation. Forefront was issued a warrant to purchase 46,667 shares of Common Stock at $1.00 per share upon completion of the Orthofix Subsequent Financing. Forefront will receive a cash fee equal to 8% of gross proceeds received and payable upon each closing (4% if investors are introduced to the Company by either Bone Biologics, AFH Holdings and Advisory, LLC, or their respective officers and directors, or an aggregate of $40,000 on the Orthofix Subsequent Financing, including $10,000 incurred in connection with the MTF 2014 Note assigned to Orthofix).

 

On September 15, 2014, Bone and MTF entered into the MTF Short Term 2014 Loan pursuant to which MTF has agreed to advance an initial $250,000 to Bone and, at Bone’s request and subject to the terms and conditions of the MTF Short Term 2014 Loan, to advance up to an additional $250,000 to Bone. The MTF Short Term 2014 Loan has an interest rate of eight and one-half percent (8.5%) accruing annually. The MTF Short Term 2014 Loan matures on the earlier to occur of (i) the date on which at least $1 million is loaned to or invested in the Company and (ii) December 31, 2014. In further consideration of the MTF 2014 Loan, Bone granted to MTF 625,000 warrants at a strike price of $1.62. The MTF 2014 Loan was assigned to the Company on September 19, 2014.

 

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Cash Flows

 

The following is a summary of Bone’s cash flows provided by operating, investing and financing activities for the six months ended June 30, 2014 and 2013, and the years ended December 31, 2013 and 2012:

 

    Six Months Ended
June 30, 2014
    Six Months Ended
June 30, 2013
    Year Ended
December 31, 2013
    Year Ended
December 31, 2012
 
Net Cash Used In Operating Activities   $ (288,752 )   $ (339,011 )   $ (525,365 )   $ (447,486 )
Net Cash Provided by Investing Activities     37,377       0       0       0  
Net Cash Provided by Financing Activities     250,000       374,533       524,533       448,609  
Net Increase (Decrease) in Cash and Cash Equivalents   $ (1,375 )   $ 35,522     $ (832 )   $ 1,123  

 

Operating activities

 

In the six months ended June 30, 2014 and 2013, cash used in operating activities was $288,752 and $339,011 respectively, which was driven by Bone’s net losses of $751,215 and $485,474, respectively. Cash expenditures in both the 2014 and 2013 periods increased primarily due to patent costs and professional fees as a result of Bone’s financing activities which included the Bridge Financing and matters related to financing and the merger transactions.

 

During the six months ended June 30, 2014, cash used in operating activities was partially offset by non-cash increases in accrued interest expense of $162,493, debt discount amortization of $91,111, advances due to related party of $89,374, other accrued expenses of $108,095 and a loss of $9,623 on the sale of marketable securities received in lieu of cash on our 2013 Bridge Note with AFH. During the six months ended June 30, 2013, cash used in operating activities included an increase in prepaid expenses and other current assets of $17,708 and a decrease in accrued expenses of $7,892, and were partially offset by non-cash increases in accrued interest expense of $161,616 and debt discount amortization of $10,447.

 

In the years ended December 31, 2013 and 2012, cash used in operating activities was $525,365 and $447,486, respectively, which was driven by Bone’s net losses of $1,082,203 and $715,565, respectively. Cash expenditures in 2013 and 2012 increased primarily due to patent costs and professional fees as a result of Bone’s financing activities which included the Bridge Financing and matters related to the merger transactions in 2013.

 

In the year ended December 31, 2013, cash used in operating activities increased due to an increase in prepaid expenses and other current assets of $10,767, and was offset by non-cash increases in accrued interest expense of $340,268 related to our Bridge Notes and notes due to MTF and an amortization of debt discount of $67,104, and increases in accrued expenses of $114,215 and accounts payable of $41,300. In the year ended December 31, 2012, cash used in operating activities increased due to a reduction in accounts payable of $29,657, which was offset by increases in accrued interest expense of $279,104 and accrued expenses of $18,632.

 

Investing activities

 

In the six months ended June 30, 2014, cash provided by investing activities of $37,377 resulted from the sale of marketable securities which were received in lieu of cash for our Bridge Note with AFH. There were no investing activities in the years ended December 31, 2013 or 2012.

 

Financing activities

 

In the six months ended June 30, 2014, cash provided by financing activities was $250,000 and resulted from the proceeds received from the issuance of the 2014 Note. In the six months ended June 30, 2013, cash provided by financing activities was $374,533 and resulted from the proceeds received from the issuance of the 2013 Bridge Notes and 2014 notes to MTF.

 

In the year ended December 31, 2013 and 2012, cash provided by financing activities of $524,533 and $448,609, respectively, was due to proceeds received from the issuance of promissory notes and convertible notes payable.

 

37
 

  

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Critical Accounting Policies

 

Our financial statements are presented in accordance with accounting principles generally accepted in the U.S., or GAAP. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Significant estimates include warrants and income tax valuation allowances. Actual results could differ from those estimates.

 

Patents and Licenses

 

In March 2006, Bone entered into the Regents’ License with the Regents for the worldwide application of the Nell-1 protein through a technology transfer. Patent expenses include costs to acquire the license of Nell-1, which was de minimus, and costs to file patent applications related to Nell-1.

 

Bone Biologics expenses the costs incurred to file patent applications, all costs related to abandoned patent applications and maintenance costs, and these costs are included in research and development expenses. Costs associated with licenses acquired to be able to use products from third parties prior to receipt of regulatory approval to market the related products are also expensed. Our licensed technologies may have alternative future uses in that they are enabling (or platform) technologies that can be the basis for multiple products that would each target a specific indication. Costs of acquisition of licenses are expensed.

 

Research and Development Costs

 

Research and development costs include, but are not limited to, payroll and other personnel expenses, consultants, expenses incurred under agreements with contract research and manufacturing organizations and animal clinical investigative sites and the cost to manufacture clinical trial materials. Costs related to research, design and development of products are charged to research and development expense as incurred.

 

Income Taxes

 

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due and deferred taxes resulting from timing differences in the recording of transactions for tax purposes and financial reporting purposes.

 

Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are received or settled. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized.

 

The accounting provisions related to uncertain income tax positions require us to determine whether any tax position in all open years meets a more likely than not threshold of being sustained upon examination by the applicable taxing authority. Bone did not have any changes to its liability for uncertain tax positions for the years ended December 31, 2013 and 2012.

 

Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. No such amounts were accrued by Bone as of June 30, 2014 and December 31, 2013 and 2012.

 

New Accounting Standard

 

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. We adopted ASU 2014-10 during the quarter ended June 30, 2014, thereby are no longer presenting or disclosing any information required by Topic 915.

 

38
 

 

DESCRIPTION OF PROPERTY

 

Our primary office, including administrative and laboratory space, is located at 175 May Street, Suite 400, Edison, NJ 08837. We also lease office space located at 100 Rancho Rd., Suite 7, Thousand Oaks, CA 91362.

 

39
 

 

SECURITY OWNERSHIP OF CERTAIN STOCKHOLDERS AND MANAGEMENT

 

Pre-Merger Beneficial Ownership

 

AFH Acquisition X, Inc.

 

The following table sets forth certain pre-merger information with respect to the beneficial ownership AFH Acquisition X, Inc. as of September 18, 2014, regarding (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii) each director, nominee and executive officer of the Company, and (iii) all officers and directors as a group.

 

Name and Address of Beneficial Owner   Title of Class     Shares   Percentage
of Class
 
AFH Holding & Advisory, LLC     Common Stock       3,175,000       63.50 %

10830 Massachusetts Ave., Penthouse

Los Angeles, CA 90024

                       
                         
Amir Heshmatpour     Common Stock       4,175,000 (1)     83.50 %

269 Beverly Drive, Ste. 1600

Beverly Hills, CA 90212

                       
                         
Don Hankey     Common Stock       450,000 (2)(3)     9 %

4751 Wilshire Blvd., Suite 110

Los Angeles, CA 90010

                       
                         

Hankey Investment Company, L.P.

 

    Common Stock       450,000       9 %
4751 Wilshire Blvd., Suite 110
Los Angeles, CA 90010
                       
                         
All Officers and Directors as a group     Common Stock       450,000       9 %

 

 

 

  (1) These shares of Common Stock are owned by AFH Holding, H&H and Mr. Heshmatpour’s spouse and children. Mr. Heshmatpour is sole member of AFH Holding and has sole voting and investment control over the 3,175,000 shares of Common Stock owned of record by AFH Holding. Mr. Heshmatpour is the sole member of H&H and has sole voting and investment control over the 200,000 shares of Common Stock owned of record by H&H. Mr. Heshmatpour has voting and investment control over the 800,000 shares of Common Stock owned by his spouse and children. Accordingly, he may be deemed a beneficial owner with respect to these 4,175,000 shares of Common Stock.
     
  (2) Executive Officer and/or Director
     
  (3) These shares of Common Stock are owned by Hankey Investment Company, L.P. (“HIC”). Mr. Hankey has voting and investment control over the shares of Common Stock owned of record by HIC. Accordingly, he may be deemed a beneficial owner with respect to the 450,000 shares.

 

40
 

 

Bone Biologics

 

The following table sets forth certain pre-merger information with respect to the beneficial ownership of Bone Biologics as of September 18, 2014, regarding (i) each person known by Bone Biologics to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii) each director, nominee and executive officer of Bone Biologics, and (iii) all officers and directors as a group.

 

Name and Address of Beneficial Owner   Title of Class    

Amount and Nature of
Beneficial Ownership (2)

    Percentage
of Class
 
5% or greater stockholders                  
                   
The Musculoskeletal Transplant
Foundation, Inc.
125 May Street
Edison, NJ 08837
    Common Stock       11,307,807       56.8 %
                         

Dr. Kang Ting (1)

115 North Doheny Drive

Beverly Hills, CA 90211

    Common Stock       2,000,000       10.1 %
                         
Orthofix Holdings Inc.
3451 Plana Parkway
Lewisville, TX 75056
    Common Stock       1,909,908       9.6 %
                         

Dr. Chia Soo (1)

115 North Doheny Drive

Beverly Hills, CA 90211

    Common Stock       1,119,318       5.6 %
                         

Dr. Benjamin Wu (1)

2740 Lorain Road

San Marino, CA 91108

    Common Stock       1,000,000       5.0 %
                         

Michael Schuler (1)

175 May Street, Suite 300

Edison, NJ 08837

    Common Stock                  
                         

Bruce Stroever (1)

175 May Street, Suite 300

Edison, NJ 08837

    Common Stock                  
                         

Mark Spilker (1)

175 May Street

Edison, NJ 08837

    Common Stock                  
                         
All Officers and Directors as a group     Common Stock       4,131,943       20.8 %

 

 

 

  (1) Executive Officer and/or Director
     
  (2) The number of shares of Common Stock issued and outstanding that was used to calculate the percentage ownership of each listed person includes the shares of Common Stock underlying convertible debt and warrants that are exercisable 60 days after the close of the Merger.

 

41
 

   

Post-Merger Beneficial Ownership

 

Company

 

The following table sets forth information with respect to the post-merger beneficial ownership of the Company’s common stock as of September 19, 2014, by each person or group of affiliated persons known to the Company to beneficially own 5% or more of its common stock, each director, each named executive officer, and all of its directors and named executive officers as a group.

 

Name of Beneficial Owner or Identity of Group   Title of Class     Shares (1)     Percentage  
5% or greater stockholders:                  
                   
The Musculoskeletal Transplant Foundation, Inc.
125 May Street
Edison, NJ 08837
  Common Stock       11,932,807       49.3 %
                       
AFH Holding & Advisory, LLC
10830 Massachusetts Ave., Penthouse
Los Angeles, CA 900024
  Common Stock       2,609,602       10.8 %
                       
Amir Heshmatpour
269 Beverly Drive, Ste. 1600
Beverly Hills, CA 90212
  Common Stock       3,609,602 (2)     14.9 %
                       
Dr. Kang Ting
115 North Doheny Drive
Beverly Hills, CA 90211
  Common Stock       2,000,000       8.3 %
                       
Orthofix Holdings Inc.
3451 Plana Parkway
Lewisville, TX 75056
  Common Stock       1,909,908       7.9 %
                       
Executive Officers and Directors:                      
                       
Michael Schuler
175 May Street
Edison, NJ 08837
          -       -  
                       
William J. Treat
175 May Street, Suite 400
Edison, NJ 08837
  Common Stock       198,202       0.8 %
                       
Catherine Doll
175 May Street, Suite 400
Edison, NJ 08837
  Common Stock       12,625       0.1 %
                       
Bruce Stroever
175 May Street, Suite 400
Edison, NJ 08837
          -       -  
                       
Dr. Chia Soo
175 May Street, Suite 400
Edison, NJ 08837
  Common Stock       1,119,318       4.6 %
                       
William Coffin
175 May Street, Suite 400
Edison, NJ 08837
          -       -  
                       
John Booth
175 May Street, Suite 400
Edison, NJ 08837
          -       -  
                       
Jimmy Delshad
175 May Street, Suite 400
Edison, NJ 08837
          -       -  
                       
Steve Warnecke
1026 Anaconda Drive
Castle Rock, CO 80108
          -       -  
                       
Total Officers and Directors as a Group   Common Stock       1,330,145       5.5 %
                       
Reserve for Future Issuance:                      
Option Plan         2,444,696          

 

 

 

  (1) The number of shares of Common Stock issued and outstanding that was used to calculate the percentage ownership of each listed person includes the shares of Common Stock underlying convertible debt, stock options and warrants that are exercisable 60 days after the close of the Merger.
     
  (2) These shares of Common Stock are owned by AFH Holding, H&H and Mr. Heshmatpour’s spouse and children. Mr. Heshmatpour is sole member of AFH Holding and has sole voting and investment control over the 2,609,602 shares of Common Stock owned of record by AFH Holding. Mr. Heshmatpour is the sole member of H&H and has sole voting and investment control over the 200,000 shares of Common Stock owned of record by H&H. Mr. Heshmatpour has voting and investment control over the 800,000 shares of Common Stock owned by his spouse and children. Accordingly, he may be deemed a beneficial owner with respect to these 3,609,602 shares of Common Stock.

 

42
 

 

DIRECTORS AND EXECUTIVE OFFICERS

 

The Company’s officers and directors are elected annually for a one year term or until their respective successors are duly elected and qualified or until their earlier resignation or removal. The following table sets forth certain information regarding the Company’s directors and executive officers:

 

Name   Age   Position   Term Length
Michael Schuler   64   Interim Chief Executive Officer   1 years
William J. Treat   59   President and Chief Technology Officer   1 year
Catherine Doll   53   Interim Chief Financial Officer   1 year
Bruce Stroever   64   Chairman of the Board of Directors   1 year
Dr. Chia Soo   46   Director   1 year
William Coffin   69   Director   1 year
John Booth   59   Director   1 year
Jimmy Delshad   74   Director   1 year
Steve Warnecke   57   Director   1 year

 

Michael Schuler: Interim Chief Executive Officer

 

Pursuant to a consulting agreement by and between the Company and MTF, MTF has agreed to provide the services of Mr. Schuler to serve as the Company’s interim Chief Executive Officer. Mr. Schuler has served as Vice-President, New Business Development of MTF since 2002. In addition to his work at MTF, since 2000 Mr. Schuler is the founder and partner in Tri-Medics, LLC, an early stage company developing and marketing innovative medical devices. From 1995 to 2001, Mr. Schuler served as an independent strategic planner and new business development consultant with Olympus USA and SurgiNex, Inc. From 1993 to 1995, he was President of the Surgical Products Division of Imagyn Medical Technologies, a NASDAQ listed company. From 1992 to 1996, he served as Executive Vice President, Marketing and Sales, then President and CEO of Advanced Surgical, Inc., an innovator in surgical instruments for advanced procedures and a NASDAQ listed company. Prior to his roles at Advanced Surgical, Inc. Mr. Schuler spent 18 years with Johnson & Johnson, where he progressively held positions of greater responsibility, including a position in new business development which was responsible for the assessment and development of the Palmaz-Schatz Stent technology that was utilized in cardiology and radiology. As Director and then Vice-President of Marketing of Johnson & Johnson Interventional Systems from 1987 to 1992, he was involved in the launch of the Intraluminal Stent that grew to over $1 billion in annual sales. Mr. Schuler was the only Johnson & Johnson employee to receive both the Phillip B. Hoffman award for outstanding achievement in R&D and the Johnson & Johnson Entrepreneurial Award for creating over $50 million in new business. He is the holder of 13 US patents and numerous international patents. Mr. Schuler was a part-time professor at the Rutgers University Graduate School from 1978-1993. He has also served as a member of Bone’s Board of Directors since April 7, 2006. He earned a Bachelors of Science in Industrial Engineering in 1971, a Masters in Business Administration in 1973, and a Masters of Science in Engineering in 1974, all from Rutgers University. Given Mr. Schuler’s extensive background in medical device development and marketing, as well as his previous roles with Bone Biologics, the Company believes he is well qualified to fill the role of interim Chief Executive Officer.

 

William Jay Treat, Ph.D.: President and Chief Technology Officer

 

Dr. Treat has served as the President and Chief Technology Officer of Bone Biologics since November 2012. Since 2005 to present, he has run his own consulting business specializing in providing senior management leadership to clients in developing their products from concept to commercial launch. During this period he was one of the founders and remains active in America Stem Cell (now Targazyme) overseeing their manufacturing and clinical supplies. He also currently serves as Advisor for Systems Operations at PBS BioTech. From 2001 to 2005 he served first as Vice President of Business Development and later as Chief Operations Officer for Avid Bioservices, a contract manufacturing organization specializing in the production of monoclonal antibodies and other recombinant non-antibody proteins. As Chief Operating Officer of Avid Bioservices he presided over a successful PAI and commercial license of a biologic for Halozyme. Prior to joining Avid Bioservices, from 1999 to 2001 he was Vice President of Research and Development at Irvine Scientific where his team developed products for human assisted reproductive medicine and for cell culture medium formulations used to produce medically important biological molecules. From 1990 to 1999 he was with BioWhittaker (acquired by Cambrex), where he held positions of progressively greater responsibility in manufacturing, technical support, new business acquisitions and marketing while they were a privately held company and later as a public company. Dr. Treat started his career at Lipogen, where he quickly moved to Vice President of Manufacturing and managed the technology transfer to BioWhittaker. During his career, Dr. Treat has also served as Chief Operating Officer for BioTork, CSO for Algenol, Vice President of Manufacturing for Attenuion, CTO for Geneve Bio and Head of Commercial Manufacturing for DianaPlantSciences. Dr. Treat has served on the Scientific Advisory Boards for the Chemical Engineering Department at Texas A&M University from 2000 to 2013 and on the Emergent Biosolutions and XOMA External Advisory Boards in support of NAIAD/DOD bioterrorism programs. He earned a Bachelors of Science in Microbiology in 1979, a Masters of Science in Microbiology in 1982 and a Ph.D. in Agricultural and Biochemical Engineering in 1988 all from Texas A&M University. Given Dr. Treat’s extensive background with biologics and his previous roles with Bone Biologics, the Company believe Dr. Treat is well qualified to serve as its President and Chief Technology Officer.

 

43
 

  

Catherine Doll: Interim Chief Financial Officer

 

Pursuant to a consulting agreement by and between the Company and Gilson Group, Gilson Group has agreed to provide the services of Ms. Doll to serve as the Company’s interim Chief Financial Officer. Ms. Doll, a certified public accountant, brings more than 25 years of international corporate finance and accounting experience in both publicly and privately held companies to the Company. From 2004 through the present Ms. Doll has been a consultant at Gilson Group where she has assisted clients with the development of audit strategies and management assessments, as well as acting as an audit liaison for clients in preparation for or support of compliance audit under the Sarbanes-Oxley Act. She has also served as project lead and quality control for SOX implementation and monitoring for public companies. From 1999 through 2004 Ms. Doll was and associate at Resources Global Professionals where she provided management, financial and accounting services to clients. From 1996 through 1999, Ms. Doll served as the controller of National Directory Company. From 1993 through 1996 she served as the advisor to the secretary of finance for the Federated States of Micronesia. From 1987 through 1993 she served as the controller of Triquest Development Company. From 1983 through 1987 she served as a senior accountant at Deloitte & Touche, LLP. Ms. Doll received her Bachelor of Arts Degree in Economics with an emphasis in Accounting at the University of California Santa Barbara. Given Ms. Doll’s extensive accounting background and here work with a number of private and public companies, the Company believe Ms. Doll is well qualified to serve as its Interim Chief Financial Officer.

 

Bruce Stroever: Chairman of the Board of Directors

 

Mr. Stroever has forty years of product development and general management experience in the medical device and orthobiologics fields. Mr. Stroever joined MTF in late 1988 as General Manager and is currently the President and Chief Executive Officer of MTF. He has served MTF’s President since his appointment in 1992 and as Chief Executive Officer since 1996. Under Mr. Stroever’s leadership, MTF has grown to be the largest tissue bank in the world providing over 450,000 grafts per year. From 1971 to 1988, Mr. Stroever held several positions with Ethicon, Inc., a Johnson & Johnson, Inc. subsidiary. Mr. Stroever currently serves on the advisory boards for the Department of Bioengineering at UCLA and the New Jersey Organ and Tissue Sharing Network. He was elected to the Board of Governors of the American Association of Tissue Banks for a three year term in 1999 and subsequently in 2012. Mr. Stroever has served as the Chairman of Bone’s Board of Directors since 2012. Mr. Stroever received his B.E. in Mechanical/Chemical Engineering from Stevens Institute of Technology in 1972 and a Masters of Science in Bioengineering from Columbia University in 1977. Given Mr. Stroever’s forty years of experience in the medical device and orthobiologics fields, as well as, the roles he has held at Bone, the Company believes he is well qualified to serve as the Chairman of the Board of Directors.

 

Dr. Chia Soo: Director

 

Since 2009, Dr. Soo has served as a Professor in the Orthopedic Hospital Department of Orthopedics of UCLA. Dr. Soo and her colleagues have been studying the osteogenic potential of the Nell-1 protein for the last 13 years. In addition to currently being the PI of an NIH and a DOD translational grant to study the osteoinductive properties of Nell-1, Dr. Soo has served as PI for two NIH SBIR grants, as Co-PI on an RO1 grant, and managed two (2) University of California Discovery grants. Since 2011, Dr. Soo has served as a consultant to MTF, the world’s largest tissue bank for allograft product development. She also has consulted extensively on FDA issues related to allograft products, cGMP protein production, and FDA regulatory submissions. She is technically experienced with both large and small translational animal models of skeletal disease. Dr. Soo is certified by the American Board of Plastic Surgery and a Fellow of the American College of Surgeons. She has also served as a member of Bone’s Board of Directors since 2004. Given Dr. Soo’s background with grants, her studies of the Nell-1 protein and position on Bone’s Board of Directors, the Company thinks she is well qualified to serve as a Director of the Company.

 

William Coffin: Director

 

Founder and CEO of CCG, a national investor relations agency which during his leadership conducted business through offices in New York, Los Angeles, Beijing, Mr. Coffin was an investor relations counselor for over 25 years until his retirement in 2012. In this role, Mr. Coffin represented numerous publicly held and private companies, assisted in over 100 initial public offerings, counseled and participated in over 50 mergers and acquisitions, and worked with virtually every major investment banking firm in the country. Since 2004, Mr. Coffin has served as Chairman of the Board of the California Council on Economic Education, a nonprofit, nonpartisan organization that works towards implementing and increasing economic and financial literacy among California primary and secondary school students. Mr. Coffin is also an adjunct professor in the MBA program at Mount St. Mary’s college, a private liberal arts college in Los Angeles, where he teaches modern theories of corporate governance and corporate communications. Mr. Coffin received a B.A. in journalism from California State University, Los Angeles.

 

John Booth: Director

 

Mr. Booth has been CEO of Spineology Inc. since 2004 and has been a board member since its inception in 1998. Spineology is involved in the development and commercialization of minimally invasive spinal implants and access systems. Mr. Booth held various executive level positions at Phillips Plastics Corporation, most recently serving as CEO from June of 2001 to December 2002. Before serving as CEO of Phillips, he was CEO of Microvena Corporation, a cardiovascular device subsidiary of Phillips, from 1999 to 2001 and CEO of Phillips Origen Group Division from 1998 to 1999. Prior to Phillips, Mr. Booth was President and CEO of INCSTAR Corporation, a publicly held medical technology company involved in in-vitro diagnostics. He has held various positions in both financial and general management in the medical technology industry since 1981. Mr. Booth has also serve on the boards of directors of INCSTAR Corporation from 1994 to 1997, Microvena Corporation from 1998 to 2001, Phillips Plastics Corporation from 2000 to 2002, Imricor Medical Systems Inc. from 2007 to 2014, Spineology Inc. from 1998 to the present. Mr. Booth received a B.S. degree in accounting from Villanova University and an MBA from Seton Hall University.

 

44
 

  

Jimmy Delshad: Director

 

Mr. Delshad brings more than ten years of elected public service to the Company. From 2003 through 2011, Mr. Delshad served as Mayor and Councilmember of the City of Beverly Hills, California. In this role, Mr. Delshad was responsible for, among other things: the formulation of city policies and ordinances; the establishment and monitoring of a budget of approximately $500 million; and the management of more than 1000 city employees. Additionally, since his retirement as Mayor in 2011, Mr. Delshad has served as a Goodwill Ambassador for the City of Beverly Hills. Since 2012, Mr. Delshad has held the position of Chairman of Delshad Capital, which guides companies in technology, security, crowd-funding and marketing. During 2011 through 2012, Mr. Delshad was Vice Chairman at Pacific Capital Group where he evaluated and managed various projects, such as Smart City initiatives, fuel technology and software products. From 1978 through 2002, Mr. Delshad was founder and Chief Executive Officer of American International Business, Inc., a manufacturer of computer storage technologies with offices in Germany, London and Brussels. Mr. Delshad served on the board of directors of Evryx Corp from 2008 through 2010 and Dream Team Gaming from 2007 through 2009. Mr. Delshad has also served on the Boards of Directors of the Iranian American Jewish Federation from 2002 through the present, the World Affair Council from 2011 through 2012, Sheba Medical Center from 2003 through 2008, Maple Counseling Center from 2001 through 2003, Mount Sinai Mortuaries from 2001 through the present and Nessah Synagogue from 2001 through 2004. Mr. Delshad received his B.S. in Computer Science from California State University and completed additional post-graduate coursework at the University of Southern California.

 

Steve Warnecke: Director

 

Mr. Warnecke brings to the Company over thirty years of management experience in biotech, pharma, medical device, healthcare, software/telecom, travel/airline, construction/real estate and manufacturing/distribution. Since 2010 Mr. Warnecke has served as member of the board of directors of Evolutionary Genomics, Inc., unique biotechnology company that is changing how relevant gene/target discovery and validation is performed during the post-genomics era. From 2003 through 2008 and from 2011 through the present, Mr. Warnecke has held several positions with Children’s Hospital Colorado Foundation, including vice president, chief financial officer and chief operating officer. He currently leads all of their accounting, finance, gift processing and IT functions, and participates in Board/Executive Committee/Audit Committee/Investment Committee meetings. From 2012 through the present Mr. Warnecke has served as chairman of the board of directors of VETDC, Inc., a veterinary product development company that adapts innovative, underutilized human biomedical technologies for use in companion animals. Since 2013, Mr. Warnecke has served as a member of the board of directors of the University of Iowa Cardiovascular Research Center. Since 2004 he has also served as chairman of Children’s Partners Foundation. MR. Warnecke has also served as member of the board of directors of the Cystic Fibrosis Foundation since 2002. From 2003 through 2011, Mr. Warnecke has held various positions, including lead independent director, chairman of the audit committee, financial expert and member of the nominating and governance committee of Evolving Systems, Inc. In 2011, he also served as a member of the board of directors, chairman of the audit committee and financial expert for Emmaus Life Sciences. Mr. Warnecke also served as the chief financial officer of Targeted Medical Pharma, Inc. in 2011. From 2008 to 2010, Mr. Warnecke served as the chief financial officer and a member of the board of directors of Bacterin International, Inc. From 2005 through 2008 he served as a member of the board of directors and served as a member of the compensation committee of Boppy Company. From 2001 to 2002, he served as senior vice president of strategic planning at First Data/Western Union (NYSE-FDC). From 1999 to 2001 he served as the chief financial officer of Frontier Airlines (NASDAQ-FRNT). From 1982 to 1999 he served as the chief financial officer of Helm Corporation and affiliates. Mr. Warnecke earned a BBA with honors from the University of Iowa in 1979. Given Mr. Warnecke’s broad base of experience in serving as an officer and director of a variety of companies and his experience in serving on audit committees and compensation committees, the Company believes he is well suited to serve as a member of the Company’s Board of Directors.

 

Family Relationships

 

Drs. Ting and Soo are husband and wife.

 

Board of Directors and Corporate Governance

 

Our Board of Directors currently consists of six (6) members. On the Closing of the Merger, Don Hankey, the sole member of the Board of Directors of the Company, resigned, and simultaneously therewith, a new Board of Directors was appointed. Our Board consists of Bruce Stroever and Dr. Chia Soo, who were former directors of Bone Biologics, and William Coffin, John Booth, Jimmy Delshad and Steve Warnecke, who were appointed at the Closing of the Merger.

 

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Board Independence and Committees

 

We are not currently listed on any national securities exchange or in an inter-dealer quotation system that has a requirement that the Board of Directors be independent. However, in evaluating the independence of our members and the composition of the committees of our Board of Directors, our Board utilizes the definition of “independence” as that term is defined by applicable listing standards of the Nasdaq Stock Market and SEC rules, including the rules relating to the independence standards of an audit committee and the non-employee director definition of Rule 16b-3 promulgated under the United States Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).

 

Our Board of Directors expects to continue to evaluate its independence standards and whether and to what extent the composition of the Board and its committees meets those standards. We ultimately intend to appoint such persons to our Board and committees of our Board as are expected to be required to meet the corporate governance requirements imposed by a national securities exchange. Therefore, we intend that a majority of our directors will be independent directors of which at least one director will qualify as an “audit committee financial expert,” within the meaning of Item 407(d)(5) of Regulation S-K, as promulgated by the SEC.

 

Additionally, our Board of Directors is expected to appoint an audit committee, governance committee and compensation committee and to adopt charters relative to each such committee.

 

Code of Ethics

 

We have not adopted a formal code of ethics within the meaning of Item 406 of Regulation S-K promulgated under the Securities Act, that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and that that establishes, among other things, procedures for handling actual or apparent conflicts of interest. Our Board of Directors intends to adopt such a formal code of ethics when it deems appropriate based on the size of our operations and personnel.

 

Indemnification Agreements

 

Our Board has approved a form of indemnification agreement for our directors and executive officers (“ Indemnification Agreement ”). Following Board approval, we entered into Indemnification Agreements with each of our current directors and executive officers.

 

The Indemnification Agreement provides for indemnification against expenses, judgments, fines and penalties actually and reasonably incurred by an indemnitee in connection with threatened, pending or completed actions, suits or other proceedings, subject to certain limitations. The Indemnification Agreement also provides for the advancement of expenses in connection with a proceeding prior to a final, non-appealable judgment or other adjudication, provided that the indemnitee provides an undertaking to repay to us any amounts advanced if the indemnitee is ultimately found not to be entitled to indemnification by us. The Indemnification Agreement sets forth procedures for making and responding to a request for indemnification or advancement of expenses, as well as dispute resolution procedures that will apply to any dispute between us and an indemnitee arising under the Indemnification Agreement.

 

The foregoing description is qualified in its entirety by reference to the form of Indemnification Agreement attached to this Report as Exhibit 10.17.

 

Effective as of September 19, 2014, our Board of Directors also approved the Former D&O Indemnification Agreement to be entered into between us, Don Hankey and Amir Heshmatpour. The Former D&O Indemnification Agreement requires that for a period of four (4) years from and after September 19, 2014, we will indemnify (including advancement of expenses) and hold harmless persons who were officers and directors of the Company (i) by reason of being an officer or director of the Company prior to the Merger, including through all transactions relating to the Merger, or (ii) is related to acts in connection with the Merger taken by the Former D&O Indemnified Persons, provided however, that the foregoing indemnity shall be excess of all any insurance coverage available to the Former D&O Indemnified Parties for any such loss. The accuracy of the Hankey Affidavit and Heshmatpour Affidavit in connection with the Former D&O Indemnification is a condition precedent to the foregoing indemnity (including advancement of expenses). The Company has no insurance coverage that would cover any claim asserted against the Company by any Former D&O Indemnified Person pursuant to this Former D&O Indemnification Agreement.

 

This description is qualified in its entirety by the Former D&O Indemnification Agreement filed as Exhibit 10.18 to this Current Report on Form 8-K and incorporated herein by reference.

 

Scientific Advisory Board

 

Mr. Gertzman has served as a member of Bone’s Scientific Advisory Board since 2005. He is the former Executive Vice President for Research and Development from MTF since 1996 and is currently a consultant to MTF in patent prosecution. He has been engaged in industrial product development of surgical implants for forty years. From 1964 to 1993, he was employed by Ethicon, Inc., a Johnson & Johnson Company as Director of Product Engineering Johnson & Johnson USA. From 1993 to 1996, he was employed by Xomed Medical Products and served in several positions of responsibility in research and product development, after his appointment as Vice President, Research and Development in 1993. Mr. Gertzman was appointed Vice President, Research and Development for MTF in 1996 and is currently employed in the development of new tissue forms and related processes. He holds over twenty-five (25) U.S. patents, with many more pending, both in the U.S. and internationally. He completed a Bachelors of Science at CCNY in 1960 and a Masters of Science degree in Chemistry from Boston University in 1963.

 

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Dr. Shun’ichi Kuroda has served as a member of Bone’s Scientific Advisory Board since 2005. He taught as a professor at the Department of Bio-agricultural Sciences of Nagoya University since 2009 and has served as the Chairman of the Department since 2012. Dr. Kuroda has expertise is in recombinant protein engineering and manufacturing.

 

Dr. Jeffrey C. Wang has served as a member of Bone’s Scientific Advisory Board since 2005. Dr. Wang has been Chief of the Orthopaedic Spine Surgery Service since 1997, Fellowship Director of the UCLA Orthopaedic Spine Surgery Fellowship, and is Currently Professor of Orthopaedic Surgery and Neurosurgery. He is also the Vice Chair of Clinical Operations for the UCLA Department of Orthopaedic Surgery. He is Co-Director of the UCLA Spine Center. Dr. Wang’s research areas include the use of osteoinductive and osteoconductive materials for spinal fusion as well as novel gene therapy and minimally invasive techniques for spinal surgery. He obtained his undergraduate degree from Stanford University and his medical degree from the University of Pittsburgh. He then completed his Orthopaedic Surgery training at UCLA and his Spine Fellowship at Case Western Reserve University.

 

Dr. Xinli Zhang has served as a member of Bone’s Scientific Advisory Board since 2005. Since 2009, he has served as an Associate Professor at the UCLA School of Dentistry. Prior to joining UCLA, Dr. Zhang was Associate Professor in the Third Military Medical University in China from 1994 to 2000. Dr. Zhang combines his specialized training as a pathologist with a PhD in molecular biology. Dr. Zhang brings over twenty years of experience in medical and dental research in both China and the U.S. Dr. Zhang is an expert in developmental molecular biology and pathology of various bone and cartilaginous tissue related conditions.

 

Dr. Mark Spilker joined MTF in early 2009 and is currently managing the R&D, Project Management, Clinical Studies, Quality Assurance and Regulatory departments. Mark has been leading the continued development and expansion of MTF’s human allograft tissue portfolio. Under his leadership, the MTF team has developed new tissue forms including allograft bone designs for extremity surgery, allograft scaffolds for cartilage regeneration and a living allogeneic stem cell graft for orthopedic surgery. Over his career, Mark has held positions in Marketing, R&D and Program Management. Prior to MTF, Mark was formerly Vice President, R&D and Program Management for Integra NeuroSciences where he was responsible for development programs ranging from collagen-based scaffolds for bone and soft tissue regeneration to medical electronics and implantable fluid-handling shunts and valves. Prior to joining Integra he conducted his post-graduate studies at Massachusetts Institute of Technology, making significant contributions in the field of biomaterials technology and tissue engineering in neurosurgery. He received a B.S. degree in Mechanical Engineering from the University of Utah and an M.S. and Ph.D. in Mechanical Engineering from the Massachusetts Institute of Technology.

 

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EXECUTIVE COMPENSATION

 

None of the directors, named executive officers or members acting in similar capacities of the Company received any compensation as that term is defined in Item 402(a)(2) of Regulation S-K for the years ending October 31, 2012 and 2013.

 

For the fiscal years ending December 31, 2012 and 2013, other than the amounts paid to William Jay Treat set forth below, none of the directors, named executive officers or members acting in similar capacities of Bone Biologics received any compensation as that term is defined in Item 402(a)(2) of Regulation S-K for the fiscal years ending December 31, 2012 and 2013.

 

Name and
Principal Position
  Year     Salary     Bonus
($)
    Stock Awards
($)
    Option Awards
($)
    Non-Equity Incentive Plan Compensation
($)
    Deferred Compensation
($)
    All Other Compensation
($)
    Total Compensation
($)
 
William Jay Treat     2012     $ 15,000                                         $ 15,000  
                                                                         
President, Chief Technology Officer     2013     $ 60,000                                                     $ 60,000  

 

Changes in Executive Compensation

 

The Company engaged a professional executive compensation expert that recommended to the Company that they institute a stock option plan. Accordingly, immediately following the Merger, our Company’s Board of Directors approved a compensation program for our named executive officers. Consistent with the size and nature of our Company, our executive compensation program is simple, consisting of a base salary, an annual performance-based cash award and an annual long-term equity award under our 2014 Stock Option Plan.

 

  Base Salary: The Company’s base salaries are designed as a means to provide a fixed level of compensation in order to attract and retain talent. The base salaries of our named executive officers depend on their job responsibilities, the market rate of compensation paid by companies in our industry for similar positions, our financial position and the strength of our business.
     
  Performance-Based Cash Awards: As part of the Company’s executive compensation program, the board intends to establish an annual performance-based cash award program for our executive officers and other key employees based upon individual performance and the Company’s performance. The award program will also be designed to reinforce the Company’s goals and then current strategic initiatives. The annual performance-based cash awards will be based on the achievement of Company and individual performance metrics established at the beginning of each fiscal year by the compensation committee and our Board of Directors. Following the end of each fiscal year, the compensation committee will be responsible for determining the bonus amount payable to the executive officer based on the achievement of the Company’s performance and the individual performance metrics established for such executive.
     
  Long-Term Equity Awards: Our Board of Directors believes that equity ownership by our executive officers and key employees encourages them to create long-term value and aligns their interest with those of our stockholders. We intend to grant annual equity awards to our executive officers under our 2014 Stock Option Plan. Our Board of Directors adopted and approved the following 2014 Stock Option Plan and intends to submit it for approval by our stockholders.
     
  2014 Stock Option Plan: 2,642,898 shares of our common stock have been initially authorized and reserved for issuance under our 2014 Stock Plan as option awards. This reserve may be increased by the Board on January 1, 2015 and each subsequent anniversary through January 1, 2024 by up to the number of shares of stock equal to 5% of the number of shares of stock issued and outstanding on the immediately preceding December 31. Appropriate adjustments will be made in the number of authorized shares and other numerical limits in our 2014 Stock Option Plan and in outstanding awards to prevent dilution or enlargement of participants’ rights in the event of a stock split or other change in our capital structure. Shares subject to awards granted under our 2014 Stock Option Plan which expire, are repurchased or are cancelled or forfeited will again become available for issuance under our 2014 Stock Option Plan. The shares available will not be reduced by awards settled in cash. Shares withheld to satisfy tax withholding obligations will not again become available for grant. The gross number of shares issued upon the exercise of stock appreciation rights or options exercised by means of a net exercise or by tender of previously owned shares will be deducted from the shares available under our 2014 Stock Option Plan.
     
  Awards may be granted under our 2014 Stock Option Plan to our employees, including officers, director or consultants, and our present or future affiliated entities. While we may grant incentive stock options only to employees, we may grant non-statutory stock options, stock appreciation rights, restricted stock purchase rights or bonuses, restricted stock units, performance shares, performance units and cash-based awards or other stock based awards to any eligible participant.
     
  The 2014 Stock Option Plan will be administered by our compensation committee. Subject to the provisions of our 2014 Stock Option Plan, the compensation committee determines, in its discretion, the persons to whom, and the times at which, awards are granted, as well as the size, terms and conditions of each award. All awards are evidenced by a written agreement between us and the holder of the award. The compensation committee has the authority to construe and interpret the terms of our 2014 Stock Option Plan and awards granted under our 2014 Stock Option Plan.

   

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Our Board of Directors approved the following compensation for our named executives officers:

  

Michael Schuler, Interim Chief Executive Officer:

 

Base Salary: The compensation provided to MTF for Mr. Schuler’s monthly services will be $15,000, pro-rated based upon the actual amount of time Mr. Schuler provides services to the Company.

 

Warrants: For the services provide by Mr. Schuler, MTF shall receive warrants with a 10 year term to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share upon completion of Consultant’s first year of service as the Company’s Chief Executive Officer. MTF shall also receive $50,000 worth of common stock upon completion of each year of service Mr. Schuler provides as the Company’s Chief Executive Officer. Such issuances of common stock shall be split into four installments, each valued at $12,500 and distributed quarterly on the date that the Company files its Form 10-Q or Form 10-K, as applicable, with the SEC. The common stock will be valued at the average of the trading price for shares of common stock over the 10 day period prior to the issuance.

 

The board of directors believes that the compensation paid to MTF for Mr. Schuler’s services is in line with the Company’s goal of rapidly increasing its profitability and helps to ensure that MTF’s and Mr. Schuler’s interests are aligned with those of the Company’s stockholders.

 

Catherine Doll, Interim Chief Financial Officer:

 

Base Salary: The compensation provided to Gilson Group for the services provided by Ms. Doll shall be $10,000 per month for the first 66 hours of services provided by Ms. Doll each month. Any services provided in excess of 66 hours in a given month will be paid at a rate of $150/hour.

 

Warrants: For the services provided by Ms. Doll, Gilson Group shall receive 1 warrant for Company common stock for each dollar that is paid by Company for services provided by Ms. Doll. The first issuance of such warrants will be made at the completion of the initial 90 day term of the agreement. Any additional warrants to be provided for dollars paid for services rendered after the initial 90 day term of the agreement will be paid at the end of each 30 day period thereafter.

 

The board of directors believes that the compensation provided to Gilson Group for the services provided by Ms. Doll is in line with the Company’s goal of rapidly increasing its profitability and helps to ensure that Gilson Group’s and Ms. Doll’s interests are aligned with those of the Company’s stockholders.

 

William Jay Treat, President and Chief Technology Officer:

 

Base Salary: Mr. Treat’s base salary will be $300,000.

 

Bonus: During each calendar year beginning in 2014, Mr. Treat shall be eligible to earn an annual target bonus of thirty-five percent (35%) of his base salary as in-effect for the applicable calendar year, subject to the achievement of personal and corporate objectives or milestones to be established by the board of directors, or any compensation committee thereof, (after considering any input or recommendations from Mr. Treat) within sixty (60) days following the beginning of each calendar year during Mr. Treat’s employment. In order to earn the annual bonus under this provision, the applicable objectives must be achieved and Mr. Treat must be employed by Company at the time the annual bonus is distributed by Company. The annual bonus, if any, shall be paid on or before March 15th of the calendar year following the year in which it is considered earned. The actual annual bonus paid may be more or less than thirty-five percent (35%) of Mr. Treat’s base salary.

 

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Stock Options: Subject to the approval of the Board of Directors, Mr. Treat will be granted an option to purchase 2.5% of the Company’s fully diluted shares of common stock outstanding as of the date of closing of the Merger. The option will be granted under Company’s stock plan and related stock option documents. The Option is intended to be an “incentive stock option” (within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended ) to the greatest extent permitted under the code. The option will have an exercise price per share equal to the fair market value of one share of Company’s common stock on the date of grant, as determined by the board of directors. As a condition of receipt of the option, Mr. Treat will be required to sign Company’s standard form of stock option agreement and the option will be subject to the terms and conditions of the plan, the option agreement and his employment agreement. The option will vest over a two-year period from the effective date subject to Mr. Treat’s continued Service (as defined in the plan), with 33.33% of the shares subject to the option becoming vested and exercisable on the date that Mr. Treat’s employment agreement is executed, 33.33% of the shares subject to the option becoming vested and exercisable on the date that is twelve (12) months after the effective date, and 33.34% of the shares subject to the option vesting and becoming exercisable on the date that is twenty four (24) months after the effective date; provided, however, that all unvested shares subject to the option (and any additional equity awards hereafter issued by Company to Mr. Treat pursuant to the plan) shall fully vest and be exercisable if Mr. Treat’s service ceases as a result of a “qualifying termination” occurring on or within twelve (12) months after a “change in control.”

 

The board of directors believes that Mr. Treat’s compensation is in line with the Company’s goal of rapidly increasing its profitability and helps to ensure that Mr. Treat’s interests are aligned with those of the Company’s stockholders. The board of directors also believes that the compensation awarded to Mr. Treat provides appropriate incentives and provides for rewards appropriate for the level of difficulty in achieving the applicable metrics.

 

Potential Payments upon Termination of Change in Control

 

There were no payments or benefits due to any of the Company’s named executive officers upon termination of their employment or a change in control of the Company as of the end of its fiscal year ending October 31, 2013.

 

There were no payments or benefits due to any of Bone Biologic’s named executive officers upon termination of their employment or a change in control of Bone Biologics at the end of its fiscal year ending December 31, 2013.

 

Changes to Potential Payments upon Termination of Change in Control

 

William Jay Treat: Pursuant to the employment agreement signed with Mr. Treat immediately following the Merger, if the Company terminates Mr. Treat’s employment for other than Cause, or if Mr. Treat terminates his employment due to a breach of his employment agreement by the Company, or if Mr. Treat terminates his employment agreement for Good Reason, Mr. Treat will receive the standard entitlements and shall be entitled to receive reimbursement of any business expenses, to the extent not previously reimbursed, in accordance with his employment agreement. In addition, Mr. Treat will receive (a) a severance payment in an amount which is equivalent to the greater of the remaining number of months left in the initial term of his employment or twelve (12) months of his base salary then in effect on the date of termination, payable in equal installments (but no less frequently than once per calendar month) for a duration equal to the greater of the remaining number of months left in the Initial Term or twelve (12) months, in accordance with Company’s regular payroll cycle, beginning on the first payroll date following the date on which the general release referenced below has become effective and (b) payment (or reimbursement) of monthly premiums for Mr. Treat and Mr. Treat’s dependents’ group health care coverage continuation pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1986, for the severance period, provided Mr. Treat elects to continue and remains eligible for such benefits and does not become eligible for health coverage through another employer during the severance period. Mr. Treat will only receive the severance package and other severance benefits and payments described if Mr. Treat: (i) complies with all surviving provisions of his employment agreement; and (ii) executes a separation agreement and release of claims agreement and such release has become effective in accordance with its terms prior to the 60th day following the termination date. Except for any terms and conditions of Mr. Treat’s employment agreement that by their terms survive termination of Mr. Treat’s employment, all other Company obligations to Mr. Treat pursuant to Mr. Treat’s employment agreement will become automatically terminated and completely extinguished.

 

For purposes of Mr. Treat’s payments upon termination, “cause” and “good reason” shall have the following meanings:

 

Cause ” means (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Mr. Treat with respect to Mr. Treat’s obligations or otherwise relating to the business of Company; (b) any acts or conduct by Mr. Treat that are materially adverse to Company’s interests; (c) Mr. Treat’s material breach of this Agreement; (d) Mr. Treat’s material breach of Company’s employee proprietary information and inventions agreement; (e) Mr. Treat’s conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude or that otherwise materially negatively impacts Mr. Treat’s ability to effectively perform Mr. Treat’s duties hereunder; (f) Mr. Treat’s willful neglect of duties as determined in the good faith discretion of the board of directors (provided that poor performance and/or subpar results by themselves do not constitute “cause”); or (g) the winding down of Company’s business and/or dissolution or liquidation of Company (other than in connection with a change in control). In the event of termination of Mr. Treat’s employment based on clauses (a), (b) or (f) above, Mr. Treat will have fifteen (15) days following receipt of notice from Company to cure the issue, if curable.

 

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Good Reason ” means that any one or more of the following events have occurred without Mr. Treat’s express prior written consent: (i) a material adverse change in Mr. Treat’s authority, duties and/or responsibilities such that Mr. Treat’s authority, duties and/or responsibilities are no longer commensurate with Mr. Treat being Company’s President or most senior technology officer; (ii) the relocation of the primary workplace to a location that increases Mr. Treat’s daily commute by more than thirty (30) miles from its location specified in his employment agreement; (iii) any material breach by Company of any material term of Mr. Treat’s employment agreement; or (iv) any material reduction by Company (or its successor) of (A) Mr. Treat’s base salary or (B) Mr. Treat’s target bonus, unless any such reduction is made as part of, and is generally consistent with, a general reduction of senior executive base salaries or target bonuses, respectively, in which case such a reduction shall not constitute Good Reason. In order to resign his employment for Good Reason, Mr. Treat must within 60 days of Mr. Treat’s awareness of the applicable Good Reason event(s) provide Company with written notice informing Company about Mr. Treat’s intention to resign his employment for Good Reason unless such event(s) is cured or remedied by Company. Company will have 30 days after its receipt of such notice to cure or remedy the good reason event(s). If Company does not timely cure or remedy the good reason event(s), then Mr. Treat can resign Mr. Treat’s employment for good reason at any time within 30 days following the expiration of the 30 day cure/remedy period.

 

Employment and Consulting Agreements for Executives

 

The Company has entered into employment agreements with the following executives: William Jay Treat, MTF (for the services of Michael Schuler) and Gilson Group (for the services of Catherine Doll).

 

MTF (for the services of Michael Schuler): Immediately following the Merger, the Company entered into a consulting agreement with MTF, which has agreed to provide the services of Mr. Schuler to the Company as a contractor. Pursuant to the agreement, Mr. Schuler will serve as the Company’s Interim Chief Executive Officer for a period of 6 months. The agreement shall automatically renew for successive three (3) month periods unless either party provides written notice to the other party at least 10 days in advance of the renewal term of its decision not to renew the term. The agreement is intended to be temporary in nature, and will cease once the Company retains a permanent Chief Executive Officer. There are no payments due to MTF or Mr. Schuler with respect to any change in control of the Company or termination of the consulting agreement. Please see our discussion of Changes in Executive Compensation for further information regarding the compensation to be paid to MTF for Mr. Schuler’s services pursuant to the consulting agreement with the Company.

 

Gilson Group (for the services of Catherine Doll): Immediately following the Merger, the Company entered into an consulting agreement with Gilson Group, which has agreed to provide the services of Ms. Doll to the Company as a contractor. Pursuant to the agreement, Ms. Doll will serve as the Company’s Interim Chief Financial Officer for a period of 90 days. The agreement shall automatically renew for successive one (1) month periods unless either party provides written notice to the other party at least 10 days in advance of the renewal term of its decision not to renew the term. The agreement is intended to be temporary in nature, and will cease once the Company retains a permanent Chief Executive Officer. There are no payments due to Gilson Group or Ms. Doll with respect to any change in control of the Company or termination of the consulting agreement. Please see our discussion of Changes in Executive Compensation for further information regarding Ms. Doll’s compensation pursuant to his employment agreement with the Company.

 

William J. Treat: Immediately following the Merger, the Company entered into an employment agreement with Mr. Treat. Pursuant to the agreement, Mr. Treat will serve as the Company’s President and Chief Technology Officer for an initial term of two years. The agreement shall automatically renew for successive one (1) year periods unless either party provides written notice to the other party at least thirty (30) days in advance of the renewal term of its decision not to renew the agreement. Please see our discussion of Changes in Executive Compensation for further information regarding Mr. Treat’s compensation pursuant to his employment agreement with the Company. Please see our discussion of Potential Payments Upon Termination or Change in Control for information regarding any termination payments that may become due to Mr. Treat pursuant to his employment agreement with the Company.

 

Grants of Plan-Based Awards

 

The Company did not grant any equity awards to our named executive officers during the fiscal year ended October 31, 2013. Additionally, Bone Biologics did not grant any equity awards to its named executive officers during its fiscal year ended December 31, 2013.

 

Outstanding Equity Awards at Fiscal Year End

 

The Company had no outstanding equity awards owed to our named executive officers that were outstanding as of the end of our fiscal year on October 31, 2013. Additionally, Bone Biologics had no outstanding equity awards owed to its named executive officers that were outstanding as of the end of its fiscal year on December 31, 2013.

 

Director Compensation

 

No compensation was paid to any of the Company’s directors for the fiscal years ending October 31, 2012 and October 31, 2013.

 

No compensation was paid to any directors of Bone Biologic’s for the fiscal years ended December 31, 2012 and December 31, 2013.

 

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Changes in Director Compensation

 

Immediately following the Merger, the Board of Directors of the Company entered into employment agreements with and agreed to the following compensation for each member of the Company’s Board of Directors.

 

Bruce Stroever: Pursuant to a consulting agreement by and between the Company and MTF, MTF has agreed to provide the services of Mr. Stroever to serve as the chairman of the Company’s board of directors. MTF has agreed to provide Mr. Stroever’s services as chairman of the board of directors for a one year term. For the services being provided, MTF shall receive an annual payment of $25,000, paid quarterly. In addition, MTF shall receive warrants equal to 50,000 shares of the Company’s $0.001 par value per share common stock at an exercise price of $1.00 per share with a term of 10 years, upon completion of the year of service by Mr. Stroever as chairman of the Company’s board of directors.

 

Dr. Chia Soo: Dr. Soo shall serve as a director of the Company for a one year term. Dr. Soo shall receive annual compensation of $25,000, paid quarterly, during her tenure as a board member. In addition, Dr. Soo shall receive options equal to 50,000 shares of the Company’s $0.001 par value per share common stock at an exercise price of $1.00 per share, with a term of 10 years, upon completion of the year of service as a member of the board of directors.

 

William Coffin: Mr. Coffin shall serve as a director of the Company and chairman of the corporate governance committee for a one year term. Mr. Coffin shall receive annual compensation of $25,000, paid quarterly, during his tenure as a board member. Mr. Coffin shall also receive $5,000 as annual compensation for his service as the chairman of the corporate governance committee. In addition, Mr. Coffin shall receive options equal to 50,000 shares of the Company’s $0.001 par value per share common stock at an exercise price of $1.00 per share with a term of 10 years, upon completion of the year of service as a member of the board of directors.

 

John Booth: Mr. Booth shall serve as a director of the Company and chairman of the compensation committee for a one year term. Mr. Booth shall receive annual compensation of $25,000, paid quarterly, during his tenure as a board member. Mr. Booth shall also receive $5,000 as annual compensation for his service as the chairman of the compensation committee. In addition, Mr. Booth shall receive options equal to 50,000 shares of the Company’s $0.001 par value per share common stock at an exercise price of $1.00 per share with a term of 10 years, upon completion of the year of service as a member of the board of directors.

 

Jimmy Delshad: Mr. Delshad shall serve as a director of the Company for a one year term. Mr. Delshad shall receive annual compensation of $25,000, paid quarterly, during his tenure as a board member. In addition, Mr. Delshad shall receive options equal to 50,000 shares of the Company’s $0.001 par value per share common stock at an exercise price of $1.00 per share with a term of 10 years, upon completion of the year of service as a member of the board of directors.

 

Steve Warnecke: Mr. Warnecke shall serve as a director of the Company and chairman of the audit committee for a one year term. Mr. Warnecke shall receive annual compensation of $25,000, paid quarterly, during his tenure as a board member. Mr. Warnecke shall also receive $5,000 as annual compensation for his service as the chairman of the audit committee. In addition, Mr. Warnecke shall receive options equal to 50,000 shares of the Company’s $0.001 par value per share common stock at an exercise price of $1.00 per share with a term of 10 years, upon completion of the year of service as a member of the board of directors.

 

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Except as disclosed below, none of the following persons has any direct or indirect material interest in any transaction to which we are a party since our incorporation or in any proposed transaction to which we are proposed to be a party:

 

  Any of our directors or officers;
     
  Any proposed nominee for election as our director;
     
  Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our Common Stock; or
     
  Any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary of our Company.

 

Review, Approval or Ratification of Transactions with Related Persons

 

Due to the small size of our Company, we do not at this time have a formal written policy regarding the review of related party transactions, and rely on our full Board of Directors to review, approve or ratify such transactions and identify and prevent conflicts of interest. Our Board of Directors reviews any such transaction in light of the particular affiliation and interest of any involved director, officer or other employee or stockholder and, if applicable, any such person’s affiliates or immediate family members. Management aims to present transactions to our Board of Directors for approval before they are entered into or, if that is not possible, for ratification after the transaction has occurred. If our Board of Directors finds that a conflict of interest exists, then it will determine the appropriate action or remedial action, if any. Our Board of Directors approves or ratifies a transaction if it determines that the transaction is consistent with our best interests and the best interest of our stockholders.

 

Director Independence

 

In connection with the closing of the Merger, AFH Advisory selected three of the members of our Board of Directors and the remaining three directors were selected by MTF; all six members were thereafter added to our Board of Directors in accordance with our Bylaws. Our Board of Directors thereafter undertook a review of the composition of our Board of Directors and the independence of each director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our Board of Directors has determined that William Coffin, John Booth, Jimmy Delshad, Dr. Chia Soo and Steve Warnecke (the “ Independent Directors ”) would qualify as “independent” as that term is defined by NASDAQ Listing Rule 5605(a)(2). Further, although we do not presently have separately standing audit or governance committees of our Board of Directors, our Board of Directors has determined that each of the independent directors would qualify as “independent” under NASDAQ Listing Rules applicable to such board committees. Bruce Strover would not qualify as “independent” under applicable NASDAQ Listing Rules applicable to the Board of Directors generally or to separately designated board committees because he is the Chief Executive Officer of MTF, a significant shareholder of the Company and an entity to whom the Company continues to owe obligations to pursuant to notes outstanding to MTF. In making such determinations, our Board of Directors considered the relationships that each of our nonemployee directors has with the Company and all other facts and circumstances deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director.

 

Subject to some exceptions, NASDAQ Listing Rule 5605(a)(2) provides that a director will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and that a director cannot be an “independent director” if (a) the director is, or in the past three years has been, an employee of ours; (b) a member of the director’s immediate family is, or in the past three years has been, an executive officer of ours; (c) the director or a member of the director’s immediate family has received more than $120,000 per year in direct compensation from us within the preceding three years, other than for service as a director or benefits under a tax-qualified retirement plan or non-discretionary compensation (or, for a family member, as a non-executive employee); (d) the director or a member of the director’s immediate family is a current partner of our independent public accounting firm, or has worked for such firm in any capacity on our audit at any time during the past three years; (e) the director or a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers serves on the compensation committee; or (f) the director or a member of the director’s immediate family is an executive officer, partner or controlling shareholder of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-month period during our past three fiscal years, exceeds the greater of 5% of the recipient’s consolidated gross revenues for that year or $200,000 (except for payments arising solely from investments in our securities or payments under non-discretionary charitable contribution matching programs). Additionally, in order to be considered an independent member of an audit committee under Rule 10A-3 of the Exchange Act, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the Board of Directors, or any other committee of the Board of Directors, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the applicable company or any of its subsidiaries or otherwise be an affiliated person of the applicable company or any of its subsidiaries.

 

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DESCRIPTION OF CAPITAL STOCK

 

Authorized Capital Stock

 

Our authorized capital stock consists of 100,000,000 shares of Common Stock at a par value of $0.001 per share and 20,000,000 shares of preferred stock at a par value of $0.001 per shares (“ Preferred Stock ”). As of September 19, 2014, 17,939,933 shares of our Common Stock and no shares of our Preferred Stock were issued and outstanding.

 

Common Stock

 

All outstanding shares of Common Stock are of the same class and have equal rights and attributes. The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available. In the event of liquidation, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative or preemptive rights.

 

Preferred Stock

 

Our Amended and Restated Certificate of Incorporation provides that we are authorized to issue up to 20,000,000 shares of Preferred Stock. Our Board of Directors has the authority, without further action by the stockholders, to issue from time to time the Preferred Stock in one or more series for such consideration and with such relative rights, privileges, preferences and restrictions that the Board of Directors may determine. The preferences, powers, rights and restrictions of different series of Preferred Stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and purchase funds and other matters. The issuance of Preferred Stock could adversely affect the voting power or other rights of the holders of Common Stock.

 

Registration Rights Agreement

 

Effective as of September 19, 2014, the Company entered into a Registration Rights Agreement with MTF, AFH Advisory and Hanky Investment Company, L.P. (“ HIC ”), each of which have certain demand registration rights and unlimited piggyback registration rights for the Company’s shares under the Registration Rights Agreement and subject to an agreed lock up period. Pursuant to the Registration Rights Agreement, within thirty (30) days hereof, the Company will seek registration under the Securities Act of all or part of the registrable shares of MTF, AFH Advisory and HIC. Within five (5) days hereof, the Company will provide written notice of such request to all other holders of registrable securities and will include in such registration all registrable shares with respect to which the Company has received written requests for inclusion within twenty-five (25) days after delivery of the Company’s notice. The Company has agreed to pay all registration expenses relating to up to two long-form registrations or short-form registrations for each of MTF, AFH Advisory and HIC.

 

Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a demand registration under the Registration Rights Agreement) and the registration form to be used may be used for the registration of any registrable shares, the Company will give prompt written notice to all holders of the registrable shares of its intention to effect such a registration and will include in such registration all registrable shares (in accordance with the priorities set forth in the Registration Rights Agreement) with respect to which the Company has received written requests for inclusion within fifteen (15) days after the delivery of the Company’s notice. Pursuant to Registration Rights Agreement, holders of registrable shares and the Company agree not to effect any public sale or distribution of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the six (6) months following, the effective date of the Merger Agreement.

 

Bridge Warrants

 

In April 2013, the Company’s Board approved the Company to borrow up to an aggregate principal amount of $300,000 pursuant to the sale and issuance of convertible promissory notes and warrants to purchase common stock of the Company. Each Bridge Note accrues interest at a rate of 12% per year and is payable per quarter. A Bridge Warrant to purchase the Company’s common stock equal to 50% of the original principal amount at $1.00 per share was issued to each Bridge Financing participant. Principal and unpaid accrued interest may be converted into equity securities issued in the Private Placement at a price equal to the price paid by investors in the Private Placement.

 

On April 29, 2013, June 5, 2013 and October 2013, Bone borrowed $100,000 from MTF and $100,000 and $150,000 from Orthofix, respectively, under the Bridge Financing. In August 2013, AFH Advisory purchased $50,000 of the Bridge Financing

 

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Orthofix Subsequent Financing

 

On July 1, 2014, (i) Orthofix purchased $500,000 worth of Bone Biologics Common Stock or the Subsequent Orthofix Shares; (ii) was issued the Subsequent Orthofix Convertible Promissory Notes in the principal amount of $500,000 and exercisable for $666,666 worth of Bone Biologics Common Stock at $0.75 per share; and (iii) was issued the Subsequent Orthofix Warrants which were exercisable for 333,334 shares of Bone Biologics Common Stock at an exercise price per share of $1.50 (the “ Orthofix Subsequent Financing ”). Upon subscribing for the Subsequent Orthofix Shares, the Subsequent Orthofix Convertible Promissory Notes converted into a combined total of $666,666 worth of shares of Bone Biologics Common Stock in accordance with the terms of the Subsequent Orthofix Convertible Promissory Notes. The Subsequent Orthofix Warrants converted into warrants of the Company with substantially identical terms upon consummation of the Merger.

 

Extra Warrants

 

At the closing of the Subsequent Orthofix Shares and Notes, AFH Advisory was entitled to receive the Extra Warrants. AFH Advisory has normal and customary piggyback registration rights with respect to the shares of Common Stock issuable upon exercise of the Extra Warrants.

 

Agent Warrants

 

Forefront or its designees will receive the Agent Warrant. Such Agent Warrant will be issued at the closing of the Private Placement and shall provide, among other things, that the Agent Warrant shall: (i) be exercisable at the price of the securities (or the exercise price of the securities) issued to the investors in the offering, (ii) expire five (5) years from the date of issuance, (iii) include customary registration rights, including the registration rights provided to the Investors, (iv) contain provisions for cashless exercise and (v) include such other terms that are normal and customary for warrants of this type. In addition, Forefront or its designees will receive and Advisory Warrant equal to 2.0% of the Company’s post-merger and financing fully diluted shares outstanding upon the closing of $2.5 million of investors on which Forefront is eligible to receive compensation. Forefront was issued a warrant to purchase 46,667 shares of Common Stock at $1.00 per share upon completion of the Orthofix Subsequent Financing.

 

MTF Short Term 2014 Loan

 

On September 15, 2014, Bone and MTF entered into a loan agreement and accompanying promissory note to fund the continued operations of Bone prior to the Merger. Pursuant to the MTF Short Term 2014 Loan, MTF has agreed to advance an initial $250,000 to Bone and, at Bone's request and subject to the terms and conditions of the MTF Short Term 2014 Loan, to advance up to an additional $250,000 to Bone. The MTF Short Term 2014 Loan has an interest rate of eight and one-half percent (8.5%) accruing annually. The MTF Short Term 2014 Loan matures on the earlier to occur of (i) the date on which at least $1 million is loaned to or invested in the Company and (ii) December 31, 2014. In further consideration of the MTF 2014 Loan, Bone granted to MTF 625,000 warrants at a strike price of $1.62. The MTF 2014 Loan was assigned to the Company on September 19, 2014.

 

Anti-Takeover Effects of Provisions of Delaware State Law

 

Anti-takeover provisions in our Amended and Restated Certificate of Incorporation and Delaware law could make an acquisition more difficult and could prevent attempts by our stockholders to remove or replace current management.

 

Anti-takeover provisions of Delaware law and in our Amended and Restated Certificate of Incorporation and our Bylaws may discourage, delay or prevent a change in control of our company, even if a change in control would be beneficial to our stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors. In particular, under our Amended and Restated Certificate of Incorporation our Board of Directors may issue up to 20,000,000 shares of Preferred Stock with rights and privileges that might be senior to our Common Stock, without the consent of the holders of our Common Stock. Moreover, without any further vote or action on the part of the stockholders, the Board of Directors would have the authority to determine the price, rights, preferences, privileges, and restrictions of the Preferred Stock. This preferred stock, if it is ever issued, may have preference over, and harm the rights of, the holders of Common Stock. Although the issuance of this Preferred stock would provide us with flexibility in connection with possible acquisitions and other corporate purposes, this issuance may make it more difficult for a third party to acquire a majority of our outstanding voting stock. Similarly, our authorized but unissued Common Stock is available for future issuance without stockholder approval.

 

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LIMITATIONS ON TRANSFER OF SHARES

 

The securities offered in the Private Placement have not been registered with the SEC pursuant to the Securities Act; however, they will be deemed to be exempt from such registration pursuant to Regulation D, Rule 506 of the Securities Act. Even so, the securities are subject to a restriction on re-sale and will be marked as such on the face of the certificate. In addition, there are limits on the resale of the securities by virtue of their corporate issuance. Accordingly, an investment in the securities offered in the Private Placement should be considered highly illiquid.

 

Changes in Control

 

We are not aware of any agreement or a party to arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change of control.

 

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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Market Information

 

Prior to September 19, 2014, our Common Stock has not been available for trading on the over-the-counter market since the Common Stock had never been traded.

 

Trades in our Common Stock may be subject to Rule 15g-9 of the Exchange Act, which imposes requirements on broker/dealers who sell securities subject to the rule to persons other than established customers and accredited investors. For transactions covered by the rule, broker/dealers must make a special suitability determination for purchasers of the securities and receive the purchaser’s written agreement to the transaction before the sale.

 

The SEC also has rules that regulate broker/dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities listed on certain national exchanges, provided that the current price and volume information with respect to transactions in that security is provided by the applicable exchange or system). The penny stock rules require a broker/dealer, before effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing before effecting the transaction, and must be given to the customer in writing before or with the customer’s confirmation. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for shares of our Common Stock. As a result of these rules, investors may find it difficult to sell their shares.

 

Holders

 

As of September 3, 2014, there are approximately 25 record holders of 17,939,933 shares of Common Stock. As of the date of this filing, 2,581,043 shares of Common Stock are issuable upon the exercise of outstanding warrants and options, 3,659,328 shares of Common Stock are issuable upon exercise of the conversion features associated with our convertible promissory notes and 2,444,696 shares are reserved for future issuance to management, directors and consultants. The shares issued in connection with the Transactions, including the Common Stock issued to the former Bone Biologics stockholders and investors in the Private Placement, are “restricted securities,” which may be sold or otherwise transferred only if such shares are first registered under the Securities Act or are exempt from the registration requirements. As discussed elsewhere in this Current Report, we have agreed to file a registration statement within 90 days of the final Effective Time, to register the shares of the Common Stock and shares of Common Stock issuable upon exercise of the shares of Common Stock issuable upon exercise of the New Bridge Warrants.

 

Dividend Policy

 

We have never declared or paid dividends. We do not intend to pay cash dividends on our Common Stock for the foreseeable future, but currently intend to retain any future earnings to fund the development and growth of our business. The payment of dividends if any, on our Common Stock will rest solely within the discretion of our Board of Directors and will depend, among other things, upon our earnings, capital requirements, financial condition, and other relevant factors.

 

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LEGAL PROCEEDINGS

 

In the normal course of our business, Bone may periodically become subject to various lawsuits. However, there are currently no legal actions pending against us or, to our knowledge, are any such proceedings contemplated.

 

On January 24, 2007, Bone entered into a Biopharmaceutic Services Agreement with Cytovance, Inc. to provide certain services including the production of NELL protein in mammallian cells. In January 2008, Bone terminated the agreement based upon Cytovance’s alleged breach of contract. On July 31, 2008, Cytovance commenced legal action in the District Court of Oklahoma County State of Oklahoma against Bone for breach of contract, but the action was subsequently dismissed as the parties had initially agreed contractually to resolve all disputes through mediation. Bone alleges that, as a result of Cytovance’s breach of contract, the company is owed more than $150,000 for damages. Bone has attempted to amicably resolve this matter with a settlement offer made on April 15, 2009 but the matter has remained unresolved without further communication.

 

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RECENT SALES OF UNREGISTERED SECURITIES

 

Sales by Bone Biologics

 

From January 2008 through December 2010, Bone Biologics sold unsecured promissory and convertible promissory notes to MTF. The notes included a (i) convertible promissory note dated January 18, 2008 in the face amount of $1,107,000 (the “ 2008 January Convertible Note ”), (ii) promissory note dated as of November 4, 2008 in the face amount of $250,000 (the “ 2008 November Promissory Note ”), (iii) promissory note dated as of March 17, 2009 in the face amount of $400,000 (the “ 2009 March Promissory Note ”), (iv) promissory note dated as of August 24, 2009 in the face amount of $16,420 (the “ 2009 August Promissory Note ”) and (v) promissory note dated as of September 30, 2009 in the face amount of $445,400, which was subsequently amended to, among other things, increase the maximum face amount to $2,090,000 (the “ 2009 September Promissory Note ” and collectively with the 2008 November Promissory Note, the 2009 March Promissory Note and the 2009 August Promissory Note, the “ MTF 2008 and 2009 Promissory Notes ”).

 

Interest accrued at various rates of Prime plus 1.5% to 8% and Libor plus 8% to 12%. Under the terms of certain of the notes, unpaid principal and accrued interest was convertible into shares of Bone Biologics Series B Preferred Stock. In connection with the Security Agreement issued with the March 2009 Promissory Note, Bone Biologics also issued MTF a warrant to purchase 118,383 shares of common stock at an exercise price of $0.44. In July 2013, all notes held by MTF were amended to extend the maturity date to March 31, 2014 and amended again on April 1, 2014 to extend the maturity date to March 31, 2015.

 

On September 19, 2014, the MTF 2008 and 2009 Promissory Notes and any related loan agreements, credit agreements, guarantee agreements or other agreements related to the MTF 2008 and 2009 Promissory Notes were cancelled and Bone Biologics issued MTF a convertible promissory note in the face amount of $3,659,328 (the “ New MTF Convertible Note ”). Pursuant to the terms of the New MTF Convertible Note, 50% of all principal and accrued and unpaid interest due under the New MTF Convertible Note will be converted into common stock of the Company upon the closing of the PIPE. The remainder of the New MTF Convertible Note, including all accrued and unpaid interest, will be converted upon consummation of the Initial Public Offering.

 

Upon consummation of the merger, the 2008 January Convertible Note will be converted into 1,533,356 shares of common stock of the Company. Upon consummation of the merger, MTF also converted all their outstanding Series A and B Preferred Stock, 5,829,438 shares, into common stock.

 

In April 2013 and June 2013, Bone Biologics sold convertible promissory notes of $100,000 to MTF and $100,000 to Orthofix, Inc. under the Bridge Financing, and in October 2013 Bone Biologics sold an additional promissory note of $150,000 to Orthofix, Inc. The convertible promissory notes were issued with a one year term and accrued interest at a rate of 12% per year and payable quarterly. A warrant to purchase shares of Bone Biologics’ common stock equal to 50% of the original principal amount divided by $1.00 was issued to the holders of the Bridge Notes. Principal and unpaid accrued interest may be converted into equity securities issued in Bone Biologics’ next equity financing in an aggregate amount of at least $2.5 million at a price equal to the price paid by investors in the next equity financing or in the event Bone consummates its first underwritten public offering. AFH Advisory purchased $50,000 of the Bridge Notes and Bridge Warrants which was contingent upon liquidation of the securities transferred to Bone Biologics by AFH Advisory, and subject to adjustment, as described in that certain Letter Agreement, dated September 26, 2013, by and between Amir F. Heshmatpour and Bone Biologics. In June 2014, the note held by MTF under the April Bridge Financing was amended to extend the maturity date to October 14, 2014. Upon consummation of the merger, the bridge notes converted into 455,974 shares of common stock.

 

In May, 2014, the Company entered into a convertible promissory note with MTF (the “2014 Note”) for $250,000 with interest at 7% per annum compounded annually and a maturity date of June 15, 2015. In the event of a financing of not less than $1 million, the 2014 Note automatically converts into Equity Securities, as defined in the 2014 Note, at a 25% discount to the price paid per share in such financing. In connection with the 2014 Note, the Company issued a warrant to purchase 166,667 shares of the Company’s common stock at an exercise price of $1.50 per share and 4 year term. The Company accrued placement agent fees of $10,000 or 4% of the funds raised in connection with the financing and is obligated to issue a warrant for the purchase of 13,333 shares of common stock, which represents 4% of the common shares underlying the 2014 Note. In July 2014, the 2014 Note and related warrants were assigned to Orthofix and included in the Subsequent Orthofix Financing discussed below.

 

On July 1, 2014, Orthofix (A) purchased $500,000 worth of Bone Biologics Common Stock; (B) was issued two convertible promissory notes, each in the principal amount of $250,000 and exercisable for $333,333 worth of Bone Biologics Common Stock; and (C) was issued two warrants, each exercisable for 166,667 shares of Bone Biologics Common Stock at an exercise price per share of $1.50. Upon subscribing for the Subsequent Orthofix Shares, the Subsequent Orthofix Convertible Promissory Notes converted by their terms into a combined total of $666,666 worth of shares of Bone Biologics’ Common Stock in accordance with the terms of the Subsequent Orthofix Convertible Promissory Notes. The Subsequent Orthofix Warrants converted into warrants of the Company with substantially identical terms upon consummation of the Merger.

 

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At the closing of the Subsequent Orthofix Shares and Notes, AFH Advisory was entitled to receive the Extra Warrants. Forefront or its designees will receive the Agent Warrant. Such Agent Warrant will be issued at the closing of the Private Placement and shall provide, among other things, that the Agent Warrant shall: (i) be exercisable at the price of the securities (or the exercise price of the securities) issued to the investors in the offering, (ii) expire five (5) years from the date of issuance, (iii) include customary registration rights, including the registration rights provided to the Investors, (iv) contain provisions for cashless exercise and (v) include such other terms that are normal and customary for warrants of this type. In addition, Forefront or its designees will receive and Advisory Warrant equal to 2.0% of the Company’s post-merger and financing fully diluted shares outstanding upon the closing of $2.5 million of investors on which Forefront is eligible to receive compensation. Forefront was issued a warrant to purchase 46,667 shares of Common Stock at $1.00 per share upon completion of the Orthofix Subsequent Financing.

 

On July 11, 2014, Catherine Doll, Internim CFO, was granted warrants to purchase up to 12,625 shares of Common Stock of the Company at a strike price of $0.00 per share, with a 4 year term.

 

On September 15, 2014, Bone and MTF entered into the MTF Short Term 2014 Loan pursuant to which MTF has agreed to advance an initial $250,000 to Bone and, at Bone’s request and subject to the terms and conditions of the MTF Short Term 2014 Loan, to advance up to an additional $250,000 to Bone. The MTF Short Term 2014 Loan has an interest rate of eight and one-half percent (8.5%) accruing annually. The MTF Short Term 2014 Loan matures on the earlier to occur of (i) the date on which at least $1 million is loaned to or invested in the Company and (ii) December 31, 2014. In further consideration of the MTF 2014 Loan, Bone granted to MTF 625,000 warrants at a strike price of $1.62. The MTF 2014 Loan was assigned to the Company on September 19, 2014.

 

The transactions described above were exempt from registration under Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder.

 

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INDEMNIFICATION OF OFFICERS AND DIRECTORS

 

Current Officers and Directors of the Company

 

Under Section 145 of the General Corporation Law of the State of Delaware, we may indemnify our directors and officers against liabilities they may incur in such capacities, including liabilities under the Securities Act. Our Amended and Restated Certificate of Incorporation provides that no director shall be personally liable to the us or our stockholders for monetary damages for any breach of fiduciary duty by such director as a director. This provision does not eliminate liability (i) for breach of the director’s duty of loyalty to us or us stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the General Corporation Law of the State of Delaware or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended to authorize the further elimination or limitation of the liability of directors, then the liability of our directors, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended DGCL.

 

Our Amended and Restated By-laws provide that we shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person, or a person for whom such person is the legal representative, 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 or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such indemnified person in such proceeding. We shall pay the expenses (including attorneys’ fees) incurred by an indemnified person in defending any proceeding in advance of its final disposition; provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the indemnified person to repay all amounts advanced if it should be ultimately determined that the indemnified person is not entitled to be indemnified.

 

Our Amended and Restated By-laws provide that we may indemnify and advance expenses to any person who was or is made or is threatened to be made or is otherwise involved in any proceeding by reason of the fact that such person, or a person for whom such person is the legal representative, is or was an employee or agent of the corporation or, while an employee or agent of the corporation, is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorney’s fees) reasonably incurred by such person in connection with such proceeding. We may pay the expenses (including attorney’s fees) incurred by persons who are non-director or non-officer employees or agents in defending any proceeding in advance of its final disposition on such terms and conditions as may be determined by the Board of Directors.

 

We have been advised that in the opinion of the SEC, insofar as indemnification for liabilities arising under the Securities Act may be permitted to its directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event a claim for indemnification against such liabilities (other than the our payment of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

Our Board has approved an Indemnification Agreement for our directors and executive officers. Following Board approval, we entered into Indemnification Agreements with each of our current directors and executive officers. The Indemnification Agreement provides for indemnification against expenses, judgments, fines and penalties actually and reasonably incurred by an indemnitee in connection with threatened, pending or completed actions, suits or other proceedings, subject to certain limitations. The Indemnification Agreement also provides for the advancement of expenses in connection with a proceeding prior to a final, non-appealable judgment or other adjudication, provided that the indemnitee provides an undertaking to repay to us any amounts advanced if the indemnitee is ultimately found not to be entitled to indemnification by us. The Indemnification Agreement sets forth procedures for making and responding to a request for indemnification or advancement of expenses, as well as dispute resolution procedures that will apply to any dispute between us and an indemnitee arising under the Indemnification Agreement.

 

Former Officers and Directors of the Company

 

Effective as of September 19, 2014, our Board of Directors also approved the Former D&O Indemnification Agreement to be entered into between us, Don Hankey and Amir Heshmatpour. The Former D&O Indemnification Agreement requires that for a period of four (4) years from and after September 19, 2014, we will indemnify (including advancement of expenses) and hold harmless persons who were officers and directors of the Company (i) by reason of being an officer or director of the Company prior to the Merger, including through all transactions relating to the Merger, or (ii) is related to acts in connection with the Merger taken by the Former D&O Indemnified Persons, provided however, that the foregoing indemnity shall be excess of all any insurance coverage available to the Former D&O Indemnified Parties for any such loss. The accuracy of the Hankey Affidavit and Heshmatpour Affidavit in connection with the Former D&O Indemnification is a condition precedent to the foregoing indemnity (including advancement of expenses). The Company has no insurance coverage that would cover any claim asserted against the Company by any Former D&O Indemnified Person pursuant to this Former D&O Indemnification Agreement.

 

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PART F/S

 

Reference is made to the disclosure set forth under Item 9.01 of this Current Report, which disclosure is incorporated herein by reference.

 

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INDEX TO EXHIBITS

 

See Item 9.01(d) below, which is incorporated by reference herein.

 

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Item 3.02. Unregistered Sales of Equity Securities.

 

The disclosure set forth in Item 2.01 to this Current Report is incorporated into this item by reference.

 

Item 5.01. Changes in Control of the Registrant.

 

As a result of the transfer of a majority of the Common Stock to the previous stockholders of Bone Biologics in connection with the Merger, we experienced a change in control, with the former stockholders of Bone Biologics acquiring control of us. The disclosure set forth in Item 2.01 to this Current Report is incorporated into this item by reference.

 

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

 

The disclosure set forth in Item 2.01 to this Current Report is incorporated into this item by reference.

 

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

 

On September 19, 2014, concurrent with the Merger, we adopted the fiscal year end of Bone Biologics, thereby changing our fiscal year end from October 31 to December 31.

 

Item 5.06. Change in Shell Company Status.

 

The disclosure set forth in Item 2.01 to this Current Report is incorporated into this item by reference. As a result of the completion of the Merger, we believe that we are no longer a shell company, as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.

 

Item 9.01. Financial Statements and Exhibits.

 

(a) Financial Statements of business acquired

 

In accordance with Item 9.01(a), Bone Biologics’ audited financial statements for the years ended December 31, 2013 and 2012 are included with this Current Report beginning on Page F-1.

 

(b) Pro forma financial information

 

In accordance with Item 9.01(b), unaudited pro-forma combined financial statements are included with this Current Report beginning on Page F-19.

 

64
 

 

Exhibits

 

Exhibit No.   Description
     
2.1   Agreement and Plan of Merger, dated as of September 19, 2014, by and among AFH Acquisition X, Inc., Bone Biologics Acquisition Corp., and Bone Biologics, Inc.*
     
2.2   Certificate of Merger as filed with the California Secretary of State effective September 19, 2019*
     
3.1(i)   Amended and Restated Articles of Incorporation, of Bone Biologics, Corp., as filed with the Delaware Secretary of State on July 28, 2014*
     
3.1(ii)   Amended and Restated Bylaws of Bone Biologics, Corp.*
     
4.1   Bone Biologics, Corp. September 2013 Warrant issued to AFH*
     
4.2  

Bone Biologics, Corp. June 2013 Warrant issued to Orthofix*

     
4.3   Bone Biologics, Corp. April 2013 Warrant issued to MTF*
     
4.4  

Amendment to Bone Biologics, Corp. April 2013 Warrant issued to MTF, June 2013 Warrant issued to Orthofix and September 2013 Warrant issued to AFH*

     
4.5   Bone Biologics, Corp. Warrant issued to Marie Antonia Gray*
     
4.6   Bone Biologics, Corp. March 2009 Warrant issued to MTF*
     
4.7   Bone Biologics, Corp. Warrant issued to T.O. Medical Development Inc.*
     
4.8   Bone Biologics, Corp. Warrant issued to Chia Soo*
     
4.9   Bone Biologics, Corp. Warrant issued to Aragen Bioscience, Inc.*
     
4.10   Bone Biologics, Corp. Warrant issued to Alquest, Inc.*
     
4.11   Bone Biologics, Corp. October 2013 Warrant issued to Orthofix*
     
4.12   Bone Biologics, Corp. June 2014 Warrant issued to MTF, as thereafter assigned to Orthofix*
     
4.13   Bone Biologics, Corp. July 2014 Warrant issued to Orthofix*
     
4.14   Bone Biologics, Corp. July 2014 Warrant issued to AFH*
     
4.15   Bone Biologics, Corp. Warrant issued to Catherine Doll *
     
4.16   Bone Biologics, Corp. Warrant issued to Forefront Capital Markets, LLC*
     
4.17   Bone Biologics, Corp. September 2014 Warrant issued to MTF *
     
4.18   Form of Registration Rights Agreement, by and between Bone Biologics, Corp., AFH, HIC and MTF*
     
4.19  

Bone Biologics, Corp. Convertible Note Purchase Agreement, dated September 19, 2014 by and Between Bone Biologics, Corp. and MTF *

     
4.20   Bone Biologics, Corp. Convertible Promissory Note, dated September 19, 2014, issued to MTF*
     
4.21   $340,000 Note issued in Favor of AFH Advisory*
     
4.22  

Loan Agreement dated September 15, 2014, by and Between MTF and Bone Biologics, Inc. and Assignment, Assumption and Consent Agreement *

     
4.23   Note dated as of September 15, 2014, issued in Favor of MTF *

 

65
 

 

4.24   Letter of Credit granted by MTF to AFH Advisory*
     
4.25   Return to Treasury Agreement of Bone Biologics, Corp. with AFH Advisory*
     
10.1   Letter Agreement, dated September 7, 2014, by and among AFH Holding & Advisory, LLC, Bone Biologics, Inc. and Musculoskeletal Transplant Foundation, Inc. *
     
10.2   Letter agreement, dated December 18, 2013, as amended on September 22, 2014, by and among Bone Biologics, Inc., AFH Acquisition X, Inc., and Forefront Capital Markets, LLC*
     
10.3   Director Offer Letter, dated July 2, 2014, by and between Chia Soo and Bone Biologics, Corp. *+
     
10.4   Director Offer Letter, dated July 1, 2014, by and between Bruce Stroever and Bone Biologics, Corp. *+
     
10.5   Director Offer Letter, dated August 22, 2014, by and between John Booth and Bone Biologics, Corp. *+
     
10.6   Director Offer Letter, dated June 23, 2014, by and between Jimmy Delshad and Bone Biologics, Corp. *+
     
10.7   Director Offer Letter, dated, June 25, 2014, by and between Steve Warnecke and Bone Biologics, Corp. *+
     
10.8   Director Offer Letter, dated, June 25, 2014, by and between William Coffin and Bone Biologics, Corp. *+
     
10.9   Management Consulting Agreement, dated September 19, 2014, by and between the Musculoskeletal Transplant Foundation, Inc. and Bone Biologics, Corp. (Mike Schuler) *+
     
10.10   Management Consulting Agreement, dated September 19, 2014, by and between the Musculoskeletal Transplant Foundation, Inc. and Bone Biologics, Corp. (Bruce Stroever) *+
     
10.11   President and Chief Technology Officer Employment agreement, dated September 19, 2014, by and between Bone Biologics, Corp. and William Jay Treat*+
     
10.12   Management Consulting Agreement, dated July 1, 2014, by and between The Gilson Group, LLC and Bone Biologics, Corp. *+
     
10.13   Consulting Agreement, dated September 19, 2014, by and between Bone Biologics, Corp. and T.O. Medical Development Inc. *+
     
10.14   Bone Biologics, Corp. 2014 Stock Plan*+
     
10.15   Form of Stock Option Award Agreement under the Bone Biologics, Corp. 2014 Equity Incentive Plan*+
     
10.16   Exclusive License Agreement, dated as of March 15, 2006, by and between Bone Biologics, Inc. and the Regents of the University of California*
     
10.17   Form of Indemnification Agreement*
     
10.18   Form of Former Officer and Director Indemnification Agreement*
     
21.1   Subsidiaries*
     
101.INS   XBRL Instance Document*
101.SCH   XBRL Taxonomy Extension Schema Document*
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF   XBRL Taxonomy Extension Definition Document*
101.LAB   XBRL Taxonomy Extension Label Linkbase Document*
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document*

 

* Filed herewith.
+ Designates management contracts and compensation plans.

 

66
 

 

SIGNATURES

 

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

 

  BONE BIOLOGICS CORP.
     
Date: September 25, 2014 By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer

 

67
 

 

BONE BIOLOGICS, INC.

 

TABLE OF CONTENTS

 

(A) Financial Statements of Bone Biologics, Inc. as of and for the Years Ended December 31, 2013 and 2012 and for the Period from March 9, 2004 (Inception) through December 31, 2013  
     
Independent Auditor’s Report   F-2
     
Balance Sheets, for the years ended December 31, 2013 and 2012   F-4
     
Statements of Operations, for the years ended December 31, 2013 and 2012 and for the period from March 9, 2004 (Inception) to December 31, 2013   F-5
     
Statements of Stockholders’ Deficit, for the years from December 31, 2004 through December 31, 2013   F-6
     
Statements of Cash Flows, for the years ended December 31, 2013 and 2012 and for the period from March 9, 2004 (Inception) to December 31, 2013   F-8
     
Notes to Financial Statements, as of December 31, 2013 and 2012   F-9
     
(B) Bone Biologics, Corp. (formerly AFH Acquisition X, Inc.), Unaudited Pro Forma Consolidated Financial Statements as at June 30, 2014  
     
Pro Forma Consolidated Statement of Financial Position as at June 30, 2014 (Unaudited)   F-20
     
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the Year Ended December 31, 2013 (Unaudited)   F-21
     
Pro Forma Statement of Operations and Comprehensive Income for the Six Months Ended June 30, 2014 (Unaudited)   F-22
     
Noted to Pro Forma Consolidated Financial Statement Six Months Ended June 30, 2014 (Unaudited)   F-23
     
(C) Bone Biologics, Inc. Condensed Financial Statements for the Three and Six Months Ended June 30, 2014 and 2013 (Unaudited)  
     
Bone Biologics, Inc. Condensed Balance Sheets as of June 30, 2014 (Unaudited) and December 31, 2013   F-30
     
Bone Biologics, Inc. Condense Statements of Operations for the Three Months Ended June 30, 2014 and 2013 and the Six Months Ended June 30, 2014 and 2013 (Unaudited)   F-31
     
Bone Biologics, Inc. Condensed Statement of Cash Flows for the Six Months Ended June 30, 2014 and 2013 (Unaudited)   F-32
     
Notes to Condensed Financial Statements   F-33

 

F- 1
 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Stockholders of Bone Biologics, Inc.

 

We have audited the accompanying balance sheets of Bone Biologics, Inc. (the “Company”) as of December 31, 2013 and 2012, and the related statement of operations, changes in stockholders’ deficit and cash flows for the years then ended, and the period from March 9, 2004 (Inception) through December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bone Biologics, Inc. as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended, and the period from March 9, 2004 (Inception) through December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has recurring losses from operations and an accumulated deficit of $7,613,504 at December 31, 2013. As discussed in Note 1 to the financial statements, the Company has negative cash flows from operations, working capital deficiencies, has notes payable and related interest payable, and has not established commercial viability of its products. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters, which are further described in Note 1, are to use its available borrowing capacity through its short-term credit facilities provided by related parties, raise additional debt or equity capital, and continue to progress towards commercial viability of its products. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ ANTON & CHIA, LLP  
   
Newport Beach, California  
June 6, 2014  

 

F- 2
 

 

Financial Statements

 

As of and for the Years Ended December 31, 2013 and 2012 and for the

Period from March 9, 2004 (inception) through December 31, 2013

 

F- 3
 

 

Bone Biologics, Inc.

(A Development Stage Company)

 

Balance Sheets

 

    December 31, 2013     December 31, 2012  
             
Assets                
                 
Current assets                
Cash   $ 1,538     $ 2,370  
Prepaid expenses     10,767       -  
Deferred transaction costs     75,000       -  
                 
Total current assets     87,305       2,370  
                 
Total assets   $ 87,305     $ 2,370  
                 
Liabilities and Stockholders’ Equity                
                 
Current liabilities                
Accounts payable   $ 41,300     $ -  
Accrued expenses     1,525,604       991,403  
Notes payable to related party, net of debt discount     3,947,817       3,687,237  
Notes payable, net of debt discount     180,690       -  
                 
Total current liabilities     5,695,411       4,678,640  
                 
Total liabilities     5,695,411       4,678,640  
                 
Commitments and Contingencies                
                 
Stockholders’ deficit                
Series A Preferred Stock, $0.0001 par value per share; 493,339 shares authorized; 493,339 shares issued and outstanding at December 31, 2013 and December 31, 2012 (liquidation preference $881,103 at December 31, 2013 and December 31, 2012, respectively)     49       49  
Series B Preferred Stock, $0.0001 par value per share; 10,000,000 shares authorized; 5,336,099 shares issued and outstanding at December 31, 2013 and December 31, 2012 (liquidation preference $23,585,557 at December 31, 2013 and December 31, 2012, respectively)     534       534  
Common stock, $0.0001 par value per share; 20,000,000 shares authorized; 5,098,661 shares issued and outstanding at December 31, 2013 and December 31, 2012     510       510  
Additional paid-in capital     2,004,305       1,853,938  
Accumulated deficit     (7,613,504 )     (6,531,301 )
                 
Total stockholders’ deficit     (5,608,106 )     (4,676,270 )
                 
Total liabilities and stockholders’ deficit   $ 87,305     $ 2,370  

 

See accompanying notes to financial statements.

 

F- 4
 

 

Bone Biologics, Inc.

(A Development Stage Company)

 

Statements of Operations

 

    Year Ended
December 31, 2013
    Year Ended
December 31, 2012
    Period from
March 9, 2004 (inception) to December 31, 2013
 
                   
Revenues   $ -     $ -     $ -  
                         
Cost of revenues     -       -       -  
                         
Gross profit     -       -       -  
                         
Operating expenses                        
Research and development     188,236       255,575       5,089,482  
General and administrative     483,749       180,089       1,238,419  
                         
Total operating expenses     671,985       435,664       6,327,901  
                         
Loss from operations     (671,985 )     (435,664 )     (6,327,901 )
                         
Interest expense, net     (409,419 )     (279,101 )     (1,277,603 )
                         
Loss before provision for income taxes     (1,081,404 )     (715,765 )     (7,605,504 )
                         
Provision for income taxes     800       800       8,000  
                         
Net loss   $ (1,082,204 )   $ (715,565 )   $ (7,613,504 )

 

See accompanying notes to financial statements.

 

F- 5
 

 

Bone Biologics, Inc.

(A Development Stage Company)

 

Statements of Stockholders’ Deficit

 

    Series A Preferred Stock     Series B Preferred Stock     Common Stock     Additional Paid-in     Accumulated Deficit During the Development     Total Stockholders’ Equity  
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Stage     (Deficit)  
                                                       
Balance at March 9, 2004     -     $ -       -     $ -       -     $ -     $ -     $ -     $ -  
                                                                         
Capital contribution     -       -       -       -       -       -       35,000       -       35,000  
                                                                         
Net loss     -       -       -       -       -       -       -       (32,327 )     (32,327 )
                                                                         
Balance at December 31, 2004     -       -       -       -       -       -       35,000       (32,327 )     2,673  
                                                                         
Capital contribution     -       -       -       -       -       -       (18,000 )     -       (18,000 )
                                                                         
Issuance of common stock     -       -       -       -       5,125,500       513       34,012       -       34,525  
                                                                         
Net loss     -       -       -       -       -       -       -       (50,762 )     (50,762 )
                                                                         
Balance at December 31, 2005     -       -       -       -       5,125,500       513       51,012       (83,089 )     (31,564 )
                                                                         
Issuance of common stock     -       -       -       -       473,161       47       (47 )     -       -  
      -       -       -       -                                          
Sale and issuance of Series A Preferred Stock in July 2006 at $1.786 per share for cash     83,987       8       -       -       -       -       149,993       -       150,001  
                                                                         
Issuance of Series A Preferred Stock in conjunction with the conversion of notes payable in July 2006     409,352       41       -       -       -       -       731,062       -       731,103  
                                                                         
Issuance of warrants in November 2006     -       -       -       -       -       -       10,356       -       10,356  
                                                                         
Net loss     -       -       -       -       -       -       -       (476,474 )     (476,474 )
                                                                         
Balance at December 31, 2006     493,339       49       -       -       5,598,661       560       942,376       (559,563 )     383,422  
                                                                         
Sale and issuance of Series B Preferred Stock in July 2007 at $4.42 per share for cash     -       -       147,846       15       -       -       653,467       -       653,482  
                                                                         
Repurchase common stock     -       -       -       -       (500,000 )     (50 )     (34,650 )     -       (34,700 )
                                                                         
Net loss     -       -       -       -       -       -       -       (1,218,678 )     (1,218,678 )

 

F- 6
 

 

Bone Biologics, Inc.

(A Development Stage Company)

 

Statements of Stockholders’ Deficit (Continued)

 

    Series A Preferred Stock     Series B Preferred Stock     Common Stock     Additional Paid-in     Deficit Accumulated During the Development     Total Stockholders’ Equity/  
    Shares     Amount     Shares     Amount     Shares     Amount     Capital     Stage     (Deficit)  
                                                       
Balance at December 31, 2007     493,339       49       147,846       15       5,098,661       510       1,561,193       (1,778,241 )     (216,474 )
                                                                         
Net loss     -       -       -       -       -       -       -       (1,001,573 )     (1,001,573 )
                                                                         
Balance at December 31, 2008     493,339       49       147,846       15       5,098,661       510       1,561,193       (2,779,814 )     (1,218,047 )
                                                                         
Warrant issuance in connection with March 2009 note     -       -       -       -       -       -       47,970       -       47,970  
                                                                         
Net loss     -       -       -       -       -       -       -       (1,200,579 )     (1,200,579 )
                                                                         
Balance at December 31, 2009     493,339       49       147,846       15       5,098,661       510       1,609,163       (3,980,393 )     (2,370,656 )
                                                                         
Issuance of Series B Preferred Stock in conjunction with the conversion of September 2009 Convertible Note in February 2010     -       -       5,188,253       519       -       -       141,448       -       141,967  
                                                                         
Issuance of warrants in February 2010     -       -       -       -       -       -       103,327       -       103,327  
                                                                         
Net loss     -       -       -       -       -       -       -       (897,713 )     (897,713 )
                                                                         
Balance at December 31, 2010     493,339       49       5,336,099       534       5,098,661       510       1,853,938       (4,878,106 )     (3,023,075 )
                                                                         
Net loss     -       -       -       -       -       -       -       (937,630 )     (937,630 )
                                                                         
Balance at December 31, 2011     493,339       49       5,336,099       534       5,098,661       510       1,853,938       (5,815,736 )     (3,960,705 )
                                                                         
Net loss     -       -       -       -       -       -       -       (715,565 )     (715,565 )
                                                                         
Balance at December 31, 2012     493,339     $ 49       5,336,099     $ 534       5,098,661     $ 510     $ 1,853,938     $ (6,531,301 )   $ (4,676,270 )
                                                                         
Net Loss     -       -       -       -       -       -       -       (1,082,203 )     (1,082,203 )
                                                                         
Warrants issued in connection with Bridge Notes     -       -       -       -       -       -       150,367       -       150,367  

Balance at December 31, 2013

    493,339     $ 49       5,336,099     $ 534       5,098,661     $ 510     $ 2,004,305     $ (7,613,504 )   $ (5,608,106 )

 

See accompanying notes to financial statements.

  

F- 7
 

 

Bone Biologics, Inc.

(A Development Stage Company)

 

Statements of Cash Flows

 

    For the Year Ended
December 31, 2013
    For the Year Ended
December 31, 2012
    Period from
March 9, 2004
(inception) to
December 31, 2013
 
                   
Operating Activities                        
Net loss   $ (1,082,203 )   $ (715,565 )   $ (7,613,504 )
Adjustments to reconcile net loss to net cash used in operating activities:                        
Accrued interest expense     340,268       279,104       1,180,488  
Debt discount     67,104       -       67,104  
Warrants issued in connection with deferred fees     -       -       161,613  
Changes in operating assets and liabilities:                        
Prepaid expenses and other current assets     (10,767 )     -       (10,767 )
Deferred transaction costs     4,717       -       4,717  
Accounts payable     41,300       (29,657 )     41,300  
Accrued expenses     114,215       18,632       287,422  
                         
Net cash used in operating activities     (525,365 )     (447,486 )     (5,881,628 )
                         
Financing Activities                        
Capital contributions, net     -       -       17,000  
Proceeds from issuance of notes payable     524,533       448,609       5,062,858  
Proceeds from issuance of common stock     -       -       34,525  
Repurchase of common stock     -       -       (34,700 )
Proceeds from sale of Series A preferred stock     -       -       150,000  
Proceeds from sale of Series B preferred stock     -       -       653,482  
                         
Net cash provided by financing activities     524,533       448,609       5,883,165  
                         
Net increase (decrease) in cash     (832 )     1,123       1,538  
                         
Cash, beginning of period     2,370       1,247       -  
                         
Cash, end of period   $ 1,538     $ 2,370     $ 1,538  
                         
Supplemental non-cash information                        
Conversion of notes payable and Accrued interest to preferred stock   $ -     $ -     $ 873,070  
Accrued transaction fees   $ 129,717     $ -     $ -  
Interest paid   $ 2,047     $ -     $ 2,047  
Taxes paid   $ 800     $ 800     $ 8,000  
Warrants issued in connection with notes payable   $ 150,367     $ -     $ -  

 

See accompanying notes to financial statements.

 

F- 8
 

 

Bone Biologics, Inc.
(A Development Stage Company)

 

Notes to Financial Statements

  

1.

The Company

 

Bone Biologics, Inc. (“Bone” or the “Company”) was incorporated in California on March 9, 2004. Bone is a privately-held biotechnology company that is currently focused on bone regeneration in spinal fusion using the recombinant human protein, known as UCB-1 (or “Nell-1”). The UCB-1 protein is an osteoinductive recombinant protein that provides target specific control over bone regeneration. The protein has been licensed exclusively for worldwide applications to Bone Biologics through a technology transfer from the University of California, Los Angeles (“UCLA”). Bone Biologics recently received guidance from the United States Food and Drug Administration (“FDA”) that UCB-1 will be classified as a combination product with a device lead.

 

The Company is a development stage entity. The production and marketing of the Company’s products and its ongoing research and development activities will be subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any drug developed by the Company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the FDA under the Food, Drug and Cosmetic Act. The Company has limited experience in conducting and managing the preclinical and clinical testing necessary to obtain regulatory approval. There can be no assurance that the Company will not encounter problems in clinical trials that will cause the Company or the FDA to delay or suspend clinical trials.

 

The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated, or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company.

 

In August 2012, the Company, along with its majority owner and debt holder, Musculoskeletal Transplant Foundation, Inc. (“MTF”) and AFH Holding & Advisory, LLC (“AFH”) entered into a Letter of Intent (“LOI”), as amended on August 19, 2013, to consummate a business combination through a share exchange, reverse merger, or other similar transactions resulting in the Company becoming a public entity (“The Transaction”) and the contemplated subsequent financings (see Note 4).

 

Going Concern and Liquidity

 

The Company has no significant operating history and, from March 9, 2004 (inception) to December 31, 2013, has generated an accumulated deficit of approximately $7.6 million. The Company will continue to incur significant expenses for development activities for their lead product Nell-1. The accompanying financial statements for the year ended December 31, 2013, have been prepared assuming the Company will continue as a going concern. In connection with the LOI, management intends to raise additional debt and/or equity financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts and on acceptable terms necessary to meet the Company’s needs.

 

The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

 

Use of Estimates

 

The preparation of the accompanying financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Significant estimates include warrants and income tax valuation allowances. Actual results could differ from those estimates.

 

F- 9
 

 

Bone Biologics, Inc.
(A Development Stage Company)

 

Notes to Financial Statements

  

Research and Development Costs

 

Research and development costs include, but are not limited to, patents and license expenses, payroll and other personnel expenses, consultants, expenses incurred under agreements with contract research and manufacturing organizations and animal clinical investigative sites and the cost to manufacture clinical trial materials. Costs related to research, design and development of products are charged to research and development expense as incurred.

 

Patents and Licenses

 

In March 2006, the Company entered into an exclusive license agreement (“Exclusive License Agreement”) with UCLA for the worldwide application of the UCB-1 protein through a technology transfer. See Note 4 for commitments related to the Exclusive License Agreement. Patent expenses include costs to acquire the license of UCB-1, which were de minimus, and costs to file patent applications related to UCB-1.

 

Bone Biologics expenses the costs incurred to file patent applications, all costs related to abandoned patent applications and maintenance costs, and these costs are included in research and development expenses. Costs associated with licenses acquired to be able to use products from third parties prior to receipt of regulatory approval to market the related products are also expensed. The Company’s licensed technologies may have alternative future uses in that they are enabling (or platform) technologies that can be the basis for multiple products that would each target a specific indication. Costs of acquisition of licenses are expensed.

 

Concentration of Credit Risk and Other Risks and Uncertainties

 

Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. All of the non-interest bearing cash balances were fully insured at December 31, 2012 due to a temporary federal program in effect from December 31, 2010 through December 31, 2012. Under the program, there is no limit to the amount of insurance for eligible accounts. Beginning January 1, 2013, insurance coverage reverted to $250,000 per depositor at each financial institution, and the Company’s non-interest bearing cash balances may again exceed federally insured limits. There were no interest-bearing amounts on deposit in excess of federally insured limits at December 31, 2013 and December 31, 2012.

 

Income Taxes

 

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due and deferred taxes resulting from timing differences in recording of transactions for tax purposes and financial reporting purposes.

 

The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are received or settled. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized.

 

The accounting provisions related to uncertain income tax positions require the Company to determine whether any tax position in all open years meets a more likely than not threshold of being sustained upon examination by the applicable taxing authority. The Company did not have any changes to its liability for uncertain tax positions for the years ended December 31, 2013 and 2012.

 

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. No such amounts are accrued as of December 31, 2013 and 2012.

 

F- 10
 

 

Bone Biologics, Inc.
(A Development Stage Company)

 

Notes to Financial Statements

  

3. Accrued Expenses

 

Accrued expenses consist of the following:

 

    December 31, 2013     December 31, 2012  
             
Interest expense   $ 1,158,465     $ 818,195  
Professional services     152,492       161,700  
Transaction costs     137,585       -  
Patents     75,383       10,031  
Payroll taxes     1,679       1,477  
                 
    $ 1,525,604     $ 991,403  

 

4. Commitments and Contingencies

 

Letter of Intent

 

In August of 2012, the Company, along with its majority owner and debt holder, MTF, entered into a Letter of Intent (“LOI”) with AFH to consummate a business combination through a share exchange, reverse merger, or other similar transactions resulting in the Company becoming a public entity (“The Transaction”). In August, 2013, the LOI was amended and restated, and on May 7, 2014, the LOI was again amended and restated. The Amended and Restated Letter of Intent dated May 7, 2014 (the “Amended LOI”) contemplates and defines the following events:

 

Consummation of Bridge Financings (“Closing I”)

 

In April 2013 and September 2013, the Company’s Board approved the Company to borrow up to an aggregate principal amount of $300,000 (April Bridge Financing) and $250,000 (September Bridge Financing) pursuant to the sale and issuance of convertible promissory notes and warrants to purchase common stock of the Company (collectively, the “Bridge Financings”). The note accrues interest at a rate of 12% per year and payable per quarter. A warrant to purchase the Company’s common stock equal to 50% of the original principal amount at $1.00 per share will be issued to each Bridge Financing participant. Principal and unpaid accrued interest may be converted into equity securities issued in the Company’s next equity financing in an aggregate amount of at least $2.5 million at a price equal to the price paid by investors in the next equity financing. On April 29, 2013 and on June 5, 2013, the Company borrowed $100,000 from MTF and $100,000 from Orthofix, Inc., respectively, under the April Bridge Financing. In August 2013, in conjunction with the Amended LOI, AFH agreed to purchase $50,000 of the April Bridge Financing prior to Closing II. In October 2013, the Company borrowed an additional $150,000 from Orthofix under the September Bridge Financing.

 

Consummation of Business Combination (“Closing II”)

 

Under the amended LOI, it is contemplated that the Company and its equity holders will consummate a share exchange, reverse merger, or other business combination, with a Delaware corporation publicly reporting pursuant to United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), or a private Delaware corporation (“Acquisition Co.”), either directly or indirectly through an affiliate. If the post-business combination entity is not already a corporation publicly reporting pursuant to the Exchange Act, AFH will assist the post business combination entity with the filing of an appropriate registration statement resulting in the Company becoming a public company (“PubCo”).

 

Consummation of the Private Placement (“Closing III”)

 

Subsequent to Closing II, AFH will use its best efforts to assist PubCo in procuring one or more investors for a private financing, whether debt or equity, of a minimum of $2.5 million up to a maximum of $5.0 million. Such transaction is to include an over-allotment option of 15% at AFH’s discretion (the “Private Placement”).

 

Consummation of the PIPE Transaction (“Closing IV”)

 

Subsequent to Closing III, AFH Advisory will use its best efforts to assist PubCo in procuring an investment bank (the “Bank”) to facilitate a private investment in public equity transaction in an amount between $8.0 million and $10.0 million through the sale of securities of PubCo (the “PIPE”). Such transaction will include a 15% over allotment at AFH and/or the Bank’s discretion. Such transaction is contingent upon the appointment of a Bank and filing appropriate forms with the Financial Industry Regulatory Authority, Inc. (“FINRA”).

 

F- 11
 

 

Bone Biologics, Inc.
(A Development Stage Company)

 

Notes to Financial Statements

  

Consummation of Initial Public Offering (“Closing V”)

 

Subsequent to Closing IV, AFH will assist PubCo in procuring a Bank to act as underwriter for an initial public offering in an amount of up to $40.0 million (the “Initial Public Offering”). The Initial Public Offering shall include a 15% over allotment option at AFH and/or the Bank’s discretion. Such a transaction is contingent upon the appointment of the Bank.

 

At or prior to consummation of the Business Combination, MTF agrees to convert all of its outstanding shares of Series A preferred stock and Series B preferred stock of the Company into share of Common Stock.

 

In addition, MTF agrees to convert 30%, 35%, and 35% of all outstanding convertible promissory notes and promissory notes converting as amended (principal and accrued interest) at each of the consummation of Closing II, Closing IV, and Closing V, respectively.

 

Upon (i) the consummation of the Business Combination, (ii) after giving effect to the issuance of any securities by Acquisition Co. in connection with the Business Combination (the “Business Combination Shares”), (iii) the completion of the Private Placement and (iv) after giving effect to the PIPE, the existing stockholders of Acquisition Co., and its owners, relatives, assignees and affiliates (collectively, the “AFH Group”), will own an aggregate of ten percent of the issued and outstanding common shares (the “Advisor Shares”) of PubCo.

 

At the consummation of Closing III, AFH Group shall be entitled to receive warrants to purchase up to 500,000 share of common stock of PubCo at the per share price of the shares offered in the Private Placement with a 5 year term and a cashless exercise provision (the “Extra Warrants”).

 

In addition to the Advisor Shares and Extra Warrants, AFH Group shall be entitled to receive warrants to purchase shares of common stock of PubCo (“Advisor Warrants”) in the amount necessary to cause AFH Group, when combined with the Advisor Shares, to have ownership equal to 10% of the fully diluted outstanding Common Stock, options and warrants at Closing III.

 

AFH will also be entitled to a reimbursement of $590,000 in connection with the Business Combination, which shall be payable directly from the net proceeds of the Private Placement (Closing III) to AFH at closing. Each party will bear all of its own costs and expenses in connection with each Closing.

 

In conjunction with the Amended LOI, the Company has agreed to covenants for the period of time between signing of the Amended LOI and the consummation of the Business Combination (Closing II) or upon termination of the agreement. Such covenants include restrictions and limitations on additional indebtedness, liquidation, selling of equity securities, amending organizational document and certain other normal and customary covenants. The Amended LOI will expire on August 31, 2014 if Closing II has not occurred.

 

License Commitment

 

In connection with the Exclusive License Agreement, the Company is required to pay a royalty fee beginning in the first year of commercial sale of the licensed product equal to 3% of net sales on a quarterly basis with an annual minimum royalty of $25,000 for the life of the patent rights. In addition to the royalty fees, the Company is also required to pay UCLA a $10,000 annual maintenance fee, $50,000 upon FDA marketing approval, and $25,000 upon first commercial sale.

 

On October 22, 2013, the Exclusive License Agreement was amended. The following additional fees will be due to UCLA i) 2% of the amount raised in the Private Placement. If the Private Placement does not close or is less than $2.5 million then a fee of $100,000 will be due and payable by June 1, 2014, ii) $25,000 due upon dosing of Phase 1 clinical trial and iii) $50,000 due upon closing of Phase 3 clinical trial.

 

Contingencies

 

The Company is subject to claims and assessments from time to time in the ordinary course of business. The Company’s management does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

 

F- 12
 

 

Bone Biologics, Inc.
(A Development Stage Company)

 

Notes to Financial Statements

  

Indemnification

 

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.

 

In accordance with its amended and restated certificate of incorporation and amended and restated bylaws, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date and the Company has a director and officer insurance policy that enables it to recover a portion of any amounts paid for future potential claims.

 

5. Notes Payable to Related Party

 

As of December 31, 2013 and December 31, 2012, the Company had a total of $5,095,427 and $4,505,432, respectively, of notes outstanding (principal and interest) with MTF, a related party, which consist of the following:

 

Note Type   Issue Date     Maturity Date     Interest Rate     December 31, 2013     December 31, 2012  
Convertible Promissory Note     1/18/08     3/31/14     PRIME + 1 ½%     $ 1,479,654     $ 1,415,475  
Promissory Note     11/4/08     3/31/14     PRIME + 3%       343,429       322,963  
Promissory Note     3/17/09     3/31/14     PRIME + 8%       584,745       543,128  
Promissory Note     8/24/09     3/31/14     LIBOR + 8%       23,193       21,110  
Tranched Promissory Note     9/30/09     3/31/14     LIBOR + 8%       2,570,126       2,202,756  
Bridge Note, net of discount     4/29/13     4/29/14     12%     94,280       -  
                                         
                            $ 5,095,427     $ 4,505,432  

 

Accrued interest on the notes payable to related party of $1,158,465 (2012 - $818,195) is recorded in accrued expenses at December 31, 2013 and 2012.

 

Convertible Promissory Notes

 

The convertible promissory notes are considered hybrid instruments, which consist of a debt host instrument together with a conversion feature, thus giving the holder of a convertible note an option to convert into an equity instrument providing the holder a residual interest in the Company. The holder of a convertible promissory note also has the option to present its convertible promissory note to the Company and demand payment under the terms of the note after the maturity date or upon the occurrence of certain events such as the failure of the Company to make a payment on the note when due, bankruptcy or certain other liquidation events. The Company concluded that the convertible promissory notes would be accounted for as a typical debt instrument with related interest expense recorded in the Company’s statements of operations. The company concluded that there is no beneficial conversion feature as of the date of issuance of the convertible notes. However, the note contains a contingent feature whereby the conversion rate may be lowered if a financing occurs at a lower rate than the note’s conversion rate. If the contingency is met and the conversion feature is determined to be “beneficial” in a future accounting period, an additional financing cost would be recorded for the beneficial conversion feature in the Company’s statements of operations at that time.

 

In April 2005, the Company issued a $100,000 convertible promissory note (the “2005 Convertible Note”) to MTF in accordance with the Convertible Note Purchase Agreement and Convertible Promissory Note dated April 6, 2005. In April 2006 the Company issued an additional $612,000 convertible promissory note (the “2006 Convertible Note”) to MTF in accordance with the Convertible Note Purchase Agreement and Convertible Promissory Note dated April 7, 2006.

 

The 2005 Convertible Note and the 2006 Convertible Note bore interest at a fixed rate of 6% per annum and prime plus one and one-half percent per annum, respectively, and matured on September 30, 2008 and September 30, 2009, respectively. In July 2006, the 2005 Note and 2006 Note, respectively, and accrued interest thereon for a total of $731,103, were converted into an aggregate of 409,352 shares of Series A preferred stock which was based on the conversion price of $1.786 per share (see Note 6). The conversion of the notes did not trigger a contingency and no additional financing charge was recognized.

 

F- 13
 

 

Bone Biologics, Inc.
(A Development Stage Company)

 

Notes to Financial Statements

   

In January 2008, the Company issued a $1,107,000 convertible promissory note (“January 2008 Note”) to MTF in accordance with the Convertible Promissory Note dated January 18, 2008, as amended. The January 2008 Note bears interest at prime plus one and one-half percent per annum. MTF has the right to convert the entire outstanding balance (principal plus accrued interest) into shares of Series B Preferred Stock at the initial conversion price of $4.42 per share (“Initial Conversion Price”). Such Initial Conversion Price shall be subject to adjustments including but not limited to stock splits, issuance of securities and next equity financing.

 

The Company issued promissory notes to MTF in November 2008 of $250,000 (“November 2008 Note”), in March 2009 of $400,000 (“March 2009 Note) and in August 2009 of $16,400 (August 2009 Note”). The November 2008 and the March 2009 Note bear interest at prime plus three percent per annum. The August 2009 Note bears interest at LIBOR plus eight percent per annum.

 

In connection with the March 2009 Note, the Company entered into a Security Agreement (the “Security Agreement”) which grants MTF a security interest in all of the Company’s right, title and interest, whether presently existing or hereafter acquired, in, to all intellectual property and all other collateral. In connection with the Security Agreement, the Company issued a warrant to purchase 118,383 shares of common stock at an exercise price of $0.44 (See Note 6).

 

In September 2009, the Company issued a $139,047 promissory note (the “2009 Convertible Note”) to MTF in accordance with the Convertible Note Purchase Agreement and Convertible Promissory Note dated September 30, 2009. The 2009 Convertible Note bears interest at the rate of LIBOR plus 8% per annum and matured on October 30, 2009, but could have extended to November 30, 2009 or December 31, 2009. If the note is was not repaid by the maturity date, MFT was entitled to (i) convert the amount due on the 2009 Convertible Note into shares of Series B Preferred stock sufficient to increase MTF’s ownership in the Company to 51% of the fully-diluted capitalization, and (ii) receive the right to designate up to three additional members of the Company’s Board of Directors.

 

Since the 2009 Convertible Note was not repaid by the maturity date, on February 4, 2010, the 2009 Convertible Note was converted into 5,188,253 shares of Series B Preferred stock, which increased MTF’s ownership in the Company to 51% of the fully-diluted capitalization.

 

In September 2009, the Company entered into a tranched promissory note with MTF (“Tranched Note”), allowing the Company to initially borrow up to $445,000 in a series of one or more tranches. The Tranched Note was subsequently amended which, among other things, increased the maximum advance amount to $2,190,000.

 

In July 2013, all notes held by MTF were amended to extend the maturity date to March 31, 2014, and amended again on April 1, 2014 to extend the maturity date to March 31, 2015.

 

Bridge Note

 

In April 2013 and June 2013, the Company borrowed $100,000 from MTF and $100,000 from Orthofix, Inc. under the April Bridge Financing, and in October the Company borrowed an additional $150,000 from Orthofix, Inc. under the September Bridge Financing (See Note 5). The convertible promissory note accrues interest at a rate of 12% per year and payable per quarter. A warrant to purchase the Company’s common stock equal to 50% of the original principal amount divided by $1.00 was issued to the Bridge Financing participant. Principal and unpaid accrued interest may be converted into equity securities issued in the Company’s next equity financing in an aggregate amount of at least $2.5 million at a price equal to the price paid by investors in the next equity financing. As of December 31, 2013 the total outstanding balance under the Bridge Financings was $266,737 (net of debt discount of $83,263) of which $94,280 is included in Notes Payable to Related Party and $180,690 is reported as Notes Payable, net of discount.

 

F- 14
 

 

Bone Biologics, Inc.
(A Development Stage Company)

 

Notes to Financial Statements

  

6. Stockholders’ Equity

 

Preferred Stock

 

The Company’s amended second amended and restated certificate of incorporation authorizes the Company to issue a total of 10,493,339 shares of preferred stock (Series A and B Combined). The Company has reserved sufficient shares of common stock for issuance upon conversion of the preferred stock. As of December 31, 2013, the Company has the following outstanding shares of preferred stock as shown in the table below.

 

Series   Date Issued   Issue Price     Shares
Outstanding
    Carrying Amount     Liquidation Preference     Dividend Rate  
                                             
A   July 2007   $ 1.786       493,339     $ 881,103     $ 881,103     $ 0.09  
B   August 2007     4.420       147,846       653,479       653,479       0.09  
B   February 2010     0.027       5,188,253       141,967       22,932,078       0.09  
                                             
                  5,829,438     $ 1,676,549     $ 24,466,660          

 

Dividends - The holders of Series A and B preferred stock are entitled to receive noncumulative dividends prior to and in preference to any declaration of payment of any dividends on the common stock of the Company, at the rate of $0.09 per share per annum. Such dividends are payable only when, and if declared by the Board of Directors. No dividends on preferred stock were declared by the Board from inception through December 31, 2013.

 

Liquidation Preference - In the event of liquidation, dissolution, or winding up of the Company, the holders of the Series A and B preferred stock are entitled to receive an amount per share equal to $1.786 and $4.42, respectively, for each outstanding share of Series A & B preferred stock (as adjusted for stock splits, stock dividends, combinations or other recapitalizations), plus all declared and unpaid dividends on such shares. Thereafter, if assets or surplus funds remained in the Company, the holders of common stock are entitled to receive all of the remaining assets of the Company.

 

Deemed Liquidation - Any merger or consolidation which would result in the Company’s stockholders immediately prior to such transaction not holding at least 50% of the voting power of the surviving, continuing or purchasing entity, or the sale or lease of all or substantially all of the assets of the Company, was deemed to be a liquidation, dissolution or winding up. Upon this event, holders of all shares of Series A and Series B preferred stock, as well as holders of the Company’s common stock would have receive their liquidation preference, including any declared and unpaid dividends as of the liquidation date. As in an ordinary liquidation, no class or series of the Company’s equity securities has a right to receive a particular form of consideration (e.g., cash or shares) upon a deemed liquidation event. Accordingly, because the holders of the Company’s preferred stock did not have a right to receive cash redemption of their shares, the Preferred stock are classified as permanent equity.

 

Conversion Rights - The holder of each share of Series A and B preferred stock have the option to convert each share into such number of fully paid and non-assessable shares of the Company’s common stock as is determined by dividing $1.786 (Series A Conversion Price) and $4.42 (Series B Conversion Price).

 

If the value of the adjusted number of shares of common stock into which the convertible preferred stock was convertible, based on the market price of the common stock on the date the convertible preferred stock was issued, was greater than the value of the number of shares of common stock into which the convertible preferred stock was convertible prior to such adjustment, based on the market price of the common stock on the date the convertible preferred stock was issued, the Company will recognize a beneficial conversion feature associated with the preferred stock. Because the beneficial conversion feature meets the requirements for equity classification (i.e., is not required to be accounted for as a liability), such future beneficial conversion feature charge will be recorded as a preferred stock dividend and the amount will be presented in a reconciliation of “net loss” to arrive at “net loss attributable to common shareholders” on the face of the Company’s statements of operations.

 

Each share of Series A and Series B preferred is subject to automatic conversion into common stock upon the earlier of (i) the Company’s sales of its common stock in a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act of 1933, as amended or (ii) the date specified by written consent of holders of a majority of the then outstanding shares of Series A and Series B preferred stock, voting together as a single class on an as-converted basis.

 

Redemption - The preferred stock is not redeemable.

 

Voting Rights - The holders of preferred stock has the same voting rights as the holders of common stock. The holders of each share of convertible preferred stock are entitled to the number of votes equal to the number of shares of common stock into which such shares of convertible preferred stock could be converted.

 

F- 15
 

 

Bone Biologics, Inc.
(A Development Stage Company)

 

Notes to Financial Statements

  

Common Stock

 

The Company’s amendment to the second amended and restated certificate of incorporation authorizes the Company to issue a total of 20,000,000 shares of common stock. As of
December 31, 2013, the Company had an aggregate of 5,098,661 shares of common stock outstanding of which 4,000,000 shares of the outstanding common stock were issued to the founders of the Company in exchange for technology know how and services.

 

Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared by the Board from inception through December 31, 2013.

 

In the event of a liquidation dissolution, or winding up of the Company, after distribution to the holders of the Series A and B convertible preferred stock, all remaining assets or surplus funds of the Company shall be distributed on a pro-rata basis among the holders of the outstanding common stock and convertible preferred stock assuming full conversion of the convertible preferred stock.

 

Common Stock Warrants

 

As of December 31, 2013, the Company had an aggregate of 609,300 outstanding unexercised common stock warrants as follows:

 

Date Issued   Exercise Price     Number of Shares  
                 
2006   $ 0.17       60,920  
2009   $ 0.44       118,383  
2010   $ 0.44       254,997  
2013   $ 1.00       175,000  
                 
Total Shares at December 31, 2013             609,300  

 

In November 2006 and February 2010, the Company issued warrants to purchase 60,920 shares of common stock at an exercise price of $0.17 per share and 254,997 shares of common stock at an exercise price of $0.44 per share, respectively. The warrants were issued to one of the co-founders of the Company and to certain consultants who previously rendered services to the Company for which they agreed to defer payment for their services. The warrants expire in ten years from issuance date and may be exercised for cash or, if the current market price of the Company’s common stock is greater than the per share exercise price, by surrender of a portion of the warrant in a cashless exercise. The initial fair value of the warrants was estimated at an aggregate value of $113,683, using the Black-Scholes option pricing model with the following assumptions at the date of issuance: expected volatility of 105.6%, risk-free interest rate of between 3.62% and 4.62%, contractual term of 10 years and dividend yield of 0%. The warrants are classified as permanent equity. As of December 31, 2013 and December 31, 2012, the unpaid deferred payment balance was $90,199 and is included in accrued professional services (see Note 3).

 

In March 2009, the Company entered a Credit Agreement with MTF, a related party, for which the Company may borrow up to $400,000 (see Note 5). In connection with this transaction, the Company entered into a Warrant Agreement whereby it issued to MTF a warrant to purchase 118,383 shares of the Company’s common stock (“Note Warrant”) at an exercise price of $0.44 which allowed the Company to extend the maturity dates of the notes dated January 18, 2008 and November 4, 2008 to December 31, 2009. The fair value of the warrants was recorded as a debt issuance cost and was being amortized to interest expense over the term of the loan . The initial fair value of the Note Warrant at the grant date was estimated at an aggregate value of $47,970, using the Black-Scholes option pricing model. The warrant was classified as permanent equity at December 31, 2013.

 

In the connection with the Bridge Financings (see Note 4), warrants were issued to purchase 125,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The warrants expire in seven years from issuance date and may be exercised for cash or, if the current market price of the Company’s common stock is greater than the per share exercise price, by surrender of a portion of the warrant in a cashless exercise. The initial fair value of the warrant was estimated at an aggregate value of $150,367 using the Black-Scholes option pricing model. The fair value on the warrants was recorded as a debt issuance cost and is being amortized to interest expense over the term of the note. For the year ended December 31, 2013, $67,104 of the debt issuance costs was amortized to interest expense.

 

F- 16
 

 

Bone Biologics, Inc.
(A Development Stage Company)

 

Notes to Financial Statements

  

7. Income Taxes

 

The provision for income taxes consists of the following:

 

    Year Ended
December 31, 2013
    Year Ended December 31, 2012     Period from
March 9, 2004 (inception) to December 31, 2013
 
                   
Current:                        
Federal   $ -     $ -     $ -  
State     800       800       8,000  
                         
Total current     800       800       8,000  
                         
Deferred:                        
Federal     -       -       -  
State     -       -       -  
                         
Total deferred     -       -       -  
                         
Provision for income taxes   $ 800     $ 800     $ 8,000  

 

The components of deferred tax assets and liabilities consist of the following:

 

December 31,   2013     2012  
             
Deferred tax assets                
Net operating losses   $ 1,866,000     $ 1,610,000  
Patents     560,000       520,000  
Accrued expenses     550,000       390,000  
R&D credits     57,000       45,000  
Warrants     45,000       45,000  
                 
Total     3,078,000       2,610,000  
                 
Less: Valuation allowance     (3,078,000 )     (2,610,000 )
                 
    $ -     $ -  

 

The Company’s federal and state net operating loss carryfowards at December 31, 2013 were approximately $4,681,000 and $4,713,000, respectively, and will begin to expire in 2019 if not utilized.

 

The Company reviews its deferred tax assets for realization based upon historical taxable income, prudent and feasible tax planning strategies, the expected timing of the reversals of existing temporary differences and expected future taxable income. The Company has concluded that it is more likely than not that the deferred tax assets will not be realized. Accordingly, the Company has recorded a valuation allowance against the net deferred tax assets in the amount of $3,078,000 at December 31, 2013. The net change in the valuation allowance for the year ended December 31, 2013 was $468,000.

 

The effective tax rate differs from the statutory tax rate principally due to the change in valuation allowance, nondeductible permanent differences, credits, and state income taxes.

 

F- 17
 

 

Bone Biologics, Inc.
(A Development Stage Company)

 

Notes to Financial Statements

  

8. Related Party Transactions

 

In September 2006, the Company entered into a consulting agreement with one of its stockholders whom previously served as chairman, president and CEO of the Company. The Company paid $120,000 for each year ended December 31, 2013 and 2012, in consulting fees to this related party.

 

In addition, one of the Company’s co-founders had previously provided research and development consulting services to the Company and earned an aggregate of $320,000 of fees from inception to January 2010. Of the $320,000, $52,500 has been deferred for payment until the Company’s next equity financing. As of December 31, 2013 and December 31, 2012, the $52,500 deferred payment was included in the accrued expenses.

 

During the year ended December 31, 2013 a related party, MTF, advanced $41,300 (2012 - $0) to the Company.

 

See Note 5 for related party notes payable to MTF.

 

F- 18
 

 

Bone Biologics, Corp.

 

(formerly AFH Acquisition X, Inc.)

 

Unaudited pro forma consolidated financial statements as at June 30, 2014

 

F- 19
 

 

Bone Biologics, Corp.

(formerly AFH Acquisition X, Inc.)

PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT June 30, 2014
(Unaudited)

 

    AFH Acquisition X, Inc.     Bone Biologics, Inc.     Subtotal     Pro forma adjustments     Notes     Bone Biologics, Corp.  
    April 30, 2014     June 30, 2014                       June 30, 2014  
Assets                                                
Current assets                                                
Cash     58       163       221       250,000       f       715,221  
                              500,000       e          
                              (35,000 )     h          
Prepaid expenses and other current assets             9,000       9,000                       9,000  
Deferred transaction costs             100,335       100,335       366,496       h       461,831  
                              (5,000 )     h          
Deferred financing fees             16,581       16,581       13,105       h       16,581  
                              (13,105 )     h          
Total Current Assets     58       126,079       126,137                       1, 202,633  
Total Assets     58       126,079       126,137                       1,202,633  
                                                 
Liabilities                                                
Current liabilities                                                
Accrued liabilities     4,454       1,829,927       1,834,381       590,000       h       2,167,294  
                              200,000       h          
                              (410,726 )     j          
                              (44,683 )     i          
                              (1,678 )     g          
Advances to related party             130,674       130,674                       130,674  
Due to parent     39,173               39,173       (39,173 )     i       -  
Convertible notes payable                             (111,893 )     f       -  
                              250,000       f          
                              111,893       g          
                              (250,000 )     g          
Notes payable, net             277,066       277,066       (250,000 )     k       -  
                              15,879       k          
                              (50,000 )     k          
                              7,055       k          
Notes payable to related parties, net             4,106,972       4,106,972       (1,107,000 )     j       2,754,770  
                              (100,000 )     k          
                              104,798       k          
                              (250,000 )     k          
Total current liabilities     43,627       6,344,639       6,388,266                       5,052,738  
      43,627       6,344,639       6,388,266                       5,052,738  
Stockholders’ deficit                                                
Series A convertible preferred stock             49       49       (49 )     l       -  
Series B convertible preferred stock             534       534       (534 )     l       -  
Common stock     5,000       510       5,510       50       e,g       17,913  
                              5       k          
                              (5,000 )     i          
                              152       j          
                              583       l          
                              114       k          
                              276       k          
                              16,157       o          
                              67       g          
Additional paid-in capital     20,000       2,145,066       2,165,066       499,950       e       5,894,641  
                              111,893       f          
                              (20,000 )     i          
                              (43,569 )     i          
                              1,517,574       j          
                              114,205       k          
                              275,417       k          
                              (13,557 )     h          
                              393,158       h          
                              501,611       g          
                              54,665       k          
                              (2,500 )     h          
                              26,200       h          
                              (15,720 )     h          
                              (23,333 )     h          
                              (16,157 )     o          
                              39,173       i          
                              330,564       n          
Accumulated deficit     (68,569 )     (8,364,719 )     (8,433,288 )     68,569       i       (9,762,660 )
                              (590,000 )     h          
                              (200,000 )     h          
                              (7,055 )     k          
                              (15,879 )     k          
                              (10,480 )     h          
                              (11,667 )     h          
                              (13,105 )     h          
                              (216,691 )     g          
                              (2,500 )     h          
                              (330,564 )     n          
Total stockholders’ deficit     (43,569 )     (6,218,560 )     (6,262,129 )                     (3,850,105 )
                                                 
Total liabilities and stockholders’ deficit     58       126,079       126,137                       1,202,633  

 

See accompanying notes to pro forma consolidated financial statements

 

F- 20
 

 

Bone Biologics, Corp.
(formerly AFH Acquisition X, Inc.)

 

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2013
(Unaudited)

 

    AFH Acquisition X, Inc.     Bone
Biologics, Inc.
    Subtotal     Pro forma adjustments     Notes     Bone Biologics, Corp.  
    Year Ended October 31, 2013     Year Ended December 31, 2013                       Year Ended December 31, 2013  
                                     
Revenues:     -       -       -                       -  
                                                 
Cost of revenue:     -       -       -                       -  
      -       -       -                       -  
Gross profit     -       -       -                       -  
                                                 
Operating expenses                                                
Research and development             188,236       188,236                       188,236  
General and administrative     4,806       483,749       488,555       (50,000 )     q       1,730,288  
                              1,291,733       t          
Total operating expenses     4,806       671,985       676,791                       1,918,524  
                                                 
Loss from operations     (4,806 )     (671,985 )     (676,791 )                     (1,918,524 )
                                                 
Other income (expense)                                                
Other expense     -       -       -                       -  
Interest expense, net     -       (409,419 )     (409,419 )     (150,371 )     r,s       (259,048 )
Total other income (expense)     -       -       -                       -  
                                                 
Loss before provision for income taxes     (4,806 )     (1,081,404 )     (1,086,210 )                     (2,177,572 )
                                                 
Provision for income taxes     400       800       1,200               p       1,200  
                                                 
Net loss and comprehensive loss     (5,206 )     (1,082,204 )     (1.087,410 )                     (2,178,772 )

 

See accompanying notes to pro forma consolidated financial statements

 

F- 21
 

 

Bone Biologics, Corp.
(formerly AFH Acquisition X, Inc.)

 

PRO FORMA STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2014
(Unaudited)

 

    AFH Acquisition X, Inc.     Bone Biologics, Inc.     Subtotal     Pro forma adjustments     Notes     Bone Biologics, Corp.  
    Six Months Ended
April 30, 2014
    Six Months Ended
June 30, 2014
                      Six Months Ended
June 30, 2014
 
                                                 
Revenues:     -       -       -                       -  
                                                 
Cost of revenue:     -       -       -                       -  
                                                 
Gross profit     -       -       -                       -  
                                                 
Operating expenses                                                
Research and development             183,111       183,111                       183,111  
General and administrative     3,364       307,948       311,312       164,217       w       475,529  
Total operating expenses     3,364       491,059       494,423                       658,640  
                                                 
Loss from operations     (3,364 )     (491,059 )     (494,423 )                     (658,640 )
                                                 
Other income (expense)                                                
Other expense             (9,623 )     (9,623 )                     (9,623 )
Interest expense, net     -       (250,533 )     (250,533 )     (153,561 )     u,v       (96,972 )
Total other income (expense)     -       (260,156 )     (260,156 )                     (106,595 )
                                                 
Loss before provision for income taxes     (3,364 )     (751,215 )     (754,579 )                     (765,235 )
                                                 
Provision for income taxes     400       -       400               p       400  
                                                 
Net loss and comprehensive loss     (3,764 )     (751,215 )     (754,979 )                     (765,635 )

 

See accompanying notes to pro forma consolidated financial statements

 

F- 22
 

 

Bone Biologics, Corp.
(formerly AFH Acquisition X, Inc.)

 

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Six Months ended June 30, 2014
(Unaudited)

 

1. Basis of presentation

 

On September 19, AFH Acquisition X, Inc. (“AFH”) and its wholly-owned subsidiary, Merger Sub, entered into the Merger Agreement between AFH, Merger Sub, and Bone Biologics, Inc. Pursuant to the Merger Agreement, Merger Sub merged with and into Bone Biologics with Bone Biologics remaining as the surviving corporation in the Merger. Upon the consummation of the Merger, the separate existence of Merger Sub ceased, on September 22, 2014 AFH officially changed its name to “Bone Biologics, Corp.” to more accurately reflect the nature of its business, and Bone Biologics became a wholly-owned subsidiary of the Company.

 

As used in this Current Report, the terms “we,” “us,”, “our” and “the Company” refer to AFH, after giving effect to the Merger or Bone Biologics, Corp., unless otherwise stated or the context clearly indicates otherwise. The term “AFH” refers to the Company, as it was named “AFH Acquisition X, Inc.” before giving effect to the Merger.

 

These pro forma consolidated financial statements have been prepared from, and should be read in conjunction with the audited financial statements as at October 31, 2013 and 2012 and for each of the years in the two years ended October 31, 2013; and the unaudited financial statements as at April 30, 2014 and for the six month periods ended April 30, 2014 and 2013 of Acquisition X, Inc. In addition, these pro forma consolidated financial statements have been prepared from, and should be read in conjunction with the audited financial statements as at December 31, 2013 and 2012 and for the two years then ended; and the unaudited financial statements as at June 30, 2014 and for the six month periods ended June 30, 2014 and 2013 of Bone Biologics. These financial statements are included elsewhere in this Filing Statement.

 

The Merger will be treated as a recapitalization of the Company for financial accounting purposes and is being accounted for as a “reverse merger,” and although the Company is the legal acquirer, Bone Biologics, Inc. is deemed to be the acquirer for accounting purposes in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the Merger will be those of Bone, and the consolidated financial statements after completion of the Merger will include the assets and liabilities of Bone, historical operations of Bone and operations of Bone from the Closing Date of the Merger and in all future filings with the Securities and Exchange Commission (the “SEC”).

 

The pro forma consolidated statement of financial position gives effect to the transactions described in Note 6 below as if they had occurred on June 30, 2014. The pro forma consolidated statement of financial position and results of operations are not necessarily indicative of the results that would have actually occurred if the transactions had been consummated on this date, nor is it necessarily indicative of the future financial position of the Company.

 

2. Summary of significant accounting policies

 

The accounting policies adopted by the Company are those of Bone Biologics, Inc. since it is the accounting acquirer. The unaudited pro forma consolidated financial information has been prepared based on the historical financial information of Bone Biologics, Inc. and AFH Acquisition X, Inc. giving effect to the transaction between Bone Biologics with AFH Acquisition X and related adjustments described in these notes.

 

3. Transaction

 

The pro forma adjustments to the pro forma consolidated statement of financial position have been prepared to reflect the following transactions:

 

  (a) In connection with the Merger, all of the issued and outstanding shares of Bone Biologics Inc.’s $0.0001 par value common stock (“Bone Biologics Common Stock”) converted into 19,237,857 shares of the Company’s Common Stock (including 1,526,926 shares issuable upon the exercise of outstanding warrants and 5,568,016 shares issuable upon the conversion of debt including accrued interest through 6/30/2014) (the “Company Merger Consideration”). In exchange, Bone Biologics agreed to pay AFH Holding & Advisory, LLC (“AFH Advisory”) the principal sum of $590,000. On July 3, 2014, Bone Biologics paid AFH Advisory $250,000 of such amount and on July 31, 2014, Bone Biologics issued that certain Promissory Note, dated July 31, 2014 (the “Note”), pursuant to which the Bone Biologics promised to pay AFH Advisory the principal sum of $340,000. MTF has granted AFH Advisory a standby letter of credit in the amount of $340,000 for the remaining amount due under the Note. On September 19, 2014, the Note was assigned to the Company.
     
    The 5,000,000 outstanding shares of Common Stock of AFH Acquisition X, Inc. prior to the Merger were consolidated into 3,853,600 shares of Bone Biologics, Corp. Common Stock and the remaining shares were cancelled.
     
  (b) In addition, upon consummation of the Merger, MTF agreed to convert 30% or $1,517,726 of the outstanding convertible promissory notes (including accrued interest through 6/30/2014) entered into between the Company and MTF (the “MTF Notes”) into Series B Preferred Stock of the Company at $ 1.00, then to Common Stock of the Company at 1:1 basis.
     
    Upon consummation of the Merger, the 2013 Bridge Note holders agreed to convert all outstanding principal and accrued interest (through 6/30/2014) of $444,683 at $1.00 per share into 444,683 shares of Common Stock on a 1:1 basis.
     
    Upon consummation of the Merger, the holders of the Subsequent Orthofix Notes converted $500,000 into Common Stock at $0.75 per share for a total of 668,904 shares of Common Stock (which includes the $250,000 May 2014 MTF Note, and related accrued interest, assigned to Orthofix).

 

F- 23
 

 

  (c) Upon consummation of the Merger, MTF agreed to (i) convert its entire outstanding shares of Series A preferred stock and Series B preferred stock of the Company held into shares of Common Stock on a 1:1 basis.
     
  (d) A reserve was established for the 2014 Equity Incentive Plan of 2,642,898 shares of Common Stock, of which 583,059 options to purchase shares of Common Stock were issued to management of Bone Biologics, Corp. The stock options vest as to one third immediately upon issuance and the remainder vest 50% at the end of each of the next 2 years. An aggregate of 350,000 stock options and 350,000 restricted shares were granted to the board members and CEO of Bone Biologics, Corp. The stock options vest upon completion of 1 year of service and the restricted stock vests at the end of each quarter over 1 year. The estimated fair value of the 583,059 stock options, 350,000 board and CEO options and 350,000 restricted shares was $476,866, $282,799 and $350,000, respectively, and will be recognized over respective vesting periods. The stock options were valued using the Black-Scholes Option Pricing Model with an exercise price of $1.00, estimated volatility of 109%, a risk-free rate of 1.62% and expected life of 5.5-5.75 years.
     
    In addition, warrants to purchase 699,671 shares of Bone Biologics, Corp. Common Stock were issued to a consultant outside of the 2014 Equity Incentive Plan. The warrants vest as to one third immediately upon issuance with the remainder vesting 50% at the end of each of the next 2 years and were valued at $510,437 using the Black-Scholes Option Pricing Model with an exercise price of $1.00, volatility of 109%, risk free rate of 0.88% and have a 4 year term.

 

4. Pro forma adjustments – Consolidated Statement of Financial Position

 

  (e) Impact of Subsequent Orthofix Financing
     
    Reflect the aggregate of 500,000 subscription receipts issued at $1.00 per subscription to Orthofix for gross proceeds of $500,000 and recorded in Common Stock and additional paid-in capital.
     
  (f) Reflect the issuance of $250,000 Subsequent Orthofix Convertible Notes, which are convertible into 333,333 shares at $0.75 per share, and the issuance of Subsequent Orthofix Warrants to purchase 166,667 shares of the Company’s common stock at $1.50 per share. The fair value of the Subsequent Orthofix Warrants was $111,893 and was calculated using the Black-Scholes option pricing model with a risk-free rate of 0.88%, volatility of 109% and a 4 year term.
     
  (g) Reflect the conversion of the Subsequent Orthofix Bridge Notes of $500,000 plus accrued interest of $1,678 into 668,904 shares of Common Stock and expensing of related debt discount of $216,691. Included in these amounts are the debt discount of $104,798 and interest of $1,678 associated with the $250,000 May 2014 MTF Note which was assigned to Orthofix.
     
  (h) Offering costs incurred in connection with the Private Placement; allocated to additional paid in capital as issuance costs and deferred financing fees for debt placement. Reflect costs incurred in connection with the Merger.

 

  Promissory note due AFH Advisory of $590,000, which reflects a shell fee of $500,000 and legal expenses of $90,000 and expensed as a cost of the merger. Bone Biologics paid $250,000 as of July 3, 2014. In July 2014, Bone issued a secured promissory note for $340,000 and MTF granted AFH Advisory a standby letter of credit in the amount of $340,000 for the remaining amount due under the Note.
     
  At the closing of the Private Placement, AFH Advisory is entitled to receive warrants (“Extra Warrants”) to purchase up to 500,000 shares of Common Stock at the closing of the Private Placement at the price per share offered in the Private Placement or $1.00 per share with a 5 year term. The warrants have an estimated fair value of $393,159 calculated using the Black-Scholes Option Pricing Model with a risk-free rate of 1.62% and volatility of 109%. The fair value of the warrants was allocated and charged (i) $13,105 to deferred financing fees related to the Subsequent Orthofix Notes, (ii) $13,557 to Subsequent Orthofix Subscription and offset against the related proceeds and (iii) $366,496 charged to Deferred Transaction Costs for allocation to PPM and PIPE. Allocations are based on corresponding amounts of debt raised to date and total estimated equity associated with the Subsequent Orthofix Raise, PPM and PIPE financing.
     
  Legal expenses incurred in connection with the Merger of $200,000.
     
  Forefront as Placement Agent was issued a warrant (the “Agent Warrant”) to purchase 46,667 shares of Common Stock at $1.00 per share upon completion of the Orthofix Subsequent Financing. The Agent Warrant is equal to 4% of the Common Stock underlying the securities issued in the Orthofix Subsequent Financing. The warrant has a 5 year term and total estimated fair value of $34,381 calculated using the Black-Scholes Option Pricing Model with a risk-free rate of 1.56% and volatility of 109%. An additional 33,334 shares were recorded in connection with the financing for an estimated fair value of $26,200.
     
  The Company agreed to pay Forefront a cash fee equal to 4% of gross proceeds received from the Orthofix Subsequent Financing or an additional $30,000 and an estimated $5,000 in expenses, for an aggregate of $35,000 (in addition to $10,000 accrued at June 30, 2014 in connection with the May 2014 MTF Note assigned to Orthofix). Both the fair value of the Agent Warrant and the cash fee were allocated to debt (and written-off as the Subsequent Orthofix Notes were converted to equity) and additional paid-in capital (which offset the proceeds received from the Subsequent Orthofix Subscription), based on the corresponding amounts of debt and equity raised in the Subsequent Orthofix Financing.
     
  Previously deferred transaction costs of $5,000 were allocated to the Subsequent Orthofix Financing (which includes the assigned MTF 2014 Note) and charged 50% against the proceeds from the Orthofix Subsequent Financing within additional paid-in capital and 50% to interest expense (accumulated deficit) for Orthofix Subsequent Notes which were converted to equity.
     
  AFH Advisory and MTF will each receive restricted stock awards contingent upon completion of milestone targets equal to 2.5% of the fully diluted shares of the Company at the time of completion of all such targets. Compensation expense associated with the restricted shares will be recognized when probable over the performance period of 2 years. There was no impact to the Pro forma financial statements.

 

F- 24
 

 

  (i) Reflect the exchange of AFH Acquisition X shares for shares of the Company.

 

  Record the transfer of the value of AFH Acquisition X common shares of $5,000 to additional paid-in capital.
     
  Record the transfer of the value of AFH Acquisition X additional paid-in capital of $20,000 to Bone Biologics additional paid-in capital.
     
  Record the elimination of AFH Acquisition X deficit of $68,569.
     
  Net amount of ($43,569), which represents the fair value of net assets of AFH Acquisition X and charged to additional paid-in capital as a cost of the listing.
     
  Record the reclass of amount due to parent of $39,173 to equity – additional paid-in capital.

 

  (j) Record the conversion of Bone Biologics MTF Convertible Notes related party debt and accrued interest into Common Stock on a 1 for 1 basis.
     
    Convertible debt of $1,517,726, including accrued interest of $410,726 through 6/30/2014, converts into 1,517,726 shares of Series B Preferred stock at $1.00 per share and subsequently into Common Stock on a 1 for 1 basis.
     
  (k) Record the conversion of Bone Biologics 2013 Bridge Notes and accrued interest into Common Stock on a 1 for 1 basis.
     
    Bridge Notes of $444,683 including interest of $44,683 converts into 444,683 shares of Common Stock at $1.00 per share. The remaining debt discount of $22,935 is charged to interest expense (accumulated deficit).
     
  (l) Record the conversion of Bone Biologics Series A and Series B Preferred into Common Stock on a 1 for 1 basis.
     
    At the time of the Reverse Merger, MTF agreed to convert its entire outstanding holdings of Bone Biologics Preferred Stock into shares of Common Stock, which consist of 493,339 shares of Series A Preferred and 5,336,099 shares of Series B Preferred for an aggregate of 5,829,438 shares.
     
    Since the value of the adjusted number of shares of common stock into which the convertible preferred stock was convertible was not greater than the value of the number of shares of common stock into which the convertible preferred stock was convertible prior to such adjustment, based on the market price of the common stock on the date the convertible preferred stock was issued, the Company did not recognize a beneficial conversion feature associated with the preferred stock.
     
  (m) Record the exchange of Bone Biologics outstanding warrants for warrants of the Company.
     
    As a result of the transaction, Bone Biologics warrants to purchase 1,526,926 shares of common stock were exchanged for warrants of Bone Biologics, Corp on a 1:1 basis. There was no impact to the Pro forma financial statements at June 30, 2014.
     
  (n) Record stock-based compensation associated with the issuance of new management and consultant stock options, for an aggregate total of $330,564.
     
    Reflect stock-based compensation of $162,103 related to the issuance of 583,059 options to purchase shares of Common Stock issued to management of Bone Biologics, Corp., of which 198,202 vest immediately upon issuance.
     
    Reflect stock-based compensation of $168,461 related to the issuance of warrants to purchase 699,671 shares of Bone Biologics, Corp. Common Stock issued to a consultant outside of the 2014 Equity Incentive Plan, of which 230,915 vest immediately upon issuance.
     
  (o) Adjust the PAR value of Bone Biologics Common Stock
     
    PAR value was adjusted from $0.0001 per share to $0.001 per share of Bone Biologics, Corp. Common stock for a total of 17,913,012 issued and outstanding shares, and a reclass of $16,157 from APIC to Common Stock for a total value of $17,913.
     
  (p) Tax Impact
     
    Although the Company will be subject to applicable US and California income tax and other tax obligations, we do not expect that an income tax will be payable by the Company in the foreseeable future. The US statutory corporate tax rate on the operating entity of the Company is currently 35%. However, Bone Biologics has significant net operating loss carryovers and deferred tax assets that are fully reserved, which brings Bone Biologic’s effective tax rate down to 0%. As a result, there is no income tax impact reflected in the Pro forma financial statements.

 

5. Pro forma adjustment –Statement of Operations for the year ended December 31, 2013

 

The pro forma adjustments to the pro forma statement of operations for the year ended December 31, 2013 have been prepared to reflect the following transactions:

 

  (q) Reversal of one-time legal fees of $50,000 associated with the LOI transactions including the PPM and Merger Agreement.
     
  (r) Reversal of $83,267 of interest expense, of which $64,178 is related to the 30% conversion of MTF Notes and $19,088 related to the 2013 Bridge Notes.
     
  (s) Reversal of amortization of debt discount related to the 2013 Bridge Notes of $67,104.
     
  (t) Estimated stock-based compensation expense of $1,291,733 related to the management and consultant stock option grants, board and CEO stock option grants and restricted stock awards.

 

F- 25
 

 

6. Pro forma adjustments –Statement of Operations for the six months ended June 30, 2014

 

The pro forma adjustments to the pro forma statement of operations for the three months ended March 31, 2014 have been prepared to reflect the following transactions:

 

  (u) Reversal of $62,450 of interest expense, of which $34,927 is related to the 30% conversion of MTF Notes, $25,845 is related to the 2013 Bridge Notes and $1,678 is related to the May 2014 MTF Note.
     
  (v) Reversal of amortization of debt discount of $91,111, of which $20,959 is related to the 2013 MTF Bridge Notes and 2014 MTF Note, $53,430 is related to the Orthofix 2013 Bridge Notes and $16,721 is related to the AFH 2013 Bridge Note.
     
  (w) Estimated stock-based compensation expense of $164,185, which is related to the management and consultant stock option grants.

 

7. Share capital

 

Common shares

 

The following table summarizes the changes in share capital that will occur pursuant to the aforementioned transactions as of June 30, 2014:

 

Common shares of AFH Acquisition X, Inc. issued and outstanding as at June 30, 2014(1)     5,000,000     $ (43,569 )     Note 6(a)  
                         
Consolidation of AFH Acquisition X, Inc. shares(1)     (1,146,400 )             Note 6(a)  
Shares issued in exchange for Bone Biologics shares to effect reverse merger (2)(3)     14,059,412       (3,806,536 )     Note
6(a)(b)(c)
 
                         
Common shares of Bone Biologics, Corp. issued and outstanding, at June 30, 2014 after giving effect to Pro-forma adjustments     17,913,012     $ (3,850,105 )        

 

 

(1) Reflects consolidation of the 5,000,000 outstanding shares of Common Stock of AFH Acquisition X, Inc. prior to the Merger into 3,853,600 shares of Bone Biologics, Corp. Common Stock and the remaining shares were cancelled.

 

(2) Assumes the following:

 

  a) Outstanding 5,098,661 shares of Common Stock of Bone Biologics converted on a 1:1 basis;
     
  b) Conversion of 30% MTF convertible debt principal and accrued interest (through 6/30/2014) of $1,517,726 into Common Stock at a price of $1.00 per share or 1,517,726 shares;
     
  c) Conversion of $444,683 principal and accrued interest (through 6/30/2014) of 2013 Bridge Notes into Common Stock at a price of $1.00 per share or 444,683shares;
     
  d) Conversion of all outstanding Bone Biologics Series A and B Preferred shares into Common Stock on a 1:1 basis, or 5,829,438 shares; and
     
  e) Subsequent Orthofix Financing of 1,168,904 shares of Common Stock which includes the conversion of $500,000 Convertible Notes and $1,678 accrued interest at $0.75 per share (inclusive of the shares from conversion of the May 2014 MTF Note and related accrued interest which was assigned to Orthofix).

 

(3) Does not include:

 

  e) Conversion of remaining principal and interest (through 6/30/2014) of MTF Notes of $3,605,607;
     
  f) The exercise of outstanding warrants and options to purchase shares of the Company’s Common stock as follows:

 

  i. Warrants issued to consultants for the purchase of 1,146,596 shares of Common Stock at prices per share ranging from $0.00 to $1.00.
     
  ii. Warrants issued to 2013 Bridge Note holders for the purchase of 200,000 shares of Common Stock;
     
  iii. Orthofix Subsequent Warrants for the purchase of 333,334 shares of Common Stock at $1.00 per share (including the 166,667 assigned to Orthofix from the May 2014 MTF Note);
     
  iv. Extra Warrants issued to AFH as advisor for the purchase of 500,000 shares of Common Stock at a price per share of $1.50.
     
  v. Advisor Warrants issued to Forefront as placement agent on Orthofix Subsequent Financing of 46,667 shares at $1.00 per share.
     
  vi. Stock options issued to Bone Biologics, Corp. management for the purchase of 583,059 shares of Common Stock at $1.00 per share.
     
  vii. Issuance of equity awards to Board members and CEO for an aggregate of 350,000 options with an exercise price of $1.00 and 350,000 restricted stock grants. The stock options vest after one year and the restricted stock grants are issued quarterly over one year.
     
  viii. Shares reserved for the 2014 Equity Incentive Plan of 2,642,898, of which 1,359,839 shares are available for future issuance (after adjustment for the grants in vi and vii above).
     
  ix. Warrants to purchase 625,000 shares of Common Stock at a price per share of $1.62 issued pursuant to the 8.5% MTF Omnibus Note of $500,000 entered into September 2014 and maturing on December 31, 2014.
     
  x. The issuance of performance-based restricted stock awards granted to AFH and MTF, contingent and issuable upon completion of all milestone targets at 2.5% of fully diluted shares calculated at completion.

 

F- 26
 

 

  Bone Biologics, Inc.
   
  Condensed Financial Statements
  For the Three and Six Months Ended June 30, 2014 and 2013 (unaudited)

 

F- 27
 

 

Bone Biologics, Inc.

(A Development Stage Company)

 

Condensed Financial Statements

For the Three and Six Months Ended June 30, 2014 and 2013 (unaudited)

 

F- 28
 

 

Bone Biologics, Inc.

 

Contents

 

Condensed Financial Statements  
   
Condensed Balance Sheets F-30
   
Condensed Statements of Operations F-31
   
Condensed Statements of Cash Flows F-32
   
Condensed Notes to Financial Statements F-33 – F-46

 

F- 29
 

 

Bone Biologics, Inc.

 

Condensed Balance Sheets

 

    June 30, 2014     December 31, 2013  
    (unaudited)        
Assets                
                 
Current assets                
Cash   $ 163     $ 1,538  
Prepaid expenses     9,000       10,767  
Deferred transaction costs     100,335       75,000  
Deferred financing fees     16,581       -  
                 
Total current assets     126,079       87,305  
                 
Total assets   $ 126,079     $ 87,305  
                 
Liabilities and Stockholders’ Equity                
                 
Current liabilities                
Accrued expenses   $ 1,829,927     $ 1,525,604  
Advances due to related party     130,674       41,300  
Notes payable to related party, net of debt discount     4,106,972       3,947,817  
Notes payable, net of debt discount     277,066       180,690  
                 
Total current liabilities     6,344,639       5,695,411  
                 
Total liabilities     6,344,639       5,695,411  
                 
Commitments and Contingencies                
                 
Stockholders’ deficit                
Series A Preferred Stock, $0.0001 par value per share; 493,339 shares authorized; 493,339 shares issued and outstanding at June 30, 2014 and December 31, 2013 (liquidation preference $881,103 at June 30, 2014 and December 31, 2013, respectively)     49       49  
Series B Preferred Stock, $0.0001 par value per share; 10,000,000 shares authorized; 5,336,099 shares issued and outstanding at June 30, 2014 and December 31, 2013 (liquidation preference $23,585,557 at June 30, 2014 and December 31, 2013, respectively)     534       534  
Common stock, $0.0001 par value per share; 20,000,000 shares authorized; 5,098,661 shares issued and outstanding at June 30, 2014 and December 31, 2013     510       510  
Additional paid-in capital     2,145,066       2,004,305  
Accumulated deficit     (8,364,719 )     (7,613,504 )
                 
Total stockholders’ deficit     (6,218,560 )     (5,608,106 )
                 
Total liabilities and stockholders’ deficit   $ 126,079     $ 87,305  

 

See accompanying notes to condensed financial statement .

 

F- 30
 

 

Bone Biologics, Inc.

 

Condensed Statements of Operations

 

    Three Months Ended
June 30, 2014
    Three Months Ended
June 30, 2013
    Six Months Ended
June 30, 2014
    Six Months Ended
June 30, 2013
 
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Revenues   $ -     $ -     $ -     $ -  
                                 
Cost of revenues     -       -       -       -  
                                 
Gross profit     -       -       -       -  
                                 
Operating expenses                                
Research and development     155,257       56,619       183,111       96,213  
General and administrative     183,036       154,756       307,948       215,937  
                                 
Total operating expenses     338,293       211,375       491,059       312,150  
                                 
Loss from operations     (338,293 )     (211,375 )     (491,059 )     (312,150 )
                                 
Other Income (expense)                                
Other expense     (9,623 )     -       (9,623 )     -  
Interest expense, net     (116,294 )     (94,277 )     (250,533 )     (172,524 )
                                 
Total other income (expense)     (125,917 )     (94,277 )     (260,156 )     (172,524 )
                                 
Loss before provision for income taxes     (464,210 )     (305,652 )     (751,215 )     (484,674 )
                                 
Provision for income taxes     -       800       -       800  
                                 
Net loss   $ (464,210 )   $ (306,452 )   $ (751,215 )   $ (485,474 )

 

See accompanying notes to condensed financial statements.

 

F- 31
 

 

Bone Biologics, Inc.

 

Condensed Statements of Cash Flows

 

    For the Six Months Ended June 30, 2014     For the Six Months Ended June 30, 2013  
    (unaudited)     (unaudited)  
Cash flows from operating activities                
Net loss   $ (751,215 )   $ (485,474 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
Accrued interest expense     162,493       161,616  
Debt discount amortization     91,111       10,447  
Loss on sale of marketable securities     9,623          
Changes in operating assets and liabilities:                
Prepaid expenses and other current assets     1,767       (17,708 )
Advances due to related party     89,374       -  
Accrued expenses     108,095       (7,892 )
                 
Net cash provided by (used in) operating activities     (288,752 )     (339,011 )
                 
Cash flows from investing activities                
Proceeds from sale of marketable securities     37,377       -  
                 
Net cash provided by investing activities     37,377       -  
                 
Cash flows from financing activities                
Proceeds from issuance of notes payable     250,000       374,533  
                 
Net cash provided by financing activities     250,000       374,533  
                 
Net increase (decrease) in cash     (1,375 )     35,522  
                 
Cash, beginning of period     1,538       2,370  
                 
Cash, end of period   $ 163     $ 37,892  
                 
Supplemental non-cash information                
Issuance of warrants in connection with Notes Payable, net of amortization included above   $ 104,798     $ 75,292  
Issuance of warrants in payment of financing fees   $ 8,180     $ -  
Interest paid   $ -     $ -  
Taxes paid   $ -     $ 800  

 

See accompanying notes to condensed financial statements.

 

F- 32
 

 

Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

1. The Company

 

Bone Biologics, Inc. (“Bone” or the “Company”) was incorporated in California on March 9, 2004. Bone is a privately-held biotechnology company that is currently focused on bone regeneration in spinal fusion using the recombinant human protein, known as UCB-1 (or “Nell-1”). The Nell-1 protein is an osteoinductive recombinant protein that provides target specific control over bone regeneration. The protein has been licensed exclusively for worldwide applications to Bone Biologics through a technology transfer from the University of California, Los Angeles (“UCLA”). Bone Biologics recently received guidance from the United States Food and Drug Administration (“FDA”) that Nell-1 will be classified as a combination product with a device lead.

 

The production and marketing of the Company’s products and its ongoing research and development activities will be subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any drug developed by the Company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the FDA under the Food, Drug and Cosmetic Act. The Company has limited experience in conducting and managing the preclinical and clinical testing necessary to obtain regulatory approval. There can be no assurance that the Company will not encounter problems in preclinical and clinical trials that will cause the Company or the FDA to delay or suspend clinical trials.

 

The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated, or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company.

 

In August 2012, the Company, along with its majority owner and debt holder, Musculoskeletal Transplant Foundation, Inc. (“MTF”) and AFH Holding & Advisory, LLC (“AFH”) entered into a Letter of Intent (“LOI”), as amended on August 19, 2013 and subsequently on May 7, 2014, to consummate a business combination through a share exchange, reverse merger, or other similar transactions resulting in the Company becoming a public entity (“The Transaction”) and the contemplated subsequent financings (see Note 4).

 

Going Concern and Liquidity

 

The Company has no significant operating history and, from March 9, 2004 (inception) to June 30, 2014, has generated a net loss of approximately $8.4 million. The Company will continue to incur significant expenses for development activities for their lead product Nell-1. The accompanying condensed financial statements for the three and six months ended June 30, 2014, have been prepared assuming the Company will continue as a going concern. In connection with the LOI, management intends to raise additional debt and/or equity financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet the Company’s needs.

 

The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

F- 33
 

 

Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

2. Summary of Significant Accounting Policies

 

The unaudited interim condensed financial statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited financial statements and notes for the year ended December 31, 2013. The results of the three and six-month periods ended June 30, 2014 are not necessarily indicative of the results to be expected for the full year ending December 31, 2014.

 

Basis of Presentation

 

The accompanying condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

 

Use of Estimates

 

The preparation of the accompanying condensed financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Significant estimates include warrants and income tax valuation allowances. Actual results could differ from those estimates.

 

Research and Development Costs

 

Research and development costs include, but are not limited to, patents and license expenses, payroll and other personnel expenses, consultants, expenses incurred under agreements with contract research and manufacturing organizations and animal clinical investigative sites and the cost to manufacture clinical trial materials. Costs related to research, design and development of products are charged to research and development expense as incurred.

 

Patents and Licenses

 

In March 2006, the Company entered into an exclusive license agreement (“Exclusive License Agreement”), with UCLA for the worldwide application of the UCB-1 protein through a technology transfer. See Note 4 for commitments related to the Exclusive License Agreement. Patent expenses include costs to acquire the license of UCB-1, which was de minimus, and costs to file patent applications related to UCB-1.

 

Bone Biologics expenses the costs incurred to file patent applications, all costs related to abandoned patent applications and maintenance costs, and these costs are included in research and development expenses. Costs associated with licenses acquired to be able to use products from third parties prior to receipt of regulatory approval to market the related products are also expensed. The Company’s licensed technologies may have alternative future uses in that they are enabling (or platform) technologies that can be the basis for multiple products that would each target a specific indication. Costs of acquisition of licenses are expensed.

 

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Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

Deferred Financing and Transaction Costs

 

Deferred financing costs represent costs incurred in connection with the issuance of the convertible notes payable and private equity financing. Deferred financing costs related to the issuance of debt are being amortized over the term of the financing instrument using the effective interest method, while deferred transaction costs from equity financings are netted against the gross proceeds received from the equity financings.

 

During the three and six month periods ended June 30, 2014, the Company capitalized deferred financing costs of $18,180 in connection with the 2014 Note that closed in May (See Note 5). During the three and six months ended June 30, 2014, the Company incurred $25,335 of offering costs in connection with the future financings discussed in Note 4. As of June 30, 2014, all offering costs were included in accounts payable and accrued expenses in the accompanying financial statements. There were no deferred financing or transaction costs during the three and six months ended June 30, 2013.

 

Concentration of Credit Risk and Other Risks and Uncertainties

 

Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. All of the non-interest bearing cash balances were fully insured at June 30, 2014. As of January 1, 2013, federal insurance coverage is $250,000 per depositor at each financial institution. The Company’s non-interest bearing cash balances may from time to time exceed federally insured limits. There were no interest-bearing amounts on deposit in excess of federally insured limits at June 30, 2014 and December 31, 2013.

 

Income Taxes

 

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due and deferred taxes resulting from timing differences in recording of transactions for tax purposes and financial reporting purposes.

 

The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are received or settled. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized.

 

The accounting provisions related to uncertain income tax positions require the Company to determine whether any tax position in all open years meets a more likely than not threshold of being sustained upon examination by the applicable taxing authority. The Company did not have any changes to its liability for uncertain tax positions as at June 30, 2014 and December 31, 2013.

 

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. No such amounts are accrued as of June 30, 2014 and December 31, 2013.

 

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Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

New Accounting Standards

 

The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its condensed consolidated financial statements.

 

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company adopted ASU 2014-10 during the quarter ended June 30, 2014, thereby no longer presenting or disclosing any information required by Topic 915.

 

3. Accrued Expenses

 

Accrued expenses consist of the following:

 

    June 30, 2014     December 31, 2013  
             
Interest expense   $ 1,311,618     $ 1,158,465  
Professional services     239,153       114,849  
Patents     110,245       85,412  
Deferred compensation     90,199       90,199  
Transaction costs     75,000       75,000  
Payroll liabilities     3,712       1,679  
    $ 1,829,927     $ 1,525,604  

 

4. Commitments and Contingencies

 

Letter of Intent

 

In August of 2012, the Company, along with its majority owner and debt holder, MTF, entered into a Letter of Intent (“LOI”) with AFH to consummate a business combination through a share exchange, reverse merger, or other similar transactions resulting in the Company becoming a public entity (“The Transaction”). In August, 2013, the LOI was amended and restated, and on May 7, 2014, the LOI was again amended and restated. The Amended and Restated Letter of Intent dated May 7, 2014 (the “Amended LOI”) contemplates and defines the following events:

 

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Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

Consummation of Bridge Financings (“Closing I”)

 

In April 2013 and September 2013, the Company’s Board approved the Company to borrow up to an aggregate principal amount of $300,000 (April Bridge Financing) and $250,000 (September Bridge Financing) pursuant to the sale and issuance of convertible promissory notes and warrants to purchase common stock of the Company (collectively, the “Bridge Financings”). The note accrues interest at a rate of 12% per year and payable per quarter. A warrant to purchase the Company’s common stock equal to 50% of the original principal amount at $1.00 per share will be issued to each Bridge Financing participant. Principal and unpaid accrued interest may be converted into equity securities issued in the Company’s next equity financing in an aggregate amount of at least $2.5 million at a price equal to the price paid by investors in the next equity financing. On April 29, 2013 and on June 5, 2013, the Company borrowed $100,000 from MTF and $100,000 from Orthofix, Inc., respectively, under the April Bridge Financing. In September 2013, AFH purchased $50,000 of the April Bridge Financing. In October 2013, the Company borrowed an additional $150,000 from Orthofix under the September Bridge Financing.

 

Consummation of Business Combination (“Closing II”)

 

Under the amended LOI, it is contemplated that the Company and its equity holders will consummate a share exchange, reverse merger, or other business combination, with a Delaware corporation publicly reporting pursuant to United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), or a private Delaware corporation (“Acquisition Co.”), either directly or indirectly through an affiliate. If the post-business combination entity is not already a corporation publicly reporting pursuant to the Exchange Act, AFH will assist the post business combination entity with the filing of an appropriate registration statement resulting in the Company becoming a public company (“PubCo”).

 

Consummation of the Private Placement (“Closing III”)

 

Subsequent to Closing II, AFH will use its best efforts to assist PubCo in procuring one or more investors for a private financing, whether debt or equity, of a minimum of $2.5 million up to a maximum of $5.0 million. Such transaction is to include an over-allotment option of 15% at AFH’s discretion (the “Private Placement”).

 

Consummation of the PIPE Transaction (“Closing IV”)

 

Subsequent to Closing III, AFH Advisory will use its best efforts to assist PubCo in procuring an investment bank (the “Bank”) to facilitate a private investment in public equity transaction in an amount between $8.0 million and $10.0 million through the sale of securities of PubCo (the “PIPE”). Such transaction will include a 15% over allotment at AFH and/or the Bank’s discretion. Such transaction is contingent upon the appointment of a Bank and filing appropriate forms with the Financial Industry Regulatory Authority, Inc. (“FINRA”).

 

Consummation of Initial Public Offering (“Closing V”)

 

Subsequent to Closing IV, AFH will assist PubCo in procuring a Bank to act as underwriter for an initial public offering in an amount of up to $40.0 million (the “Initial Public Offering”). The Initial Public Offering shall include a 15% over allotment option at AFH and/or the Bank’s discretion. Such a transaction is contingent upon the appointment of the Bank.

 

At or prior to consummation of the Business Combination, MTF agrees to convert all of its outstanding shares of Series A preferred stock and Series B preferred stock of the Company into share of Common Stock.

 

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Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

In addition, MTF agrees to convert 30%, 35%, and 35% of all outstanding convertible promissory notes and promissory notes converting as amended (principal and accrued interest) at each of the consummation of Closing II, Closing IV, and Closing V, respectively.

 

Upon (i) the consummation of the Business Combination, (ii) after giving effect to the issuance of any securities by Acquisition Co. in connection with the Business Combination (the “Business Combination Shares”), (iii) the completion of the Private Placement and (iv) after giving effect to the PIPE, the existing stockholders of Acquisition Co., and its owners, relatives, assignees and affiliates (collectively, the “AFH Group”), will own an aggregate of ten percent of the issued and outstanding common shares (the “Advisor Shares”) of PubCo.

 

At the consummation of Closing III, AFH Group shall be entitled to receive warrants to purchase up to 500,000 share of common stock of PubCo at the per share price of the shares offered in the Private Placement with a 5 year term and a cashless exercise provision (the “Extra Warrants”).

 

In addition to the Advisor Shares and Extra Warrants, AFH Group shall be entitled to receive warrants to purchase shares of common stock of PubCo (“Advisor Warrants”) in the amount necessary to cause AFH Group, when combined with the Advisor Shares, to have ownership equal to 10% of the fully diluted outstanding Common Stock, options and warrants at Closing III.

 

AFH will also be entitled to a reimbursement of $590,000 in connection with the Business Combination, which shall be payable directly from the net proceeds of the Private Placement (Closing III) to AFH at closing. Each party will bear all of its own costs and expenses in connection with each Closing.

 

In conjunction with the Amended LOI, the Company has agreed to covenants for the period of time between signing of the Amended LOI and the consummation of the Business Combination (Closing II) or upon termination of the agreement. Such covenants include restrictions and limitations on additional indebtedness, liquidation, selling of equity securities, amending organizational document and certain other normal and customary covenants. The Amended LOI will expire on August 31, 2014 if Closing II has not occurred. On August 28, 2014 the Amended LOI expiration date was extended to September 30, 2014.

 

License Commitment

 

In connection with the Exclusive License Agreement, the Company is required to pay a royalty fee beginning in the first year of commercial sale of the licensed product equal to 3% of net sales on a quarterly basis with an annual minimum royalty of $25,000 for the life of the patent rights. In addition to the royalty fees, the Company is also required to pay UCLA a $10,000 annual maintenance fee, $50,000 upon FDA marketing approval, and $25,000 upon first commercial sale.

 

On October 22, 2013, the Exclusive License Agreement was amended. The following additional fees will be due to UCLA i) 2% of the amount raised in the Private Placement. If the Private Placement did not close or was less than $2.5 million then a fee of $100,000 was due and payable by June 1, 2014, ii) $25,000 due upon closing of Phase 1 clinical trial and iii) $50,000 due upon dosing of Phase 3 clinical trial. The Company paid the fee of $100,000 in June 2014.

 

Contingencies

 

The Company is subject to claims and assessments from time to time in the ordinary course of business. The Company’s management does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the

Company’s business, financial condition, results of operations or cash flows.

 

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Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

Indemnification

 

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.

 

In accordance with its amended and restated certificate of incorporation and amended and restated bylaws, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date and the Company has a director and officer insurance policy that enables it to recover a portion of any amounts paid for future potential claims.

 

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Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

5. Notes Payable to Related Party

 

As of June 30, 2014 and December 31, 2013, the Company had a total of $5,486,133 and $5,095,427, respectively, of notes outstanding (principal and interest) including unamortized discount, with MTF a related party, which consisted of the following:

 

Note Type   Issue Date     Maturity
Date(1)
    Interest Rate     June 30, 2014     December 31, 2013  
                               
Convertible Promissory Note     1/18/08       3/31/15     PRIME + 1 ½%     $ 1,517,726     $ 1,479,654  
Promissory Note     11/04/08       3/31/15     PRIME + 3%       352,615       343,429  
Promissory Note     3/17/09       3/31/15     PRIME + 8%       612,346       584,745  
Promissory Note     8/24/09       3/31/15     LIBOR + 8%       24,271       23,193  
Tranched Promissory Note     9/30/09       3/31/15     LIBOR + 8%       2,616,376       2,570,126  
Bridge Note, net of discount     4/29/13       10/14/14     12%     114,320       94,280  
Convertible Promissory Note, net of discount     5/27/14       6/30/15     7%     146,880       -  
                                         
                              5,384,533       5,095,427  
Less: Accrued interest expense                             1,277,561       1,147,610  
Notes payable to related party, net of debt discount                           $ 4,106,972     $ 3,947,817  

   

 

(1) As amended.

 

Accrued interest on the notes payable to related party of $1,277,561 (2013 - $1,147,610) is recorded in accrued expenses at June 30, 2014 and December 31, 2013.

 

Convertible Promissory Notes

 

The convertible promissory notes are considered hybrid instruments, which consist of a debt host instrument together with a conversion feature, thus giving the holder of a convertible note an option to convert into an equity instrument providing the holder a residual interest in the Company. The holder of a convertible promissory note also has the option to present its convertible promissory note to the Company and demand payment under the terms of the note after the maturity date or upon the occurrence of certain events such as the failure of the Company to make a payment on the note when due, bankruptcy or certain other liquidation events. The Company concluded that the convertible promissory notes would be accounted for as a typical debt instrument with related interest expense recorded in the Company’s statements of operations. The company concluded that there is no beneficial conversion feature as of the date of issuance of the convertible notes. However, the note contains a contingent feature whereby the conversion rate may be lowered if a financing occurs at a lower rate than the note’s conversion rate. If the contingency is met and the conversion feature is determined to be “beneficial” in a future accounting period, an additional financing cost would be recorded for the beneficial conversion feature in the Company’s statements of operations at that time.

 

In April 2005, the Company issued a $100,000 convertible promissory note (the “2005 Convertible Note”) to MTF in accordance with the Convertible Note Purchase Agreement and Convertible Promissory Note dated April 6, 2005. In April 2006 the Company issued an additional $612,000 convertible promissory note (the “2006 Convertible Note”) to MTF in accordance with the Convertible Note Purchase Agreement and Convertible Promissory Note dated April 7, 2006.

 

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Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

The 2005 Convertible Note and the 2006 Convertible Note bore interest at a fixed rate of 6% per annum and prime plus one and one-half percent per annum, respectively, and matured on September 30, 2008 and September 30, 2009, respectively. In July 2006, the 2005 Note and 2006 Note, respectively, and accrued interest thereon for a total of $731,103, were converted into an aggregate of 409,352 shares of Series A preferred stock which was based on the conversion price of $1.786 per share (see Note 6). The conversion of the notes did not trigger a contingency and no additional financing charge was recognized.

 

In January 2008, the Company issued a $1,107,000 convertible promissory note (“January 2008 Note”) to MTF in accordance with the Convertible Promissory Note dated January 18, 2008, as amended. The January 2008 Note bears interest at prime plus one and one-half percent per annum. MTF has the right to convert the entire outstanding balance (principal plus accrued interest) into shares of Series B Preferred Stock at the initial conversion price of $4.42 per share (“Initial Conversion Price”). Such Initial Conversion Price shall be subject to adjustments including but not limited to stock splits, issuance of securities and next equity financing.

 

The Company issued promissory notes to MTF in November 2008 of $250,000 (“November 2008 Note”), in March 2009 of $400,000 (“March 2009 Note) and in August 2009 of $16,400 (August 2009 Note”). The November 2008 and the March 2009 Note bear interest at prime plus three percent per annum. The August 2009 Note bears interest at LIBOR plus eight percent per annum.

 

In connection with the March 2009 Note, the Company entered into a Security Agreement (the “Security Agreement”) which grants MTF a security interest in all of the Company’s right, title and interest, whether presently existing or hereafter acquired, in, to all intellectual property and all other collateral. In connection with the Security Agreement, the Company issued a warrant to purchase 118,383 shares of common stock at an exercise price of $0.44 (See Note 6).

 

In September 2009, the Company issued a $139,047 promissory note (the “2009 Convertible Note”) to MTF in accordance with the Convertible Note Purchase Agreement and Convertible Promissory Note dated September 30, 2009. The 2009 Convertible Note bears interest at the rate of LIBOR plus 8% per annum and matured on October 30, 2009, but could have extended to November 30, 2009 or December 31, 2009. If the note was not repaid by the maturity date, MTF was entitled to (i) convert the amount due on the 2009 Convertible Note into shares of Series B Preferred stock sufficient to increase MTF’s ownership in the Company to 51% of the fully-diluted capitalization, and (ii) receive the right to designate up to three additional members of the Company’s Board of Directors.

 

Since the 2009 Convertible Note was not repaid by the maturity date, on February 4, 2010, the 2009 Convertible Note was converted into 5,188,253 shares of Series B Preferred stock, which increased MTF’s ownership in the Company to 51% of the fully-diluted capitalization.

 

In September 2009, the Company entered into a tranched promissory note with MTF (“Tranched Note”), allowing the Company to initially borrow up to $445,000 in a series of one or more tranches. The Tranched Note was subsequently amended which, among other things, increased the maximum advance amount to $2,090,000. The Company borrowed a total of $2,088,350 under the Tranched Note through 2013.

 

In July 2013, all notes held by MTF were amended to extend the maturity date to March 31, 2014 and amended again on April 1, 2014 to extend the maturity date to March 31, 2015.

 

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Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

In May, 2014, the Company entered into a convertible promissory note with MTF (the “2014 Note”) for $250,000 with interest at 7% per annum compounded annually and a maturity date of June 15, 2015. In the event of a financing of not less than $1 million, the 2014 Note automatically converts into Equity Securities, as defined in the 2014 Note, at a 25% discount to the price paid per share in such financing. In connection with the 2014 Note, the Company issued a warrant to purchase 166,667 shares of the Company’s common stock at an exercise price of $1.50 per share and 4 year term (See Note 6). The warrants had a fair value of $111,804, calculated using the Black-Scholes option pricing model with a volatility of 109%, a risk free rate of 0.79%. The Company accrued placement agent fees of $10,000 or 4% of the funds raised in connection with the financing and is obligated to issue a warrant for the purchase of 13,333 shares of common stock, which represents 4% of the common shares underlying the 2014 Note, with an exercise price of $1.00, a 5 year term and fair value of $8,181, calculated using the Black-Scholes model with a volatility of 109% and a risk free rate of 0.39%.

 

In July 2014, the 2014 Note and related warrants were assigned to Orthofix (see Note 9).

 

Bridge Notes

 

In April 2013 and June 2013, the Company borrowed $100,000 from MTF and $100,000 from Orthofix, Inc. under the April Bridge Financing, and in September 2013 and October 2013 the Company borrowed $50,000 from AFH and an additional $150,000 from Orthofix, Inc. under the September Bridge Financing (See Note 5). The convertible promissory note accrues interest at a rate of 12% per year and payable per quarter. A warrant to purchase the Company’s common stock equal to 50% of the original principal amount divided by $1.00 was issued to the Bridge Financing participant. Principal and unpaid accrued interest may be converted into equity securities issued in the Company’s next equity financing in an aggregate amount of at least $2.5 million at a price equal to the price paid by investors in the next equity financing. As of June 30, 2014 the total outstanding balance under the Bridge Financings was $377,066 (net of debt discount of $22,934) of which $100,000 is included in Notes Payable to Related Party and $277,066 is reported as Notes Payable, net of discount.

 

In June 2014, the note held by MTF under the April Bridge Financing was amended to extend the maturity date to October 14, 2014.

 

6. Stockholders’ Equity

 

Preferred Stock

 

The Company’s amended second amended and restated certificate of incorporation authorizes the Company to issue a total of 10,493,339 shares of preferred stock. The Company has reserved sufficient shares of common stock for issuance upon conversion of the preferred stock. As of June 30, 2014, the Company has the following outstanding shares of preferred stock as shown in the table below.

 

Series   Date Issued   Issue Price     Shares
Outstanding
    Carrying
Amount
    Liquidation
Preference
    Dividend
Rate
 
                                             
A   July 2007   $ 1.786       493,339     $ 881,103     $ 881,103     $ 0.09  
B   August 2007     4.420       147,846       653,479       653,479       0.09  
B   February 2010     0.027       5,188,253       141,967       22,932,078       0.09  
                                             
                  5,829,438     $ 1,676,549     $ 24,466,660          

 

Dividends - The holders of Series A and B preferred stock are entitled to receive noncumulative dividends prior to and in preference to any declaration of payment of any dividends on the common stock of the Company, at the rate of $0.09 per share per annum. Such dividends are payable only when, and if declared by the Board of Directors. No dividends on preferred stock were declared by the Board from inception through June 30, 2014.

 

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Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

Liquidation Preference - In the event of liquidation, dissolution, or winding up of the Company, the holders of the Series A and B preferred stock are entitled to receive an amount per share equal to $1.786 and $4.42, respectively, for each outstanding share of Series A & B preferred stock (as adjusted for stock splits, stock dividends, combinations or other recapitalizations), plus all declared and unpaid dividends on such shares. Thereafter, if assets or surplus funds remained in the Company, the holders of common stock are entitled to receive all of the remaining assets of the Company.

 

Deemed Liquidation - Any merger or consolidation which would result in the Company’s stockholders immediately prior to such transaction not holding at least 50% of the voting power of the surviving, continuing or purchasing entity, or the sale or lease of all or substantially all of the assets of the Company, was deemed to be a liquidation, dissolution or winding up. Upon this event, holders of all shares of Series A and Series B preferred stock, as well as holders of the Company’s common stock would have receive their liquidation preference, including any declared and unpaid dividends as of the liquidation date. As in an ordinary liquidation, no class or series of the Company’s equity securities has a right to receive a particular form of consideration (e.g., cash or shares) upon a deemed liquidation event. Accordingly, because the holders of the Company’s preferred stock did not have a right to receive cash redemption of their shares, the Preferred stock is classified as permanent equity.

 

Conversion Rights - The holder of each share of Series A and B preferred stock have the option to convert each share into such number of fully paid and non-assessable shares of the Company’s common stock as is determined by dividing $1.786 (Series A Conversion Price) and $4.42 (Series B Conversion Price).

 

If the value of the adjusted number of shares of common stock into which the convertible preferred stock was convertible, based on the market price of the common stock on the date the convertible preferred stock was issued, was greater than the value of the number of shares of common stock into which the convertible preferred stock was convertible prior to such adjustment, based on the market price of the common stock on the date the convertible preferred stock was issued, the Company will recognize a beneficial conversion feature associated with the preferred stock. Because the beneficial conversion feature meets the requirements for equity classification (i.e., is not required to be accounted for as a liability), such future beneficial conversion feature charge will be recorded as a preferred stock dividend and the amount will be presented in a reconciliation of “net loss” to arrive at “net loss attributable to common shareholders” on the face of the Company’s statements of operations.

 

Each share of Series A and Series B preferred is subject to automatic conversion into common stock upon the earlier of (i) the Company’s sales of its common stock in a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act of 1933, as amended or (ii) the date specified by written consent of holders of a majority of the then outstanding shares of Series A and Series B preferred stock, voting together as a single class on an as-converted basis.

 

Redemption - The preferred stock is not redeemable.

 

Voting Rights - The holders of preferred stock has the same voting rights as the holders of common stock. The holders of each share of convertible preferred stock are entitled to the number of votes equal to the number of shares of common stock into which such shares of convertible preferred stock could be converted.

 

Common Stock

 

The Company’s amendment to the second amended and restated certificate of incorporation authorizes the Company to issue a total of 20,000,000 shares of common stock. As of June 30, 2014, the Company had an aggregate of 5,098,661 shares of common stock outstanding of which 4,000,000 shares of the outstanding common stock were issued to the founders of the Company in exchange for technology know how and services.

 

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Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared by the Board from inception through June 30, 2014.

 

In the event of a liquidation dissolution, or winding up of the Company, after distribution to the holders of the Series A and B convertible preferred stock, all remaining assets or surplus funds of the Company shall be distributed on a pro-rata basis among the holders of the outstanding common stock and convertible preferred stock assuming full conversion of the convertible preferred stock.

 

Common Stock Warrants

 

As of June 30, 2014, the Company had an aggregate of 800,967 outstanding unexercised common stock warrants as follows:

 

Date Issued   Exercise Price     Number of Shares  
                 
2006   $ 0.17       60,920  
2009   $ 0.44       118,383  
2010   $ 0.44       254,997  
2013   $ 1.00       200,000  
2014   $ 1.50       166,667  
Total Shares at June 30, 2014             800,967  

 

In November 2006 and February 2010, the Company issued warrants to purchase 60,920 shares of common stock at an exercise price of $0.17 per share and 254,997 shares of common stock at an exercise price of $0.44 per share, respectively. The warrants were issued to one of the co-founders of the Company and to certain consultants who previously rendered services to the Company for which they agreed to defer payment for their services. The warrants expire in ten years from issuance date and may be exercised for cash or, if the current market price of the Company’s common stock is greater than the per share exercise price, by surrender of a portion of the warrant in a cashless exercise. The initial fair value of the warrants was estimated at an aggregate value of $113,683, using the Black-Scholes option pricing model with the following assumptions at the date of issuance: expected volatility of 105.6%, risk-free interest rate of between 3.62% and 4.62%, contractual term of 10 years and dividend yield of 0%. The warrants are classified as permanent equity. As of June 30, 2014 and December 31, 2013, the unpaid deferred payment balance was $90,199 (see Note 3).

 

In March 2009, the Company entered a Credit Agreement with MTF, a related party, for which the Company may borrow up to $400,000 (see Note 5). In connection with this transaction, the Company entered into a Warrant Agreement whereby it issued to MTF a warrant to purchase 118,383 shares of the Company’s common stock (“Note Warrant”) at an exercise price of $0.44 which allowed the Company to extend the maturity dates of the notes dated January 18, 2008 and November 4, 2008 to December 31, 2009. The fair value of the warrants was recorded as a debt issuance cost and was being amortized to interest expense over the term of the loan. The initial fair value of the Note Warrant at the grant date was estimated at an aggregate value of $47,970, using the Black-Scholes option pricing model. The warrant was classified as permanent equity at June 30, 2014.

 

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Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

In the connection with the Bridge Financings (see Note 4), warrants were issued to purchase 200,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The warrants expire in seven years from issuance date and may be exercised for cash or, if the current market price of the Company’s common stock is greater than the per share exercise price, by surrender of a portion of the warrant in a cashless exercise. The initial fair value of the warrant was estimated at an aggregate value of $171,143 using the Black-Scholes option pricing model. The fair value on the warrants was recorded as a debt issuance cost and is being amortized to interest expense over the term of the note. For the six months ended June 30, 2014 and the year ended December 31, 2013, $83,625 and $67,104 of the debt issuance costs was amortized to interest expense, respectively.

 

In connection with the 2014 Note, the Company issued a warrant to purchase 166,667 shares of the Company’s common stock at an exercise price of $1.50 per share and 4 year term (See Note 5).

 

7. Income Taxes

 

The Company’s effective tax rate is 0% for income tax for the six months ended June 30, 2014 and the Company expects that its effective tax rate for the full year 2014 will be 0%. Based on the weight of available evidence, including cumulative losses since inception and expected future losses, the Company has determined that it is more likely than not that the deferred tax asset amount will not be realized and therefore a valuation allowance has been provided on net deferred tax assets.

 

The Company files tax returns for U.S. Federal and State of California. The Company is not currently subject to any income tax examinations. Since the Company’s inception, the Company had incurred losses from operations, which generally allows all tax years to remain open.

 

Uncertain Tax Positions

 

The Company recognizes the financial statement effects of a tax position when it becomes more likely than not, based upon the technical merits, that the position will be sustained upon examination.

 

The Company recognizes interest and/or penalties related to uncertain tax positions. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected in the period that such determination is made. The interest and penalties are recognized as other expense and not tax expense. The Company currently has no interest and penalties related to uncertain tax positions.

 

8. Related Party Transactions

 

In September 2006, the Company entered into a consulting agreement with one of its stockholders whom previously served as chairman, president and CEO of the Company. The Company paid $70,000 and $60,000, respectively, for the six months ended June 30, 2014 and 2013 in consulting fees to this related party.

 

In addition, one of the Company’s co-founders had previously provided research and development consulting services to the Company and earned an aggregate of $320,000 of fees from inception to January 2010. Of the $320,000, $52,500 has been deferred for payment until the Company’s next equity financing. As of June 30, 2014 and December 31, 2013, the $52,500 deferred payment was included in the accrued expenses.

 

See Note 5 for related party notes payable to MTF.

 

F- 45
 

 

Bone Biologics, Inc.

Notes to Condensed Financial Statements

 

9. Subsequent Events

 

Orthofix Subsequent Financing

 

On July 1, 2014, (i) Orthofix purchased $500,000 worth of Bone Biologics Common Stock or the Subsequent Orthofix Shares; (ii) was issued the Subsequent Orthofix Convertible Promissory Notes in the principal amount of $500,000 (which includes the assignment of the $250,000 2014 Note from MTF) and convertible into 666,666 worth of the Company’s Common Stock at $0.75 per share; and (iii) was issued the Subsequent Orthofix Warrants (including the assignment of warrants by MTF issued in connection with the 2014 Note) which were exercisable for 333,334 shares of Bone Biologics Common Stock at an exercise price per share of $1.50 (the “Orthofix Subsequent Financing”). Upon subscribing for the Subsequent Orthofix Shares, the Subsequent Orthofix Convertible Promissory Notes and accrued interest converted into a combined total of 668,904 shares of Bone Biologics Common Stock in accordance with the terms of the Subsequent Orthofix Convertible Promissory Notes. The Subsequent Orthofix Warrants converted into warrants of the Company with substantially identical terms upon consummation of the Merger.

 

At the closing of the Subsequent Orthofix Shares and Notes, AFH Advisory was entitled to receive warrants to purchase up to 500,000 shares of Common Stock of the Company at the per share price of the shares offered or $1.00 per share, with a 5 year term and a cashless exercise provision (the “Extra Warrants”). AFH Advisory has normal and customary piggyback registration rights with respect to the shares of Common Stock issuable upon exercise of the Extra Warrants.

 

Forefront or its designees will receive a warrant to purchase shares of Common Stock (the “Agent Warrant”) equal to 8% of the Common Stock underlying the securities issued in the Private Placement (4% if investors are introduced by Bone Biologics, AFH Holdings & Advisory, LLC or their respective officers and directors). Such Agent Warrant will be issued at the closing of the Private Placement and shall provide, among other things, that the Agent Warrant shall: (i) be exercisable at the price of the securities (or the exercise price of the securities) issued to the investors in the offering, (ii) expire five (5) years from the date of issuance, (iii) include customary registration rights, including the registration rights provided to the Investors, (iv) contain provisions for cashless exercise and (v) include such other terms that are normal and customary for warrants of this type. In addition, Forefront or its designees will receive and Advisory Warrant equal to 2.0% of the Company’s post-merger and financing fully diluted shares outstanding upon the closing of $2.5 million of investors on which Forefront is eligible to receive compensation. Forefront was issued warrants to purchase 46,667 shares of Common Stock at $1.00 per share upon completion of the Orthofix Subsequent Financing (which includes 13,333 warrants in connection with the 2014 Note with MTF).

 

F- 46
 

 

AGREEMENT AND PLAN OF MERGER

 

BY AND AMONG:

 

AFH ACQUISITION X, INC.,

 

BONE BIOLOGICS ACQUISITION CORP.

 

AND

 

BONE BIOLOGICS, INC.

 

September 19, 2014

 

 
 

 

Agreement and Plan of Merger

 

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of September 19, 2014 (the “ Agreement Date ”), by and among AFH Acquisition X, Inc., a Delaware corporation (“ Purchaser ”), Bone Biologics Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Purchaser (“ Sub ”), and Bone Biologics, Inc., a California corporation (the “ Company ”).

 

Recitals

 

WHEREAS, Purchaser, the Company, and Sub believe it is in the best interests of their respective companies and the stockholders of their respective companies that Company and Sub combine into a single company through the statutory merger of Sub with and into Company (the “ Merger ”);

 

WHEREAS, in connection with the Merger, the outstanding shares of Company’s capital stock at the Effective Time will be converted into the right of the Company to receive the Company Merger Consideration, in exchange for providing Purchaser with the Purchaser Merger Consideration, upon the terms and subject to the conditions of this Agreement; and

 

WHEREAS, Purchaser, the Company, and Sub desire to make certain representations and warranties and other agreements in connection with the Merger.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties, intending to be legally bound, hereby agree as follows:

 

Article I

 

THE MERGER

 

1.1 Certain Definitions . As used in this Agreement, the following terms shall have the meanings indicated below. Unless indicated otherwise, all mathematical calculations contemplated hereby shall be rounded to the tenth decimal place.

 

Acquisition Proposal ” has the meaning given to it in Section 5.9 .

 

Action ” has the meaning given to it in Section 2.6 .

 

Affiliate ” has the meaning set forth in Rule 144 promulgated under the Securities Act.

 

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Agreement ” has the meaning given to it in the Preamble.

 

Agreement Date ” has the meaning given to it in the Preamble .

 

Business Day ” means any day other than Saturday, Sunday, or a day on which commercial banks in California or New York are obligated by any Legal Requirement to close.

 

California Law ” means the California Corporations Code.

 

Cash ” means cash and cash equivalents.

 

Certificates ” has the meaning given to it in Section 1.10(a)(i) .

 

Certificate of Merger ” has the meaning given to it in Section 1.2 .

 

Closing ” has the meaning given to it in Section 1.3 .

 

Closing Date ” has the meaning given to it in Section 1.3 .

 

Closing Expenses Certificate ” means a certificate executed by the Chief Financial Officer of the Company, certifying the amount of Transaction Expenses not paid as of July 31, 2014 (including an itemized list of each such Transaction Expense with a description of the nature of such expense and the Person to whom such expense is owed).

 

Code ” shall mean the Internal Revenue Code of 1986, as amended.

 

Company ” has the meaning given to it in the Preamble .

 

Company Authorization ” shall mean each material federal, state, county, local or foreign governmental consent, license, permit, grant, or other authorization of a Governmental Entity that is necessary to own, lease and operate the Company’s properties and to carry on the Company’s business as owned, leased, operated or carried on as of the Agreement Date.

 

Company Board ” means the Board of Directors of the Company.

 

Company Cash Certificate ” means a certificate executed by the Chief Financial Officer of the Company, certifying on behalf of the Company the amount of the Company’s Cash as of July 31, 2014.

 

Company Common Stock ” means the Common Stock, par value $0.0001 per share, of the Company.

 

Company Debt Certificate ” means a certificate executed by the Chief Financial Officer of the Company, certifying on behalf of the Company an itemized list of all outstanding Indebtedness as of July 31, 2014 and the Person to whom such outstanding Indebtedness is owed and an aggregate total of such outstanding Indebtedness.

 

Company Disclosure Schedule ” has the meaning given to it in Article II .

 

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Company Indemnified Persons ” has the meaning given to it in Section 5.8(a) .

 

Company Merger Consideration ” shall mean 19,897,587 shares of the Purchaser’s Common Stock (including 2,151,926 shares issuable upon the exercise of outstanding warrants and 5,648,658 shares issuable upon the conversion of debt). The 5,000,000 outstanding shares of Common Stock of the Purchaser prior to the Merger were consolidated into 3,853,600 shares of Common Stock and the remaining shares were cancelled and extinguished.

 

Company Warrants ” means options, warrants, and other convertible rights to purchase shares of Company Common Stock.

 

Company Securityholders ” means the Company Stockholders and Company Warrantholders, collectively.

 

Company Stockholders ” means the holders of issued and outstanding shares of Company Common Stock.

 

Company’s Knowledge ” (or similar words), means the actual knowledge of any individual after reasonable inquiry of the officers or directors of the Company that (i) directly report to such individual in the scope of their engagement by the Company and (ii) are directly responsible for the information that is the subject of the applicable representation or warranty.

 

Consent ” means any consent, waiver, approval, authorization, exemption, registration or declaration.

 

Contract ” means any written or oral contract, agreement, purchase or sale order, instrument, license, commitment, undertaking or arrangement.

 

Delaware Courts ” has the meaning given to it in Section 8.9 .

 

Delaware Law ” means the General Corporation Law of the State of Delaware.

 

Dissenting Shares ” shall mean any shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and in respect of which appraisal rights have been perfected in accordance with California Law in connection with the Merger.

 

Effective Time ” has the meaning given to it in Section 1.5 .

 

Encumbrance ” means, with respect to any asset, any mortgage, deed of trust, lien, pledge, or charge, except for restrictions on transfer generally arising under any applicable federal or state or foreign securities laws.

 

GAAP ” means United States generally accepted accounting principles.

 

Governmental Entity ” means any national, supra-national, federal, state, municipal, local or foreign government, or any court, tribunal, arbitrator, administrative agency, commission or other governmental or quasi-governmental authority or instrumentality, in each case whether domestic or foreign, any stock exchange or similar self-regulatory organization or any quasi-governmental body exercising any regulatory, Taxing or other governmental or quasi-governmental authority.

 

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Guarantee ” means any obligation, contingent or otherwise, of a Person guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, contingent or otherwise, of such Person (i) to purchase or repay such Indebtedness, (ii) to reimburse a bank for amounts drawn under a letter of credit for the purpose of paying such Indebtedness or (iii) entered into for the purpose of assuring in any other manner the holder of such Indebtedness of the payment thereof.

 

HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

Indebtedness ” means (i) all indebtedness of the Company for borrowed money (other than trade debt incurred in the ordinary course of business consistent with past practices), (ii) all long or short term debt obligations of the Company evidenced by notes, bonds, debentures or similar instruments and (iii) all Guarantees by the Company of Indebtedness of others. Indebtedness of the Company shall include the Indebtedness of any other entity (including any partnership in which the Company is a general partner) to the extent the Company is liable therefor as a result of its ownership interest in such entity, except to the extent the terms of such Indebtedness provide that it is not liable therefor.

 

Indemnified Persons ” means the Company Indemnified Persons and the Purchaser Indemnified Persons, collectively.

 

Legal Requirements ” means all United States or foreign federal, state, national, supra-national, provincial, or local laws, treaties, constitutions, statutes, codes, rules, common law, regulations, ordinances, orders, judgments, injunctions, permits, decrees or edicts by a Governmental Entity having the force of law.

 

Letter of Credit ” means that certain Letter of Credit, appearing as Exhibit G attached hereto, by and between AFH Holding and Advisory, LLC (“ AFH Advisory ”) and the Musculoskeletal Transplant Foundation, Inc. (“ MTF ”).

 

Letter of Intent ” means that certain Amended and Restated Letter of Intent, dated August 28, 2014, by and among the Company, AFH Advisory and MTF, as notated and as amended.

 

Letter of Transmittal ” has the meaning given to it in Section 1.10(a)(i) .

 

Material Adverse Effect ” means any change, event, development or effect with respect to the Company that, individually or in the aggregate, has a material adverse effect on the business, assets, operations, results of operations or financial condition of the Company, taken as a whole, other than any change, event, development or effect that results from: (i) general economic conditions in any of the markets in which the Company operates; (ii) any change in the financial, banking, currency or capital markets in the United States; (iii) changes in law, GAAP or other applicable accounting standards or the interpretations thereof, in each case that are proposed, approved or enacted after the date of this Agreement; (iv) acts of God or other calamities in the United States, including the engagement by any country in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence or threatened occurrence of any military or terrorist attack, in each case occurring after the date of this Agreement; (v) any actions taken, or failures to take action, or such other changes or events, in each case, to which Purchaser has specifically consented in advance in writing; (vi) any failure to meet internal projections relating to the Company (it being understood that the underlying causes of, or factors contributing to, the failure to meet such projections may be taken into account in determining whether a Material Adverse Effect has occurred); or (vii) the announcement or pendency of, or the taking of any action specifically required by this Agreement and the other agreements contemplated hereby, including by reason of the identity of Purchaser or any communication by Purchaser regarding the plans or intentions of Purchaser with respect to the conduct of the business of the Company and including the resignation or termination of any employee following the announcement of the transactions contemplated hereby, in the case of clauses (i), (ii), (iii) and (iv), other than to the extent such changes, events, developments or effects disproportionately impact the Company relative to the other companies in the industry in which the Company operates; or (B) materially impairs or delays the ability of the Company to consummate the transactions contemplated by this Agreement.

 

5
 

 

Merger ” has the meaning given to it in the first Recital .

 

Note ” shall mean that certain Promissory Note, appearing as Exhibit A attached hereto, dated as of July 31, 2014, in the amount of $340,000, issued by Purchaser to AFH Advisory, as payment for the shell fee and related transaction expenses incurred by AFH Advisory, that Purchaser will pay the interest and principal amount due under with the gross proceeds of the Offering.

 

Offering ” means that certain offering that will take place after the Closing pursuant to which Purchaser will raise an amount up to $10,000,000 through the sale of Purchaser’s Common Stock to investors.

 

Outside Date ” has the meaning given to it in Section 7.1(b) .

 

Per Share Company Merger Consideration ” means (i) the Company Merger Consideration divided by (ii) the Total Stock.

 

Person ” means any natural person, company, corporation, limited liability company, general partnership, limited partnership, trust, proprietorship, joint venture, business organization or Governmental Entity.

 

Pro Rata Share ” means, with respect to a particular Company Securityholder, the percentage set forth in the Spreadsheet next to such Company Securityholder’s name in the column entitled “Pro Rata Share.”

 

Purchaser ” has the meaning given to it in the Preamble .

 

6
 

 

“Purchaser’s Common Stock” means the $0.001 par value common stock of Purchaser.

 

Purchaser Indemnified Persons ” has the meaning given to it in Section 5.8(b) .

 

Purchaser Merger Consideration ” shall mean (i) the Note and (ii) the Warrant, less 50% of any Transfer Taxes.

 

Representative ” means, with respect to a Person, such Person’s officers, directors, employees, investment bankers, attorneys, accountants, consultants or other agents or advisors.

 

Restated Certificate ” has the meaning given to it in Section 2.3(a) .

 

Securities Act ” has the meaning given to it in Section 2.4 .

 

Spreadsheet ” has the meaning given to it in Section 1.16 .

 

Stockholder Consent ” has the meaning given to it in Section 5.1(a) .

 

Stockholder Consent Delivery Deadline ” has the meaning given to it in Section 6.3(g) .

 

Stockholder Notice ” has the meaning given to it in Section 5.1(b) .

 

Sub ” has the meaning given to it in the Preamble .

 

Supplemental Matters ” has the meaning given to it in Section 5.10 .

 

Surviving Corporation ” has the meaning given to it in Section 1.2 .

 

Tax ” (and, with correlative meaning, “ Taxes ” and “ Taxable ”) means (i) any income, gross receipts, sales, use, ad valorem, value added, franchise, capital stock, profits, employment, excise, severance, stamp, real or personal property or other tax, governmental fee or other like assessment or charge of any kind whatsoever (including, but not limited to, withholding on amounts paid to or by any Person), together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Entity responsible for the imposition or collection of any such amount and any liability for any of the foregoing as transferee, (ii) in the case of the Company, liability for the payment of any amount of the type described in clause (i) as a result of being or having been before the Closing a member of an affiliated, consolidated, combined or unitary group, or a party to any agreement or arrangement, as a result of which liability of the Company to a Taxing Authority is determined or taken into account with reference to the activities of any other Person and (iii) liability of the Company for the payment of any amount as a result of being party to any Tax Sharing Agreement.

 

Tax Return ” means any return, statement, declaration, claim for refund, report, document, election, disclosure, schedule or form (including any estimated tax or information return or report) filed or required to be filed with respect to Taxes, including any amendment thereof.

 

7
 

 

Tax Sharing Agreement ” means any agreement or arrangement (whether or not written) entered into prior to the Closing that binds the Company and that provides for the allocation, apportionment, sharing or assignment of any Tax liability or benefit, or the transfer or assignment of income, revenues, receipts, or gains for the purpose of determining any Person’s Tax liability.

 

Total Stock ” means the sum, without duplication, of the aggregate number of shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time.

 

Transaction Agreements ” has the meaning given to it in Section 2.2 .

 

Transaction Expenses ” means any amounts that are or may become payable pursuant to the Transaction Agreements.

 

Transfer Taxes ” means any transfer, documentary, sales, use, stamp, registration, value added or other similar Taxes (including any penalties and interest) incurred in connection with the transactions contemplated by this Agreement.

 

Warrant ” means that certain Common Stock Purchase Warrant, substantially similar to the form attached hereto as Exhibit E , dated as of the date hereof, issued to AFH Advisory to purchase 500,000 shares of Bone Biologics, Corp.’s Common Stock at the price per share of $1.00 with a 5 year term and a cashless exercise provision.

 

Other capitalized terms defined elsewhere in this Agreement and not defined in this Section 1.1 shall have the meanings assigned to such terms in this Agreement.

 

1.2 The Merger . At the Effective Time, on the terms and subject to the conditions set forth in this Agreement, the Certificate of Merger attached hereto as Exhibit B (the “ Certificate of Merger ”) and the applicable provisions of Delaware Law, Sub shall merge with and into the Company, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation and become a wholly owned subsidiary of Purchaser. The Company, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the “ Surviving Corporation .”

 

1.3 Closing . Unless this Agreement is earlier terminated in accordance with Section 7.1 , the closing of the transactions contemplated hereby (the “ Closing ”) shall take place at a time and date to be specified by the parties which will be no later than the second (2nd) Business Day after the satisfaction or waiver of each of the conditions set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) or at such other time as the parties hereto agree. The Closing shall take place at the offices of DLA Piper LLP (US), 2000 Avenue of the Stars, Suite 400 North Tower, Los Angeles, CA 90067-4704, or at such other location as the parties hereto agree. The date on which the Closing occurs is herein referred to as the “ Closing Date .”

 

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1.4 Closing Deliveries .

 

(a) Purchaser Deliveries . Purchaser shall deliver to the Company, at or prior to the Closing, each of the following:

 

(i) a certificate, dated as of the Closing Date, executed on behalf of Purchaser by a duly authorized officer of Purchaser, certifying that each of the conditions set forth in clauses (a) and (b) of Section 6.2 has been satisfied;

 

(ii) an amount equal to the aggregate Company Merger Consideration payable pursuant to Section 1.9(a)(i) in exchange for all shares of Company Common Stock;

 

(iii) except as otherwise provided herein, a warrant of Purchaser with substantially identical terms in exchange, pursuant to Section 1.9(a)(ii) , for each Company Warrant that is vested, unexpired, and unexercised immediately prior to the Effective Time (or which become vested and exercisable as a result of the consummation of the transactions contemplated hereby); and

 

(iv) except as otherwise provided herein, a convertible promissory note, issued by Purchaser, to replace each issued and outstanding convertible promissory note issued by the Company, with each such replacement convertible promissory note containing terms that are substantially identical to the terms of each convertible promissory note being replaced.

 

(b) Company Deliveries . The Company shall deliver to Purchaser, at or prior to the Closing, each of the following:

 

(i) the Purchaser Merger Consideration;

 

(ii) a certificate, dated as of the Closing Date and executed on behalf of the Company by its Chief Executive Officer, certifying: (A) resolutions of the Company Board approving and authorizing the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby; (B) resolutions of the Company Stockholders approving the Merger and adopting this Agreement and (C) that each of the conditions set forth in clauses (a), (b) and (e) of Section 6.3 has been satisfied;

 

(iii) documents evidencing the resignation of each of the directors, except for Chia Soo, and each of the officers, except for William Jay Treat, of the Company in office or on the Board of Directors immediately prior to the Closing as directors and/or officers, as applicable, of the Company, effective no later than immediately prior to the Effective Time and documents evidencing the appointment of the directors set forth on Schedule 1.4(b)(iii) ;

 

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(iv) a certificate dated within ten (10) days prior to the Closing Date from the Secretary of State of the State of California certifying that the Company is in good standing under the laws of the State of California;

 

(v) the Spreadsheet completed to include all of the information specified in Section 1.16 ;

 

(vi) the Closing Expenses Certificate;

 

(vii) the Company Debt Certificate;

 

(viii) the Company Cash Certificate;

 

(ix) FIRPTA documentation, including a notice to the U.S. Internal Revenue Service, in accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2), in substantially the form attached hereto as Exhibit C, dated as of the Closing Date and executed by the Company;

 

(x) the Registration Rights Agreement, in the form attached hereto as Exhibit F , pursuant to which each of AFH Advisory, Hankey Investment Corp., L.P. (“ HIC ”) and MTF have two demand registration rights and unlimited piggyback registration rights following the completion of a private placement by the Company subject to the agreed upon lock up period; and

 

(xi) the Letter of Credit.

 

(c) Payment of Outstanding Indebtedness . Neither the Purchaser nor the Company shall be responsible for delivering to the other, at or prior to the Closing, an amount of money sufficient for payment of any money owed to any holders of outstanding Indebtedness immediately prior to the Effective Time. The payment of any money owed to any holders of outstanding Indebtedness shall be out of the gross proceeds raised in the Offering.

 

1.5 Effective Time . On the Closing Date, after the satisfaction or waiver of each of the conditions set forth in Article VI , Sub and the Company shall cause the Certificate of Merger to be executed and filed with the Secretary of State of the State of California, in accordance with the relevant provisions of Delaware Law. The Merger shall become effective on the date and time on which the Certificate of Merger has been filed with the Secretary of State of the State of California, such time being referred to herein as the “ Effective Time .”

 

1.6 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Sub shall become the debts, liabilities and duties of the Surviving Corporation.

 

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1.7 Certificate of Incorporation and Bylaws .

 

(a) At the Effective Time, the Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended.

 

(b) At the Effective Time, the Bylaws of the Company, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended.

 

1.8 Directors and Officers .

 

(a) At the Effective Time, the members of the Board of Directors of the Company that have not resigned shall be the members of the Board of Directors of the Surviving Corporation immediately after the Effective Time until their respective successors are duly elected, designated and qualified, or until their earlier death, resignation or removal in accordance with the Certificate of Incorporation of the Surviving Corporation.

 

(b) At the Effective Time, the officers of the Company that have not resigned shall be the officers of the Surviving Corporation immediately after the Effective Time until their respective successors are duly appointed or until their earlier death, resignation or removal in accordance with the Certificate of Incorporation of the Surviving Corporation.

 

(c) At the Effective Time, the members of the Board of Directors of Purchaser shall be the members of the Board of Directors set forth on Schedule 1.8 until their respective successors are duly elected, designated and qualified, or until their earlier death, resignation or removal in accordance with the Articles of Incorporation and the Bylaws of Purchaser.

 

1.9 Effect on Company Common Stock and Company Warrants .

 

(a) Treatment of Company Common Stock Owned by Company Stockholders; Treatment of Capital Stock of Sub . On the terms and subject to the conditions set forth in this Agreement, by virtue of the Merger and without any action on the part of Purchaser, Sub, the Company, or any holder of the Company Common Stock and/or Company Warrants:

 

(i) Common Stock . At the Effective Time, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time shall be automatically converted into the right to receive, subject to and in accordance with Section 1.10(a)(i) , an amount of consideration (without interest) equal to the Per Share Company Merger Consideration. The amount of consideration each holder of Company Common Stock is entitled to receive for the shares of Company Common Stock held by such holder shall be rounded to the nearest cent or share, as applicable, and computed after aggregating cash amounts for all shares of Company Common Stock held by such holder.

 

(ii) Company Warrants . Prior to the Closing, the Company Board shall have adopted appropriate resolutions and taken all other actions necessary and appropriate to provide that each vested, unexpired and unexercised Company Warrant shall convert to a warrant of Purchaser with terms substantially identical to the Company Warrant surrendered. For purposes of the preceding sentence, “substantially identical” shall mean that such warrants of Purchaser shall be exercisable for the same number of shares, shall be exercisable at the same exercise price, shall be exercisable during the same term, and shall contain other provisions that are generally the same as the Company Warrants surrendered.

 

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(iii) Capital Stock of Sub . Each share of capital stock of Sub that is issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without further action on the part of Purchaser, Sub or the Company, be converted into and become 100 shares of common stock of the Surviving Corporation (and the shares of the Surviving Corporation into which the shares of Sub capital stock are so converted shall be the only shares of the Surviving Corporation’s capital stock that are issued and outstanding immediately after the Effective Time). Each certificate evidencing ownership of shares of Sub common stock shall evidence ownership of such shares of common stock of the Surviving Corporation.

 

(b) Treatment of Company Common Stock Owned by the Company . At the Effective Time, all shares of Company Common Stock that are owned by the Company as treasury stock or reserved for issuance by the Company immediately prior to the Effective Time shall be cancelled and extinguished without any conversion thereof and no amount of the Company Merger Consideration shall be allocated or paid thereto.

 

(c) Dissenters’ Rights . Notwithstanding anything contained herein to the contrary, any Dissenting Shares shall not be converted into the right to receive the portion of the Company Merger Consideration provided for in Section 1.9(a) , but shall instead be converted into the right to receive such consideration as may be determined to be due with respect to any such Dissenting Shares pursuant to California Law. Each holder of Dissenting Shares who, pursuant to the provisions of California Law, becomes entitled to payment thereunder for such shares shall receive payment therefor in accordance with California Law (but only after the value therefor shall have been agreed upon or finally determined pursuant to such provisions). If, after the Effective Time, any Dissenting Shares shall lose their status as Dissenting Shares, then any such shares shall immediately be converted into the right to receive the portion of the Company Merger Consideration payable pursuant to Section 1.9(a) in respect of such shares as if such shares never had been Dissenting Shares, and Purchaser shall issue and deliver to the holder thereof, at (or as promptly as reasonably practicable after) the applicable time or times specified in Section 1.10(a) , following the satisfaction of the applicable conditions set forth in Section 1.10(a) , the portion of the Company Merger Consideration to which such holder would be entitled in respect thereof under this Section 1.9 as if such shares never had been Dissenting Shares. The Company shall give Purchaser prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments regarding demands of appraisal served pursuant to California Law and received by the Company. Except with the prior written consent of Purchaser, the Company shall not make any payment with respect to, or settle or offer to settle, any such demands.

 

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(d) Rights Not Transferable . The rights of the Company Securityholders as of immediately prior to the Effective Time are personal to each such Company Securityholder and shall not be transferable for any reason otherwise than by operation of law, will or the laws of descent and distribution or with the prior written consent of Purchaser. Any attempted transfer of such right by any holder thereof (otherwise than as permitted by the immediately preceding sentence) shall be null and void.

 

1.10 Surrender of Certificates in Exchange for Payments and Payment of Company Warrants .

 

(a) Exchange Procedures for Share Certificates and Company Warrants .

 

(i) Prior to the Closing, the Company shall mail or cause to be mailed to every Company Stockholder to whom the Company has issued Certificates and that has not previously delivered its Certificates together with a properly completed and duly executed letter of transmittal in form and substance reasonably satisfactory to the Company (the “ Letter of Transmittal ”) and to each Company Stockholder who is a holder of shares of Company Common Stock as reflected in the stock records of the Company but to whom Certificates have not been issued by the Company (A) a form of Letter of Transmittal, and (B) instructions for use of the Letter of Transmittal in effecting the surrender of certificates or instruments which immediately prior to the Effective Time represent issued and outstanding Company Common Stock (the “ Certificates ”) that will be converted into the right to receive consideration pursuant to Section 1.9(a) . The Letter of Transmittal shall specify that delivery of Certificates shall be effected, and risk of loss and title to Certificates shall pass, only upon receipt thereof by Purchaser, together with a properly completed and duly executed Letter of Transmittal, duly executed on behalf of each Person effecting the surrender of such Certificates, and shall be in such form and have such other provisions as Purchaser may reasonably specify, including a release by the Company Stockholders and that the Company Stockholders agree to be bound by the provisions of this Agreement. Upon delivery to the Company of a Certificate, together with a properly completed and duly executed Letter of Transmittal and any other documentation required thereby, the Company shall, either (x) at the Effective Time as to Certificates delivered at least two (2) Business Days prior to the Closing Date or (y) as soon as reasonably practicable (and in no event more than three (3) Business Days) after the date of delivery as to Certificates delivered after the second Business Day prior to the Closing Date, deliver to the holder of record of such Certificate, at the Company Stockholder’s election, the Company Merger Consideration amount that such Company Stockholder has the right to receive pursuant to Section 1.9(a)(i) in respect of such Certificate, and such Certificate shall be canceled.

 

(ii) The procedures for the exchange of Company Warrants shall be the same as the procedures for the exchange of Company Common Stock set forth in Section 1.10(a)(i) .

 

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(b) No Interest; U.S. Funds . No interest shall accumulate on any consideration payable in connection with the Merger, except as explicitly provided in the Note. Any cash amounts paid by any party hereunder shall be made in U.S. Dollars.

 

(c) Transfers of Ownership . If any amount payable pursuant to Section 1.9(a) is to be distributed to a Person other than the Person to which the Certificate surrendered in exchange therefor is registered, it shall be a condition of the payment thereof that the Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer and that the person requesting such exchange shall have paid to Purchaser or any agent designated by it any transfer or other Taxes required by reason of the payment of cash in any name other than that of the registered holder of the Certificate surrendered, or established to the satisfaction of Purchaser or any agent designated by it that such Tax has been paid or is not payable.

 

(d) No Liability . Notwithstanding anything to the contrary in this Section 1.10 , none of Purchaser, Sub, the Company, the Surviving Corporation, or any party hereto shall be liable to any Person for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar Legal Requirement.

 

1.11 No Further Ownership Rights in the Company Common Stock or Company Warrants . All shares of the Purchaser’s Common Stock paid or payable following the surrender for exchange of all shares of Company Common Stock, and all warrants to purchase Purchaser’s Common Stock exchanged for the Company Warrants surrendered in accordance with the terms hereof shall be so paid or payable or issued or issuable in full satisfaction of all rights pertaining to all shares of Company Common Stock and all Company Warrants including any rights to declared but unpaid dividends, and there shall be no further registration of transfers on the records of the Surviving Corporation of shares of Company Common Stock which were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, a Certificate is presented to the Surviving Corporation for any reason, such Certificate shall be canceled and exchanged as provided in this Article I.

 

1.12 Lost, Stolen or Destroyed Certificates . In the event any Certificate shall have been lost, stolen or destroyed, Purchaser shall issue in exchange for such Certificate, following the making of an affidavit of that fact by the record holder thereof and, if required by the Surviving Corporation, the posting by such record holder of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, such Purchaser’s Common Stock as may be required pursuant to Section 1.9 in respect of such Certificate.

 

1.13 Tax Consequences . The parties acknowledge that the Merger does not qualify as a “reorganization” described in Section 368(a) of the Code. Purchaser makes no representations or warranties to the Company or to any Company Securityholder regarding the Tax treatment of the Merger, or any of the Tax consequences to the Company or any Company Securityholder of this Agreement, the Merger or any of the other transactions or agreements contemplated hereby. The Company acknowledges that the Company and the Company Securityholders are relying solely on their own Tax advisors in connection with this Agreement, the Merger and the other transactions and agreements contemplated hereby.

 

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1.14 Withholding Rights . Each of Purchaser, Sub, and the Surviving Corporation shall be entitled to deduct and withhold from any amounts otherwise payable under this Agreement such amounts as Purchaser, Sub, or the Surviving Corporation reasonably determines that it is required to deduct and withhold with respect to any such payments under the Code or any other provision of federal, state, local or foreign Tax Legal Requirements. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been delivered and paid to such Persons in respect of which such deduction and withholding was made.

 

1.15 Taking of Necessary Action; Further Action . If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and interest in, to and under, and/or possession of, all assets, property, rights, privileges, powers and franchises of the Company or any Company Subsidiary, the officers and directors of the Surviving Corporation are hereby authorized in the name and on behalf of the Company or any Company Subsidiary to take all lawful action necessary or desirable to accomplish such purpose or acts, so long as such action is not inconsistent with this Agreement.

 

1.16 Spreadsheet . The Company shall prepare and deliver to Purchaser, not later than five (5) Business Days prior to the Closing Date, a spreadsheet (the “ Spreadsheet ”), certified by the Chief Executive Officer of the Company, which shall set forth all of the following information, as of the Closing Date and immediately prior to the Effective Time: (a) the names of all the Company Securityholders; and (b) the number and kind of shares of Company Common Stock held by such Persons.

 

Article II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Subject to, and except as set forth in the disclosure letter of the Company delivered to Purchaser concurrently with the parties’ execution of this Agreement (the “ Company Disclosure Schedule ”), the Company represents and warrants to Purchaser the following as of the date hereof and as of the Effective Time:

 

2.1 Organization, Good Standing and Qualification . The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company does not own directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise. The copies of the Certificate of Incorporation of the Company, as amended, and the documents which constitute all other Organization Documents of the Company, have been delivered to the Purchaser prior to the execution of this Agreement and are true and complete and have not been amended. The Company is not in violation or breach of any of the provisions of its Organizational Documents, except for such violations or breaches as, in the aggregate, will not have a Material Adverse Effect.

 

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2.2 Authorization . All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and any other documents entered into in connection with this Agreement (together with this Agreement, the “ Transaction Agreements ”) and the authorization, sale, issuance and delivery of the Note and the Warrant, and the performance of all obligations of the Company under the Transaction Agreements has been taken prior to the date hereof. The Transaction Agreements, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors’ rights generally, as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

2.3 Capitalization . As of immediately prior to the Closing, the authorized capital of the Company consists of:

 

(a) Preferred Stock . A total of 10,493,339 authorized shares of the Company’s $0.0001 par value per share Preferred Stock, consisting of: 493,339 shares designated Series A Preferred Stock, of which 493,339 shares are issued and outstanding, and 10,000,000 shares designated Series B Preferred Stock, of which 5,336,099 are issued and outstanding. The rights, privileges and preferences of the Company’s Preferred Stock are as stated in the Company’s Amended and Restated Certificate of Incorporation, as amended (the “ Restated Certificate ”). All of the issued and outstanding shares of the Company’s Preferred Stock have been duly authorized and validly issued, are fully paid and nonassessable and issued in compliance with all applicable federal and state securities laws. MTF, as holder of all issued and outstanding shares of Series A Preferred Stock and Series B Preferred Stock, agrees to convert all such shares to Company Common Stock prior to the Effective Time.

 

(b) Common Stock . 20,000,000 authorized shares of Company Common Stock, 6,267,565 shares of which are issued and outstanding (not including shares underlying warrants, shares underlying convertible promissory notes, or shares of Series A Preferred Stock or Series B Preferred Stock that will convert into shares of Company Common Stock prior to the Effective Time). All of the issued and outstanding shares of Company Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and issued in compliance with all applicable federal and state securities laws.

 

(c) Other Securities . Except for warrants to purchase 2,151,926 shares of Company Common Stock and convertible promissory notes that can collectively convert into 5,648,658 shares of Company Common Stock, there are no outstanding options, warrants, or agreements, orally or in writing, for the purchase or acquisition from the Company of any shares of its capital stock.

 

(d) The Spreadsheet . The Spreadsheet contains a true and complete list of the names of the record and beneficial holders of all of the issued and outstanding capital stock of the Company. Except as expressly provided in this Agreement, no holder of shares of Company Common Stock or any other security of the Company or any other Person is entitled to any preemptive right, right of first refusal or similar right as a result of the issuance of the shares or otherwise. There is no voting trust, agreement or arrangement among any of the holders of capital stock of the Company affecting the exercise of the voting rights of any such capital stock.

 

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2.4 Governmental Consents . No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority or other third party by the Company is required in connection with the consummation of the transactions contemplated by this Agreement except: such filings under the Securities Act of 1933, as amended, and the regulations thereunder (the “ Securities Act ”) and all other applicable securities laws as may be required in connection with the transactions contemplated by this Agreement. All such qualifications and filings will, in the case of qualifications, be effective on the Closing, and will, in the case of filings, be made within the time prescribed by law.

 

2.5 Compliance with Laws and Other Instruments; No Conflicts . The Company is not in violation or default of (i) any provision of its Certificate of Incorporation or Bylaws, each as amended to date, (ii) to its knowledge, any applicable law, regulation, judgment, decree or order of the United States of America or any state, foreign country or other governmental body or agency having jurisdiction over the Company’s business or properties, other than violations of laws, regulations, judgments, decrees or orders that could not reasonably be expected to have a Material Adverse Effect on the business, property, financial condition or results of operations of the Company or (iii) any material provision of any mortgage, indenture, agreement, instrument or contract to which it is a party or by which it is bound other than such violation that would not have a Material Adverse Effect. The execution, delivery, and performance of and compliance with this Agreement, and the issuance and sale of the Note and the Warrant hereunder, will not, with or without the passage of time or giving of notice, result in any such violation, or be in conflict with or constitute a default under any such term, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties, other than such violations or defaults that will not have a Material Adverse Effect.

 

2.6 No Litigation . Except as set forth on Schedule 2.6 attached hereto, there is no litigation, action, suit or proceeding, or governmental inquiry or investigation (“ Action ”), pending, or, to the Company’s Knowledge, threatened against the Company. There is no Action pending, or, to the Company’s Knowledge, threatened that questions the validity of this Agreement or the right of the Company to enter into this Agreement, to consummate the transactions contemplated hereby or that might otherwise have a Material Adverse Effect. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to initiate.

 

2.7 Property and Assets . The Company has good and marketable title to all of its material properties and assets, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, security interest, lease, charge or encumbrance, other than (i) liens resulting from taxes which have not yet become delinquent and (ii) liens and encumbrances which do not in any case materially detract from the value of the property subject thereto or materially impair the operations of the Company, and which have not arisen otherwise than in the ordinary course of business.

 

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2.8 Securities Law Exemptions . Based in part on the accuracy of the representations and warranties of the Company contained in Article II hereof, the offer, sale and issuance of the Company Common Stock and Company Warrants are and will be exempt from the registration requirements of the Securities Act, and the registration, permit or qualification requirements of any applicable U.S. state securities laws. Neither the Company nor any agent on its behalf has solicited or will solicit any offers to sell or has offered to sell or will offer to sell any part of the securities to any person or persons so as to bring the sale of such securities by the Company within the registration provisions of the Securities Act or any U.S. state securities law.

 

2.9 Board Recommendation . The Company Board has, by unanimous written consent, determined that this Agreement and the transactions contemplated by this Agreement, are advisable and in the best interests of the Company and its Shareholders.

 

2.10 Financial Statements . Schedule 2.10 sets forth the Financial Statements of the Company. The Financial Statements were prepared in accordance with generally accepted accounting principles (“ GAAP ”) throughout the periods covered thereby and fairly present in all material respects the Company’s consolidated financial position as of such dates and the results of the Company’s operations for such periods. The Company has no debt except for those debts disclosed on Schedule 2.10. There has been no Material Adverse Effect since December 31, 2013.

 

2.11 Tax Returns and Payments . The Company has filed all local income, sales, withholding and other tax reports, documents, statements and returns (collectively “ Tax Returns ”) that it was required to file and has paid all taxes shown thereon as due and payable, except where the failure to file Tax Returns or pay such taxes could reasonably be expected not to have a Material Adverse Effect. All such Tax Returns were complete and correct in all material respects. The Company is not a party to any agreement or other document with any taxing authority extending the period for assessment, reassessment or collection of any Taxes. No Governmental Authority has assessed against the Company any additional taxes for any period for which Tax Returns have been filed. There is no proceeding, audit or investigation concerning any liability for taxes of the Company or otherwise on account of the Company’s business pending or, to the Company’s Knowledge, threatened by any governmental authority. The Company is not a party to any tax allocation or sharing contract.

 

2.12 Disclosure . The disclosures provided by the Company to Purchaser regarding the Company’s business and transactions do not contain any untrue statements of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

2.13 No Material Adverse Changes . Since December 31, 2013, no event has occurred that has had or could reasonably be expected to have Material Adverse Effect.

 

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Article III

REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB

 

Purchaser and Sub represent and warrant to the Company the following as of the date hereof and as of the Effective Time:

 

3.1 Organization, Standing and Power . Each of Purchaser and Sub is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Neither Purchaser nor Sub is in material violation of any of the provisions of their respective certificate of incorporation or bylaws. Each of Purchaser and Sub have the full corporate power to own, lease and operate their properties and to conduct their business as currently conducted.

 

3.2 Authority; Noncontravention .

 

(a) Each of Purchaser and Sub has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by Purchaser and Sub of this Agreement and the consummation by Purchaser and Sub of the transactions contemplated hereby have been duly and validly authorized by the boards of directors of Purchaser and Sub and, effective immediately after the execution of this Agreement by Sub, the sole stockholder of Sub has adopted this Agreement and approved the Merger and the transactions contemplated hereby. This Agreement has been duly executed and delivered by Purchaser and Sub and, assuming this Agreement constitutes the valid and binding obligation of the other parties hereto, this Agreement constitutes the valid and binding obligation of Purchaser and Sub, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium or other similar Legal Requirements affecting or relating to creditors’ rights generally and principles of equity.

 

(b) The execution and delivery of this Agreement by Purchaser and Sub do not, and neither the consummation of the transactions contemplated hereby nor compliance by Purchaser or Sub with any provisions of this Agreement will, 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 or acceleration of any obligation or loss of a benefit under (i) any provision of their respective certificates of incorporation or bylaws, as amended to date, or (ii) any Legal Requirement, except where such conflict, violation, default, termination, cancellation or acceleration, individually or in the aggregate, would not be material to Purchaser’s or Sub’s ability to consummate the Merger or to perform their respective obligations under this Agreement.

 

(c) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity, is required by or with respect to Purchaser or Sub in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (i) the filing of the Certificate of Merger, as provided in Section 1.5 , (ii) such filings as may be required under applicable state securities laws and the securities laws of any foreign country, (iii) such filings and notifications as may be required to be made in connection with the Merger under the HSR Act or applicable foreign Antitrust Laws and the expiration or early termination of applicable waiting periods under the HSR Act or applicable foreign Antitrust Laws, and (iv) such other consents, authorizations, filings, approvals, notices and registrations which, if not obtained or made, would not be material to Purchaser’s or Sub’s ability to consummate the Merger or to perform their respective obligations under this Agreement.

 

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3.3 No Prior Sub Operations . Sub was formed solely for the purpose of effecting the Merger and has not engaged in any business activities or conducted any operations other than in connection with the transactions contemplated hereby.

 

3.4 Sufficient Shares . Purchaser has on hand as of the date of this Agreement, and shall have on hand on the Closing Date, sufficient shares of Purchaser’s Common Stock in its possession to enable Purchaser to consummate the transactions contemplated hereby, including payment of the Company Merger Consideration. Purchaser’s obligations under this Agreement are not subject to any conditions regarding Purchaser’s, its Affiliates’, or any other Person’s ability to obtain financing for the consummation of the transactions contemplated hereby.

 

Article IV

CONDUCT PRIOR TO THE EFFECTIVE TIME

 

4.1 Conduct of Business of the Company . During the period from the Agreement Date and continuing until the earlier of the termination of this Agreement and the Effective Time, except as Purchaser shall otherwise consent in advance in writing (such consent not to be unreasonably withheld, conditioned or delayed), the Company will conduct its business in all material respects in the ordinary course consistent with past practices and in material compliance with all applicable Legal Requirements including using its commercially reasonable efforts to:

 

(a) preserve intact its present business organization, properties and assets;

 

(b) maintain in effect all of the Company Authorizations;

 

(c) keep available the services of its directors, officers and key employees;

 

(d) preserve its relationships with customers, suppliers, distributors, licensors, licensees and others having business dealings with it.

 

(e) maintain its assets in good operating condition;

 

(f) maintain any insurance policies held by the Company as of the Agreement Date; and

 

(g) preserve the confidentiality of all trade secrets that are material to the Company’s business in a manner consistent with the Company’s past practices.

 

4.2 Restrictions on Conduct of Business of the Company . Without limiting the generality of Section 4.1 , except as expressly contemplated by this Agreement, during the period from the Agreement Date and continuing until the earlier of the termination of this Agreement and the Effective Time except as expressly contemplated by this Agreement, Purchaser shall otherwise consent in advance in writing (such consent not to be unreasonably withheld, conditioned or delayed) and the Company shall not take any action or omit to take any action that would be outside the ordinary course consistent with past practices, without the prior written consent of Purchaser (such consent not to be unreasonably withheld, conditioned or delayed).

 

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Article V

ADDITIONAL AGREEMENTS

 

5.1 Stockholder Consent .

 

(a) The Company shall use its reasonable best efforts to obtain, as soon as reasonably practicable after the execution of this Agreement, the written consent of each of the Company Stockholders listed on the Spreadsheet pursuant to which such Company Stockholders approve and adopt this Agreement, the Merger and the other transactions contemplated hereby (the “ Stockholder Consent ”). The Stockholder Consent shall be in the form attached hereto as Exhibit D and shall be irrevocable with respect to all shares of Company Common Stock owned beneficially or of record by the consenting Company Stockholders or as to which they have, directly or indirectly, the right to vote or direct the voting thereof.

 

(b) Within five (5) Business Days after the date on which the Company obtains the Stockholder Consent, the Company shall prepare and mail a notice (the “ Stockholder Notice ”) to every Company Stockholder that did not execute the Stockholder Consent. The Stockholder Notice shall (i) be a statement to the effect that the Company Board unanimously determined that the Merger is advisable in accordance with Section 251(b) of Delaware Law and in the best interests of the Company Stockholders and unanimously approved and adopted this Agreement, the Merger and the other transactions contemplated hereby, (ii) provide the Company Stockholders to whom it is sent with notice of the actions taken in the Stockholder Consent, including the approval and adoption of this Agreement, the Merger and the other transactions contemplated hereby in accordance with Section 228(e) of Delaware Law and the bylaws of the Company and (iii) notify such Company Stockholders of their dissent and appraisal rights pursuant to California Law. The Stockholder Notice will include therewith a copy of the applicable provisions of California Law and all such other information as Purchaser shall reasonably request, and shall be sufficient in form and substance to start the twenty (20) day period during which a Company Stockholder must demand appraisal of such Stockholder’s Company Common Stock as contemplated by California Law. All materials submitted to Company Stockholders in accordance with this Section 5.1(b) shall be subject to Purchaser’s advance review and reasonable approval.

 

5.2 Public Disclosure . The Company and Purchaser will consult with each other and agree before issuing any press release, making any public statement, or otherwise making any disclosure with respect to the terms of this Agreement or the transactions contemplated hereby or the use of either party’s name, and will not issue any such press release or make any such public statement or other disclosure prior to such mutual agreement, except to the extent necessary in order to comply with applicable Legal Requirements or any applicable listing agreement with a national securities exchange.

 

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5.3 Commercially Reasonable Efforts; Notice of Certain Events . Each of the parties hereto agrees to use its commercially reasonable efforts, and to cooperate with each other party hereto, to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, appropriate or desirable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated hereby, including the satisfaction of the respective conditions set forth in Article VI , and including executing and delivering such other instruments and doing and performing such other acts and things as may be necessary or reasonably desirable for effecting completely the consummation of the Merger and the other transactions contemplated hereby.

 

5.4 Access to Information . During the period commencing on the Agreement Date and continuing until the earlier of the termination of this Agreement and the Effective Time, (a) the Company shall afford Purchaser and its accountants, counsel and other representatives, reasonable access upon reasonable advance notice during business hours to (i) all of the Company’s properties, books, Contracts and records and (ii) other information concerning the business, properties and personnel of the Company as Purchaser may reasonably request; provided , that the Company shall not be required to provide Purchaser or its agents with access to any files, books, records or information where such access would (A) waive any privileges or protections under applicable Legal Requirements, (B) violate any privacy rights applicable to employees or (C) violate the terms of any nondisclosure or similar Contract with any third party (provided, that in each case, the Company shall use its commercially reasonable efforts to provide Purchaser with access to such information to the fullest extent practicable without risking loss of privilege or protections under such Legal Requirement, privacy right or Contract, including, for example, providing for such information to be reviewed by counsel for Purchaser on terms reasonably acceptable to counsel for the Company).

 

5.5 Expenses . Whether or not the Merger is consummated, except to the extent otherwise provided herein or in the Letter of Intent, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense.

 

5.6 Parachute Payment Waivers . The Company shall use commercially reasonable efforts to obtain and deliver to Purchaser, prior to the initiation of the requisite stockholder approval procedure under Section 5.7 , a parachute payment waiver from each Person who the Company reasonably believes is, with respect to the Company, a “disqualified individual” (within the meaning of Section 280G of the Code and the regulations promulgated thereunder), as determined immediately prior to the initiation of the requisite stockholder approval procedure under Section 5.7 , and who might otherwise have, receive or have the right or entitlement to receive a parachute payment under Section 280G of the Code.

 

5.7 Section 280G Stockholder Approval . The Company shall use its commercially reasonable efforts to obtain the approval by such number of Company Stockholders as is required by the terms of Section 280G(b)(5)(B) of the Code so as to render the parachute payment provisions of Section 280G of the Code inapplicable to any and all parachute payments that would not be deductible by reason of Section 280G of the Code, with such stockholder vote to be obtained in a manner which satisfies all applicable requirements of Section 280G(b)(5)(B) of the Code and the regulations promulgated thereunder.

 

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5.8 Directors’ and Officers’ Insurance; Indemnification

 

(a) For a period of four (4) years from and after the Closing Date, the Surviving Corporation agrees to indemnify (including advancement of expenses) and hold harmless all past and present officers and directors of the Company (the “ Company Indemnified Persons ”) to the same extent such persons are indemnified by the Company as of the date of this Agreement pursuant to the Company’s organizational documents, employment agreements, indemnification agreements or under applicable Legal Requirements for acts or omissions which occurred at or prior to the Effective Time; provided , that such indemnification shall be subject to limitations imposed from time to time under applicable Legal Requirements. The Surviving Corporation’s certificate of incorporation and bylaws shall contain provisions with respect to indemnification and exculpation that are at least as favorable to the past and present officers and directors of the Company as those provisions contained in the organizational documents in effect on the date hereof, and such provisions shall not be amended, repealed or otherwise modified for a period of four (4) years in any manner that would adversely affect the rights of the past and present officers and directors of the Company.

 

(b) For a period of four (4) years from and after the Closing Date, the Surviving Corporation agrees to indemnify (including advancement of expenses) and hold harmless Purchaser, all past and present officers and directors of Purchaser, AFH Advisory, all Affiliates of AFH Advisory and all past and present officers and directors of AFH Advisory (the “ Purchaser Indemnified Persons ”) for all acts taken by the Company and all failures of the Company to act, when the Company was required to act under applicable Legal Requirements, prior to the Effective Time. The acts taken by the Company and the failures of the Company to act, when the Company was required to act under applicable Legal Requirements, prior to the Effective Time shall not be treated as the acts or omissions of Purchaser, any past or present officers or directors of Purchaser, AFH Advisory, any Affiliates of AFH Advisory or any past or present officers or directors of AFH Advisory.

 

(c) Prior to the Effective Time, the Company shall obtain and fully pay the premium for directors’ and officers’ liability insurance policies, in each case for a claims reporting or discovery period of at least six years from and after the Effective Time with respect to any claim related to any period of time at or prior to the Effective Time with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under the Company’s existing policies with respect to any actual or alleged error, misstatement, misleading statement, act, omission, neglect, breach of duty or any matter claimed against a director or officer of the Company by reason of him or her serving in such capacity that existed or occurred at or prior to the Effective Time; provided , that the Company shall give Purchaser a reasonable opportunity to participate in the selection of such tail policy and the Company shall give reasonable and good faith consideration to any comments made by Purchaser with respect thereto.

 

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(d) If Purchaser, the Surviving Corporation or any of their successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of their properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Purchaser or the Surviving Corporation, as the case may be, shall assume the obligations set forth in this Section 5.8 .

 

(e) The provisions of this Section 5.8 are intended for the benefit of, and shall be enforceable by, all past and present officers and directors of the Company and their heirs and representatives. The rights of all past and present officers and directors of the Company under this Section 5.8 are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract, applicable Legal Requirements or otherwise.

 

5.9 No Solicitation . During the period from the Agreement Date and continuing until the earlier of the termination of this Agreement and the Effective Time, none of the Company or any of its Affiliates shall (i) solicit or initiate any proposals regarding a merger, consolidation, share exchange, business combination, sale of all or substantially all of the assets, or other similar transaction involving the Company other than the transactions contemplated by this Agreement (any of the foregoing proposals an “ Acquisition Proposal ”), (ii) engage or participate in negotiations or discussions concerning, or provide any Person with any non-public information regarding the Company with respect to, an Acquisition Proposal, or (iii) agree to, enter into, accept, approve or recommend the adoption of any Acquisition Proposal. Each of the Company and its Affiliates shall (and shall cause their Representatives to) cease immediately any and all discussions or negotiations with any Person (other than Purchaser and its Representatives) regarding any Acquisition Proposal. Each of the Company and its Affiliates shall enforce the terms and conditions of any confidentiality agreement entered into with such Person with respect to any Acquisition Proposal. It is understood that any violation of the restrictions set forth above by the Company, its Affiliates or any of the Representatives of the Company shall be deemed to be a breach of this Agreement by the Company.

 

5.10 Supplements to Company Disclosure Schedule . If there occurs after the Agreement Date any fact or condition that constitutes a breach of any representation or warranty made by the Company in Article II above, or if any fact or condition hereafter occurring requires any change in the Company’s Disclosure Letter delivered to Purchaser at the time of execution of this Agreement (the “ Supplemental Matters ”), the Company shall, as promptly as practicable, deliver to Purchaser a supplement to the Company’s Disclosure Letter specifying such Supplemental Matters. Should the Supplemental Matters set forth in any such supplement to Company’s Disclosure Letter cause the Company to be unable to fulfill the conditions set forth in Section 6.3(a) hereof, the Company shall provide written notice thereof to Purchaser and Purchaser shall, within fifteen (15) Business Days thereafter, make a determination in writing, delivered to the Company, to either (i) waive the conditions set forth in Section 6.3(a) hereof solely with respect to the Supplemental Matters or (ii) not waive the conditions set forth in Section 6.3(a) hereof and elect to terminate this Agreement in accordance with Section 7.1(d) hereof; provided, however, if Purchaser fails to provide a written determination prior to the expiration of such fifteen (15) Business Day period, Purchaser shall be deemed to have waived the conditions set forth in Section 6.3(a) hereof with respect to the Supplemental Matters. If the Purchaser elects to waive the conditions set forth in Section 6.3(a) hereof with respect to the Supplemental Matters (either by written determination or lapse), no effect shall be given with respect to the Supplemental Matters for purposes of determining whether there has been a failure of the Closing condition set forth in Section 6.3(a) hereof or a Warranty Breach under Article II hereof.

 

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5.11 MTF Conversion of Promissory Notes . MTF agrees: (i) to convert 30% of the convertible promissory notes issued and outstanding as of the date hereof entered into by and between the Company and MTF into shares of the Company’s Series B Preferred Stock at the price of $1.00 per share and to then convert such shares into Company Common Stock on a 1 for 1 ratio; (ii) to convert 35% of the convertible promissory notes issued and outstanding as of the date hereof entered into by and between the Company and MTF into shares of the Company’s Series B Preferred Stock at the price per share of the securities sold in the Company’s private investment in public entity offering and to then convert such shares into Company Common Stock on a 1 for 1 ratio; and (iii) to convert 35% of the convertible promissory notes issued and outstanding as of the date hereof entered into by and between the Company and MTF into shares of the Company’s Series B Preferred Stock at the price per share of the securities sold in the Company’s initial public offering and to then convert such shares into Common Stock on a 1 for 1 ratio.

 

5.12 Appointment of Board Observer . Each of AFH Advisory and MTF shall have the right to appoint one individual with non-voting “observer status” to receive all Board communications and attend all meetings of the Board for a period of 2 years from the Effective Time, including attending meetings of the Board related to engaging professional service providers and the right to review any credentials provided by such service providers.

 

Article VI

CONDITIONS TO THE MERGER

 

6.1 Conditions to Obligations of Each Party to Effect the Merger . The respective obligations of each party hereto to consummate the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions:

 

(a) Illegality . No temporary restraining order, preliminary or permanent injunction, order, decree, writ, ruling or award issued by any court or other Governmental Entity of competent authority preventing the consummation of the Merger or the other transactions contemplated by this Agreement shall be in effect, and no Legal Requirement shall have been enacted, entered, enforced or deemed applicable to the Merger, which prohibits the consummation of the Merger or the other transactions contemplated by this Agreement.

 

(b) Stockholder Consent . The Company shall have obtained the Stockholder Consent in accordance with applicable Legal Requirements and the Stockholder Consent shall be in full force and effect.

 

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6.2 Additional Conditions to Obligations of the Company . The obligations of the Company to consummate the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions (it being understood that each such condition is solely for the benefit of the Company and may be waived by the Company in writing in its sole discretion without notice, liability or obligation to any Person):

 

(a) Representations and Warranties . The representations and warranties of Purchaser in this Agreement shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or “Material Adverse Effect,” which representations and warranties as so qualified shall be true and correct in all respects) on and as of the Agreement Date and on and as of the Effective Time as though such representations and warranties were made on and as of such time (except for representations and warranties which address matters only as to a specified date, which representations and warranties shall be so true and correct with respect to such specified date).

 

(b) Covenants . Purchaser shall have performed and complied in all material respects with all covenants, obligations and agreements of this Agreement required to be performed and complied with by it at or prior to the Closing.

 

(c) Officer’s Certificate . The Company shall have received a certificate, dated as of the Closing Date, executed on behalf of Purchaser by a duly authorized officer of Purchaser, to the effect that the conditions set forth in Section 6.2(a) and Section 6.2(b) have been satisfied.

 

(d) Receipt of Closing Deliveries . The Company shall have received each of the agreements, instruments and other documents set forth in Section 1.4(a) .

 

6.3 Additional Conditions to the Obligations of Purchaser . The obligations of Purchaser and Sub to consummate the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions (it being understood that each such condition is solely for the benefit of Purchaser and Sub and may be waived by Purchaser and Sub in writing in their sole discretion without notice, liability or obligation to any Person):

 

(a) Representations and Warranties . The representations and warranties of the Company in this Agreement shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or “Material Adverse Effect,” which representations and warranties as so qualified shall be true and correct in all respects) on and as of the Agreement Date and on and as of the Effective Time as though such representations and warranties were made on and as of such time (except for representations and warranties which address matters only as to a specified date, which representations and warranties shall be so true and correct with respect to such specified date).

 

(b) Covenants . The Company shall have performed and complied in all material respects with all covenants, obligations and agreements of this Agreement required to be performed and complied with by the Company at or prior to the Closing.

 

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(c) Officer’s Certificate . Purchaser shall have received the Officer’s Certificate.

 

(d) Receipt of Closing Deliveries . Purchaser shall have received each of the agreements, instruments and other documents set forth in Section 1.4(b) .

 

(e) No Material Adverse Effect . Since the Agreement Date, there shall not have occurred a Material Adverse Effect or any change, development or effect which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

 

(f) No Governmental Litigation . There shall not be pending before any court of competent jurisdiction any legal proceeding commenced by a Governmental Entity that challenges or seeks (i) to make illegal, restrain, delay materially or prohibit the consummation of the Merger or (ii) to prohibit or limit in any material respect Purchaser’s ability to vote, receive dividends with respect to or otherwise exercise ownership rights with respect to the Company Common Stock to be acquired in the Merger or its operation of all or any material portion of the Company, or of Purchaser and its Subsidiaries taken as a whole, or (iii) to compel Purchaser or Sub to dispose of or hold separate all or any material portion of the business or assets of the Company, or of Purchaser and its Subsidiaries taken as a whole.

 

(g) Written Consent . The Stockholder Consent shall be delivered to Purchaser no later than 11:59 PM, New York City time, on the first Business Day immediately preceding the Effective Time (the “ Stockholder Consent Delivery Deadline ”).

 

(h) Dissenting Shares . No more than ten percent (10%) of the outstanding shares of Company Common Stock shall be Dissenting Shares.

 

(i) MTF Conversion of Debt and Preferred Stock . MTF must have completed the conversion of (i) all of its issued and outstanding shares of the Company’s Series A Preferred Stock and Series B Preferred Stock into the shares of Company Common Stock and (ii) 30% of the issued and outstanding convertible promissory notes entered into by and between the Company and MTF into shares of the Company’s Series B Preferred Stock at a price per share of $1.00 and then into shares of Company Common Stock on a 1 for 1 ratio.

 

(j) Post-Closing Ownership . Immediately following the Closing, the ownership of the Purchaser shall be as set forth on Schedule 6.3(j) .

 

Article VII

TERMINATION, AMENDMENT AND WAIVER

 

7.1 Termination . At any time prior to the Effective Time, this Agreement may be terminated and the Merger abandoned by authorized action taken by the terminating party (notwithstanding approval and adoption of this Agreement by the Company Stockholders):

 

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(a) by mutual written consent duly authorized by the Company Board and the Board of Directors of Purchaser;

 

(b) by either Purchaser or the Company, if the Merger shall not have occurred on or before 11:59 PM, New York City time, on September 30, 2014 (the “ Outside Date ”), or such other date that Purchaser and the Company may agree upon in writing; provided , however , that the right to terminate this Agreement under this clause (b) of Section 7.1 shall not be available to any party whose breach of this Agreement has been the proximate cause of or resulted in the failure of the Merger to occur on or before the Outside Date.

 

(c) by either Purchaser or the Company, if the Stockholder Consent shall not have been obtained by the Company and delivered to Purchaser by the Stockholder Consent Delivery Deadline;

 

(d) by Purchaser, if the Company shall have breached any representation, warranty, covenant or agreement contained herein and such breach shall not have been cured within thirty (30) Business Days after receipt by the Company of written notice of such breach and if not cured within the timeframe above and at or prior to the Closing, such breach would result in the failure of the condition set forth in Section 6.3(a) or (b) ; or

 

(e) by the Company, if Purchaser shall have breached any representation, warranty, covenant or agreement contained herein and such breach shall not have been cured within thirty (30) Business Days after receipt by Purchaser of written notice of such breach and if not cured within the timeframe above and at or prior to Closing, such breach would result in the failure of the conditions set forth in Section 6.2(a) or (b) .

 

In the event of termination by Purchaser or the Company pursuant to this Section 7.1 (other than Section 7.1(a)) , written notice thereof shall be given to the other parties hereto.

 

7.2 Effect of Termination . In the event of termination of this Agreement as provided in Section 7.1 , this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Purchaser, Sub, the Company or their respective officers, directors, stockholders, Affiliates, employees, agents, advisors, attorneys or representatives; provided , however , that (a) the provisions of this Section 7.2 (Effect of Termination), Article VIII (General Provisions) and the Letter of Intent shall remain in full force and effect and survive any termination of this Agreement and (b) no such termination shall relieve any party hereto for any damages incurred or suffered by the other party as a result of an intentional or willful breach of this Agreement.

 

7.3 Amendment . Subject to the provisions of applicable Legal Requirements, the parties hereto may amend this Agreement by authorized action at any time (notwithstanding approval and adoption of this Agreement by the Company Stockholders) pursuant to an instrument in writing signed on behalf of each of the parties hereto (provided that no amendment shall be made which by Legal Requirement requires further approval by the Company Stockholders without such further stockholder approval).

 

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Article VIII

GENERAL PROVISIONS

 

8.1 No Survival . None of the representations and warranties contained in this Agreement, or any covenant in this Agreement (other than Section 5.8 and the provisions in Article II above concerning payment of the Merger Consideration) shall survive the Effective Time.

 

8.2 Notices . Any notices and other communications hereunder shall be in writing and shall be deemed given and received (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or, the first Business Day following such receipt if the date is not a Business Day) if delivered by a nationally recognized overnight courier service (providing written proof of delivery), such as Federal Express, (iii) on the date of confirmation of receipt (or, the first Business Day following receipt if the date is not a Business Day) if sent via facsimile to the parties hereto at the following address, or at such other address for a party as shall be specified by like notice, provided that a notice of change in address shall not be deemed to have been given until received by the addressee:

 

  (i) if to Purchaser or Sub, to:

 

AFH Acquisition X, Inc.
4751 Wilshire Blvd., Suite 110
Los Angeles, CA 90010
Attention: Eugene Leydiker
Facsimile No.: (323) 692-4126
Telephone No.: (323) 692-4026

 

with a copy (which shall not constitute notice) to:

 

Reed Smith LLP
599 Lexington Avenue
New York, N.Y. 10022
Attention: Bill Haddad
Facsimile No.: (212) 521-5450
Telephone No.: (212) 549-0379

 

  (ii) if to the Company, to:

 

Bone Biologics, Inc.
100 Rancho Rd., Suite 7

Thousand Oaks, CA 91362
Attention: Michael Schuler
Facsimile No.: (732) 661-2152
Telephone No.: (732) 661-2589

 

with a copy (which shall not constitute notice) to:

 

DLA Piper LLP (US)

550 S. Hope Street

Los Angeles, CA 90071

Attention: Ann Lawrence

Facsimile: (213) 330-7555

Telephone: (213) 330-7755

 

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8.3 Interpretation . When a reference is made in this Agreement to Articles, Sections or Exhibits, such reference shall be to an Article or Section of, or an Exhibit to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” The phrases “provided to,” “furnished to,” and phrases of similar import when used herein, unless the context otherwise requires, shall mean that a true, correct and complete copy of the information or material referred to has been provided to the party to whom such information or material is to be provided. Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; and (c) the terms “hereof,” “herein,” “hereunder” and derivative or similar words refer to this entire Agreement.

 

8.4 Counterparts . This Agreement may be executed manually, by electronic transmission or by facsimile by the parties hereto, in one or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto; it being understood that all parties hereto need not sign the same counterpart.

 

8.5 Entire Agreement; Parties in Interest . This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including all the exhibits attached hereto, and the Schedules, including the Company Disclosure Schedule, (a) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof, except for the Letter of Intent, the Note, the Warrant, and the Letter of Transmittal, with the Letter of Intent continuing in full force and effect and surviving any termination of this Agreement in accordance with its respective terms and (b) are not intended to confer, and shall not be construed as conferring, upon any Person other than the parties hereto any rights or remedies hereunder (except that Section 5.8 is intended to benefit former, current and future officers and directors of the Company and Indemnified Persons).

 

8.6 Assignment . Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other parties hereto, and any such assignment without such prior written consent shall be null and void. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns.

 

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8.7 Severability . In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement shall continue in full force and effect and shall be interpreted so as reasonably to effect the intent of the parties hereto. The parties hereto shall use all reasonable efforts to replace such void or unenforceable provisions of this Agreement with a valid and enforceable provision that shall achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.

 

8.8 Remedies Cumulative . Any and all remedies herein expressly conferred upon a party hereto shall be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party hereto of any one remedy shall not preclude the exercise of any other remedy and nothing in this Agreement shall be deemed a waiver by any party of any right to specific performance or injunctive relief. It is accordingly agreed that the parties, including without limitation, Purchaser, Sub, the Company, or if after the Effective Time, shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity, and the parties hereby waive the requirement of any posting of a bond in connection with the remedies described herein.

 

8.9 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to such state’s principles of conflicts of law, except that the portions of this Agreement regarding Dissenting Shares shall be governed by and construed in accordance with California Law. Each of the parties hereby expressly and irrevocably submits to the exclusive jurisdiction of the United States District Court for the District of Delaware and the jurisdiction of any other competent court of the State of Delaware (collectively, the “ Delaware Courts ”), preserving, however, all rights of removal to such federal court under 28 U.S.C. 1441, in respect of all disputes arising out of or in connection with this Agreement and the documents referred to in this Agreement or the transactions contemplated hereby and thereby, and hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding arising out of or in connection with this Agreement and the documents referred to in this Agreement or the transactions contemplated hereby and thereby, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in the Delaware Courts. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 8.2 or in such other manner as may be permitted by applicable Legal Requirements, shall be valid and sufficient service thereof. Notwithstanding the foregoing, each party agrees that each of the other parties shall have the right to bring any action or proceeding for enforcement of any order or judgment entered by a Delaware Court in any other court having jurisdiction.

 

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8.10 Rules of Construction . The parties hereto have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, hereby waive, with respect to this Agreement, each Schedule and each Exhibit attached hereto, the application of any Legal Requirement, regulation, holding or rule of construction providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document.

 

8.11 WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, INTENTIONALLY, VOLUNTARILY AND IRREVOCABLY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

  

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IN WITNESS WHEREOF, Purchaser, Sub, and the Company have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized, all as of the date first written above.

 

  AFH Acquisition X, Inc.:
     
  By: /s/ Don Hankey
  Name: Don Hankey
  Title: President, Secretary, Chief Financial Officer, and Sole Director
     
  Bone Biologics Acquisition Corp.:
   
  By: /s/ Don Hankey
  Name: Don Hankey
  Title: President, Secretary, Chief Financial Officer, and Sole Director
     
  Bone Biologics, Inc.:
   
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer and Director
     
  Bone Biologics, Inc.:
   
By: /s/ William Jay Treat
Name: William Jay Treat
Title: President and Secretary

 

 
 

  

Acknowledged and Accepted:  
     
AFH Holding and Advisory, LLC:  
   
By: /s/ Amir F. Heshmatpour  
Name: Amir F. Heshmatpour  
Title: Managing Director  
     
The Musculoskeletal Transplant Foundation, Inc.:  
     
By: /s/ Michael J. Kawas  
Name: Michael J. Kawas  
Title: Executive Vice President and Chief Financial Officer  

 

 
 

 

Exhibit A

 

PROMISSORY NOTE
(Secured)

 

$340,000.00 July 31, 2014

 

For value received , the undersigned, Bone Biologics, Inc., a California corporation (the “ Company ”), hereby promises to pay to AFH Holding and Advisory, LLC (“ AFH ”), at 4751 Wilshire Blvd., Suite 110, Los Angeles, CA 90010, or any other place designated in a writing submitted by AFH to the Company, the principal sum of Three-Hundred Forty Thousand Dollars and 00/100 ($340,000.00), together with interest thereon, as calculated below. All sums owing under this Promissory Note (this “ Note ”) are payable in lawful money of the United States of America, in immediately available funds.

 

1. Interest. Interest on all sums owing on this Note shall accrue at a rate of eight and one-half percent (8.5%) per annum, commencing ninety days after the Effective Date and continuing until the Maturity Date, and at a rate of eight and one-half percent (8.5%) per annum, commencing on the Maturity Date and continuing until this Note is paid in full, based on a three hundred sixty (360) day year and charged on the basis of actual days elapsed.

 

2. Payment. The Company shall make payments of principal to AFH commencing on the Initial Date. Payments of principal by the Company to AFH shall be made as follows: $250,000.00 contemporaneous with the Company closing on a total of $1,500,000.00 in the Offering (the “ Initial Date ”); and $90,000.00 contemporaneous with the Company closing on a total of $2,040,000.00 in the Offering. For purposes of this Note, the term “ Offering ” shall mean that certain upcoming offering pursuant to which the Company will be selling between $1,000,000.00 and $5,000,000.00 worth of its $0.001 par value per share common stock to investors. Payments to third-parties out of the proceeds of the Offering shall be made in accordance with the terms of that certain Amended and Restated Letter of Intent, dated May 7, 2014, by and among the Company, the Musculoskeletal Transplant Foundation, Inc., a District of Columbia Corporation (“ MTF ”), and AFH.

 

3. Maturity Date. If not already due and payable in accordance with the terms of Section 2, the outstanding principal balance shall be due and payable in full six (6) months after the Effective Date (the “ Maturity Date ”); provided, however, that the Company may pay all or any portion of such outstanding principal at any time before such date without penalty.

 

4. Late Fee. If any installment is not received by AFH within ten (10) Business Days of being due, the Company will pay a late fee of five percent (5%) of the overdue amount as a late fee. Acceptance of any late fee shall not constitute a waiver of default with respect to the overdue amount, and such late fee shall be paid by the Company in addition to any other costs, attorneys’ fees, and remedies to which AFH may be entitled as a result of an Event of Default under this Note.

 

5. Events of Default. At the option of AFH, the entire unpaid principal amount of this Note and any accrued interest thereon shall become immediately due and payable if an Event of Default shall occur. Each of the following events shall constitute an Event of Default hereunder:

 

 
 

 

a. The failure to pay when due the amount of any interest or principal payment required to be paid hereunder, which failure continues for thirty (30) days after the Company receives written notice of such nonpayment;

 

b. A petition or action for relief shall be filed by or against the Company, pursuant to the Federal Bankruptcy Code (Title 11, U.S. Codes) in effect from time to time, or under any other law relating to bankruptcy, insolvency, reorganization, moratorium, creditor composition, arrangement or other relief from debts; the appointment of a receiver, trustee, custodian or liquidator of or for any property of the Company; or upon the insolvency, dissolution, or termination of the business of the Company;

 

c. The Company shall (i) admit in writing its inability to pay its debts generally as they mature; (ii) make an assignment for the benefit of creditors or commence proceedings for its dissolution; or (iii) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business;

 

d. Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; and

 

e. The Company fails to comply with any covenant, condition or provision contained in this Note or materially breaches any provision hereof, and such failure continues or such breach is not corrected within thirty (30) days after the Company receives written notice of such failure or such breach.

 

6. Attorneys’ Fees. If any attorney is engaged by AFH to enforce or defend any provision of this Note, or as a consequence of any default hereunder, with or without the filing of any legal action or proceeding, then the Company shall pay to AFH immediately upon demand all attorneys’ fees and all costs incurred by AFH in connection therewith, together with interest thereon from the date of such demand until paid at the rate of interest applicable to the principal balance owing hereunder as if such unpaid attorneys’ fees and costs had been added to the principal.

 

7. Waiver. AFH’s acceptance of partial or delinquent payment from the Company, or AFH’s failure or delay in exercising any right hereunder, shall not constitute a waiver of any obligation of the Company hereunder, or any right of AFH hereunder, and shall not affect in any way the right to require full performance at any time thereafter. Any waiver of any term of this Note and any amendment to this Note must be made in writing and signed by AFH and the Company, and shall in all cases be limited to the express terms of such waiver or amendment. No previous waiver by AFH with respect to the terms of this Note shall constitute a waiver of any later breach, default, or failure of any condition under this Note. Except as otherwise provided in this Note, the Company waives: statutes of limitation; presentment; notice of dishonor; notice of default or delinquency; notice of acceleration; notice of protest and nonpayment; notice of cost, expenses or losses and interest thereon; notice of late charges; and diligence in taking any action to collect any sums owing under this Note or in any proceeding against any of the rights or interests in or to properties securing payment of this Note, if any.

 

2
 

 

8. Security. As security for payment of this Note, AFH will receive a Standby Letter of Credit from MTF for the full principal of this Note pursuant to the terms of that certain Agreement, by and among the Company, AFH Acquisition X, Inc. and Bone Biologics Acquisition Corp. , in the form attached hereto as Exhibit A.

 

9. Order of Payments. Payments shall be applied first to any fees or other costs owed to AFH in connection with the enforcement and collection of this Note as provided by this Note, thereafter to the outstanding amount of interest, if any, and thereafter to the outstanding principal amount.

 

10. Bank Account Designated by AFH. Payments shall be made by electronic transfer to the bank account designated in writing by AFH.

 

11. Transfer of Note . AFH may assign or pledge all or part of its rights under this Note. Whenever in this Note there is reference made to AFH, such reference shall be deemed to include as applicable, a reference to the respective successors and assigns of AFH. The provisions of this Note shall be binding upon and shall inure to the benefit of said successors and assigns.

 

12. General Provisions . This Note is intended by AFH and the Company as the complete and final expression of their agreement concerning the subject matter herein. It supersedes all prior understandings or agreements with respect thereto and may be changed only by a writing signed by AFH and the Company. No course of dealing, or parole or extrinsic evidence shall be used to modify or supplement the express terms of this Note. If any provision of this Note is found to be illegal, invalid, or unenforceable, such provision shall be enforced to the maximum extent permitted, but if fully unenforceable, such provision shall be severable, and this Note shall be construed as if such provision had never been a part of this Note, and the remaining provisions shall continue in full force and effect. The provisions hereof are binding upon the successors of the Company and inure to the benefit of the successors of AFH. Each right, power, and remedy provided in this Note shall be cumulative and shall be in addition to every other right, power, and remedy provided in this Note now or hereafter existing at law, in equity or otherwise. The section and paragraph headings contained in this Note are for reference purposes only and shall not affect in any way the meaning or interpretation of this Note. The term “ Business Day ” means any day other than Saturday, Sunday, or a day on which commercial banks in California or New York are obligated by any legal requirement to close.

 

13. Governing Law . This Note shall be construed and enforced in accordance with the laws of the State of California, except to the extent that Federal laws preempt the laws of the State of California, and all persons and entities in any manner obligated under this Note consent to the jurisdiction and venue of the Federal and State of California courts situated in Los Angeles, California, and also consent to service of process by any means authorized by California or Federal law.

 

14. Effective Date . This Note is made effective as of the date first set forth above (the “ Effective Date ”).

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

3
 

 

IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed and delivered as of the Effective Date.

 

THE COMPANY:   Bone Biologics, Inc.,
    a California corporation
     
  By: /s/
    Michael Schuler, Chief Executive Officer

 

[Signature Page to Promissory Note]

 

 
 

 

EXHIBIT A

 

FORM OF LETTER OF CREDIT

 

 
 

 

 

CERTIFIED TRUE COPY

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 1

 

DATE: JULY 25, 2014

 

IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 68105133

 

  ISSUING BANK
  BANK OF AMERICA, N.A.
  ONE FLEET WAY
  PA6-580-02-30
 

SCRANTON, PA 18507-1999

   
BENEFICIARY APPLICANT
AFH HOLDING & ADVISORY, LLC MUSCULOSKELETAL TRANSPLANT
AMIR F HESHMATPOUR FOUNDATION, INC.
CHAIRMAN & MANAGING DIRECTOR 125 MAY STREET
9595 WILSHIRE BLVD SUITE 700 EDISON, NJ 08837
   
BEVERLY HILLS, CA 90212  

 

AMOUNT

NOT EXCEEDING USD 340,000.00

NOT EXCEEDING THREE HUNDRED FORTY THOUSAND AND 00/100’S US DOLLARS

 

EXPIRATION

JULY 25, 2015 AT OUR COUNTERS

 

GENTLEMEN:

 

WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER 68105133 IN YOUR FAVOR.

 

THIS CREDIT IS AVAILABLE WITH BANK OF AMERICA BY PAYMENT AGAINST PRESENTATION OF BENEFICIARY’S DRAFT(S) AT SIGHT DRAWN ON BANK OF AMERICA N.A.

 

DRAFT(S) MUST BE ACCOMPANIED BY:

 

1. THE ORIGINAL LETTER OF CREDIT AND ALL AMENDMENTS, IF ANY.

 

2. AN AFFIDAVIT SIGNED BY AFH HOLDING AND ADVISORY LLC, CERTIFYING ONE OF THE FOLLOWING:

 

QUOTE

 

A. BONE BIOLOGICS HAS FAILED TO RECEIVE EXTERNAL FUNDING TO EXTINGUISH THE FULL AMOUNT OF $340,000 OR A PORTION THEREOF STILL OWED UNDER THE PURCHASE AGREEMENT TO ACQUIRE AFH ACQUISITION X, OR HAS NOT PAID AMOUNTS DUE AND OUTSTANDING. AS OF THE DATE OF THIS DRAWING SUCH PAYMENT HAS NOT BEEN RECEIVED, AND THEREFORE WE DRAW IN

 

CERTIFIED TRUE COPY

 

 
 

 

 

CERTIFIED TRUE COPY

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 2

 

THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: 68105133

 

THE AMOUNT OF $___________ OWED BY BONE BIOLOGICS.

 

UNQUOTE

 

QUOTE

 

B. BONE BIOLOGICS HAS RECEIVED EXTERNAL FUNDING TO EXTINGUISH THE FULL AMOUNT OF $340,000 OR A PORTION THEREOF STILL OWED UNDER THE PURCHASE AGREEMENT TO ACQUIRE AFH ACQUISITION X, BUT HAS NOT PAID AMOUNTS DUE AND OUTSTANDING. AS OF THE DATE OF THIS DRAWING SUCH PAYMENT HAS NOT BEEN RECEIVED, AND THEREFORE WE DRAW IN THE AMOUNT OF $ OWED BY BONE BIOLOGICS.

 

UNQUOTE

 

PARTIAL DRAWINGS AND MULTIPLE DRAWINGS ARE ALLOWED.

 

DRAFT(S) MUST STATE “DRAWN UNDER BANK OF AMERICA N.A., STANDBY LETTER OF CREDIT NUMBER 68105133 DATED JULY 22, 2015.”

 

DRAFT(S) AND DOCUMENTS SHALL BE PRESENTED AT OUR OFFICES AT BANK OF AMERICA, N.A. ONE FLEET WAY, PA6-580 - 02-30, SCRANTON, PA 18507-1999, ATTN: GLOBAL TRADE OPERATIONS, STANDBY UNIT.

 

THIS LETTER OF CREDIT IS TRANSFERABLE IN FULL AND NOT IN PART. ANY TRANSFER MADE HEREUNDER MUST CONFORM STRICTLY TO THE TERMS HEREOF AND TO THE CONDITIONS OF RULE 6 OF THE INTERNATIONAL STANDBY PRACTICES (ISP98) FIXED BY THE INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 590. SHOULD YOU WISH TO EFFECT A TRANSFER UNDER THIS CREDIT, SUCH TRANSFER WILL BE SUBJECT TO THE RETURN TO US OF THE ORIGINAL CREDIT INSTRUMENT, ACCOMPANIED BY OUR FORM OF TRANSFER, PROPERLY COMPLETED AND SIGNED BY AN AUTHORIZED SIGNATORY OF YOUR FIRM, BEARING YOUR BANKERS STAMP AND SIGNATURE AUTHENTICATION AND PAYMENT OF OUR TRANSFER FEE. SUCH TRANSFER FORM TRANSFER FORM IS AVAILABLE UPON REQUEST.

 

COMMUNICATIONS WITH RESPECT TO THIS LETTER OF CREDIT SHALL BE IN WRITING AND SHALL BE ADDRESSED TO US AT ONE FLEET WAY, PA6-580 - 02 - 30, SCRANTON, PA 18507-1999, ATTN: GLOBAL TRADE OPERATIONS, STANDBY UNIT, PHONE: 1-800-370-7519, SPECIFICALLY REFERRING TO THE NUMBER OF THIS LETTER OF CREDIT.

 

EXCEPT AS OTHERWISE EXPRESSLY STATED HEREIN, THIS CREDIT IS ISSUED SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES (ISP98), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 590.

 

IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS TRANSACTION, PLEASE CALL 800-370-7519 OPT 1 .

  

CERTIFIED TRUE COPY

 

 
 

 

 

CERTIFIED TRUE COPY

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 3

 

THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: 68105133

 

 

 

AUTHORIZED SIGNATURE

THIS DOCUMENT CONSISTS OF 3 PAGE(S).

 

CERTIFIED TRUE COPY

 

 
 

 

 

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 1

 

DATE: JULY 28, 2014

 

AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 68105133

 

AMENDMENT NUMBER 1

 

  ISSUING BANK
  BANK OF AMERICA, N.A.
  ONE FLEET WAY
  PA6-580-02-30
 

SCRANTON, PA 18507-1999

   
BENEFICIARY APPLICANT
AFH HOLDING & ADVISORY, LLC MUSCULOSKELETAL TRANSPLANT
AMIR F HESHMATPOUR FOUNDATION, INC.
CHAIRMAN & MANAGING DIRECTOR 125 MAY STREET
10830 MASSACHUSETTS AVE

EDISON, NJ 08837

 

PENTHOUSE SUITE

LOS ANGELES, CA 90 024

 

THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF THE ABOVE CRED: AND MUST BE ATTACHED THERETO.

 

THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS:

 

THE BENEFICIARY HAS BEEN AMENDED TO:

AFH HOLDING & ADVISORY, LLC

AMIR F HESHMATPOUR

CHAIRMAN & MANAGING DIRECTOR

10830 MASSACHUSETTS AVE

 

PENTHOUSE SUITE

LOS ANGELES, CA 90024

 

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

 

IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT, PLEASE CALL 800-370-7519 OPT 1 .

 

ORIGINAL

 

 
 

 

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 2

 

 

 

AUTHORIZED SIGNATURE

THIS DOCUMENT CONSISTS OF 2 PAGE(S).

 

ORIGINAL

 

 
 

 

Exhibit B

 

CERTIFICATE OF MERGER

 

AGREEMENT OF MERGER

 

This Agreement of Merger (this “ Agreement ”) is entered into as of this September 19, 2014 between AFH Acquisition x, inc. , a Delaware corporation (the “ Purchaser ”), BONE BIOLOGICS ACQUISITION CORP., a Delaware corporation (the “ Merger Sub ”), and BONE BIOLOGICS, INC., a California corporation (the “ Target ”).

 

The Purchaser, the Merger Sub and the Target hereby agree that at the Effective Time (as defined in this Agreement), the Target and the Merger Sub shall merge into a single corporation on the following terms and conditions (the “ Merger ”):

 

ARTICLE 1

MERGER

 

At the Effective Time (as defined below), the Merger Sub shall be merged with and into the Target. The Target shall be the surviving corporation (the “ Surviving Corporation ”). At the Effective Time, the separate corporate existence of the Merger Sub shall cease, and the Surviving Corporation shall succeed to the properties, rights, privileges, powers, immunities, and franchises of the Merger Sub. All rights of creditors and all liens on the property of the Merger Sub shall be preserved unimpaired, but limited to the property affected by such rights or liens immediately before the Merger.

 

Article 2

EFFECTIVE DATE

 

The Merger provided for in this Agreement shall become effective on the filing by and in the office of the California Secretary of State of an executed copy of this Agreement with all requisite accompanying certificates. The time of such filing is referred to in this Agreement as the “ Effective Time .”

 

Article 3

Articles OF INCORPORATION; BYLAWS; BOARD OF DIRECTORS; OFFICERS

 

1. The Target’s Articles of Incorporation in effect immediately before the Effective Time shall remain the Articles of Incorporation of the Surviving Corporation without change or amendment until they are duly altered, amended, or repealed.

 

2. The Target’s Bylaws in effect immediately before the Effective Time shall remain the Bylaws of the Surviving Corporation without change or amendment until they are duly altered, amended, or repealed.

 

3. At the Effective Time, the directors and officers of the Target in office immediately before the Effective Time shall become the directors and officers of the Surviving Corporation, and shall continue as directors and officers of the Surviving Corporation until such time as their successors have been elected and qualified as provided for in the articles of incorporation and bylaws of the Surviving Corporation.

 

 
 

 

ARTICLE 4
CONVERSION OF SHARES

 

In and by virtue of the Merger, the shares of stock of the Merger Sub and the Target outstanding at the Effective Time shall be converted as follows:

 

1. At the Effective Time, each share of the Merger Sub’s common stock issued and outstanding immediately before the Effective Time shall be converted into 100 shares of common stock of the Surviving Corporation;

 

2. At the Effective Time, each share of the Target’s common stock issued and outstanding immediately before the Effective Time, other than “dissenting shares” within the meaning of the California Corporations Code §1300(b), shall by virtue of the Merger and without action on the part of the shareholder be converted on a 1 to 1 basis into the right to receive from and to be paid by the Purchaser shares of the Purchaser’s common stock (the “Acquisition Shares” ). No fraction of an Acquisition Share will be issued pursuant to this Agreement. Any such fraction that would result from the Merger which is one half of one or greater than one half of one will be rounded up to the next whole number, and less than one half of one shall be rounded down to the lower whole number. Upon surrender to the Purchaser or its transfer agent of the Target’s common stock for cancellation, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holder of such Target’s common stock shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Acquisition Shares into which the shares of the Target’s common stock so surrendered shall have been converted pursuant to this section.

 

3. The preceding paragraph of this article shall not apply to any shares of the Target’s common stock that constitute “dissenting shares” within the meaning of the California Corporations Code §1300(b). The holders of such shares shall have, in consideration for the cancellation of dissenting shares held by them, the rights given to them under the applicable provisions of the California General Corporation Law, including the right to receive the fair market value of those shares, in the manner and subject to the procedures and conditions provided by law.

 

4. From and after the Effective Time, no transfer of the Target’s common stock outstanding before the Effective Time shall be made on the record books of Target.

 

5. Immediately prior to the Effective Time, all of the outstanding shares of Series A preferred stock and Series B preferred stock of the Target were converted to common stock of the Target.

 

ARTICLE 5
TERMINATION

 

This Agreement may be terminated at any time before the Effective Time (whether before or after approval) by action of the shareholders of the Target or by the mutual consent and action of the boards of directors of the Target and the Purchaser. This Agreement shall automatically be void and of no further force and effect if, before the Effective Time, the Agreement and Plan of Merger between the Purchaser, the Merger Sub and the Target as of September 19, 2014 is terminated in accordance with the terms of that Agreement and Plan of Merger.

 

 
 

 

ARTICLE 6
CHOICE OF LAW

 

The validity, interpretation, and performance of this Agreement shall be controlled by and construed under the laws of the State of California.

 

ARTICLE 7
COUNTERPARTS

 

This Agreement may be executed in two or more counterparts and such counterparts together shall constitute a single instrument. Delivery of an executed counterpart of this Agreement by electronic means, including by facsimile transmission or by other means of electronic delivery including in portable document format (“ .pdf ”), shall be equally effective as delivery of a manually executed counterpart hereof. The Parties acknowledge and agree that in any legal proceedings between them respecting or in any way relating to this Agreement, each waives the right to raise any defense based on the execution hereof in counterparts or the delivery of such executed counterparts by electronic means.

 

IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the day and year first above written.

 

[ Remainder of page intentionally left blank; Signatures to follow ]

 

 
 

 

BONE BIOLOGICS, INC.  
     
By: /s/ William Jay Treat  
Name: William Jay Treat  
Title: President  
     
BONE BIOLOGICS, INC.  
     
By: /s/ William Jay Treat  
Name: William Jay Treat  
Title: Secretary  
     
BONE BIOLOGICS ACQUISITION CORP.  
     
By:    
Name: Don R. Hankey  
Title: President  
     
BONE BIOLOGICS ACQUISITION CORP.  
     
By:  
Name: Don R. Hankey  
Title: Secretary  
     
AFH ACQUISITION X, INC.  
     
By:    
Name: Don Hankey  
Title:

President, Secretary, Chief Financial Officer, and Sole Director

 

  

 
 

  

BONE BIOLOGICS, INC.  
     
By:    
Name: William Jay Treat  
Title: President  
     
BONE BIOLOGICS, INC.  
     
By:    
Name: William Jay Treat  
Title: Secretary  
     
BONE BIOLOGICS ACQUISITION CORP.  
     
By: /s/ Don R. Hankey  
Name: Don R. Hankey  
Title: President  
     
BONE BIOLOGICS ACQUISITION CORP.  
     
By: /s/ Don R. Hankey  
Name: Don R. Hankey  
Title: Secretary  
     
AFH ACQUISITION X, INC.  
     
By: /s/ Don R. Hankey  
Name: Don Hankey  
Title: President, Secretary, Chief Financial Officer, and Sole Director  

 

 
 

 

Exhibit C

 

FIRPTA Documentation

 

NONE  

 

 
 

 

Exhibit D

 

Stockholder Consent

 

 

WRITTEN CONSENT

OF THE STOCKHOLDERS OF

BONE BIOLOGICS, INC.

 

The undersigned, being the holders of outstanding shares of capital stock of Bone Biologics, Inc., a California corporation (the “ Company ”), having not less than the minimum number of votes that would be necessary to authorize or take the following actions at a meeting at which all shares entitled to vote thereon were present and voted, consent that the following actions be taken awithout a meeting and without prior notice as authorized by the Bylaws of the Company and Section 603 of the General Corporation Law of the State of California:

 

Proposal #1: Adoption of the Agreement and Plan of Merger and Approval of the Principal Terms of the Merger

 

WHEREAS, the Board of Directors of the Company (the “ Board ”) has unanimously determined that it is advisable and in the best interests of the Company and its stockholders to enter into an Agreement and Plan of Merger attached hereto as Exhibit A (the “ Merger Agreement ”) by and among the Company, AFH Acquisition X, Inc., a Delaware corporation (“ Parent ”), and Bone Biologics Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“ Merger Sub ”), pursuant to which Parent will acquire the Company through a reverse merger (the “ Merger ”) of Merger Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent.

 

WHEREAS, the Board has (i) determined that it is advisable, fair to and in the best interests of the Company and its stockholders for the Company to be acquired by Parent upon the terms and subject to the conditions set forth in the Merger Agreement, (ii) unanimously adopted and approved the Merger Agreement and (iii) recommended the adoption and approval of the Merger Agreement by the stockholders of the Company.

 

WHEREAS, pursuant to the Merger Agreement, at the Effective Time (as defined in the Merger Agreement): (i) the Company will survive and become a wholly-owned subsidiary of Parent, (ii) each issued and outstanding share of the Company’s Common Stock shall be cancelled and shall be converted automatically without any action on the part of the holder thereof into the right to receive a portion of the Company Merger Consideration (as defined in the Merger Agreement), and (iii) all outstanding Company Warrants (as defined in the Merger Agreement) not exercised or expired prior to the Effective Time shall convert into warrants of Parent pursuant to Section 1.9(a)(ii) of the Merger Agreement.

 

WHEREAS, the Merger will be consummated by filing an Agreement of Merger with the Secretary of State of the State of California (the “ Agreement of Merger ”).

 

 
 

 

NOW, THEREFORE, BE IT RESOLVED, that the Merger Agreement, the Merger, the Agreement of Merger, and the transactions contemplated thereby and the performance by the Company of its obligations thereunder are hereby approved and adopted.

 

RESOLVED FURTHER, that the undersigned stockholders hereby consent to and approve the appointment of William Jay Treat as shareholders representative to act on their behalf with respect to matters set forth in the Merger Agreement and as contemplated by the Merger Agreement.

 

RESOLVED FURTHER, that all acts and deeds heretofore done by the directors and officers of the Company in connection with the Merger Agreement, the Merger and the transactions contemplated thereby are hereby ratified, and the officers of the Company, which have the full authority to act without the others, are hereby authorized, for and on behalf of the Company, to file, execute, verify, acknowledge and deliver any agreements or documents determined to be necessary or appropriate to effect the Merger, and to do or cause to be done any and all such acts and things as they may deem necessary or desirable for the performance in full of all of the obligations of the Company under the terms of the Merger Agreement and to effect the Merger and the transactions contemplated thereby.

 

Proposal #2: Ancillary Authorization

 

RESOLVED, that any of the officers of the Company be, and each of them hereby is, authorized, empowered and directed to do and perform such acts and deeds to execute and deliver such other instruments, documents and agreements, and to take or cause to be taken such other further action as such officer may deem necessary, advisable or appropriate, to effectuate the purposes of the foregoing resolutions and that all actions heretofore or hereafter taken by such officers in furtherance of the matters set forth herein are hereby ratified, confirmed, approved and adopted in all respects.

 

This Written Consent of the Stockholders of the Company shall be filed with the minutes of the proceedings of the stockholders of the Company and shall have the same force and effect as a vote of the stockholders of the Company at a meeting duly held.

 

This Written Consent of the Stockholders of the Company may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

By execution below, each of the undersigned (i) acknowledges receipt of adequate information regarding the Merger; (ii) acknowledges and agrees that, by executing and delivering this Written Consent of the Stockholders of the Company, provided the undersigned is not voting against the Merger, or abstaining from such vote, the undersigned has voted in favor of adoption and approval of the Merger Agreement and the Merger and, as a result, has waived any right to dissent from the proposed Merger and obtain payment for the undersigned’s shares of the Company’s Common Stock or the Company’s Series A or Series B Preferred Stock pursuant to Section 1300 of the California General Corporation Law; (iii) waives any rights he, she or it may have to receive written notice regarding the Merger under the Bylaws or Articles of Incorporation of the Company or otherwise; (iv) acknowledges and agrees that proceeds payable pursuant to the Merger Agreement are subject to the provisions of the Merger Agreement; and (v) acknowledges and agrees that the undersigned may not revoke this Written Consent of the Stockholders of the Company after the time that written consents of the holders of the number of shares required to authorize the Proposals have been filed with the secretary of the Company. 1

 

 

1 See Section 603(c) of the CGCL.

 

2
 

 

Please indicate whether you consent to the foregoing Proposals by marking the appropriate spaces below. Consents which are signed but for which there is no selection indicated will be deemed to have been voted FOR such Proposal(s).

   

Proposal 1 - Approval of the Merger

 

[X] FOR   [  ] AGAINST   [  ]ABSTAIN

 

Proposal 2 - Approval of Ancillary Authorization

 

[X] FOR   [  ] AGAINST   [  ]ABSTAIN

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

3
 

 

IN WITNESS WHEREOF , the undersigned hereby votes all of his, her or its shares of capital stock of the Company as set forth above and waives any and all notice requirements relating to the Proposals.

  

  IF THE STOCKHOLDER IS AN INDIVIDUAL:
   
  Chia Soo
  Printed Name of Individual
   
  /s Chia Soo
  Signature
   
  8-26-14
  Date
   
  IF THE STOCKHOLDER IS AN ENTITY:
   
   
  Printed Name of Entity

 

  By:  
  Name:  
  Title:  
     
  Date  

 

 
 

 

Exhibit A

 

Agreement and Plan of Merger

 

 
 

 

WRITTEN CONSENT

OF THE STOCKHOLDERS OF

BONE BIOLOGICS, INC.

 

The undersigned, being the holders of outstanding shares of capital stock of Bone Biologics, Inc., a California corporation (the “ Company ”), having not less than the minimum number of votes that would be necessary to authorize or take the following actions at a meeting at which all shares entitled to vote thereon were present and voted, consent that the following actions be taken without a meeting and without prior notice as authorized by the Bylaws of the Company and Section 603 of the General Corporation Law of the State of California:

 

Proposal #1: Adoption of the Agreement and Plan of Merger and Approval of the Principal Terms of the Merger

 

WHEREAS, the Board of Directors of the Company (the “ Board ”) has unanimously determined that it is advisable and in the best interests of the Company and its stockholders to enter into an Agreement and Plan of Merger attached hereto as Exhibit A (the “ Merger Agreement ”) by and among the Company, AFH Acquisition X, Inc., a Delaware corporation (“Parent”), and Bone Biologics Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“ Merger Sub ”), pursuant to which Parent will acquire the Company through a reverse merger (the “ Merger ”) of Merger Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent.

 

WHEREAS, the Board has (i) determined that it is advisable, fair to and in the best interests of the Company and its stockholders for the Company to be acquired by Parent upon the terms and subject to the conditions set forth in the Merger Agreement, (ii) unanimously adopted and approved the Merger Agreement and (iii) recommended the adoption and approval of the Merger Agreement by the stockholders of the Company.

 

WHEREAS, pursuant to the Merger Agreement, at the Effective Time (as defined in the Merger Agreement): (i) the Company will survive and become a wholly-owned subsidiary of Parent, (ii) each issued and outstanding share of the Company’s Common Stock shall be cancelled and shall be converted automatically without any action on the part of the holder thereof into the right to receive a portion of the Company Merger Consideration (as defined in the Merger Agreement), and (iii) all outstanding Company Warrants (as defined in the Merger Agreement) not exercised or expired prior to the Effective Time shall convert into warrants of Parent pursuant to Section 1.9(a)(ii) of the Merger Agreement.

 

WHEREAS, the Merger will be consummated by filing an Agreement of Merger with the Secretary of State of the State of California (the “ Agreement of Merger ”).

 

 
 

 

NOW, THEREFORE, BE IT RESOLVED, that the Merger Agreement, the Merger, the Agreement of Merger, and the transactions contemplated thereby and the performance by the Company of its obligations thereunder are hereby approved and adopted.

 

RESOLVED FURTHER, that the undersigned stockholders hereby consent to and approve the appointment of William Jay Treat as shareholders representative to act on their behalf with respect to matters set forth in the Merger Agreement and as contemplated by the Merger Agreement.

 

RESOLVED FURTHER, that all acts and deeds heretofore done by the directors and officers of the Company in connection with the Merger Agreement, the Merger and the transactions contemplated thereby are hereby ratified, and the officers of the Company, which have the full authority to act without the others, are hereby authorized, for and on behalf of the Company, to file, execute, verify, acknowledge and deliver any agreements or documents determined to be necessary or appropriate to effect the Merger, and to do or cause to be done any and all such acts and things as they may deem necessary or desirable for the performance in full of all of the obligations of the Company under the terms of the Merger Agreement and to effect the Merger and the transactions contemplated thereby.

 

Proposal #2: Ancillary Authorization

 

RESOLVED, that any of the officers of the Company be, and each of them hereby is, authorized, empowered and directed to do and perform such acts and deeds to execute and deliver such other instruments, documents and agreements, and to take or cause to be taken such other further action as such officer may deem necessary, advisable or appropriate, to effectuate the purposes of the foregoing resolutions and that all actions heretofore or hereafter taken by such officers in furtherance of the matters set forth herein are hereby ratified, confirmed, approved and adopted in all respects.

 

This Written Consent of the Stockholders of the Company shall be filed with the minutes of the proceedings of the stockholders of the Company and shall have the same force and effect as a vote of the stockholders of the Company at a meeting duly held.

 

This Written Consent of the Stockholders of the Company may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

By execution below, each of the undersigned (i) acknowledges receipt of adequate information regarding the Merger; (ii) acknowledges and agrees that, by executing and delivering this Written Consent of the Stockholders of the Company, provided the undersigned is not voting against the Merger, or abstaining from such vote, the undersigned has voted in favor of adoption and approval of the Merger Agreement and the Merger and, as a result, has waived any right to dissent from the proposed Merger and obtain payment for the undersigned’s shares of the Company’s Common Stock or the Company’s Series A or Series B Preferred Stock pursuant to Section 1300 of the California General Corporation Law; (iii) waives any rights he, she or it may have to receive written notice regarding the Merger under the Bylaws or Articles of Incorporation of the Company or otherwise; (iv) acknowledges and agrees that proceeds payable pursuant to the Merger Agreement are subject to the provisions of the Merger Agreement; and (v) acknowledges and agrees that the undersigned may not revoke this Written Consent of the Stockholders of the Company after the time that written consents of the holders of the number of shares required to authorize the Proposals have been filed with the secretary of the Company. 1

 

 

1 See Section 603(c) of the CGCL.

  

2
 

 

Please indicate whether you consent to the foregoing Proposals by marking the appropriate spaces below. Consents which are signed but for which there is no selection indicated will be deemed to have been voted FOR such Proposal(s).

   

Proposal 1 - Approval of the Merger

 

[X] FOR   [  ] AGAINST   [  ]ABSTAIN

  

Proposal 2 - Approval of Ancillary Authorization

 

[X] FOR   [  ] AGAINST   [  ]ABSTAIN

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

3
 

 

IN WITNESS WHEREOF , the undersigned hereby votes all of his, her or its shares of capital stock of the Company as set forth above and waives any and all notice requirements relating to the Proposals.

  

  IF THE STOCKHOLDER IS AN INDIVIDUAL:
   
  Kang Ting
  Printed Name of Individual
   
  /s/ Kang Ting
  Signature
   
  8-26-14
  Date
   
  IF THE STOCKHOLDER IS AN ENTITY:
   
   
  Printed Name of Entity

 

  By:  
  Name:  
  Title:  
     
  Date  

   

 
 

 

Exhibit A

 

Agreement and Plan of Merger

 

 
 

 

WRITTEN CONSENT

OF THE STOCKHOLDERS OF

BONE BIOLOGICS, INC.

 

The undersigned, being the holders of outstanding shares of capital stock of Bone Biologics, Inc., a California corporation (the “ Company ”), having not less than the minimum number of votes that would be necessary to authorize or take the following actions at a meeting at which all shares entitled to vote thereon were present and voted, consent that the following actions be taken without a meeting and without prior notice as authorized by the Bylaws of the Company and Section 603 of the General Corporation Law of the State of California:

 

Proposal #1: Adoption of the Agreement and Plan of Merger and Approval of the Principal Terms of the Merger

 

WHEREAS, the Board of Directors of the Company (the “ Board ”) has unanimously determined that it is advisable and in the best interests of the Company and its stockholders to enter into an Agreement and Plan of Merger attached hereto as Exhibit A (the “ Merger Agreement ”) by and among the Company, AFH Acquisition X, Inc., a Delaware corporation (“ Parent ”), and Bone Biologics Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“ Merger Sub ”), pursuant to which Parent will acquire the Company through a reverse merger (the “ Merger ”) of Merger Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent.

 

WHEREAS, the Board has (i) determined that it is advisable, fair to and in the best interests of the Company and its stockholders for the Company to be acquired by Parent upon the terms and subject to the conditions set forth in the Merger Agreement, (ii) unanimously adopted and approved the Merger Agreement and (iii) recommended the adoption and approval of the Merger Agreement by the stockholders of the Company.

 

WHEREAS, pursuant to the Merger Agreement, at the Effective Time (as defined in the Merger Agreement): (i) the Company will survive and become a wholly-owned subsidiary of Parent, (ii) each issued and outstanding share of the Company’s Common Stock shall be cancelled and shall be converted automatically without any action on the part of the holder thereof into the right to receive a portion of the Company Merger Consideration (as defined in the Merger Agreement), and (iii) all outstanding Company Warrants (as defined in the Merger Agreement) not exercised or expired prior to the Effective Time shall convert into warrants of Parent pursuant to Section 1.9(a)(ii) of the Merger Agreement.

 

WHEREAS, the Merger will be consummated by filing an Agreement of Merger with the Secretary of State of the State of California (the “ Agreement of Merger ”).

 

 
 

 

NOW, THEREFORE, BE IT RESOLVED, that the Merger Agreement, the Merger, the Agreement of Merger, and the transactions contemplated thereby and the performance by the Company of its obligations thereunder are hereby approved and adopted.

 

RESOLVED FURTHER, that the undersigned stockholders hereby consent to and approve the appointment of William Jay Treat as shareholders representative to act on their behalf with respect to matters set forth in the Merger Agreement and as contemplated by the Merger Agreement.

 

RESOLVED FURTHER, that all acts and deeds heretofore done by the directors and officers of the Company in connection with the Merger Agreement, the Merger and the transactions contemplated thereby are hereby ratified, and the officers of the Company, which have the full authority to act without the others, are hereby authorized, for and on behalf of the Company, to file, execute, verify, acknowledge and deliver any agreements or documents determined to be necessary or appropriate to effect the Merger, and to do or cause to be done any and all such acts and things as they may deem necessary or desirable for the performance in full of all of the obligations of the Company under the terms of the Merger Agreement and to effect the Merger and the transactions contemplated thereby.

 

Proposal #2: Ancillary Authorization

 

RESOLVED, that any of the officers of the Company be, and each of them hereby is, authorized, empowered and directed to do and perform such acts and deeds to execute and deliver such other instruments, documents and agreements, and to take or cause to be taken such other further action as such officer may deem necessary, advisable or appropriate, to effectuate the purposes of the foregoing resolutions and that all actions heretofore or hereafter taken by such officers in furtherance of the matters set forth herein are hereby ratified, confirmed, approved and adopted in all respects.

 

This Written Consent of the Stockholders of the Company shall be filed with the minutes of the proceedings of the stockholders of the Company and shall have the same force and effect as a vote of the stockholders of the Company at a meeting duly held.

 

This Written Consent of the Stockholders of the Company may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

By execution below, each of the undersigned (i) acknowledges receipt of adequate information regarding the Merger; (ii) acknowledges and agrees that, by executing and delivering this Written Consent of the Stockholders of the Company, provided the undersigned is not voting against the Merger, or abstaining from such vote, the undersigned has voted in favor of adoption and approval of the Merger Agreement and the Merger and, as a result, has waived any right to dissent from the proposed Merger and obtain payment for the undersigned’s shares of the Company’s Common Stock or the Company’s Series A or Series B Preferred Stock pursuant to Section 1300 of the California General Corporation Law; (iii) waives any rights he, she or it may have to receive written notice regarding the Merger under the Bylaws or Articles of Incorporation of the Company or otherwise; (iv) acknowledges and agrees that proceeds payable pursuant to the Merger Agreement are subject to the provisions of the Merger Agreement; and (v) acknowledges and agrees that the undersigned may not revoke this Written Consent of the Stockholders of the Company after the time that written consents of the holders of the number of shares required to authorize the Proposals have been filed with the secretary of the Company.1

 

 

1 See Section 603(c) of the CGCL.

 

2
 

 

Please indicate whether you consent to the foregoing Proposals by marking the appropriate spaces below. Consents which are signed but for which there is no selection indicated will be deemed to have been voted FOR such Proposal(s).

  

Proposal 1 - Approval of the Merger

 

[X] FOR   [  ] AGAINST   [  ]ABSTAIN

 

Proposal 2 - Approval of Ancillary Authorization

 

[X] FOR   [  ] AGAINST   [  ]ABSTAIN

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

3
 

 

IN WITNESS WHEREOF , the undersigned hereby votes all of his, her or its shares of capital stock of the Company as set forth above and waives any and all notice requirements relating to the Proposals.

 

  IF THE STOCKHOLDER IS AN INDIVIDUAL:
   
   
  Printed Name of Individual
   
   
  Signature
   
   
  Date
   
  IF THE STOCKHOLDER IS AN ENTITY:
   
  T,O. Medical Development, Inc.
  Printed Name of Entity

 

  By: /s/ Carolyn Hazuka
  Name: Carolyn Hazuka
  Title: President - CEO
     
  Date 9/19/14

  

 
 

 

Exhibit A

 

Agreement and Plan of Merger

 

 
 

 

WRITTEN CONSENT

OF THE STOCKHOLDERS OF

BONE BIOLOGICS, INC.

 

The undersigned, being the holders of outstanding shares of capital stock of Bone Biologics, Inc., a California corporation (the “ Company ”), having not less than the minimum number of votes that would be necessary to authorize or take the following actions at a meeting at which all shares entitled to vote thereon were present and voted, consent that the following actions be taken without a meeting and without prior notice as authorized by the Bylaws of the Company and Section 603 of the General Corporation Law of the State of California:

 

Proposal #1: Adoption of the Agreement and Plan of Merger and Approval of the Principal Terms of the Merger

 

WHEREAS, the Board of Directors of the Company (the “ Board ”) has unanimously determined that it is advisable and in the best interests of the Company and its stockholders to enter into an Agreement and Plan of Merger attached hereto as Exhibit A (the “ Merger Agreement ”) by and among the Company, AFH Acquisition X, Inc., a Delaware corporation (“ Parent ”), and Bone Biologics Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“ Merger Sub ”), pursuant to which Parent will acquire the Company through a reverse merger (the “ Merger ”) of Merger Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent.

 

WHEREAS, the Board has (i) determined that it is advisable, fair to and in the best interests of the Company and its stockholders for the Company to be acquired by Parent upon the terms and subject to the conditions set forth in the Merger Agreement, (ii) unanimously adopted and approved the Merger Agreement and (iii) recommended the adoption and approval of the Merger Agreement by the stockholders of the Company.

 

WHEREAS, pursuant to the Merger Agreement, at the Effective Time (as defined in the Merger Agreement): (i) the Company will survive and become a wholly-owned subsidiary of Parent, (ii) each issued and outstanding share of the Company’s Common Stock shall be cancelled and shall be converted automatically without any action on the part of the holder thereof into the right to receive a portion of the Company Merger Consideration (as defined in the Merger Agreement), and (iii) all outstanding Company Warrants (as defined in the Merger Agreement) not exercised or expired prior to the Effective Time shall convert into warrants of Parent pursuant to Section 1.9(a)(ii) of the Merger Agreement.

 

WHEREAS, the Merger will be consummated by filing an Agreement of Merger with the Secretary of State of the State of California (the “ Agreement of Merger ”).

 

 
 

 

NOW, THEREFORE, BE IT RESOLVED, that the Merger Agreement, the Merger, the Agreement of Merger, and the transactions contemplated thereby and the performance by the Company of its obligations thereunder are hereby approved and adopted.

 

RESOLVED FURTHER, that the undersigned stockholders hereby consent to and approve the appointment of William Jay Treat as shareholders representative to act on their behalf with respect to matters set forth in the Merger Agreement and as contemplated by the Merger Agreement.

 

RESOLVED FURTHER, that all acts and deeds heretofore done by the directors and officers of the Company in connection with the Merger Agreement, the Merger and the transactions contemplated thereby are hereby ratified, and the officers of the Company, which have the full authority to act without the others, are hereby authorized, for and on behalf of the Company, to file, execute, verify, acknowledge and deliver any agreements or documents determined to be necessary or appropriate to effect the Merger, and to do or cause to be done any and all such acts and things as they may deem necessary or desirable for the performance in full of all of the obligations of the Company under the terms of the Merger Agreement and to effect the Merger and the transactions contemplated thereby.

 

Proposal #2: Ancillary Authorization

 

RESOLVED, that any of the officers of the Company be, and each of them hereby is, authorized, empowered and directed to do and perform such acts and deeds to execute and deliver such other instruments, documents and agreements, and to take or cause to be taken such other further action as such officer may deem necessary, advisable or appropriate, to effectuate the purposes of the foregoing resolutions and that all actions heretofore or hereafter taken by such officers in furtherance of the matters set forth herein are hereby ratified, confirmed, approved and adopted in all respects.

 

This Written Consent of the Stockholders of the Company shall be filed with the minutes of the proceedings of the stockholders of the Company and shall have the same force and effect as a vote of the stockholders of the Company at a meeting duly held.

 

This Written Consent of the Stockholders of the Company may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

By execution below, each of the undersigned (i) acknowledges receipt of adequate information regarding the Merger; (ii) acknowledges and agrees that, by executing and delivering this Written Consent of the Stockholders of the Company, provided the undersigned is not voting against the Merger, or abstaining from such vote, the undersigned has voted in favor of adoption and approval of the Merger Agreement and the Merger and, as a result, has waived any right to dissent from the proposed Merger and obtain payment for the undersigned’s shares of the Company’s Common Stock or the Company’s Series A or Series B Preferred Stock pursuant to Section 1300 of the California General Corporation Law; (iii) waives any rights he, she or it may have to receive written notice regarding the Merger under the Bylaws or Articles of Incorporation of the Company or otherwise; (iv) acknowledges and agrees that proceeds payable pursuant to the Merger Agreement are subject to the provisions of the Merger Agreement; and (v) acknowledges and agrees that the undersigned may not revoke this Written Consent of the Stockholders of the Company after the time that written consents of the holders of the number of shares required to authorize the Proposals have been filed with the secretary of the Company. 1

 

 

1 See Section 603(c) of the CGCL.

 

2
 

 

Please indicate whether you consent to the foregoing Proposals by marking the appropriate spaces below. Consents which are signed but for which there is no selection indicated will be deemed to have been voted FOR such Proposal(s).

  

Proposal 1 - Approval of the Merger

 

[X] FOR   [  ] AGAINST   [  ]ABSTAIN

 

Proposal 2 - Approval of Ancillary Authorization

 

[X] FOR   [  ] AGAINST   [  ]ABSTAIN

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

3
 

 

IN WITNESS WHEREOF , the undersigned hereby votes all of his, her or its shares of capital stock of the Company as set forth above and waives any and all notice requirements relating to the Proposals.

   

  IF THE STOCKHOLDER IS AN INDIVIDUAL:
   
   
  Printed Name of Individual
   
   
  Signature
   
   
  Date
   
  IF THE STOCKHOLDER IS AN ENTITY:
   
  Musculoskeletal Transplant Foundation, Inc.
  Printed Name of Entity

 

  By: /s/ Michael J. Kawass
  Name: Michael J. Kawass
  Title: EVP/CFO
     
  Date 9/19/14

 

 
 

 

Exhibit A

 

Agreement and Plan of Merger

 

 
 

 

Exhibit E

 

Common Stock Purchase Warrant

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933. 

 

 

Warrant No. CW-47 Number of Shares: 500,000
Date of Issuance: July 3, 2014  

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that AFH Holding & Advisory, LLC, or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 6 below), up to 500,000 shares of $0.001 par value per share common stock of the Company (the “ Common Stock ”), at an exercise price of $1.00 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

This Warrant has been issued in consideration for the acquisition of a publicly-reporting shell company.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless the Registered Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

1
 

 

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

  X =

Y (A - B)

 
    A  

 

Where X = The number of shares of Common Stock to be issued to the Registered Holder.
   
  Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
   
  A = The fair market value of one share of Common Stock (at the date of such calculation).
   
  B = The Exercise Price (as adjusted to the date of such calculation).

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

2
 

  

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of the Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to a Significant Transaction as described in Section 6(b) below, in which case the fair market value per share of the Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within three business days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of the Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

3
 

 

(b) Reclassification, Etc . In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

4
 

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

5. Representations and Warranties of Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same except under circumstances that will not result in a violation of the Securities Act or any other federal or state securities laws. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder acknowledges that the Company has no obligation to register or qualify the Securities for resale. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company is under no obligation and may not be able to satisfy.

 

5
 

 

(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company and that the Company has made no assurances that a public market will ever exist for the Securities.

 

(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchange for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNEC¬TION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 “

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6. Termination . This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) February , 2020, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “ Significant Transaction ”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

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7. Piggyback Registrations . The Company shall notify the Registered Holders in writing at least thirty (30) days prior to the initial filing of any future registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to any employee benefit plan, acquisition or a corporate reorganization,), and will afford each Registered Holder an opportunity to include in such registration statement all or any part of the Warrant Shares then held by such Registered Holder that are not currently included in another registration statement. Each Registered Holder desiring to include in any such registration statement all or any part of the Warrant Shares held by such Registered Holder shall within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Warrant Shares such Registered Holder wishes to include in such registration statement. If a Registered Holder decides not to include all of its Warrant Shares in any registration statement thereafter filed by the Company, such Registered Holder shall nevertheless continue to have the right to include any Warrant Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

 

8. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

9. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of the Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

10. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

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11. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

12. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

13. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

14. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

15. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

16. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

17. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

18. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded from this Warrant, the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

19. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

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20. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

21. Lock-up Agreement . In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, the Registered Holder agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days, but subject to such extensions as may be required by the underwriters in order to publish research reports while complying with Rule 2711 of the Financial Industry Regulatory Authority, Inc.) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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IN WITNESS WHEREOF , the parties have executed this Common Stock Purchase Warrant as of the date first forth above.

 

  BONE BIOLOGICS, INC.
   
  By: /s/
  Name: Michael Schuler
  Title: Chief Executive Officer
     
  Address: 100 Rancho Road Suite
7 - #231
Thousand Oaks, CA 91362
     
  Facsimile Number:                         

 

 
 

 

EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To: Bone Biologics, Inc Dated:

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. [CW- __] (the “ Warrant ”), hereby irrevocably elects to (a) purchase _____ shares of the Common Stock covered by the Warrant and herewith makes payment of $_______, representing the full purchase price for such shares at the price per share provided for in the Warrant, or (b) exercise the Warrant for _______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of the Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 5 of the Warrant and by its signature below hereby makes such representations and warranties to the Company. Defined terms used but not defined in this Purchase/Exercise Form shall have the meanings assigned to them in the Warrant.

 

 

  Signature:  
     
  Name (print):  
     
  Title (if applic.):  
     
  Company (if applic.):  

 

 
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, ______________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee Address/Fax Number No, of Shares
     
     
     

 

Dated:     Signature:  
         
         
         
      Witness:  

 

 
 

   

Exhibit F

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “ Agreemen t”) is made as of ____________, 2014 by and among BONE BIOLOGICS, CORP., a Delaware corporation (the “ Company ”), MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC., a California Corporation (“ MTF ”), AFH HOLDING AND ADVISORY, LLC, a Delaware limited liability company (“ AFH ”) and HANKY INVESTMENT COMPANY, L.P. (‘HIC’) (MTF, HIC and AFH each a “ Stockholder ” and collectively referred to as the “ Stockholders ”).

 

RECITALS

 

A. The Company, AFH Acquisition X, Inc. (“ AFH Acquisition ”), a wholly-owned subsidiary of AFH, Bone Biologics Acquisition Corp., a wholly-owned subsidiary of AFH Acquisition (“ Merger Sub ”), and Bone Biologics, Inc. (“ Bone Bio ”) has entered into that certain Agreement and Plan of Merger, dated ______________ (the “ Merger Agreement ”).

 

B. Under the terms of the Merger Agreement, the Merger Sub merged with and into Bone Bio, the separate corporate existence of Merger Sub ceased and the Bone Bio continued as the surviving corporation and a wholly owned subsidiary of AFH Acquisition (the “ Merger ”). In connection with the Merger, AFH Acquisition changed its name to Bone Biologics, Corp., herein also referred to as the “ Company .”

 

C. The Stockholders hold certain shares of common stock, par value $ 0.001 (“ Common Stock ”), in the Company (the “ Shares ”).

 

D. Pursuant to the terms of the Merger Agreement, MTF and AFH have certain demand registration rights and unlimited piggyback registration rights for the Shares.

 

AGREEMENTS

 

In consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Definitions . In addition to terms defined elsewhere herein, as used in this Agreement, the terms:

 

“Affiliate” of any particular person or entity means any other person or entity controlling, controlled by or under common control with such particular person or entity and, for any person that is a partnership, will also include any general or limited partner of such partnership.

 

“Business Day” means any day other than Saturday, Sunday, or a day on which commercial banks in California or New York are obligated by any legal requirement to close.

 

 
 

 

“Commission” means the Securities and Exchange Commission.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Initial Public Offering” means the Company’s first underwritten Public Offering.

 

“Public Offering” means any offering by the Company of its equity securities to the public pursuant to an effective registration statement under the Securities Act or any comparable statement under any comparable federal statute then in effect.

 

“Registrable Shares” means at any time (i) any shares of Common Stock beneficially held, directly or indirectly, by MTF, HIC and AFH as of the date of this agreement, respectively; and (ii) any shares of Common Stock then issuable directly or indirectly upon the conversion or exercise of other securities or which were issued as a dividend or other distribution with respect to or in replacement of such shares referred to in (i); provided, however, that Registrable Shares shall not include any shares which have been sold pursuant to an effective registration statement under the Securities Act or which have been sold to the public pursuant to Rule 144 under the Securities Act or any other available exemption to the Securities Act. For purposes of this Agreement, a person will be deemed to be a holder of Registrable Shares whenever such person has the then existing right to acquire such Registrable Shares (by conversion or otherwise), whether or not such acquisition actually has been effected (it being understood, however, that any Registrable Shares which are not shares of Common Stock shall be converted into or exercised for shares of Common Stock immediately prior to the filing of any registration pursuant to which such Common Stock is to be registered).

 

“Securities Act” means the Securities Act of 1933, as amended.

 

2. Demand Registration .

 

2.1 Requests for Registration . Subject to the terms of this Agreement, on or before thirty (30) days after the date the Current Form 8K regarding the Merger Agreement is filed with the Commission (the “ 8K Filing Date ”), the Company will seek registration under the Securities Act of all or part of their Registrable Shares on Form S-1 or any similar long-form registration (“ Long-Form Registration ”) or, if available, on Form S-2 or S-3 or any similar short-form registration (“ Short-Form Registration ”) (either of such registrations, a “ Demand Registration ”). Within five (5) days of the 8K Filing Date, the Company will, subject to Section 2.2 below, give written notice of its intent to make a Demand Registration to all other holders of Registrable Shares and will include in such registration all Registrable Shares with respect to which the Company has received written requests for inclusion within twenty-five (25) days after delivery of the Company’s notice. MTF, HIC and AFH will each be entitled to request two (2) Long-Form Registrations or Short-Form Registrations, in which the Company will pay, in each case, all Registration Expenses (as defined in Section 6 below). A registration will not constitute one of the permitted Demand Registrations until it has become effective and the holder of the Registrable Shares, as applicable, have been able to register and sell at least fifty percent (50%) of its Registrable Shares, respectively, requested to be included in such registration. The Company shall be entitled to include in any Demand Registration shares to be sold by the Company for its own account, provided that in the event that the number of shares included by the Company exceeds fifty percent (50%) of the shares registered in such registration, such registration will not count as a Demand Registration hereunder.

 

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2.2 Priority . The Company will include in any Demand Registration any Registrable Shares, or any other securities; provided, however, if the Demand Registration is an underwritten offering and the managing underwriter(s) advise the Company in writing that in their opinion the number of securities requested to be included exceeds the number of securities which can reasonably be sold in such offering, the Company will include in such registration, first, the Registrable Shares requested to be included in such Demand Registration pro rata among the holders of such Registrable Shares on the basis of the number of shares which such holders requested to be included in such registration, and second, the other securities to be included in such Demand Registration pro rata among the holders of such shares on the basis of the number of shares which such holders requested to be included in such registration.

 

2.3 Selection of Underwriters . MTF and AFH, as applicable, shall have the right to select the managing underwriter(s) to administer the offering anticipated by any of their Demand Registrations, subject, in each case, to the Company’s approval which will not be unreasonably withheld or delayed, and the Company shall have the right to select the managing underwriters for all other registrations and provided further that such managing underwriter(s) selected by MTF and AFH as applicable, shall be qualified nationally recognized underwriters. In the event that MTF and/or AFH shall have selected an underwriter, such Stockholder shall be required to pay any expenses related to such underwriter including any legal expenses of the Company related to such offering.

 

3. Piggyback Registration .

 

3.1 Right to Piggyback . Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a Demand Registration hereunder) and the registration form to be used may be used for the registration of any Registrable Shares (a “ Piggyback Registration ”), the Company will give prompt written notice to all holders of the Registrable Shares of its intention to effect such a registration and will include in such registration all Registrable Shares (in accordance with the priorities set forth in Sections 3.2 and 3.3 below) with respect to which the Company has received written requests for inclusion within fifteen (15) days after the delivery of the Company’s notice.

 

3.2 Priority on Primary Registrations . If a Piggyback Registration is an underwritten primary registration on behalf of the Company and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can reasonably be sold in such offering, the Company will include in such registration first , the securities that the Company proposes to sell, second, the Registrable Shares requested to be included in such registration, pro rata among the holders of such Registrable Shares on the basis of the number of shares which such holders requested to be included in such registration, and third, other securities requested to be included in such registration.

 

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3.3 Priority on Secondary Registrations . If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company’s securities other than a Demand Registration and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can reasonably be sold in such offering, the Company will include in such registration first , the securities requested to be included therein by the holders requesting such registration, the Registrable Shares requested to be included in such registration, pro rata among the holders of such securities on the basis of the number of shares which by such holders requested to be included in such registration, and, second, other securities requested to be included in such registration.

 

3.4 Selection of Underwriters . In connection with any Piggyback Registration in which MTF and/or AFH elected to include Registrable Shares, the Company shall have the right to select the managing underwriters.

 

4. Holdback Agreements .

 

4.1 Holders’ Agreements . Each holder of Registrable Shares agrees not to effect any public sale or distribution of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the six (6) months following, the effective date of the Merger Agreement.

 

5. Registration Procedures . Whenever the holders of Registrable Shares have requested that any Registrable Shares be registered pursuant to this Agreement, the Company will use its commercially reasonable best efforts to effect the registration of such Registrable Shares in accordance with the terms of this Agreement.

 

(a) prepare and file with the Commission a registration statement with respect to such Registrable Shares and use its best efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus, or any amendments or supplements thereto, the Company will furnish copies of all such documents proposed to be filed to the counsel or counsels for the sellers of the Registrable Shares covered by such registration statement);

 

(b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus(es) used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than twelve months or until all Registrable Securities registered pursuant to such registration statement have been sold.

 

(c) notify each seller of such Registrable Shares, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading and, at the request of any such seller, the Company will use commercially reasonable efforts to prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the sellers of such Registrable Shares, such prospectus will not contain any untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading.

 

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(d) use commercially reasonable efforts to cause all such Registrable Shares to be listed on each securities exchange or national quotation system on which similar securities issued by the Company are then listed or quoted;

 

(e) enter into an underwriting agreement in customary form if requested by the holders of a majority of the Registrable Shares being sold or the underwriters, if any, reasonably request in order to facilitate the disposition of such Registrable Shares;

 

(f) advise each stockholder of such Registrable Shares, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such registration statement or preventing the use of any related prospectus or suspending the qualification of any Common Stock included in such registration statement for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and promptly use all reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;

 

(g) at least forty eight (48) hours prior to the filing of any registration statement or prospectus, or any amendment or supplement to such registration statement or prospectus, furnish a copy thereof to each seller of such Registrable Shares; and

 

(h) at the request of any seller of such Registrable Shares in connection with an underwritten offering, furnish on the date or dates provided for in the underwriting agreement: (i) an opinion of counsel, addressed to the underwriters and the sellers of Registrable Shares, covering such matters as such underwriters and sellers may reasonably request, including such matters as are customarily furnished in connection with an underwritten offering; (ii) a letter or letters from the independent certified public accountants of the Company addressed to the underwriters and the sellers of Registrable Shares, covering such matters as such underwriters and sellers may reasonably request, in which letter(s) such accountants shall state, without limiting the generality of the foregoing, that they are independent certified public accountants within the meaning of the Securities Act and that in their opinion the financial statements and other financial data of the Company included in the registration statement, the prospectus(es), or any amendment or supplement thereto, comply in all material respects with the applicable accounting requirements of the Securities Act; and (iii) officers or employees for participation in the “road shows” for such underwritten offering provided that the Stockholders shall be required to pay the costs of such items.

 

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6. Registration Expenses .

 

6.1 Company’s Expenses . All expenses incident to the Company’s performance of or compliance with this Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the Company and all independent certified public accountants (including all special audit and financial statement costs), and other persons retained by the Company (all such expenses being herein called “Registration Expenses”), will be borne by the Company.

 

6.2 Holder’s Expenses . Notwithstanding anything to the contrary contained herein, each holder of Registrable Shares will pay all discounts and commissions attributable to their respective shares and all attorney fees and disbursements for counsel they retain in connection with the registration of Registrable Shares, as the case may be.

 

7. Indemnification .

 

7.1 [ By the Company . The Company agrees to indemnify, to the extent permitted by law, each holder of Registrable Shares, its officers, directors and trustees and each person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including without limitation, attorney’s fees) caused by or relating to any action or proceeding arising out of or based upon any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus, or any amendment thereof or supplement thereto, or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except such indemnification shall not be available to a holder, its officers and directors or controlling person insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder’s failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto. In connection with an underwritten offering, the Company will indemnify such underwriters, their officers and directors and each person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Shares. The payments required by this Section 7.1 will be made periodically during the course of the investigation or defense, as and when bills are received or expenses incurred.]

 

7.2 By Each Holder . In connection with any registration statement in which a holder of Registrable Shares is participating, each such holder will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will indemnify the Company, its directors and officers and each person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus, or any amendment thereof or supplement thereto, or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided that the obligation to indemnify will be several, not joint and several, among such holders of Registrable Shares and the liability of each such holder of Registrable Shares will be limited to and in proportion to the net amount received by such holder from the sale of Registrable Shares, as the case may be, pursuant to such registration statement.

 

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7.3 Procedure . Any person entitled to indemnification hereunder will (a) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that the indemnifying party is prejudiced by the failure to give such notice), and (b) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) and which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

 

7.4   Contribution . If the indemnification provided for in this Section 7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses to which such indemnified party would be otherwise entitled under Section 7, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. In no event shall any person be required to contribute an amount greater than the dollar amount of the proceeds received by such person with respect to the sale of any Registrable Shares.

 

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The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The contribution provided for in this Section 7.4 shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party.

 

7.5 Survival . The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director, trustee or controlling person of such indemnified party and will survive the transfer of securities. The Company also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event the Company’s indemnification is unavailable for any reason.

 

8. Compliance with Rule 144 . In the event that the Company (a) registers a class of securities under Section 12 of the Exchange Act, (b) issues an offering circular meeting the requirements of Regulation A under the Securities Act or (c) commences to file reports under Section 13 or 15(d) of the Exchange Act, then at the request of any holder who proposes to sell securities in compliance with Rule 144 of the Commission, the Company will (i) forthwith furnish to such holder a written statement of compliance with the filing requirements of the Commission as set forth in Rule 144, as such rule may be amended from time to time and (ii) make available to the public and such holders such information as will enable the holders to make sales pursuant to Rule 144.

 

9. Participation in Underwritten Registrations . No person may participate in any registration hereunder which is underwritten unless such person (a) agrees to sell its securities on the basis provided in any underwriting arrangements approved by such person or persons entitled hereunder to approve such arrangements, (b) completes and executes all customary questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, (c) provides all customary information reasonably requested by the Company or underwriter in connection with such registration, including copies of customary documents, instruments and agreements and (d) complies with all applicable federal and state securities laws in connection with such registration.

 

10. Miscellaneous .

 

10.1 Successors and Assigns . This Agreement is not assignable by any Stockholder without the express written consent of the Company. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto, whether so expressed or not. In addition, and whether or not any express assignment has been made, the provisions of this Agreement which are for the benefit of holders of Registrable Shares are also for the benefit of, and enforceable by, any subsequent holders of such Shares.

 

8
 

 

10.2 Severability . 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 prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

 

10.3 Descriptive Headings . The descriptive headings of this Agreement are inserted for convenience of reference only and do not constitute a part of and shall not be utilized in interpreting this Agreement.

 

10.4 Notices . Any notices and other communications hereunder shall be in writing and shall be deemed given and received (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or, the first Business Day following such receipt if the date is not a Business Day) if delivered by a nationally recognized overnight courier service (providing written proof of delivery), such as Federal Express, (iii) on the date of confirmation of receipt (or, the first Business Day following receipt if the date is not a Business Day) if sent via facsimile to the parties hereto at the following address, or at such other address for a party as shall be specified by like notice, provided that a notice of change in address shall not be deemed to have been given until received by the addressee:

 

If to the Company, to:  
     
  Bone Biologics, Corp.  
    175 May Street, Suite 400  
    Edison, NJ 08837  
    Attention: Michael Schuler
    Facsimile No.: (732) 661-2152
    Telephone No.: (732) 661-2589
       
  with a copy (which shall not constitute notice) to:
       
    DLA Piper LLP (US)  
    550 S. Hope Street  
    Los Angeles, CA 90071  
    Attention: Ann Lawrence  
    Facsimile: (213) 330-7555  
    Telephone: (213) 330-7755  

 

9
 

 

If to the AFH, to:  
       
    AFH Holding and Advisory, LLC
    4751 Wilshire Blvd., Suite 110  
    Los Angeles, CA 90010  
    Attention: Eugene Leydiker  
    Facsimile No.: (323) 692-4126  
    Telephone No.: (323) 692-4026  
       
  with a copy (which shall not constitute notice) to:
       
    Reed Smith LLP  
    599 Lexington Avenue  
    New York, N.Y. 10022  
    Attention: Bill Haddad  
    Facsimile No.: (212) 521-5450  
    Telephone No.: (212) 549-0379  
       
If to the MTF, to:  
       
    Musculoskeletal Transplant Foundation
    125 May Street  
    Edison, NJ 08837  
    Attention: Bruce Stroever, President, CEO
    Facsimile No.: (732) 661-2297  
    Telephone No.: (732) 661-0202  

 

10.5 Governing Law . All questions concerning the construction, validity and interpretation of this Agreement, and the performance of the obligations imposed by this Agreement, shall be governed by the laws of the State of Delaware applicable to contracts made and wholly to be performed in that state.

 

10.6 Final Agreement . This Agreement, together with the Merger and all other agreements entered into by the parties hereto, constitutes the complete and final agreement of the parties concerning the matters referred to herein, and supersedes all prior agreements and understandings.

 

10.7 Execution in Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and such counterparts together shall constitute one instrument.

 

10.8 No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, regardless of which party drafted this Agreement.

 

10
 

 

10.9 Amendment . Except as otherwise expressly provided herein, the provisions of this Agreement may be amended or waived at any time only by the written agreement of the Company, MTF and AFH. Any waiver, permit, consent or approval of any kind or character on the part of any such holder of any provisions or conditions of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in such writing.

 

10.10 Waiver of Jury Trial . Each of the parties hereto hereby irrevocably waives any and all right to trial by jury of any claim or cause of action in any legal proceeding arising out of or related to this Agreement or the transactions or events contemplated hereby or any course of conduct, course of dealing, statements (whether verbal or written) or actions of any party hereto. The parties hereto each agree that any and all such claims and causes of action shall be tried by a court trial without a jury. Each of the parties hereto further waives any right to seek to consolidate any such legal proceeding in which a jury trial has been waived with any other legal proceeding in which a jury trial cannot or has not been waived.

 

[The Rest of this Page Intentionally Left Blank]

 

11
 

 

IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement on the date first set forth above.

 

  BONE BIOLOGICS, CORP.
     
  By:  
  Name: Michael Schuler
  Its: Chief Executive Officer and Director
     
  AFH HOLDING AND ADVISORY, LLC
     
  By:  
  Name: Amir F. Heshmatpour
  Its: Managing Director
     
  THE MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.
     
  By:  
  Name: Michael J. Kawas
  Its: Executive Vice President and Chief Financial Officer

 

12
 

 

Exhibit G

 

Letter of Credit

  

 

CERTIFIED TRUE COPY

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 1

 

DATE: JULY 25, 2014

 

IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 68105133

 

  ISSUING BANK
  BANK OF AMERICA, N.A.
  ONE FLEET WAY
  PA6-580-02-30
  SCRANTON, PA 18507-1999
 
BENEFICIARY APPLICANT
AFH HOLDING & ADVISORY, LLC MUSCULOSKELETAL TRANSPLANT
AMIR F HESHMATPOUR FOUNDATION, INC.
CHAIRMAN & MANAGING DIRECTOR 125 MAY STREET

9595 WILSHIRE BLVD SUITE 700

EDISON, NJ 08837
   
BEVERLY HILLS, CA 90212  

 

AMOUNT

 

NOT EXCEEDING USD 340,000.00

 

NOT EXCEEDING THREE HUNDRED FORTY THOUSAND AND 00/100’S US DOLLARS

 

EXPIRATION

JULY 25, 2015 AT OUR COUNTERS

 

GENTLEMEN:

 

WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER 68105133 IN YOUR FAVOR.

 

THIS CREDIT IS AVAILABLE WITH BANK OF AMERICA BY PAYMENT AGAINST PRESENTATION OF BENEFICIARY’S DRAFT(S) AT SIGHT DRAWN ON BANK OF AMERICA N.A.

 

DRAFT(S) MUST BE ACCOMPANIED BY:

 

1. THE ORIGINAL LETTER OF CREDIT AND ALL AMENDMENTS, IF ANY.

 

2. AN AFFIDAVIT SIGNED BY AFH HOLDING AND ADVISORY LLC, CERTIFYING ONE OF THE FOLLOWING:

 

QUOTE

 

A. BONE BIOLOGICS HAS FAILED TO RECEIVE EXTERNAL FUNDING TO EXTINGUISH THE FULL AMOUNT OF $340,000 OR A PORTION THEREOF STILL OWED UNDER THE PURCHASE AGREEMENT TO ACQUIRE AFH ACQUISITION X, OR HAS NOT PAID AMOUNTS DUE AND OUTSTANDING. AS OF THE DATE OF THIS DRAWING SUCH PAYMENT HAS NOT BEEN RECEIVED, AND THEREFORE WE DRAW IN

 

CERTIFIED TRUE COPY

 

 
 

 

 

 

CERTIFIED TRUE COPY

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 2

 

THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: 68105133

 

THE AMOUNT OF $___________ OWED BY BONE BIOLOGICS.

 

UNQUOTE

 

QUOTE

 

B. BONE BIOLOGICS HAS RECEIVED EXTERNAL FUNDING TO EXTINGUISH THE FULL AMOUNT OF $340,000 OR A PORTION THEREOF STILL OWED UNDER THE PURCHASE AGREEMENT TO ACQUIRE AFH ACQUISITION X, BUT HAS NOT PAID AMOUNTS DUE AND OUTSTANDING. AS OF THE DATE OF THIS DRAWING SUCH PAYMENT HAS NOT BEEN RECEIVED, AND THEREFORE WE DRAW IN THE AMOUNT OF $ OWED BY BONE BIOLOGICS.

 

UNQUOTE

 

PARTIAL DRAWINGS AND MULTIPLE DRAWINGS ARE ALLOWED.

 

DRAFT(S) MUST STATE “DRAWN UNDER BANK OF AMERICA N.A., STANDBY LETTER OF CREDIT NUMBER 68105133 DATED JULY 22, 2015.”

 

DRAFT(S) AND DOCUMENTS SHALL BE PRESENTED AT OUR OFFICES AT BANK OF AMERICA, N.A. ONE FLEET WAY, PA6-580 - 02-30, SCRANTON, PA 18507-1999, ATTN: GLOBAL TRADE OPERATIONS, STANDBY UNIT.

 

THIS LETTER OF CREDIT IS TRANSFERABLE IN FULL AND NOT IN PART. ANY TRANSFER MADE HEREUNDER MUST CONFORM STRICTLY TO THE TERMS HEREOF AND TO THE CONDITIONS OF RULE 6 OF THE INTERNATIONAL STANDBY PRACTICES (ISP98) FIXED BY THE INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 590. SHOULD YOU WISH TO EFFECT A TRANSFER UNDER THIS CREDIT, SUCH TRANSFER WILL BE SUBJECT TO THE RETURN TO US OF THE ORIGINAL CREDIT INSTRUMENT, ACCOMPANIED BY OUR FORM OF TRANSFER, PROPERLY COMPLETED AND SIGNED BY AN AUTHORIZED SIGNATORY OF YOUR FIRM, BEARING YOUR BANKERS STAMP AND SIGNATURE AUTHENTICATION AND PAYMENT OF OUR TRANSFER FEE. SUCH TRANSFER FORM TRANSFER FORM IS AVAILABLE UPON REQUEST.

 

COMMUNICATIONS WITH RESPECT TO THIS LETTER OF CREDIT SHALL BE IN WRITING AND SHALL BE ADDRESSED TO US AT ONE FLEET WAY, PA6-580 - 02 - 30, SCRANTON, PA 18507-1999, ATTN: GLOBAL TRADE OPERATIONS, STANDBY UNIT, PHONE: 1-800-370-7519, SPECIFICALLY REFERRING TO THE NUMBER OF THIS LETTER OF CREDIT.

 

EXCEPT AS OTHERWISE EXPRESSLY STATED HEREIN, THIS CREDIT IS ISSUED SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES (ISP98), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 590.

 

IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS TRANSACTION, PLEASE CALL 800-370-7519 OPT 1 .

  

CERTIFIED TRUE COPY

 

 
 

 

 

CERTIFIED TRUE COPY

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 3

 

THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: 68105133

 

 

 

AUTHORIZED SIGNATURE

THIS DOCUMENT CONSISTS OF 3 PAGE(S).

 

CERTIFIED TRUE COPY

 

 
 

 

 

BANK OF AMERICA – CONFIDENTIAL

PAGE: 1

 

DATE: JULY 28, 2014

 

AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 68105133

 

AMENDMENT NUMBER 1

 

  ISSUING BANK
  BANK OF AMERICA, N.A.
  ONE FLEET WAY
  PA6-580-02-30
 

SCRANTON, PA 18507-1999

   
BENEFICIARY APPLICANT
AFH HOLDING & ADVISORY, LLC MUSCULOSKELETAL TRANSPLANT
AMIR F HESHMATPOUR FOUNDATION, INC.
CHAIRMAN & MANAGING DIRECTOR 125 MAY STREET
10830 MASSACHUSETTS AVE

EDISON, NJ 08837

   
PENTHOUSE SUITE  
LOS ANGELES, CA 90 024  

 

THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF THE ABOVE CRED: AND MUST BE ATTACHED THERETO.

 

THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS:

 

THE BENEFICIARY HAS BEEN AMENDED TO:

AFH HOLDING & ADVISORY, LLC

AMIR F HESHMATPOUR

CHAIRMAN & MANAGING DIRECTOR

10830 MASSACHUSETTS AVE

 

PENTHOUSE SUITE

LOS ANGELES, CA 90024

 

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

 

IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT, PLEASE CALL 800-370-7519 OPT 1 .

 

ORIGINAL

 

 
 

 

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 2

 

 

 

AUTHORIZED SIGNATURE

THIS DOCUMENT CONSISTS OF 2 PAGE(S).

 

ORIGINAL

 

 
 

 

 

AGREEMENT OF MERGER

 

This Agreement of Merger (this “ Agreement ”) is entered into as of this September 19, 2014 between AFH Acquisition x, inc. , a Delaware corporation (the “ Purchaser ”), BONE BIOLOGICS ACQUISITION CORP., a Delaware corporation (the “ Merger Sub ”), and BONE BIOLOGICS, INC., a California corporation (the “ Target ”).

 

The Purchaser, the Merger Sub and the Target hereby agree that at the Effective Time (as defined in this Agreement), the Target and the Merger Sub shall merge into a single corporation on the following terms and conditions (the “ Merger ”):

 

ARTICLE 1

MERGER

 

At the Effective Time (as defined below), the Merger Sub shall be merged with and into the Target. The Target shall be the surviving corporation (the “ Surviving Corporation ”). At the Effective Time, the separate corporate existence of the Merger Sub shall cease, and the Surviving Corporation shall succeed to the properties, rights, privileges, powers, immunities, and franchises of the Merger Sub. All rights of creditors and all liens on the property of the Merger Sub shall be preserved unimpaired, but limited to the property affected by such rights or liens immediately before the Merger.

 

Article 2

EFFECTIVE DATE

 

The Merger provided for in this Agreement shall become effective on the filing by and in the office of the California Secretary of State of an executed copy of this Agreement with all requisite accompanying certificates. The time of such filing is referred to in this Agreement as the “ Effective Time .”

 

Article 3

Articles OF INCORPORATION; BYLAWS; BOARD OF DIRECTORS; OFFICERS

 

1. The Target’s Articles of Incorporation in effect immediately before the Effective Time shall remain the Articles of Incorporation of the Surviving Corporation without change or amendment until they are duly altered, amended, or repealed.

 

2. The Target’s Bylaws in effect immediately before the Effective Time shall remain the Bylaws of the Surviving Corporation without change or amendment until they are duly altered, amended, or repealed.

 

3. At the Effective Time, the directors and officers of the Target in office immediately before the Effective Time shall become the directors and officers of the Surviving Corporation, and shall continue as directors and officers of the Surviving Corporation until such time as their successors have been elected and qualified as provided for in the articles of incorporation and bylaws of the Surviving Corporation.

 

 
 

 

ARTICLE 4
CONVERSION OF SHARES

 

In and by virtue of the Merger, the shares of stock of the Merger Sub and the Target outstanding at the Effective Time shall be converted as follows:

 

1. At the Effective Time, each share of the Merger Sub’s common stock issued and outstanding immediately before the Effective Time shall be converted into 100 shares of common stock of the Surviving Corporation;

 

2. At the Effective Time, each share of the Target’s common stock issued and outstanding immediately before the Effective Time, other than “dissenting shares” within the meaning of the California Corporations Code §1300(b), shall by virtue of the Merger and without action on the part of the shareholder be converted on a 1 to 1 basis into the right to receive from and to be paid by the Purchaser shares of the Purchaser’s common stock (the “Acquisition Shares” ). No fraction of an Acquisition Share will be issued pursuant to this Agreement. Any such fraction that would result from the Merger which is one half of one or greater than one half of one will be rounded up to the next whole number, and less than one half of one shall be rounded down to the lower whole number. Upon surrender to the Purchaser or its transfer agent of the Target’s common stock for cancellation, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holder of such Target’s common stock shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of Acquisition Shares into which the shares of the Target’s common stock so surrendered shall have been converted pursuant to this section.

 

3. The preceding paragraph of this article shall not apply to any shares of the Target’s common stock that constitute “dissenting shares” within the meaning of the California Corporations Code §1300(b). The holders of such shares shall have, in consideration for the cancellation of dissenting shares held by them, the rights given to them under the applicable provisions of the California General Corporation Law, including the right to receive the fair market value of those shares, in the manner and subject to the procedures and conditions provided by law.

 

4. From and after the Effective Time, no transfer of the Target’s common stock outstanding before the Effective Time shall be made on the record books of Target.

 

5. Immediately prior to the Effective Time, all of the outstanding shares of Series A preferred stock and Series B preferred stock of the Target were converted to common stock of the Target.

 

ARTICLE 5
TERMINATION

 

This Agreement may be terminated at any time before the Effective Time (whether before or after approval) by action of the shareholders of the Target or by the mutual consent and action of the boards of directors of the Target and the Purchaser. This Agreement shall automatically be void and of no further force and effect if, before the Effective Time, the Agreement and Plan of Merger between the Purchaser, the Merger Sub and the Target as of September 19, 2014 is terminated in accordance with the terms of that Agreement and Plan of Merger.

 

 
 

 

ARTICLE 6
CHOICE OF LAW

 

The validity, interpretation, and performance of this Agreement shall be controlled by and construed under the laws of the State of California.

 

ARTICLE 7
COUNTERPARTS

 

This Agreement may be executed in two or more counterparts and such counterparts together shall constitute a single instrument. Delivery of an executed counterpart of this Agreement by electronic means, including by facsimile transmission or by other means of electronic delivery including in portable document format (“ .pdf ”), shall be equally effective as delivery of a manually executed counterpart hereof. The Parties acknowledge and agree that in any legal proceedings between them respecting or in any way relating to this Agreement, each waives the right to raise any defense based on the execution hereof in counterparts or the delivery of such executed counterparts by electronic means.

 

IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the day and year first above written.

 

[ Remainder of page intentionally left blank; Signatures to follow ]

 

 
 

 

BONE BIOLOGICS, INC.  
     
By: /s/ William Jay Treat  
Name: William Jay Treat  
Title: President  
     
BONE BIOLOGICS, INC.  
     
By: /s/ William Jay Treat  
Name: William Jay Treat  
Title: Secretary  
     
BONE BIOLOGICS ACQUISITION CORP.  
     
By:    
Name: Don R. Hankey  
Title: President  
     
BONE BIOLOGICS ACQUISITION CORP.  
     
By:    
Name: Don R. Hankey  
Title: Secretary  
     
AFH ACQUISITION X, INC.  
     
By:    
Name: Don Hankey  
Title:

President, Secretary, Chief Financial Officer, and Sole Director

 

 

 

 
 

 

BONE BIOLOGICS, INC.  
     
By:    
Name: William Jay Treat  
Title: President  
     
BONE BIOLOGICS, INC.  
     
By:    
Name: William Jay Treat  
Title: Secretary  
     
BONE BIOLOGICS ACQUISITION CORP.  
     
By: /s/ Don R. Hankey  
Name: Don R. Hankey  
Title: President  
     
BONE BIOLOGICS ACQUISITION CORP.  
     
By: /s/ Don R. Hankey  
Name: Don R. Hankey  
Title: Secretary  
     
AFH ACQUISITION X, INC.  
     
By: /s/ Don R. Hankey  
Name: Don Hankey  
Title:

President, Secretary, Chief Financial Officer, and Sole Director

 

 

 
 

 

Certificate of Approval

of

Agreement of Merger

 

William Jay Treat certifies that:

 

1. He is the president and the secretary of Bone Biologics, Inc., a California corporation.

 

2. The principal terms of the Agreement of Merger in the form attached were duly approved by the board of directors and by the shareholders of the corporation by a vote that equaled or exceeded the vote required.

 

3. There are three classes of shares. The number of outstanding shares of Bone Biologics, Inc. entitled to vote on the merger consists of 8,256,895 shares of Common Stock, 493,339 shares of Series A Preferred Stock and 5,336,099 shares of Series B Preferred Stock. Pursuant to the Bylaws of Bone Biologics, Inc., the Series A Preferred, Series B Preferred, and Common Stock vote together as though they were a single class. Approval by more than fifty percent of the total outstanding Series A Preferred, Series B Preferred, and Common Stock is required to approve the merger. A vote of more than fifty percent of the total Series A Preferred, Series B Preferred, and Common Stock outstanding was obtained approving the Agreement of Merger.

 

We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.

 

Date: September 19, 2014 By: /s/ William Jay Treat
  Name: William Jay Treat
    President and Secretary
    Bone Biologics, Inc.

 

 
 

 

Certificate of Approval

of

Agreement of Merger

 

Don R. Hankey certifies that:

 

1. He is the president and the secretary of Bone Biologics Acquisitions Corp., a Delaware corporation.

 

2. The principal terms of the Agreement of Merger in the form attached were duly approved by the board of directors and by the shareholders of the corporation by a vote that equaled or exceeded the vote required.

 

3. The shareholder approval was by the holders of 100% of the outstanding shares of the corporation.

 

4. There is only one class of shares and the number of shares outstanding entitled to vote on the merger is 100.

 

5. The principal terms of the Agreement of Merger in the form attached were duly approved by the shareholders of Bone Biologics Acquisition Corp.’s parent corporation, AFH Acquisition X, Inc., a Delaware corporation, by a vote that equaled or exceeded the vote required. Shareholder approval was by the holders of 100% of the outstanding shares of AFH Acquisition X, Inc.

 

We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.

 

Date: September 19, 2014 By: /s/ Don R. Hankey
  Name: Don R. Hankey
    President, Secretary
    Bone Biologics Acquisition Corp.

 

 
 

 

 

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

OF

 

AFH ACQUISITION X, INC.

 

Pursuant to the provisions of Sections 242 and 245 of the Delaware General Corporation Law, the undersigned officer of AFH ACQUISITION X, INC. hereby executes this Amended and Restated Certificate of Incorporation (this “Amended and Restated Certificate of Incorporation”) to supersede its original Certificate of Incorporation filed with the Secretary of State of Delaware on October 18, 2007.

 

1. The name of the corporation is AFH ACQUISITION X, INC. (the “Corporation”).

 

2. The address of its registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, County of New Castle. The name of its registered agent at such address is the Corporation Service Company.

 

3. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware (the “DGCL”).

 

4. The Corporation is to have perpetual existence.

 

5. The total number of shares of capital stock which the Corporation shall have authority to issue is: One Hundred Twenty Million (120,000,000). These shares shall be divided into two classes with 100,000,000 shares designated as common stock at $.001 par value (the “Common Stock”) and 20,000,000 shares designated as preferred stock at $.001 par value (the “Preferred Stock”).

 

The Preferred Stock of the Corporation shall be issued by the Board of Directors of the Corporation in one or more classes or one or more series within any class and such classes or series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, limitations or restrictions as the Board of Directors of the Corporation may determine, from time to time.

 

Holders of shares of Common Stock shall be entitled to cast one vote for each share held at all stockholders’ meetings for all purposes, including the election of directors. The Common Stock does not have cumulative voting rights.

 

No holder of shares of stock of any class shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock of any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.

 

6. The Board of Directors shall have the power to adopt, amend or repeal the bylaws of the Corporation.

 

 
 

 

7. No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. If the DGCL hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended DGCL. No amendment to or repeal of this Article 7 shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.

 

8. The Corporation shall indemnify, to the fullest extent permitted by Section 145 of the DGCL and the Corporation’s Bylaws, each as amended from time to time, each person that such section grants the Corporation the power to indemnify.

 

IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be executed this 25th day of July, 2014.

 

  /s/ Amir F. Heshmatpour
  Amir F. Heshmatpour
  President, Secretary, Chief Financial Officer, and Sole Director


 

- 2 -
 

 

 

AMENDED AND RESTATED BY-LAWS

 

OF

 

AFH ACQUISITION X, INC.

 

(a Delaware corporation)

 

ARTICLE I

 

STOCKHOLDERS

 

Section 1. Certificates Representing Stock . (a) Certificates representing stock in the corporation shall be signed by, or in the name of, the corporation by the Chairman or Vice-Chairman of the Board of Directors, if any, or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation. Any or all the signatures on any such 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 shall have 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 he were such officer, transfer agent, or registrar at the date of issue.

 

(b) Whenever the corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock, and whenever the corporation shall issue any shares of its stock as partly paid stock, the certificates representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate representing such shares.

 

(c) The corporation may issue a new certificate of stock or uncertificated shares in place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the corporation 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 any such new certificate or uncertificated shares.

 

Section 2. Uncertificated Shares . Subject to any conditions imposed by the General Corporation Law, the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the corporation shall be uncertificated shares. Within a reasonable time after the issuance or transfer of any uncertificated shares, the corporation shall send to the registered owner thereof any written notice prescribed by the General Corporation Law.

 

 
 

 

Section 3. Fractional Share Interests . The corporation may, but shall not be required to, issue fractions of a share. If the corporation does not issue fractions of a share, it shall (1) arrange for the disposition of fractional interests by those entitled thereto, (2) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (3) issue scrip or warrants in registered form (either represented by a certificate or uncertificated) or bearer form (represented by a certificate) which shall entitle the holder to receive a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share or an uncertificated fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing the full shares or uncertificated full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose.

 

Section 4. Stock Transfers . Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the corporation shall be made only on the stock ledger of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and, in the case of shares represented by certificates, on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon.

 

Section 5. Record Date For Stockholders . In order that the corporation may determine the stockholders entitled to notice of or to vote at 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 sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or 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 the adjourned meeting. 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 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. If no record date has been fixed by the Board of Directors, the record date for determining the stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the General Corporation 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 meeting of stockholders are recorded. Delivery made to the corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the General Corporation 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 day on which the Board of Directors adopts the resolution taking such prior action. 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 sixty 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.

 

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Section 6. Meaning of Certain Terms . As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of meeting, as the case may be, the term “share” or “shares” or “share of stock” or “shares of stock” or “stockholder” or “stockholders” refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the certificate of incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the General Corporation Law confers such rights notwithstanding that the certificate of incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder; provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the certificate of incorporation, except as any provision of law may otherwise require.

 

Section 7. Stockholder Meetings .

 

●    Time . The annual meeting shall be held on the date and at the time fixed, from time to time, by the directors, provided that the first annual meeting shall be held on a date within thirteen months after the organization of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. A special meeting shall be held on the date and at the time fixed by the directors.

 

●    Place . Annual meetings and special meetings shall be held at such place, within or without the State of Delaware, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, the meeting shall be held at the registered office of the corporation in the State of Delaware.

 

●    Call . Annual meetings and special meetings may be called by the directors or by any officer instructed by the directors to call the meeting.

 

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●    Notice or Waiver of Notice . Written notice of all meetings shall be given, stating the place, date, hour of the meeting and stating the place within the city or other municipality or community at which the list of stockholders of the corporation may be examined. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is called. The notice of any meeting shall also include, or be accompanied by, any additional statements, information, or documents prescribed by the General Corporation Law. Except as otherwise provided by the General Corporation Law, a copy of the notice of any meeting shall be given, personally or by mail, not less than ten days nor more than sixty days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, and directed to each stockholder at his record address or at such other address which he may have furnished by request in writing to the Secretary of the corporation. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States Mail. If a meeting is adjourned to another time, not more than thirty days hence, and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting. Notice need not be given to any stockholder who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the 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, not the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice.

 

●    Stockholder List . The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city or other municipality or community where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote at any meeting of stockholders.

 

●    Conduct of Meeting . Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting-the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the Chairman of the meeting shall appoint a secretary of the meeting.

 

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●    Proxy Representation . Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that is irrevocable and, if, and only as long as it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally.

 

●    Inspectors . The directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If any inspector or inspectors are not appointed, the person presiding at the meeting may, but need not appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspectors at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question, or matter determined by him or them and execute a certificate of any fact found by him or them. Except as otherwise required by subsection (e) of Section 231 of the General Corporation Law, the provisions of that Section shall not apply to the corporation.

 

●    Quorum . The holders of a majority of the outstanding shares of stock shall constitute a quorum at a meeting of stockholders for the transaction of any business. The stockholders presents may adjourn the meeting despite the absence of a quorum.

 

●    Voting . Each share of stock shall entitle the holder thereof to one vote. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Any other action shall be authorized by a majority of the votes cast except where the General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the certificate of incorporation and these Bylaws. In the election of directors, and for any other action, voting need not be by ballot.

 

Section 8. Stockholder Action Without Meetings . Any action required by the General Corporation Law to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock 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. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Action taken pursuant to this paragraph shall be subject to the provisions of Section 228 of the General Corporation Law.

 

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ARTICLE II

 

DIRECTORS

 

Section 1. Functions and Definition . The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors of the corporation. The Board of Directors shall have the authority to fix the compensation of the members thereof. The use of the phrase “whole board” herein refers to the total number of directors which the corporation would have if there were no vacancies.

 

Section 2. Qualifications and Number . A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The initial Board of Directors shall consist of one (1) person. Thereafter, the number of directors may be increased or decreased from time to time by action of the stockholders or of the directors, or, if the number is not fixed, the number shall be one (1).

 

Section 3. Election and Term . The first Board of Directors, unless the members thereof shall have been named in the certificate of incorporation, shall be elected by the incorporator or incorporators and shall hold office until first annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon written notice to the corporation. Thereafter, directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting resignation or removal. Except as the General Corporation Law may otherwise require, in the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of directors and/or for the removal of one or more directors and for the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director.

 

Section 4. Meetings .

 

●    Time . Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble.

 

●    Place . Meetings shall be held at such place within or without the State of Delaware as shall be fixed by the Board.

 

●    Call . No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, of the President, or of a majority of the directors in office.

 

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●    Notice or Actual or Constructive Waiver . No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. Notice need not be given to any director or to any member of a committee of directors who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he 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 directors need be specified in any written waiver of notice.

 

●    Quorum and Action . A majority of the whole Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided, that such majority shall constitute at least one-third of the whole Board. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as herein otherwise provided, and except as otherwise provided by the General Corporation Law, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. The quorum and voting provisions herein stated shall not be construed as conflicting with any provisions of the General Corporation Law and these Bylaws which govern a meeting of the directors held to fill vacancies and newly created directorships in the Board or action of disinterested directors.

 

Any member or members of the Board of Directors or of any committee designated by the Board, may participate in a meeting of the Board, or any such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other.

 

●    Chairman of the Meeting . The Chairman of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the Board, if any and if present and acting, or the President, if present and acting, or any other director chosen by the Board, shall preside.

 

Section 5. Removal of Directors . Except as may otherwise be provided by the General Corporation Law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

 

Section 6. Committees . The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board 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 any member of any such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they 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, shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the corporation with the exception of any authority the delegation of which is prohibited by Section 141 of the General Corporation Law, and may authorize the seal of the corporation to be affixed to all papers which may require it.

 

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Section 7. Written Action . Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.

 

Section 8. Board of Advisors . The Board of Directors, in its discretion, may establish a Board of Advisors, consisting of individuals who may or may not be stockholders or directors of the corporation. The purpose of the Board of Advisors would be to advise the officers and directors of the corporation with respect to such matters as such officers and directors shall choose, and any other matters which the members of such Board of Advisors deem appropriate in furtherance of the best interest of the corporation. The Board of Advisors shall meet on such basis as the members thereof may determine. The Board of Directors may eliminate the Board of Advisors at any time. No member of the Board of Advisors, nor the Board of Advisors itself, shall have any authority of the Board of Directors or any decision-making power and shall be merely advisory in nature. Unless the Board of Directors determines another method of appointment, the President shall recommend possible members of the Board of Advisors to the Board of Directors, who shall approve such appointments or reject them.

 

ARTICLE III

 

OFFICERS

 

The officers of the corporation shall consist of a President and a Secretary, and, if deemed necessary, expedient, or desirable by the Board of Directors, a Treasurer, a Chairman of the Board, a Vice-Chairman of the Board, an Executive Vice- President, one or more other Vice-Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers with such title as the resolution of the Board of Directors choosing them shall designate. Except as may otherwise be provided in the resolution of the Board of Directors choosing him, no officer other than the Chairman or Vice-Chairman of the Board, if any, need be a director. Any number of offices may be held by the same person, as the directors may determine.

 

Unless otherwise provided in the resolution choosing him, each officer shall be chosen for a term which shall continue until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor shall have been chosen and qualified.

 

All officers of the corporation shall have such authority and perform such duties in the management and operation of the corporation as shall be prescribed in the resolutions of the Board of Directors designating and choosing such officers and prescribing their authority and duties, and shall have such additional authority and duties as are incident to their office except to the extent that such resolutions may be inconsistent therewith. The Secretary or an Assistant Secretary of the corporation shall record all of the proceedings of all meetings and actions in writing of stockholders, directors, and committees of directors, and shall exercise such additional authority and perform such additional duties as the Board shall assign to him. Any officer may be removed, with or without cause, by the Board of Directors. Any vacancy in any office may be filled by the Board of Directors.

 

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ARTICLE IV

 

The following indemnification provisions shall apply to the persons enumerated below:

 

Section 1. Right to Indemnification of Directors and Officers . The corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an “ Indemnified Person ”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ Proceeding ”), by reason of the fact that such person, or a person for whom such person is the legal representative, 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 or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 4(C) or in respect of any counterclaims of an Indemnified Person made in response to a Proceeding not commenced by such Indemnified Person, the corporation shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board of Directors.

 

Section 2. Prepayment of Expenses of Directors and Officers . The corporation shall pay the expenses (including attorneys’ fees) incurred by an Indemnified Person in defending any Proceeding in advance of its final disposition; provided , however , that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnified Person to repay all amounts advanced if it should be ultimately determined that the Indemnified Person is not entitled to be indemnified under this Article Fourth or otherwise.

 

Section 3. Claims by Directors and Officers . If a claim for indemnification or advancement of expenses under this Article Fourth is not paid in full within 30 days after a written claim therefor by the Indemnified Person has been received by the corporation, the Indemnified Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the corporation shall have the burden of proving that the Indemnified Person is not entitled to the requested indemnification or advancement of expenses under applicable law.

 

Section 4. Indemnification of Employees and Agents . The corporation may indemnify and advance expenses to any person who was or is made or is threatened to be made or is otherwise involved in any Proceeding by reason of the fact that such person, or a person for whom such person is the legal representative, is or was an employee or agent of the corporation or, while an employee or agent of the corporation, is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorney’s fees) reasonably incurred by such person in connection with such Proceeding. The ultimate determination of entitlement to indemnification under this Section 4(D) of persons who are non-director or non-officer employees or agents shall be made in such manner as is determined by the Board of Directors in its sole discretion. Notwithstanding the foregoing sentence, the corporation shall not be required to indemnify a person under this Section 4(D) in connection with a Proceeding initiated by such person if the Proceeding was not authorized in advance by the Board of Directors.

 

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Section 5. Advancement of Expenses of Employees and Agents . The corporation may pay the expenses (including attorney’s fees) incurred by persons who are non-director or non-officer employees or agents in defending any Proceeding in advance of its final disposition on such terms and conditions as may be determined by the Board of Directors.

 

Section 6. Non-Exclusivity of Rights . The rights conferred on any person by this Article Fourth shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, provision of the Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

 

Section 7. Insurance . The Board of Directors may, to the full extent permitted by applicable law as it presently exists, or may hereafter be amended from time to time, authorize an appropriate officer or officers to purchase and maintain at the corporation’s expense insurance: (a) to indemnify the corporation for any obligation which it incurs as a result of the indemnification of directors, officers and employees under the provisions of this Article Fourth; and (b) to indemnify or insure directors, officers and employees against liability in instances in which they may not otherwise be indemnified by the corporation under the provisions of this Article Fourth.

 

Section 8. Amendment or Repeal . Any repeal or modification of the foregoing provisions of this Article Fourth shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. The rights provided hereunder shall inure to the benefit of any Indemnified Person and such person’s heirs, executors and administrators.

 

ARTICLE V

 

CORPORATE SEAL

 

The corporate seal shall be in such form as the Board of Directors shall prescribe.

 

ARTICLE VI

 

FISCAL YEAR

 

The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors.

 

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ARTICLE VII

 

AMENDMENT

 

These Bylaws may be adopted, amended or repealed at any time by the unanimous written consent of the Board of Directors.

 

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THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

BONE BIOLOGICS, INC.

 

WARRANT TO PURCHASE COMMON STOCK

 

No. CW-9 September 20, 2013

 

Void After September 20, 2020

 

This Certifies That , for value received, AFH Holding and Advisory , LLC or assigns (the “ Holder ”), is entitled to subscribe for and purchase from Bone Biologics, Inc. , a California corporation, with its principal office at 100 Rancho Rd., Suite 7 – 231, Thousand Oaks, CA 91362 (the “ Company ”) the number of Exercise Shares as set forth in this Warrant at the Exercise Price (each subject to adjustment as provided herein). This Warrant is being issued as one of a series of warrants (the “ Warrants ”) pursuant to the terms of the Note and Warrant Purchase Agreement dated April 29, 2013, by and among the Company and the Purchasers therewith (the “ Purchase Agreement ”).

 

Unless indicated otherwise, the number of Exercise Shares that the Holder may purchase by exercising this warrant is equal to (A) the product of (i) fifty percent (50%) multiplied by (ii) such Purchaser’s Loan Amount for the Closing in which this warrant is issued, divided by (B) $2.00.

 

1 Definitions . Capitalized terms used but not defined herein shall have the meanings set forth in the Purchase Agreement or the Notes. As used herein, the following terms shall have the following respective meanings:

 

(a) Exercise Period ” shall mean the period commencing upon the date hereof and the date ending seven (7) years from the date hereof, unless sooner terminated as provided below.

 

(b) Exercise Price ” for each Exercise Share shall mean $2.00.

 

(c) Exercise Shares ” shall mean shares of the Company’s Common Stock.

 

2 Exercise of Warrant . The rights represented by this Warrant may be exercised in whole or in part at any time during the Exercise Period, by delivery of the following to the Company at its address set forth above (or at such other address as it may designate by notice in writing to the Holder):

 

(a) An executed Notice of Exercise in the form attached hereto;

 

(b) Payment of the Exercise Price either (i) in cash or by check, or (ii) by cancellation of indebtedness, unless this Warrant is net exercised pursuant to Section 2.1; and

 

(c) This Warrant.

 

1 .
 

 

Upon the exercise of the rights represented by this Warrant, a certificate or certificates for the Exercise Shares so purchased, registered in the name of the Holder or persons affiliated with the Holder, if the Holder so designates, shall be issued and delivered to the Holder within a reasonable time after the rights represented by this Warrant shall have been so exercised. In the event that this Warrant is being exercised for less than all of the then-current number of Exercise Shares purchasable hereunder, the Company shall, concurrently with the issuance by the Company of the number of Exercise Shares for which this Warrant is then being exercised, issue a new Warrant exercisable for the remaining number of Exercise Shares purchasable hereunder.

 

The person in whose name any certificate or certificates for Exercise Shares are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

 

2.1 Net Exercise . Notwithstanding any provisions herein to the contrary, if the fair market value of one Exercise Share is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise in which event the Company shall issue to the Holder a number of Exercise Shares computed using the following formula:

 

  X =

Y (A-B)

 
    A  

  

  Where X = the number of Exercise Shares to be issued to the Holder
     
  Y = the number of Exercise Shares purchasable under the Warrant or, if only a portion of the Warrant is being exercised, that portion of the Warrant being canceled (at the date of such calculation)
     
  A = the fair market value of one Exercise Share (at the date of such calculation)
     
  B = Exercise Price (as adjusted to the date of such calculation)

 

For purposes of the above calculation, the fair market value of one Exercise Share shall be determined by the Company’s Board of Directors in good faith; provided, however, that in the event that this Warrant is exercised pursuant to this Section 2.1 in connection with the Company’s initial public offering of its Common Stock, the fair market value per share shall be the per share offering price to the public of the Company’s initial public offering.

 

3 Covenants of the Company .

 

3.1 Covenants as to Exercise Shares . The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of the series of equity securities comprising the Exercise Shares to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of such series of the Company’s equity securities shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of such series of the Company’s equity securities to such number of shares as shall be sufficient for such purposes.

 

2 .
 

 

4 Representations of the Holder .

 

4.1 Acquisition of Warrant for Personal Account . The Holder represents and warrants that it is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with a view to or for sale or distribution of said Warrant or Exercise Shares or any part thereof. The Holder also represents that the entire legal and beneficial interests of the Warrant and Exercise Shares the Holder is acquiring is being acquired for, and will be held for, its account only.

 

4.2 Securities Are Not Registered .

 

(a) The Holder understands that the Warrant and the Exercise Shares have not been registered under the Securities Act of 1933, as amended (the “ Act ”) on the basis that no distribution or public offering of the stock of the Company is to be effected. The Holder realizes that the basis for the exemption may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. The Holder has no such present intention.

 

(b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. The Holder recognizes that the Company has no obligation to register the Warrant or the Exercise Shares of the Company, or to comply with any exemption from such registration.

 

(c) The Holder is aware that neither the Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations. The Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company presently has no plans to satisfy these conditions in the foreseeable future.

 

4.3 Disposition of Warrant and Exercise Shares .

 

(a) The Holder further agrees not to make any disposition of all or any part of the Warrant or Exercise Shares in any event unless and until:

 

(i) The Company shall have received a letter secured by the Holder from the Securities and Exchange Commission stating that no action will be recommended to the Commission with respect to the proposed disposition;

 

(ii) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or

 

3 .
 

 

(iii) The Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the effect that such disposition will not require registration of such Warrant or Exercise Shares under the Act or any applicable state securities laws. The Company agrees that it will not require an opinion of counsel with respect to transactions under Rule 144 of the Securities Act, except in unusual circumstances.

 

(b) The Holder understands and agrees that all certificates evidencing the shares to be issued to the Holder may bear the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

4.4 Accredited Investor Status . The Holder is an “accredited investor” as defined in Regulation D promulgated under the Act.

 

5 Adjustment of Exercise Price and Number of Exercise Shares .

 

5.1 Changes in Securities . In the event of changes in the series of equity securities of the Company comprising the Exercise Shares by reason of stock dividends, splits, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of Exercise Shares available under the Warrant in the aggregate and the Exercise Price shall be correspondingly adjusted to give the Holder of the Warrant, on exercise for the same aggregate Exercise Price, the total number, class, and kind of shares as the Holder would have owned had the Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. For purposes of this Section 5, the “ Aggregate Exercise Price ” shall mean the aggregate Exercise Price payable in connection with the exercise in full of this Warrant. The form of this Warrant need not be changed because of any adjustment in the number of Exercise Shares subject to this Warrant.

 

6 Fractional Shares . No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) to be issued upon exercise of this Warrant shall be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current fair market value of one Exercise Share by such fraction.

 

7 Reorganization . In the event of, at any time during the Exercise Period, any capital reorganization or recapitalization of the capital stock of the Company (other than a change in par value or from par value to no par value or no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares, and other than a Liquidation Transaction (as defined in the Company’s Articles of Incorporation, as amended from time to time) which shall be governed by Section 8 below) (an “ Organic Change ”), then, as a condition of such Organic Change, lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the Exercise Shares of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Exercise Shares equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, and the Exercise Price shall be appropriately adjusted so that the Aggregate Exercise Price after such Organic Change shall be equal to the Aggregate Exercise Price immediately prior to such Organic Change.

 

4 .
 

 

8 Early Termination . In the event of, at any time during the Exercise Period prior to the exercise of this Warrant, a Liquidation Transaction, the Company shall provide to the Holder 10 days’ advance written notice of the Closing of such transaction. This Warrant shall terminate upon the consummation of the Liquidation Transaction.

 

9 Market Stand-Off Agreement . Holder shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock (or Exercise Shares or other securities) of the Company held by Holder, during the 180-day period following the effective date of a registration statement of the Company filed under the Act (or such longer period, not to exceed 18 days after the expiration of the 180-day period, as the underwriters or the Company shall request in order to facilitate compliance with FINRA Rule 2711). Holder agrees to execute and deliver such other agreements as requested by the Company and/or the managing underwriter(s) which are consistent with the foregoing or which are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to such Common Stock (or other securities) until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 9 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

 

10 No Stockholder Rights . This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.

 

11 Transfer of Warrant . Subject to applicable laws and the restriction on transfer set forth on the first page of this Warrant, this Warrant and all rights hereunder are transferable, by the Holder in person or by duly authorized attorney, upon delivery of this Warrant and the form of assignment attached hereto to any transferee designated by the Holder. The transferee shall sign an investment letter in form and substance satisfactory to the Company.

 

12 Lost, Stolen, Mutilated or Destroyed Warrant . If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. 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.

 

13 Amendment . Any term of this Warrant may be amended or waived with the written consent of the Company and the Majority Holders provided that all Warrants are similarly affected. Upon the effectuation of such amendment or waiver in conformance with this Section 13, the Company shall promptly give written notice thereof to the record holders of the Warrants who have not previously consented thereto in writing.

 

5 .
 

 

14 Notices, etc . All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address listed on the signature page and to the Holder at the address listed on the Schedule of Purchasers to the Purchase Agreement or at such other address as the Company or the Holder may designate by ten (10) days advance written notice to the other parties hereto.

 

15 Acceptance . Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

 

16 Governing Law . This Warrant and all rights, obligations and liabilities hereunder shall be governed by and construed under the laws of the State of California as applied to agreements among California residents, made and to be performed entirely within the State of California without giving effect to conflicts of laws principles.

 

[Remainder of Page Intentionally Left Blank]

 

6 .
 

 

In Witness Whereof , the Company has caused this Warrant to be executed by its duly authorized officer as of September [20], 2013.

 

  Bone Biologics, Inc.
     
  By: /s/ William Jay Treat
  Name: William Jay Treat
  Title: President & CTO
     
  Address:

100 Rancho Rd., Suite 7 – 231

Thousand Oaks, CA 91362

 

Warrant Signature Page

 

 
 

 

NOTICE OF EXERCISE

 

TO: Aurora SFC Systems, Inc.

 

(1) [  ] The undersigned hereby elects to purchase __________ shares of __________ (the “ Exercise Shares ”) of Bone Biologics, Inc. (the “ Company ”) pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

[  ] The undersigned hereby elects to purchase __________ shares of __________ (the “ Exercise Shares ”) of Bone Biologics, Inc. (the “ Company ”) pursuant to the terms of the net exercise provisions set forth in Section 2.1 of the attached Warrant, and shall tender payment of all applicable transfer taxes, if any.

 

(2) Please issue a certificate or certificates representing said Exercise Shares in the name of the undersigned or in such other name as is specified below:

 

______________________

(Name)

 

______________________

______________________

(Address)

 

(3) The undersigned represents that (i) the aforesaid Exercise Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares; (ii) the undersigned is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned’s own interests; (iv) the undersigned understands that Exercise Shares issuable upon exercise of this Warrant have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), by reason of a specific exemption from the registration provisions of the Securities Act, which exemption depends upon, among other things, the bona fide nature of the investment intent as expressed herein, and, because such securities have not been registered under the Securities Act, they must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available; (v) the undersigned is aware that the aforesaid Exercise Shares may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met and until the undersigned has held the shares for the number of years prescribed by Rule 144, that among the conditions for use of the Rule is the availability of current information to the public about the Company and the Company has not made such information available and has no present plans to do so; and (vi) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares of Exercise Shares unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement, or, if reasonably requested by the Company, the undersigned has provided the Company with an opinion of counsel satisfactory to the Company, stating that such registration is not required.

 

     
(Date)   (Signature)
     
     
    (Print name)

 

 
 

 

ASSIGNMENT FORM

 

  (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)  

 

For Value Received , the foregoing Warrant and all rights evidenced thereby are hereby assigned to ;

 

Name:    
  (Please Print)  
Address:    
  (Please Print)  
Dated: _____________, 20____  
     

Holder’s

Signature

   
     

Holder’s

Address:

   

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

 
 

 

 

THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

BONE BIOLOGICS, INC.

 

WARRANT TO PURCHASE COMMON STOCK

 

No. CW-8 June 5, 2013

 

Void After June 4, 2020

 

This Certifies That , for value received, Orthofix, Inc. or assigns (the “ Holder ”), is entitled to subscribe for and purchase from Bone Biologics, Inc. , a California corporation, with its principal office at 100 Rancho Rd., Suite 7 – 231, Thousand Oaks, CA 91362 (the “ Company ”) the number of Exercise Shares as set forth in this Warrant at the Exercise Price (each subject to adjustment as provided herein). This Warrant is being issued as one of a series of warrants (the “ Warrants ”) pursuant to the terms of the Note and Warrant Purchase Agreement dated April 29, 2013, by and among the Company and the Purchasers therewith (the “ Purchase Agreement ”).

 

Unless indicated otherwise, the number of Exercise Shares that the Holder may purchase by exercising this warrant is equal to (A) the product of (i) fifty percent (50%) multiplied by (ii) such Purchaser’s Loan Amount for the Closing in which this warrant is issued, divided by (B) $2.00.

 

1 Definitions . Capitalized terms used but not defined herein shall have the meanings set forth in the Purchase Agreement or the Notes. As used herein, the following terms shall have the following respective meanings:

 

(a) Exercise Period ” shall mean the period commencing upon the date hereof and the date ending seven (7) years from the date hereof, unless sooner terminated as provided below.

 

(b) Exercise Price ” for each Exercise Share shall mean $2.00.

 

(c) Exercise Shares ” shall mean shares of the Company’s Common Stock.

 

2 Exercise of Warrant . The rights represented by this Warrant may be exercised in whole or in part at any time during the Exercise Period, by delivery of the following to the Company at its address set forth above (or at such other address as it may designate by notice in writing to the Holder):

 

(a) An executed Notice of Exercise in the form attached hereto;

 

(b) Payment of the Exercise Price either (i) in cash or by check, or (ii) by cancellation of indebtedness, unless this Warrant is net exercised pursuant to Section 2.1; and

 

(c) This Warrant.

 

1 .
 

  

Upon the exercise of the rights represented by this Warrant, a certificate or certificates for the Exercise Shares so purchased, registered in the name of the Holder or persons affiliated with the Holder, if the Holder so designates, shall be issued and delivered to the Holder within a reasonable time after the rights represented by this Warrant shall have been so exercised. In the event that this Warrant is being exercised for less than all of the then-current number of Exercise Shares purchasable hereunder, the Company shall, concurrently with the issuance by the Company of the number of Exercise Shares for which this Warrant is then being exercised, issue a new Warrant exercisable for the remaining number of Exercise Shares purchasable hereunder.

 

The person in whose name any certificate or certificates for Exercise Shares are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

 

2.1 Net Exercise . Notwithstanding any provisions herein to the contrary, if the fair market value of one Exercise Share is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise in which event the Company shall issue to the Holder a number of Exercise Shares computed using the following formula:

 

  X =

Y (A-B)  

 
    A  

 

  Where X = the number of Exercise Shares to be issued to the Holder
     
  Y = the number of Exercise Shares purchasable under the Warrant or, if only a portion of the Warrant is being exercised, that portion of the Warrant being canceled (at the date of such calculation)
     
  A = the fair market value of one Exercise Share (at the date of such calculation)
     
  B = Exercise Price (as adjusted to the date of such calculation)

 

For purposes of the above calculation, the fair market value of one Exercise Share shall be determined by the Company’s Board of Directors in good faith; provided, however, that in the event that this Warrant is exercised pursuant to this Section 2.1 in connection with the Company’s initial public offering of its Common Stock, the fair market value per share shall be the per share offering price to the public of the Company’s initial public offering.

 

3 Covenants of the Company .

 

3.1 Covenants as to Exercise Shares . The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of the series of equity securities comprising the Exercise Shares to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of such series of the Company’s equity securities shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of such series of the Company’s equity securities to such number of shares as shall be sufficient for such purposes.

 

2 .
 

 

4 Representations of the Holder .

 

4.1 Acquisition of Warrant for Personal Account . The Holder represents and warrants that it is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with a view to or for sale or distribution of said Warrant or Exercise Shares or any part thereof. The Holder also represents that the entire legal and beneficial interests of the Warrant and Exercise Shares the Holder is acquiring is being acquired for, and will be held for, its account only.

 

4.2 Securities Are Not Registered .

 

(a) The Holder understands that the Warrant and the Exercise Shares have not been registered under the Securities Act of 1933, as amended (the “ Act ”) on the basis that no distribution or public offering of the stock of the Company is to be effected. The Holder realizes that the basis for the exemption may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. The Holder has no such present intention.

 

(b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. The Holder recognizes that the Company has no obligation to register the Warrant or the Exercise Shares of the Company, or to comply with any exemption from such registration.

 

(c) The Holder is aware that neither the Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations. The Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company presently has no plans to satisfy these conditions in the foreseeable future.

 

4.3 Disposition of Warrant and Exercise Shares .

 

(a) The Holder further agrees not to make any disposition of all or any part of the Warrant or Exercise Shares in any event unless and until:

 

(i) The Company shall have received a letter secured by the Holder from the Securities and Exchange Commission stating that no action will be recommended to the Commission with respect to the proposed disposition;

 

(ii) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or

 

3 .
 

 

(iii) The Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the effect that such disposition will not require registration of such Warrant or Exercise Shares under the Act or any applicable state securities laws. The Company agrees that it will not require an opinion of counsel with respect to transactions under Rule 144 of the Securities Act, except in unusual circumstances.

 

(b) The Holder understands and agrees that all certificates evidencing the shares to be issued to the Holder may bear the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

4.4 Accredited Investor Status . The Holder is an “accredited investor” as defined in Regulation D promulgated under the Act.

 

5 Adjustment of Exercise Price and Number of Exercise Shares .

 

5.1 Changes in Securities . In the event of changes in the series of equity securities of the Company comprising the Exercise Shares by reason of stock dividends, splits, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of Exercise Shares available under the Warrant in the aggregate and the Exercise Price shall be correspondingly adjusted to give the Holder of the Warrant, on exercise for the same aggregate Exercise Price, the total number, class, and kind of shares as the Holder would have owned had the Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. For purposes of this Section 5, the “ Aggregate Exercise Price ” shall mean the aggregate Exercise Price payable in connection with the exercise in full of this Warrant. The form of this Warrant need not be changed because of any adjustment in the number of Exercise Shares subject to this Warrant.

 

6 Fractional Shares . No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) to be issued upon exercise of this Warrant shall be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current fair market value of one Exercise Share by such fraction.

 

7 Reorganization . In the event of, at any time during the Exercise Period, any capital reorganization or recapitalization of the capital stock of the Company (other than a change in par value or from par value to no par value or no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares, and other than a Liquidation Transaction (as defined in the Company’s Articles of Incorporation, as amended from time to time) which shall be governed by Section 8 below) (an “ Organic Change ”), then, as a condition of such Organic Change, lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the Exercise Shares of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Exercise Shares equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, and the Exercise Price shall be appropriately adjusted so that the Aggregate Exercise Price after such Organic Change shall be equal to the Aggregate Exercise Price immediately prior to such Organic Change.

 

4 .
 

 

8 Early Termination . In the event of, at any time during the Exercise Period prior to the exercise of this Warrant, a Liquidation Transaction, the Company shall provide to the Holder 10 days’ advance written notice of the Closing of such transaction. This Warrant shall terminate upon the consummation of the Liquidation Transaction.

 

9 Market Stand-Off Agreement . Holder shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock (or Exercise Shares or other securities) of the Company held by Holder, during the 180-day period following the effective date of a registration statement of the Company filed under the Act (or such longer period, not to exceed 18 days after the expiration of the 180-day period, as the underwriters or the Company shall request in order to facilitate compliance with FINRA Rule 2711). Holder agrees to execute and deliver such other agreements as requested by the Company and/or the managing underwriter(s) which are consistent with the foregoing or which are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to such Common Stock (or other securities) until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 9 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

 

10 No Stockholder Rights . This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.

 

11 Transfer of Warrant . Subject to applicable laws and the restriction on transfer set forth on the first page of this Warrant, this Warrant and all rights hereunder are transferable, by the Holder in person or by duly authorized attorney, upon delivery of this Warrant and the form of assignment attached hereto to any transferee designated by the Holder. The transferee shall sign an investment letter in form and substance satisfactory to the Company.

 

12 Lost, Stolen, Mutilated or Destroyed Warrant . If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. 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.

 

13 Amendment . Any term of this Warrant may be amended or waived with the written consent of the Company and the Majority Holders provided that all Warrants are similarly affected. Upon the effectuation of such amendment or waiver in conformance with this Section 13, the Company shall promptly give written notice thereof to the record holders of the Warrants who have not previously consented thereto in writing.

 

5 .
 

 

14 Notices , etc . All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address listed on the signature page and to the Holder at the address listed on the Schedule of Purchasers to the Purchase Agreement or at such other address as the Company or the Holder may designate by ten (10) days advance written notice to the other parties hereto.

 

15 Acceptance . Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

 

16 Governing Law . This Warrant and all rights, obligations and liabilities hereunder shall be governed by and construed under the laws of the State of California as applied to agreements among California residents, made and to be performed entirely within the State of California without giving effect to conflicts of laws principles.

 

[Remainder of Page Intentionally Left Blank]

 

6 .
 

 

In Witness Whereof , the Company has caused this Warrant to be executed by its duly authorized officer as of April ____, 2013.

 

  Bone Biologics, Inc.
     
  By: /s/ William Jay Treat
  Name: William Jay Treat
  Title: President & CTO
     
  Address:

100 Rancho Rd., Suite 7 – 231

    Thousand Oaks, CA 91362

 

Warrant Signature Page

 

 
 

 

NOTICE OF EXERCISE

 

TO: Aurora SFC Systems, Inc.

 

(1) [  ] The undersigned hereby elects to purchase __________ shares of __________ (the “ Exercise Shares ”) of Bone Biologics Inc. (the “ Company ”) pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

[  ] The undersigned hereby elects to purchase __________ shares of __________ (the “ Exercise Shares ”) of Bone Biologics, Inc. (the “ Company ”) pursuant to the terms of the net exercise provisions set forth in Section 2.1 of the attached Warrant, and shall tender payment of all applicable transfer taxes, if any.

 

(2) Please issue a certificate or certificates representing said Exercise Shares in the name of the undersigned or in such other name as is specified below:

 

______________________

(Name)

 

______________________

______________________

 (Address)

 

(3) The undersigned represents that (i) the aforesaid Exercise Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares; (ii) the undersigned is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned’s own interests; (iv) the undersigned understands that Exercise Shares issuable upon exercise of this Warrant have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), by reason of a specific exemption from the registration provisions of the Securities Act, which exemption depends upon, among other things, the bona fide nature of the investment intent as expressed herein, and, because such securities have not been registered under the Securities Act, they must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available; (v) the undersigned is aware that the aforesaid Exercise Shares may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met and until the undersigned has held the shares for the number of years prescribed by Rule 144, that among the conditions for use of the Rule is the availability of current information to the public about the Company and the Company has not made such information available and has no present plans to do so; and (vi) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares of Exercise Shares unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement, or, if reasonably requested by the Company, the undersigned has provided the Company with an opinion of counsel satisfactory to the Company, stating that such registration is not required.

 

     
(Date)   (Signature)
     
     
    (Print name)

 

 
 

 

ASSIGNMENT FORM

 

  (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)  

 

For Value Received , the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

Name:    
  (Please Print)  
     
Address:    
  (Please Print)  
     
Dated:  _____________, 20__  
Holder’s
Signature
   
Holder’s
Address:
   

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

 
 

 

 

 

THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

BONE BIOLOGICS, INC.

 

WARRANT TO PURCHASE COMMON STOCK

 

No. CW-7 April 29, 2013

 

VOID AFTER APRIL 28, 2020

 

THIS CERTIFIES THAT , for value received, MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC . or assigns (the “ Holder ”), is entitled to subscribe for and purchase from BONE BIOLOGICS, INC., a California corporation, with its principal office at 100 Rancho Rd., Suite 7-231, Thousand Oaks, CA 91362 (the “ Company ”) the number of Exercise Shares as set forth in this Warrant at the Exercise Price (each subject to adjustment as provided herein). This Warrant is being issued as one of a series of warrants (the “ Warrants ”) pursuant to the terms of the Note and Warrant Purchase Agreement dated April 29, 2013, by and among the Company and the Purchasers therewith (the “ Purchase Agreement’ ).

 

Unless indicated otherwise, the number of Exercise Shares that the Holder may purchase by exercising this warrant is equal to (A) the product of (i) fifty percent (50%) multiplied by (ii) such Purchaser’s Loan Amount for the Closing in which this warrant is issued, divided by (B) $2.00.

 

1. DEFINITIONS . Capitalized terms used but not defined herein shall have the meanings set forth in the Purchase Agreement or the Notes. As used herein, the following terms shall have the following respective meanings:

 

(a) Exercise Period ” shall mean the period commencing upon the date hereof and the date ending seven (7) years from the date hereof, unless sooner terminated as provided below.

 

(b) Exercise Price ” for each Exercise Share shall mean $2.00.

 

(c) Exercise Shares ” shall mean shares of the Company’s Common Stock.

 

1 .
 

 

2. EXERCISE OF WARRANT . The rights represented by this Warrant may be exercised in whole or in part at any time during the Exercise Period, by delivery of the following to the Company at its address set forth above (or at such other address as it may designate by notice in writing to the Holder):

 

(a) An executed Notice of Exercise in the form attached hereto;

 

(b) Payment of the Exercise Price either (i) in cash or by check, or (ii) by cancellation of indebtedness, unless this Warrant is net exercised pursuant to Section 2.1; and

 

(c) This Warrant.

 

Upon the exercise of the rights represented by this Warrant, a certificate or certificates for the Exercise Shares so purchased, registered in the name of the Holder or persons affiliated with the Holder, if the Holder so designates, shall be issued and delivered to the Holder within a reasonable time after the

 

rights represented by this Warrant shall have been so exercised. In the event that this Warrant is being exercised for less than all of the then-current number of Exercise Shares purchasable hereunder, the Company shall, concurrently with the issuance by the Company of the number of Exercise Shares for which this Warrant is then being exercised, issue a new Warrant exercisable for the remaining number of Exercise Shares purchasable hereunder.

 

The person in whose name any certificate or certificates for Exercise Shares are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

 

2.1 Net Exercise . Notwithstanding any provisions herein to the contrary, if the fair market value of one Exercise Share is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise in which event the Company shall issue to the Holder a number of Exercise Shares computed using the following formula:

 

  X =

Y (A-B)  

 
    A  

 

  Where X = the number of Exercise Shares to be issued to the Holder
     
  Y = the number of Exercise Shares purchasable under the Warrant or, if only a portion of the Warrant is being exercised, that portion of the Warrant being canceled (at the date of such calculation)
     
  A = the fair market value of one Exercise Share (at the date of such calculation)
     
  B = Exercise Price (as adjusted to the date of such calculation)

 

2 .
 

 

For purposes of the above calculation, the fair market value of one Exercise Share shall be determined by the Company’s Board of Directors in good faith; provided, however, that in the event that this Warrant is exercised pursuant to this Section 2.1 in connection with the Company’s initial public offering of its Common Stock, the fair market value per share shall be the per share offering price to the public of the Company’s initial public offering.

 

3. COVENANTS OF THE COMPANY .

 

3.1 Covenants as to Exercise Shares . The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by the Warrant will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of the series of equity securities comprising the Exercise Shares to provide for the exercise of the rights represented by this Warrant. If any at time during the Exercise Period the number of authorized but unissued shares of such series of the Company’s equity securities shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of such series of the Company’s equity securities to such number of shares as shall be sufficient for such purposes.

 

3.2 Covenants as to Exercise Shares . The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of the series of equity securities comprising the Exercise Shares to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of such series of the Company’s equity securities shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of such series of the Company’s equity securities to such number of shares as shall be sufficient for such purposes.

 

4. REPRESENTATIONS OF THE HOLDER .

 

4.1 Acquisition of Warrant for Personal Account . The Holder represents and warrants that it is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with a view to or for sale or distribution of said Warrant or Exercise Shares or any part thereof. The Holder also represents that the entire legal and beneficial interests of the Warrant and Exercise Shares the Holder is acquiring is being acquired for, and will be held for, its account only.

 

3 .
 

 

4.2 Securities Are Not Registered .

 

(a) The Holder understands that the Warrant and the Exercise Shares have not been registered under the Securities Act of 1933, as amended (the “ Act ”) on the basis that no distribution or public offering of the stock of the Company is to be effected. The Holder realizes that the basis for the exemption may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. The Holder has no such present intention.

 

(b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. The Holder recognizes that the Company has no obligation to register the Warrant or the Exercise Shares of the Company, or to comply with any exemption from such registration.

 

(c) The Holder is aware that neither the Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations. The Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company presently has no plans to satisfy these conditions in the foreseeable future.

 

4.3 Disposition of Warrant and Exercise Shares .

 

(a) The Holder further agrees not to make any disposition of all or any part of the Warrant or Exercise Shares in any event unless and until:

 

(i) The Company shall have received a letter secured by the Holder from the Securities and Exchange Commission stating that no action will be recommended to the Commission with respect to the proposed disposition;

 

(ii) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or

 

(iii) The Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the effect that such disposition will not require registration of such Warrant or Exercise Shares under the Act or any applicable state securities laws. The Company agrees that it will not require an opinion of counsel with respect to transactions under Rule 144 of the Securities Act, except in unusual circumstances.

 

4 .
 

 

(b) The Holder understands and agrees that all certificates evidencing the shares to be issued to the Holder may bear the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.  

 

4.4 Accredited Investor Status . The Holder is an “accredited investor” as defined in Regulation D promulgated under the Act.

 

5. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF EXERCISE SHARES .

 

5.1 Changes in Securities . In the event of changes in the series of equity securities of the Company comprising the Exercise Shares by reason of stock dividends, splits, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of Exercise Shares available under the Warrant in the aggregate and the Exercise Price shall be correspondingly adjusted to give the Holder of the Warrant, on exercise for the same aggregate Exercise Price, the total number, class, and kind of shares as the Holder would have owned had the Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. For purposes of this Section 5, the “ Aggregate Exercise Price ” shall mean the aggregate Exercise Price payable in connection with the exercise in full of this Warrant. The form of this Warrant need not be changed because of any adjustment in the number of Exercise Shares subject to this Warrant.

 

6. FRACTIONAL SHARES . NO fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) to be issued upon exercise of this Warrant shall be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current fair market value of one Exercise Share by such fraction.

 

7. REORGANIZATION . In the event of, at any time during the Exercise Period, any capital reorganization or recapitalization of the capital stock of the Company (other than a change in par value or from par value to no par value or no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares, and other than a Liquidation Transaction (as defined in the Company’s Articles of Incorporation, as amended from time to time) which shall be governed by Section 8 below) (an “ Organic Change ”), then, as a condition of such Organic Change, lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the Exercise Shares of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Exercise Shares equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, and the Exercise Price shall be appropriately adjusted so that the Aggregate Exercise Price after such Organic Change shall be equal to the Aggregate Exercise Price immediately prior to such Organic Change.

 

5 .
 

  

8. EARLY TERMINATION . In the event of, at any time during the Exercise Period prior to the exercise of this Warrant, a Liquidation Transaction, the Company shall provide to the Holder 10 days’ advance written notice of the Closing of such transaction. This Warrant shall terminate upon the consummation of the Liquidation Transaction.

 

9. MARKET STAND-OFF AGREEMENT . Holder shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock (or Exercise Shares or other securities) of the Company held by Holder, during the 180-day period following the effective date of a registration statement of the Company filed under the Act (or such longer period, not to exceed 18 days after the expiration of the 180-day period, as the underwriters or the Company shall request in order to facilitate compliance with FINRA Rule 2711). Holder agrees to execute and deliver such other agreements as requested by the Company and/or the managing underwriter(s) which are consistent with the foregoing or which are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to such Common Stock (or other securities) until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 9 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

 

10. NO STOCKHOLDER RIGHTS . This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.

 

11. TRANSFER OF WARRANT . Subject to applicable laws and the restriction on transfer set forth on the first page of this Warrant, this Warrant and all rights hereunder are transferable, by the Holder in person or by duly authorized attorney, upon delivery of this Warrant and the form of assignment attached hereto to any transferee designated by the Holder. The transferee shall sign an investment letter in form and substance satisfactory to the Company.

 

12. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT . If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. 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.

 

6 .
 

 

13. AMENDMENT . Any term of this Warrant may be amended or waived with the written consent of the Company and the Majority Holders provided that all Warrants are similarly affected. Upon the effectuation of such amendment or waiver in conformance with this Section 13, the Company shall promptly give written notice thereof to the record holders of the Warrants who have not previously consented thereto in writing.

 

14. NOTICES, ETC . All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address listed on the signature page and to the Holder at the address listed on the Schedule of Purchasers to the Purchase Agreement or at such other address as the Company or the Holder may designate by ten (10) days advance written notice to the other parties hereto.

 

15. ACCEPTANCE . Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

 

16. GOVERNING LAW . This Warrant and all rights, obligations and liabilities hereunder shall be governed by and construed under the laws of the State of California as applied to agreements among California residents, made and to be performed entirely within the State of California without giving effect to conflicts of laws principles.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

7 .
 

 

IN WITNESS WHEREOF , the Company has caused this Warrant to be executed by its duly authorized officer as of April , 2013.

 

  Bone Biologics, Inc.
     
  By: /s/ William Jay Treat
  Name: William Jay Treat
  Title: President & CTO
     
  Address:

100 Rancho Rd., Suite 7 – 231

    Thousand Oaks, CA 91362

 

WARRANT SIGNATURE PAGE

 

 
 

 

NOTICE OF EXERCISE

 

TO: AURORA SFC SYSTEMS, INC.

 

(1) [  ] The undersigned hereby elects to purchase _______ shares of _______ (the “ Exercise Shares ”) of Bone Biologics Inc . (the “ Company ”) pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

[  ] The undersigned hereby elects to purchase _______ shares of _______ (the “ Exercise Shares ”) of Bone Biologics, Inc . (the “ Company ”) pursuant to the terms of the net exercise provisions set forth in Section 2.1 of the attached Warrant, and shall tender payment of all applicable transfer taxes, if any.

 

(2) Please issue a certificate or certificates representing said Exercise Shares in the name of the undersigned or in such other name as is specified below:

______________________

(Name)

 

______________________

______________________

 (Address)

 

(3) The undersigned represents that (i) the aforesaid Exercise Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares; (ii) the undersigned is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned’s own interests; (iv) the undersigned understands that Exercise Shares issuable upon exercise of this Warrant have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), by reason of a specific exemption from the registration provisions of the Securities Act, which exemption depends upon, among other things, the bona fide nature of the investment intent as expressed herein, and, because such securities have not been registered under the Securities Act, they must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available; (v) the undersigned is aware that the aforesaid Exercise Shares may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met and until the undersigned has held the shares for the number of years prescribed by Rule 144, that among the conditions for use of the Rule is the availability of current information to the public about the Company and the Company has not made such information available and has no present plans to do so; and (vi) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares of Exercise Shares unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement, or, if reasonably requested by the Company, the undersigned has provided the Company with an opinion of counsel satisfactory to the Company, stating that such registration is not required.

 

     
(Date)   (Signature)
     
     
    (Print name)

 

 
 

 

ASSIGNMENT FORM

 

  (To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)  

 

FOR VALUE RECEIVED , the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

Name:    
  (Please Print)  
     
Address:    
  (Please Print)  
     
Dated:  _____________, 20__  
Holder’s
Signature
   
Holder’s
Address:
   

 

NOTE : The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

 
 

 

 

 

BONE BIOLOGICS, INC.

 

AMENDMENT NO. 1 TO
WARRANTS TO PURCHASE COMMON STOCK

 

This Amendment No. 1 to Warrants To Purchase Common Stock (this “ Amendment ”) is made as of August 2, 2013, by and between Bone Biologics, Inc. , a California corporation (the “ Company ”), and the undersigned holders of certain warrants to purchase Common Stock of the Company (the “ Holders ”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in that certain Note and Warrant Purchase Agreement, dated as of April 29, 2013 (collectively the “closing dates” (the “ Purchase Agreement ”).

 

Recitals

 

WHEREAS , pursuant to the Purchase Agreement, the Company previously issued certain warrants to purchase Common Stock to the Holders (the “ Existing Warrants ”);

 

WHEREAS , the Company and the Holders desire to amend the Existing Warrants as provided herein;

 

WHEREAS , pursuant to Section 13 of each of the Existing Warrants, any term of such Existing Warrants may be amended by the written consent of the Company and the Majority Holders (as defined in the Existing Warrants); and

 

WHEREAS , the undersigned Holders constitute the Majority Holders (as defined in the Existing Warrants) and desire to amend the Existing Warrants as provided below.

 

NOW, THEREFORE , in consideration of the mutual agreements, covenants and considerations contained herein, the Company and the undersigned Holders hereby agree to amend the Existing Warrants as follows:

 

1. The second paragraph of each Existing warrant is hereby amended and restated in its entirety as set forth below:

 

“Unless indicated otherwise, the number of Exercise Shares that the Holder may purchase by exercising this warrant is equal to (A) the product of (i) fifty percent (50%) multiplied by (ii) such Purchaser’s Loan Amount for the Closing in which this warrant is issued, divided by (B) $1.00.”

 

2. Section 1(b) of each Existing Warrant is hereby amended and restated in its entirety as set forth below:

 

(b) Exercise Price ” for each Exercise Share shall mean $1.00.”

 

 
 

 

3. Except as expressly modified by this Amendment, all of the terms and conditions of the Existing Warrants are reaffirmed and shall remain in full force and effect. Other than as stated in this Amendment, this Amendment shall not operate as a waiver of any condition or obligation imposed on the parties under the Existing Warrants.

 

4. In the event of any conflict, inconsistency, or incongruity between any provision of this Amendment and any provision of the Existing Warrants, the provisions of this Amendment shall govern and control.

 

5. This Amendment and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

6. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[Signature Page Follows]

 

 
 

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  COMPANY:
   
  Bone Biologics, Inc.
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: CEO

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  HOLDER:
     
  Musculoskeletal Transplant Foundation, Inc.
     
  By: /s/ Michael J, Kawas
  Name: Michael J, Kawas
  Title: EVP/CFO

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  HOLDER:
     
  AFH Holding and Advisory, LLC
     
  By: /s/ Amir Heshmatpour
  Name: Amir Heshmatpour
`   Title:  

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  HOLDER:
     
  Orthofix, Inc.
     
  By:
  Name:  
  Title:  

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

 

Warrant No. 1 Number of Shares: 60,920
Date of Issuance; November 15, 2006 (subject to adjustment)

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that Marie Antonia Gray, or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 5 below), up to 60,920 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of common stock of the Company (the “ Common Stock ”), at an exercise price of $0.17 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

This Warrant is issued pursuant to a Services Rendered Agreement dated October __, 2006 between the Company and the Registered Holder (the “ Agreement ”) and is subject to the terms and conditions of the Agreement.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”). The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

 
 

 

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

X = Y (A - B)  
   A  

 

Where X = The number of shares of Common Stock to be issued to the Registered Holder.
     
Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
     
A = The fair market value of one share of Common Stock (at the date of such calculation).
     
B = The Purchase Price (as adjusted to the date of such calculation).

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

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(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of Common. Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to an acquisition as described in Section 5(b) below, in which case the fair market value per share of Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within ten days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1 (a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such, subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

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(b) Reclassification, Etc . In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or m part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

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5. Termination . This Warrant (and the right to purchase securities upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) October __, 2016, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, provided that this Section 5(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act.

 

6. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

7. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

8. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

9. No Rights as Shareholder . Until the exercise of this Warrant, the Registered. Holder of this Warrant shall not have or exercise any rights by virtue hereof as a shareholder of the Company.

 

10. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

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11. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

12. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

13. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

14. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

15. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

16. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded from this Warrant, the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

17. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

18. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

[Signature Page Follows]

 

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  BONE BIOLOGICS, INC.
   
  By : /s/ Bruce A. Hazuka
  Address:

Bone Biologics, Inc.

369 South Doheny Dr., Suite 1261

Beverly Hills, CA 90211

     
  Facsimile Number:  
     
  MARY ANTHONY GRAY
     
    /s/ Mary Anthony Gray

 

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EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To: Bone Biologics, Inc. Dated:

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. 1, hereby irrevocably elects to (a) purchase _______ shares of the Common Stock covered by such Warrant and herewith makes payment of $_______, representing the full purchase price for such shares at the price per share provided for in such Warrant, or (b) exercise such Warrant for _______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of such Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 3 of the Agreement (as defined in the Warrant) and by its signature below hereby makes such representations and warranties to the Company. Defined terms contained in such representations and warranties shall have the meanings assigned to them in the Agreement.

 

  Signature:  
     
  Name (print):  
     
  Title (if applic.):  
     
  Company (if applic.):  

 

 
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, _______________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee Address/Fax Number No, of Shares
     
     
     
     

 

Dated:     Signature:  
         
         
         
      Witness:  

 

 
 

 

BONE BIOLOGICS, INC.

 

AMENDMENT NO. 1 TO
WARRANTS TO PURCHASE COMMON STOCK

 

This Amendment No. 1 to Warrants To Purchase Common Stock (this “ Amendment ”) is made as of September 17, 2014, by and between Bone Biologics, Inc. , a California corporation (the “ Company ”), and Marie Antonia Gray holder of certain warrants to purchase Common Stock of the Company (the “ Holder”)

 

Recitals

 

WHEREAS , pursuant to the deferral of payment the Company previously issued certain warrants to purchase Common Stock to the Holder (the “ Existing Warrants ”);

 

WHEREAS , the Company and the Holder desire to amend the Existing Warrants as provided herein;

 

WHEREAS , pursuant to Section 12 of each of the Existing Warrants, any term of such Existing Warrants may be amended by the written consent of the Company and the Holder (as defined in the Existing Warrants);

 

WHEREAS , the undersigned Holder desires to amend the Existing Warrant as provided below.

 

NOW, THEREFORE , in consideration of the mutual agreements, covenants and considerations contained herein, the Company and the undersigned Holder hereby agree to amend the Existing Warrants as follows:

 

1. The fifth paragraph of the Existing warrant is hereby amended and restated in its entirety as set forth below:

 

This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “Expiration Date”): (a) October 15, 2016, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “Significant Transaction”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to receive a warrant to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

 
 

 

2. Except as expressly modified by this Amendment, all of the terms and conditions of the Existing Warrants are reaffirmed and shall remain in full force and effect. Other than as stated in this Amendment, this Amendment shall not operate as a waiver of any condition or obligation imposed on the parties under the Existing Warrants.

 

3. In the event of any conflict, inconsistency, or incongruity between any provision of this Amendment and any provision of the Existing Warrants, the provisions of this Amendment shall govern and control.

 

4. This Amendment and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

5. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[Signature Page Follows]

 

 
 

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  COMPANY:
   
  Bone Biologics, Inc.
   
  By: /s/ William Jay Treat
  Name: William Jay Treat
  Title: President & CTO

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  HOLDER:
   
  Marie Antonia Gray
     
  By:  
  Name:  
  Title:  

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

Warrant No. CW-1

Date of Issuance: March 17, 2009

Number of shares of Warrant Stock: 118,383

(subject to adjustment)

 

BONE BIOLOGICS INC.

 

Warrant Agreement

 

Bone Biologies Inc., a California corporation (the “ Company ”), for value received, hereby certifies that Musculoskeletal Transplant Foundation, Inc., or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 6 below), up to 118,383 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of common stock, par value $0,001 per share, of the Company (“ Common Stock ”), at a purchase price of $0.44 per share. The shares purchasable upon exercise of this Warrant and the purchase price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Purchase Price ,” respectively.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the Purchase Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise, unless Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock represented by such certificates.

 

 
 

  

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to the Registered Holder a number of shares of Common Stock computed using the following formula:

 

     

X = Y (A - B)

            A

       
Where X = The number of shares of Common Stock to be issued to the Registered Holder.
       
  Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
       
  A = The fair market value of one share of Common Stock (at the date of such calculation)
       
  B = The Purchase Price (as adjusted to the date of such calculation).

  

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “ Price to Public ” per share specified in the final prospectus with respect to the offering; or

 

(B) if (A) is not applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to an acquisition as described in Section 5(b) below, in which case the fair market value per share of Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

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(d) Delivery to Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within ten (10) days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above.

 

(e) Repurchase on Sale, Merger or Consolidation of the Company . For the purpose of this Warrant. “ Acquisition ” means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction. Upon the closing of any Acquisition, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for Warrant Stock issuable upon exercise of the unexercised portion of this Warrant as if such Warrant Stock were outstanding on the record date for the Acquisition and subsequent closing, and the Purchase Price and/or number of shares of Warrant Stock may be adjusted accordingly; provided that if pursuant to such Acquisition the entire outstanding class of shares of Warrant Stock issuable upon exercise of the unexercised portion of this Warrant are cancelled and the total consideration payable to the holders of such class of shares of Warrant Stock consists entirely of cash, then upon the exercise of this Warrant by Holder and payment to Holder of this Warrant of an amount equal to the amount such holder would receive if such holder held shares of Warrant Stock issuable upon exercise of the unexercised portion of this Warrant and such shares of Warrant Stock were outstanding on the record date for the Acquisition less the aggregate Purchase Price of such shares of Warrant Stock, this Warrant shall be cancelled.

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If at any time the Company shall (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of additional Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event. The aggregate Purchase Price of this warrant following such event shall remain as in effect immediately prior to such event. Any adjustment under this subsection (a) shall become effective when the dividend, split, subdivision or combination becomes effective.

 

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(b) Reclassification, Etc . In case of any reclassification or change of the outstanding securities of the Company or of any reorganization of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Purchase Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Purchase Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

(d) Acknowledgement . In order to avoid doubt, it is acknowledged that the Registered Holder shall be entitled to the benefit of all adjustments in the number of shares of Common Stock of the Company which occur prior to the exercise of this Warrant.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

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(b) Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company, provided , however , that this Warrant may not be transferred in part unless the transferee acquires the right to purchase at least 100% of the shares (as adjusted pursuant to Section 2) of Warrant Stock hereunder.

 

(c) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

5. Representations and Warranties of Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

5
 

  

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder acknowledges that the Company has no obligation to register or qualify the Securities for resale. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company is under no obligation and may not be able to satisfy.

 

(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company, that the Company has made no assurances that a public market will ever exist for the Securities.

 

(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchange for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6
 

  

6. Termination . This Warrant (and the right to purchase securities upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) March 17, 2019, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company is disposed of, provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act.

 

7. Notices of Certain Transactions . In case:

 

(a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or

 

(b) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity), or any transfer of all or substantially all of the assets of the Company, or

 

(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company,

 

then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up) are to be determined. Such notice shall be mailed at least ten (10) days prior to the record date or effective date for the event specified in such notice.

 

8. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

7
 

  

9. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

10. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor,

 

11. Notices . Any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or forty-eight (48) hours after being deposited in the regular mail as certified or registered mail (airmail if sent internationally) with postage prepaid, addressed (a) if to the Registered Holder, to the address of the Registered Holder most recently furnished in writing to the Company and (b) if to the Company, to the address set forth below or subsequently modified by written notice to the Registered Holder.

 

12. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

13. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

14. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

15. Headings . The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

 

16. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

17. Lock-up Agreement . In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, Registered Holder agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days, but subject to such extensions as may be required by the underwriters in order to publish research reports while complying with Rule 2711 of the Financial Industry Regulatory Authority, Inc.) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering.

 

8
 

 

The undersigned has executed this Warrant as of the date first written above.

 

  BONE BIOLOGICS, INC.
     
  By: /s/ Bruce A. Hazuka
  Name: Bruce A. Hazuka
    (print)
  Title: President & CEO
     
  Address:

100 Rancho Road

Suite 7 - #231

Thousand Oaks, CA 91362

 

AGREED TO AND ACKNOWLEDGED:

 

  MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.
     
  By: /s/ Michael J. Kawas
  Name: Michael J. Kawas
    (print)
  Title: EVP/CFO
     
  Address:

125 May Street

Edison, NJ 08873

 

 
 

 

EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To: Bone Biologies Inc. Dated:

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. CW- [     ], hereby irrevocably elects to (a) purchase _____ shares of the Common Stock covered by such Warrant and herewith makes payment of $ __________, representing the full purchase price for such shares at the price per share provided for in such Warrant, or (b) exercise such Warrant for _________ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of such Warrant.

 

The undersigned further acknowledges that the undersigned has reviewed the representations and warranties contained in Section 5 of the Warrant and the covenants contained in the Warrant, and by the undersigned’s signature below the undersigned hereby makes such representations, warranties and covenants as of the date hereof.

 

  Signature:  
     
  Name (print):
     
  Title (if applic.):  
     
  Company (if applic.):  

 

A- 1
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, _______________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee   Address/Fax Number  

No. of shares of

Warrant Stock

         
         
         
         
         

 

Dated:     Signature:    
           
      Witness:    

 

B- 2
 

 

BONE BIOLOGICS, INC.

 

AMENDMENT NO. 1 TO

WARRANTS TO PURCHASE COMMON STOCK

 

This Amendment No. 1 to Warrants To Purchase Common Stock (this “ Amendment ”) is made as of September 17, 2014, by and between Bone Biologics, Inc. , a California corporation (the “ Company ”), and Musculoskeletal Transplant Foundation, Inc. holder of certain warrants to purchase Common Stock of the Company (the “ Holder”)

 

Recitals

 

WHEREAS , pursuant to the deferral of payment the Company previously issued certain warrants to purchase Common Stock to the Holder (the “ Existing Warrants ”);

 

WHEREAS , the Company and the Holder desire to amend the Existing Warrants as provided herein;

 

WHEREAS , pursuant to Section 14 of each of the Existing Warrants, any term of such Existing Warrants may be amended by the written consent of the Company and the Holder (as defined in the Existing Warrants);

 

WHEREAS , the undersigned Holder desires to amend the Existing Warrant as provided below.

 

NOW, THEREFORE , in consideration of the mutual agreements, covenants and considerations contained herein, the Company and the undersigned Holder hereby agree to amend the Existing Warrants as follows:

 

1. The sixth paragraph of the Existing warrant is hereby amended and restated in its entirety as set forth below:

 

This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “Expiration Date”): (a) March 17, 2019, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “Significant Transaction”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to receive a warrant to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

 
 

 

2. Except as expressly modified by this Amendment, all of the terms and conditions of the Existing Warrants are reaffirmed and shall remain in full force and effect. Other than as stated in this Amendment, this Amendment shall not operate as a waiver of any condition or obligation imposed on the parties under the Existing Warrants.

 

3. In the event of any conflict, inconsistency, or incongruity between any provision of this Amendment and any provision of the Existing Warrants, the provisions of this Amendment shall govern and control.

 

4. This Amendment and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

5. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[Signature Page Follows]

 

 
 

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  COMPANY:
     
  Bone Biologics, Inc.
     
  By: /s/ William Jay Treat
  Name: William Jay Treat
  Title: President & CTO

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  HOLDER:
   
  Musculoskeletal Transplant Foundation, Inc.
   
  By: /s/ Michael J. Kawas
  Name: Michael J. Kawas
  Title: EVP/CFO

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

 

Warrant No. CW-3 Number of Shares: 28,409
Date of Issuance: February 4, 2010   (subject to adjustment)

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that T.O. Medical Development, Inc. (T.O. Medical”), or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 5 below), up to 119,318 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of common stock of the Company (the “ Common Stock ”), at an exercise price of $0.44 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

This Warrant is issued in consideration for the deferment of compensation for certain services previously rendered by T.O. Medical to the Company.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

 
   

 

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

X = Y (A - B)

A

 

Where X = The number of shares of Common Stock to be issued to the Registered Holder.
       
Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
       
A = The fair market value of one share of Common Stock (at the date of such calculation).
       
B = The Exercise Price (as adjusted to the date of such calculation).

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

- 2 -
   

 

(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to an acquisition as described in Section 5(b) below, in which case the fair market value per share of Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within ten days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

(b) Reclassification, Etc. In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

- 3 -
   

 

(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

- 4 -
   

 

5. Representations and Warranties of Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder acknowledges that the Company has no obligation to register or qualify the Securities for resale. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company is under no obligation and may not be able to satisfy.

 

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(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company, that the Company has made no assurances that a public market will ever exist for the Securities.

 

(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchange for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6. Termination . This Warrant (and the right to purchase securities upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) February __, 2020, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, provided that this Section 5(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act.

 

7. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

8. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

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9. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

10. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

11. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

12. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

13. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

14. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

15. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

16. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

17. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded from this Warrant, the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

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18. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

19. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

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20. Lock-up Agreement . In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, Registered Holder agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days, but subject to such extensions as may be required by the underwriters in order to publish research reports while complying with Rule 2711 of the Financial Industry Regulatory Authority, Inc.) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering.

 

  BONE BIOLOGICS, INC.
     
  By : /s/ Bruce A. Hazuka
     
  Address: 100 Rancho Road
    Suite 7 - #231
    Thousand Oaks, CA 91362

 

  Facsimile Number:

 

 

  T.O. MEDICAL DEVELOPMENT, INC.
     
  /s/ Carolyn Hazuka
   
  Address: 100 Rancho Road, Suite 7-231
    Thousand Oaks, CA 91362

 

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EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To: Bone Biologics, Inc. Dated:

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. [CW-__], hereby irrevocably elects to (a) purchase _____ shares of the Common Stock covered by such Warrant and herewith makes payment of $ _________, representing the full purchase price for such shares at the price per share provided for in such Warrant, or (b) exercise such Warrant for _______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of such Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 3 of the Agreement (as defined in the Warrant) and by its signature below hereby makes such representations and warranties to the Company. Defined terms contained in such representations and warranties shall have the meanings assigned to them in the Agreement.

 

  Signature:  
     
  Name (print):  
     
  Title (if applic.):  
     
  Company (if applic.):  

 

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EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, _________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee   Address/Fax Number   No. of Shares

 

 

 

 

 

Dated: _______________   Signature:    
         
         
         
    Witness:    

 

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BONE BIOLOGICS, INC.

 

AMENDMENT NO. 1 TO

WARRANTS TO PURCHASE COMMON STOCK

 

This Amendment No. 1 to Warrants To Purchase Common Stock (this “ Amendment ”) is made as of September 17, 2014, by and between Bone Biologics, Inc. , a California corporation (the “ Company ”), and T.O. Medical Development Inc. holder of certain warrants to purchase Common Stock of the Company (the “ Holder”)

 

Recitals

 

WHEREAS , pursuant to the deferral of payment the Company previously issued certain warrants to purchase Common Stock to the Holder (the “ Existing Warrants ”);

 

WHEREAS , the Company and the Holder desire to amend the Existing Warrants as provided herein;

 

WHEREAS , pursuant to Section 12 of each of the Existing Warrants, any term of such Existing Warrants may be amended by the written consent of the Company and the Holder (as defined in the Existing Warrants);

 

WHEREAS , the undersigned Holder desires to amend the Existing Warrant as provided below.

 

NOW, THEREFORE , in consideration of the mutual agreements, covenants and considerations contained herein, the Company and the undersigned Holder hereby agree to amend the Existing Warrants as follows:

 

1. The sixth paragraph of the Existing warrant is hereby amended and restated in its entirety as set forth below:

 

This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “Expiration Date”): (a) February 4, 2020, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “Significant Transaction”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to receive a warrant to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

 
   

 

2. Except as expressly modified by this Amendment, all of the terms and conditions of the Existing Warrants are reaffirmed and shall remain in full force and effect. Other than as stated in this Amendment, this Amendment shall not operate as a waiver of any condition or obligation imposed on the parties under the Existing Warrants.

 

3. In the event of any conflict, inconsistency, or incongruity between any provision of this Amendment and any provision of the Existing Warrants, the provisions of this Amendment shall govern and control.

 

4. This Amendment and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

5. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[Signature Page Follows]

 

 
   

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  COMPANY:
   
  Bone Biologics, Inc.
     
  By: /s/ William Jay Treat
  Name: William Jay Treat
  Title: President & CTO

 

SIGNATURE PAGE TO AMENDMENT NO. 1 TO WARRANTS TO PURCHASE COMMON STOCK

 

 
   

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  HOLDER:
     
  T.O. Medical Development Inc.
     
  By: /s/ Carolyn Hazuka
  Name: Carolyn Hazuka
  Title: President

 

SIGNATURE PAGE TO AMENDMENT NO. 1 TO WARRANTS TO PURCHASE COMMON STOCK

 

 
   

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

 

 

Warrant No. CW-4

Date of Issuance: February ___, 2010

 

Number of Shares: 119,318

(subject to adjustment)

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that Chia Soo, or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 5 below), up to 119,318 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of common stock of the Company (the “ Common Stock ”), at an exercise price of $0.44 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

This Warrant is issued in consideration for the deferment of compensation for certain services previously rendered by Chia Soo to the Company.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time end from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

 
 

  

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

     

X= Y (A - B)

            A

       
Where X = The number of shares of Common Stock to be issued to the Registered Holder.
       
  Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
       
  A = The fair market value of one share of Common Stock (at the date of such calculation).
       
  B = The Exercise Price (as adjusted to the date of such calculation).

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over the counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

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(C) if neither (A) nor (B) is applicable, the fair market value shall be the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors. Unless the Company is at such time subject to an acquisition as described in Section 5(b) below, in which case the fair market value per share of Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within ten days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

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(b) Reclassification, Etc . In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

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4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but od will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

5. Representations and Warranties of Holder . The Registered Holder hereby represents and warrants is to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warranty the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Registered Holder further represents that that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company were intended to describe the aspects of the Company’s business which it believes to be material.

 

(c) Restricted Securities . The Registered Holder understands that the securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder acknowledges that the Company has no obligation to register or qualify the securities for resale. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company is under no obligation and may not be able to satisfy.

 

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(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company, that the Company has made no assurances that a public market will ever exist for the Securities.

 

(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchange for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY T THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6. Termination . This Warrant (and the right to purchase securities upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): February , 2020, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, provided that this Section 5(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act.

 

7. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

8. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

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9. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

10. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

11. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

12. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waive S is sought.

 

13. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

14. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

15. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

16. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

17. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded from this Warrant, the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

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18. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

19. Notices . Unless otherwise provided otherwise herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the d or U.S. mail, as certified registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

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20. Lock-up Agreement . In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, Registered Holder agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days, but subject to such extensions as may be required by the underwriters in order to publish research reports while complying with Rule 2711 of the Financial Industry Regulatory Authority, Inc.) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering.

 

  BONE BIOLOGICS, INC.
     
  By: /s/ Bruce A. Hazuka
     
  Address:

100 Rancho Road

Suite 7 - #231

Thousand Oaks, CA 91362

 

  Facsimile Number:  

 

  CHIA SOO
     
   

/s/ Chia Soo

     
  Address: 115 North Doheny Drive
    Beverly Hills, CA 90211

 

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21. Lock-up Agreement . In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, Registered Holder agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days, but subject to such extensions as may be required by the underwriters in order to publish research reports while complying with Rule 2711 of the Financial Industry Regulatory Authority, Inc.) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering.

 

  BONE BIOLOGICS, INC.
     
  By  
     
  Address:

100 Rancho Road

Suite 7 - #231

Thousand Oaks, CA 91362

 

  Facsimile Number:

 

  CHIA SOO
     
    /s/ Chia Soo
   
  Address: 115 North Doheny Drive
    Beverly Hills, CA 90211

 

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EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To: Bone Biologics, Inc. Dated:

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. [CW- ______ ], hereby irrevocably elects to (a) purchase ___ shares of the Common Stock covered by such Warrant and herewith makes payment of $ ________ , representing the full purchase price for such shares at the price per share provided for in such Warrant, or (b) exercise such Warrant for ______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of section 1(c) of such Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 3 of the Agreement (as defined in the Warrant) and by its signature below hereby makes such representations and warranties to the Company. Defined terms contained in such representations and warranties shall have the meanings assigned to them in the Agreement.

 

  Signature:  
     
  Name (print):  
     
  Title (if applic.):  
     
  Company (if applic.):  

 

 
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED,                                                            hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee   Address/Fax Number   No. of Shares
         
         
         
         
         

 

Dated:     Signature:  
           
           
      Witness:    

 

 
 

 

BONE BIOLOGICS, INC.

 

AMENDMENT NO. 1 TO

WARRANTS TO PURCHASE COMMON STOCK

 

This Amendment No. 1 to Warrants To Purchase Common Stock (this “ Amendment ”) is made as of September 17, 2014, by and between Bone Biologics, Inc. , a California corporation (the “ Company ”), and B. Chia Soo holder of certain warrants to purchase Common Stock of the Company (the “ Holder”)

 

Recitals

 

WHEREAS , pursuant to the deferral of payment the Company previously issued certain warrants to purchase Common Stock to the Holder (the “ Existing Warrants ”);

 

WHEREAS , the Company and the Holder desire to amend the Existing Warrants as provided herein;

 

WHEREAS , pursuant to Section 12 of each of the Existing Warrants, any term of such Existing Warrants may be amended by the written consent of the Company and the Holder (as defined in the Existing Warrants);

 

WHEREAS , the undersigned Holder desires to amend the Existing Warrant as provided below.

 

NOW, THEREFORE , in consideration of the mutual agreements, covenants and considerations contained herein, the Company and the undersigned Holder hereby agree to amend the Existing Warrants as follows:

 

1. The sixth paragraph of the Existing warrant is hereby amended and restated in its entirety as set forth below:

 

This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “Expiration Date”): (a) February 4, 2020, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “Significant Transaction”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to receive a warrant to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

2. Except as expressly modified by this Amendment, all of the terms and conditions of the Existing Warrants are reaffirmed and shall remain in full force and effect. Other than as stated in this Amendment, this Amendment shall not operate as a waiver of any condition or obligation imposed on the parties under the Existing Warrants.

 

3. In the event of any conflict, inconsistency, or incongruity between any provision of this Amendment and any provision of the Existing Warrants, the provisions of this Amendment shall govern and control.

 

4. This Amendment and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

5. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[Signature Page Follows]

 

 
 

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  COMPANY:
     
  Bone Biologics, Inc.
     
  By: /s/ William Jay Treat
  Name: William Jay Treat
  Title: President & CTO

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

In Witness Whereof , the undersigned have executed this Amendment No. 1 to Warrants to Purchase Common Stock as of the day and year first set forth above.

 

  HOLDER:
     
  B. Chia Soo
     
  By: /s/ Chia Soo
  Name: Chia Soo
  Title: Shareholder, Board Member

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

 

Warrant No. CW-5 Number of Shares: 51,100
Date of Issuance: February 4, 2010 (subject to adjustment)

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that Aragen Bioscience, Inc. , or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 5 below), up to 51,100 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of common stock of the Company (the “ Common Stock ”), at an exercise price of $0.44 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

This Warrant is issued in consideration for the deferment of compensation for certain services previously rendered by Aragen Bioscience, Inc. to the Company.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

 
 

 

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

  X =

Y (A-B)

 
    A  

   

Where X =

The number of shares of Common Stock to be issued to the Registered Holder.

 

  Y =

The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).

 

  A =

The fair market value of one share of Common Stock (at the date of such calculation).

 

  B = The Exercise Price (as adjusted to the date of such calculation).

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

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(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to an acquisition as described in Section 5(b) below, in which case the fair market value per share of Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within ten days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

(b) Reclassification, Etc . In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

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(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

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5. Representations and Warranties of Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder acknowledges that the Company has no obligation to register or qualify the Securities for resale. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company is under no obligation and may not be able to satisfy.

 

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(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company, that the Company has made no assurances that a public market will ever exist for the Securities.

 

(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchange for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6. Termination . This Warrant (and the right to purchase securities upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) February 4, 2020, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, provided that this Section 5(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act.

 

7. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

8. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

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9. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

10. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

11. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

12. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

13. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

14. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

15. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

16. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

17. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded from this Warrant, the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

- 7 -
 

 

18. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

19. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

- 8 -
 

 

18. Lock-Up Agreement . In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, Registered Holder agrees not to sell, make any short sale of loan grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days but subject to such extensions as may be required by the underwriters in order to publish research reports while complying with Rule 2711 of the Financial Industry Regulatory Authority Inc.) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering.

 

  BONE BIOLOGICS, INC.
     
  By : /s/ Bruce A. Hazuka
     
  Address:  100 Rancho Road
    Suite 7 - #231
    Thousand Oaks, CA 91362
     
  Facsimile Number: 805-496-8937
   
  Aragen Bioscience, Inc.

 

  By: /s/ William R. Singley
  Print Name: William R. Singley
  Title: President & CEO
  Address: 380 Woodview Avenue
    Morgan Hill CA 95037

  

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EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To: Bone Biologics, Inc Dated:

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. CW-5, hereby irrevocably elects to (a) purchase _______ shares of the Common Stock covered by such Warrant and herewith makes payment of $ _____________, representing the full purchase price for such shares at the price per share provided for in such Warrant, or (b) exercise such Warrant for _______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of such Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 3 of the Agreement (as defined in the Warrant) and by its signature below hereby makes such representations and warranties to the Company. Defined terms contained in such representations and warranties shall have the meanings assigned to them in the Agreement.

 

  Signature:  
     
  Name (print):  
     
  Title (if applic.):  
     
  Company (if applic.):  

  

 
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, __________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee Address/Fax Number No, of Shares
     
     
     

 

Dated:     Signature:  
         
         
         
      Witness:  

 

 
 

   

BONE BIOLOGICS, INC.

 

AMENDMENT NO. 1 TO
WARRANTS TO PURCHASE COMMON STOCK

 

T his A mendment N o . 1 to W arrants T o P urchase C ommon S tock (this “ Amendment ”) is made as of September 17, 2014, by and between B one B iologics , I nc . , a California corporation (the “ Company ”), and A ragen B ioscience , I nc . holder of certain warrants to purchase Common Stock of the Company (the “ Holder ”)

 

R ecitals

 

WHEREAS , pursuant to the deferral of payment the Company previously issued certain warrants to purchase Common Stock to the Holder (the “ Existing Warrants ”);

 

WHEREAS , the Company and the Holder desire to amend the Existing Warrants as provided herein;

 

WHEREAS , pursuant to Section 12 of each of the Existing Warrants, any term of such Existing Warrants may be amended by the written consent of the Company and the Holder (as defined in the Existing Warrants);

 

WHEREAS , the undersigned Holder desires to amend the Existing Warrant as provided below.

 

NOW, THEREFORE , in consideration of the mutual agreements, covenants and considerations contained herein, the Company and the undersigned Holder hereby agree to amend the Existing Warrants as follows:

 

1. The sixth paragraph of the Existing warrant is hereby amended and restated in its entirety as set forth below:

 

This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “Expiration Date”): (a) February 4, 2020, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “Significant Transaction”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to receive a warrant to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

 
 

 

2. Except as expressly modified by this Amendment, all of the terms and conditions of the Existing Warrants are reaffirmed and shall remain in full force and effect. Other than as stated in this Amendment, this Amendment shall not operate as a waiver of any condition or obligation imposed on the parties under the Existing Warrants.

 

3. In the event of any conflict, inconsistency, or incongruity between any provision of this Amendment and any provision of the Existing Warrants, the provisions of this Amendment shall govern and control.

 

4. This Amendment and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

5. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[Signature Page Follows]

 

 
 

 

I n W itness W hereof , the undersigned have executed this A mendment N o . 1 to W arrants to P urchase C ommon S tock as of the day and year first set forth above.

 

  COMPANY:
     
  B one B iologics , I nc .
   
  By: /s/ William Jay Treat
  Name: William Jay Treat
  Title: President & CTO

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

I n W itness W hereof , the undersigned have executed this A mendment N o . 1 to W arrants to P urchase C ommon S tock as of the day and year first set forth above.

 

  HOLDER:
     
  A ragen B ioscience , I nc .
     
  B y :
  N ame :
  T itle :

 

S ignature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

Warrant No. CW-6

Date of Issuance: February 4, 2010

Number of Shares: 56,170

(subject to adjustment)

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that A lquest , I nc ., or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 5 below), up to 56,170 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of common stock of the Company (the “ Common Stock ”), at an exercise price of $0.44 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price, ” respectively.

 

This Warrant is issued in consideration for the deferment of compensation for certain services previously rendered by Alquest, Inc. to the Company.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

 
 

 

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

  X =

Y (A - B)

 
    A  

   

Where X =

The number of shares of Common Stock to be issued to the Registered Holder.

 

  Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
     
  A =

The fair market value of one share of Common Stock (at the date of such calculation).

 

  B = The Exercise Price (as adjusted to the date of such calculation).

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

- 2 -
 

 

(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to an acquisition as described in Section 5(b) below, in which case the fair market value per share of Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within ten days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

(b) Reclassification, Etc . In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

- 3 -
 

 

(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

- 4 -
 

 

5. Representations and Warranties of Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder acknowledges that the Company has no obligation to register or qualify the Securities for resale. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company is under no obligation and may not be able to satisfy.

 

- 5 -
 

 

(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company, that the Company has made no assurances that a public market will ever exist for the Securities.

 

(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchange for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6. Termination . This Warrant (and the right to purchase securities upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) February 4, 2020, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, provided that this Section 5(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act.

 

7. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

8. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

- 6 -
 

 

9. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

10. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

11. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

12. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

13. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

14. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

15. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding Upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

16. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

17. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded from this Warrant, the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

- 7 -
 

 

18. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

19. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

- 8 -
 

 

20. Lock-up Agreement . In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, Registered Holder agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days, but subject to such extensions as may be required by the underwriters in order to publish research reports while complying with Rule 2711 of the Financial Industry Regulatory Authority, Inc.) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering.

 

  BONE BIOLOGICS, INC.
     
  By :

/s/ Bruce A. Hazuka  

     
  Address: 100 Rancho Road
    Suite 7 - #231 Thousand Oaks,
    CA 91362
     
  Facsimile Number: 805-496-8937

 

 

A lquest, Inc .  

     
  By /s/ Alan Alexander
  Print Name: Alan Alexander
  Title:  Exec VP
  Address: 4050 Olson Memorial Hwy, Suite 350
    Minneapolis, MN 55422

 

- 9 -
 

 

EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To: Bone Biologics, Inc Dated:

 

The undersigned, pursuant to, the provisions set forth in the attached Warrant No. CW-6, hereby irrevocably elects to (a) purchase _______ shares of the Common Stock covered by such Warrant and herewith makes payment of $ ____________, representing the full purchase price for such shares at the price per share provided for in such Warrant, or (b) exercise such Warrant for _______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of such Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 3 of the Agreement (as defined in the Warrant) and by its signature below hereby makes such representations and warranties to the Company. Defined terms contained in such representations and warranties shall have the meanings assigned to them in the Agreement.

 

  Signature:  
     
  Name (print):  
     
  Title (if applic.):  
     
  Company (if applic.):  

 

 
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, ___________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee Address/Fax Number No, of Shares
     
     
     

 

Dated:     Signature:  
         
         
         
      Witness:  

 

 
 

 

BONE BIOLOGICS, INC.

 

AMENDMENT NO. 1 TO
WARRANTS TO PURCHASE COMMON STOCK

 

T his A mendment N o . 1 to W arrants T o P urchase C ommon S tock (this “ Amendment ”) is made as of September 17, 2014, by and between B one B iologics , I nc . , a California corporation (the “ Company ”), and Alquest, Inc. holder of certain warrants to purchase Common Stock of the Company (the “ Holder ”)

 

R ecitals

 

WHEREAS , pursuant to the deferral of payment the Company previously issued certain warrants to purchase Common Stock to the Holder (the “ Existing Warrants ”);

 

WHEREAS , the Company and the Holder desire to amend the Existing Warrants as provided herein;

 

WHEREAS , pursuant to Section 12 of each of the Existing Warrants, any term of such Existing Warrants may be amended by the written consent of the Company and the Holder (as defined in the Existing Warrants);

 

WHEREAS , the undersigned Holder desires to amend the Existing Warrant as provided below.

 

NOW, THEREFORE , in consideration of the mutual agreements, covenants and considerations contained herein, the Company and the undersigned Holder hereby agree to amend the Existing Warrants as follows:

 

1. The sixth paragraph of the Existing warrant is hereby amended and restated in its entirety as set forth below:

 

This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “Expiration Date”): (a) February 4, 2020, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “Significant Transaction”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to receive a warrant to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

 
 

 

2. Except as expressly modified by this Amendment, all of the terms and conditions of the Existing Warrants are reaffirmed and shall remain in full force and effect. Other than as stated in this Amendment, this Amendment shall not operate as a waiver of any condition or obligation imposed on the parties under the Existing Warrants.

 

3. In the event of any conflict, inconsistency, or incongruity between any provision of this Amendment and any provision of the Existing Warrants, the provisions of this Amendment shall govern and control.

 

4. This Amendment and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

5. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[Signature Page Follows]

 

 
 

 

I n W itness W hereof , the undersigned have executed this A mendment N o . 1 to W arrants to P urchase C ommon S tock as of the day and year first set forth above.

 

  COMPANY:
     
  B one B iologics , I nc .
   
  By: /s/ William Jay Treat
  Name: William Jay Treat
  Title: President & CTO

   

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

I n W itness W hereof , the undersigned have executed this A mendment No. 1 to W arrants to P urchase C ommon S tock as of the day and year first set forth above.

 

  HOLDER:
     
  A LQUEST , Inc .
     
  B y : /s/ Marti Charpentier
  N ame: Marti Charpentier
  T itle: Controller

 

Signature Page to Amendment No. 1 to Warrants to Purchase Common Stock

 

 
 

 

 

THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

BONE BIOLOGICS, INC.

 

WARRANT TO PURCHASE COMMON STOCK

 

No. CW-11 October 15, 2013

 

VOID AFTER OCTOBER 14, 2020

 

THIS CERTIFIES THAT , for value received, ORTHOFIX, INC. or assigns (the “ Holder ”), is entitled to subscribe for and purchase from BONE BIOLOGICS, INC., a California corporation, with its principal office at 100 Rancho Rd., Suite 7 - 231, Thousand Oaks, CA 91362 (the “ Company ”) the number of Exercise Shares as set forth in this Warrant at the Exercise Price (each subject to adjustment as provided herein). This Warrant is being issued as one of a series of warrants (the “ Warrants ”) pursuant to the terms of the Note and Warrant Purchase Agreement dated October 15, 2013, by and among the Company and the Purchasers therewith (the “ Purchase Agreement ”).

 

Unless indicated otherwise, the number of Exercise Shares that the Holder may purchase by exercising this warrant is equal to (A) the product of (i) fifty percent (50%) multiplied by (ii) such Purchaser’s Loan Amount for the Closing in which this warrant is issued, divided by (B) $1.00.

 

1. DEFINITIONS . Capitalized terms used but not defined herein shall have the meanings set forth in the Purchase Agreement or the Notes. As used herein, the following terms shall have the following respective meanings:

 

(a) Exercise Period ” shall mean the period commencing upon the date hereof and the date ending seven (7) years from the date hereof, unless sooner terminated as provided below.

 

(b) Exercise Price ” for each Exercise Share shall mean $ 1.00.

 

(c) Exercise Shares ” shall mean shares of the Company’s Common Stock.

 

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2. EXERCISE OF WARRANT . The rights represented by this Warrant may be exercised in whole or in part at any time during the Exercise Period, by delivery of the following to the Company at its address set forth above (or at such other address as it may designate by notice in writing to the Holder):

 

(a) An executed Notice of Exercise in the form attached hereto;

 

(b) Payment of the Exercise Price either (i) in cash or by check, or (ii) by cancellation of indebtedness, unless this Warrant is net exercised pursuant to Section 2.1; and

 

(c) This Warrant.

 

Upon the exercise of the rights represented by this Warrant, a certificate or certificates for the Exercise Shares so purchased, registered in the name of the Holder or persons affiliated with the Holder, if the Holder so designates, shall be issued and delivered to the Holder within a reasonable time after the rights represented by this Warrant shall have been so exercised. In the event that this Warrant is being exercised for less than all of the then-current number of Exercise Shares purchasable hereunder, the Company shall, concurrently with the issuance by the Company of the number of Exercise Shares for which this Warrant is then being exercised, issue a new Wan-ant exercisable for the remaining number of Exercise Shares purchasable hereunder.

 

The person in whose name any certificate or certificates for Exercise Shares are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

 

2.2. Net Exercise . Notwithstanding any provisions herein to the contrary, if the fair market value of one Exercise Share is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise in which event the Company shall issue to the Holder a number of Exercise Shares computed using the following formula:

 

X =    Y (A-B)  
   A  

  

Where X = the number of Exercise Shares to be issued to the Holder
   
            Y = the number of Exercise Shares purchasable under the Warrant or, if only a portion of the Warrant is being exercised, that portion of the Warrant being canceled (at the date of such calculation)
   
            A = the fair market value of one Exercise Share (at the date of such calculation)
   
            B = Exercise Price (as adjusted to the date of such calculation)

 

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For purposes of the above calculation, the fair market value of one Exercise Share shall be determined by the Company’s Board of Directors in good faith; provided, however, that in the event that this Warrant is exercised pursuant to this Section 2.1 in connection with the Company’s initial public offering of its Common Stock, the fair market value per share shall be the per share offering price to the public of the Company’s initial public offering.

 

3. COVENANTS OF THE COMPANY .

 

3.1. Covenants as to Exercise Shares . The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of the series of equity securities comprising the Exercise Shares to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of such series of the Company’s equity securities shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of such series of the Company’s equity securities to such number of shares as shall be sufficient for such purposes.

 

4. REPRESENTATIONS OF THE HOLDER .

 

4.1. Acquisition of Warrant for Personal Account . The Holder represents and wan-ants that it is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with a view to or for sale or distribution of said Warrant or Exercise Shares or any part thereof. The Holder also represents that the entire legal and beneficial interests of the Warrant and Exercise Shares the Holder is acquiring is being acquired for, and will be held for, its account only.

 

4.2. Securities Are Not Registered .

 

(a) The Holder understands that the Warrant and the Exercise Shares have not been registered under the Securities Act of 1933, as amended (the “ Act ”) on the basis that no distribution or public offering of the stock of the Company is to be effected. The Holder realizes that the basis for the exemption may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. The Holder has no such present intention.

 

(b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. The Holder recognizes that the Company has no obligation to register the Warrant or the Exercise Shares of the Company, or to comply with any exemption from such registration.

 

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(c) The Holder is aware that neither the Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations. The Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company presently has no plans to satisfy these conditions in the foreseeable future.

 

4.3. Disposition of Warrant and Exercise Shares .

 

(a) The Holder further agrees not to make any disposition of all or any part of the Warrant or Exercise Shares in any event unless and until:

 

(i) The Company shall have received a letter secured by the Holder from the Securities and Exchange Commission stating that no action will be recommended to the Commission with respect to the proposed disposition;

 

(ii) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or

 

(iii) The Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the effect that such disposition will not require registration of such Warrant or Exercise Shares under the Act or any applicable state securities laws. The Company agrees that it will not require an opinion of counsel with respect to transactions under Rule 144 of the Securities Act, except in unusual circumstances.

 

(b) The Holder understands and agrees that all certificates evidencing the shares to be issued to the Holder may bear the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

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4.4. Accredited Investor Status . The Holder is an “ accredited investor ” as defined in Regulation D promulgated under the Act.

 

5. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF EXERCISE SHARES .

 

5.1. Changes in Securities . In the event of changes in the series of equity securities of the Company comprising the Exercise Shares by reason of stock dividends, splits, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of Exercise Shares available under the Warrant in the aggregate and the Exercise Price shall be correspondingly adjusted to give the Holder of the Warrant, on exercise for the same aggregate Exercise Price, the total number, class, and kind of shares as the Holder would have owned had the Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. For purposes of this Section 5, the “ Aggregate Exercise Price ” shall mean the aggregate Exercise Price payable in connection with the exercise in full of this Warrant. The form of this Warrant need not be changed because of any adjustment in the number of Exercise Shares subject to this Warrant.

 

6. FRACTIONAL SHARES . No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) to be issued upon exercise of this Warrant shall be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current fair market value of one Exercise Share by such fraction.

 

7. REORGANIZATION . In the event of, at any time during the Exercise Period, any capital reorganization or recapitalization of the capital stock of the Company (other than a change in par value or from par value to no par value or no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares, and other than a Liquidation Transaction (as defined in the Company’s Articles of Incorporation, as amended from time to time) which shall be governed by Section 8 below) (an “ Organic Change ”), then, as a condition of such Organic Change, lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the Exercise Shares of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Exercise Shares equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, and the Exercise Price shall be appropriately adjusted so that the Aggregate Exercise Price after such Organic Change shall be equal to the Aggregate Exercise Price immediately prior to such Organic Change.

 

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8. EARLY TERMINATION . In the event of, at any time during the Exercise Period prior to the exercise of this Warrant, a Liquidation Transaction, the Company shall provide to the Holder 10 days’ advance written notice of the Closing of such transaction. This Warrant shall terminate upon the consummation of the Liquidation Transaction.

 

9. MARKET STAND-OFF AGREEMENT . Holder shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock (or Exercise Shares or other securities) of the Company held by Holder, during the 180-day period following the effective date of a registration statement of the Company filed under the Act (or such longer period, not to exceed 18 days after the expiration of the 180-day period, as the underwriters or the Company shall request in order to facilitate compliance with FINRA Rule 2711). Holder agrees to execute and deliver such other agreements as requested by the Company and/or the managing underwriter(s) which are consistent with the foregoing or which are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to such Common Stock (or other securities) until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 9 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

 

10. No STOCKHOLDER RIGHTS . This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.

 

11. TRANSFER OF WARRANT . Subject to applicable laws and the restriction on transfer set forth on the first page of this Warrant, this Warrant and all rights hereunder are transferable, by the Holder in person or by duly authorized attorney, upon delivery of this Warrant and the form of assignment attached hereto to any transferee designated by the Holder. The transferee shall sign an investment letter in form and substance satisfactory to the Company.

 

12. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT . If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. 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.

 

13. AMENDMENT . Any term of this Warrant may be amended or waived with the written consent of the Company and the Majority Holders provided that all Warrants are similarly affected. Upon the effectuation of such amendment or waiver in conformance with this Section 13, the Company shall promptly give written notice thereof to the record holders of the Warrants who have not previously consented thereto in writing.

 

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14. NOTICES, ETC . All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address listed on the signature page and to the Holder at the address listed on the Schedule of Purchasers to the Purchase Agreement or at such other address as the Company or the Holder may designate by ten (10) days advance written notice to the other parties hereto.

 

15. ACCEPTANCE . Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

 

16. GOVERNING LAW . This Warrant and all rights, obligations and liabilities hereunder shall be governed by and construed under the laws of the State of California as applied to agreements among California residents, made and to be performed entirely within the State of California without giving effect to conflicts of laws principles.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

7
 

 

IN WITNESS WHEREOF , the Company has caused this Warrant to be executed by its duly authorized officer as of October 15, 2013.

 

  BONE BIOLOGICS, INC.
   
  BY: /s/ William Jay Treat
  NAME: William Jay Treat
  TITLE: President & CTO
     
  Address: 100 Rancho Rd, Suite 7 - 231
    Thousand Oaks, CA 91362

 

 
 

 

NOTICE OF EXERCISE

 

TO: BONE BIOLOGICS, INC.

 

(1) [  ] The undersigned hereby elects to purchase ______ shares of ______ (the “ Exercise Shares ”) of Bone Biologics Inc . (the “ Company ”) pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

[  ]  The undersigned hereby elects to purchase ______ shares of ______ (the “ Exercise Shares ”) of Bone Biologics, Inc . (the “ Company ”) pursuant to the terms of the net exercise provisions set forth in Section 2.1 of the attached Warrant, and shall tender payment of all applicable transfer taxes, if any.

 

(2) Please issue a certificate or certificates representing said Exercise Shares in the name of the undersigned or in such other name as is specified below:

 

 

 

(Name)

 

 

 

 

 

(Address)

 

(3) The undersigned represents that (i) the aforesaid Exercise Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares; (ii) the undersigned is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned’s own interests; (iv) the undersigned understands that Exercise Shares issuable upon exercise of this Warrant have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), by reason of a specific exemption from the registration provisions of the Securities Act, which exemption depends upon, among other things, the bona fide nature of the investment intent as expressed herein, and, because such securities have not been registered under the Securities Act, they must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available; (v) the undersigned is aware that the aforesaid Exercise Shares may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met and until the undersigned has held the shares for the number of years prescribed by Rule 144, that among the conditions for use of the Rule is the availability of current information to the public about the Company and the Company has not made such information available and has no present plans to do so; and (vi) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares of Exercise Shares unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement, or, if reasonably requested by the Company, the undersigned has provided the Company with an opinion of counsel satisfactory to the Company, stating that such registration is not required.

 

     
Date)    (Signature)
     
     
    (Print name)

 

 
 

 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares. )

 

FOR VALUE RECEIVED , the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

Name: _________________________________________________________________________________

(Please Print)

Address: _______________________________________________________________________________

(Please Print)

Dated: ___________ , 20_

 

Holder’s

Signature: ____________________________________________________________

 

Holder’s

Address: _____________________________________________________________

  

NOTE : The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

 
 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

 

Warrant No. CW-482 Number of Shares: 166,667
Date of Issuance: June __, 2014 (subject to adjustment)

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that the Musculoskeletal Transplant Foundation, Inc., or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 6 below), up to 166,667 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of $0.001 par value per share common stock of the Company (the “ Common Stock ”), at an exercise price of $1.50 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless the Registered Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

 
 

 

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

X =    Y (A - B)  
   A  

 

Where X = The number of shares of Common Stock to be issued to the Registered Holder.
     
  Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
     
  A = The fair market value of one share of Common Stock (at the date of such calculation).
     
  B = The Exercise Price (as adjusted to the date of such calculation).

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

- 2 -
 

 

(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of the Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to a Significant Transaction as described in Section 6(b) below, in which case the fair market value per share of the Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within three business days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of the Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

(b) Reclassification, Etc . In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

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(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

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5. Representations and Warranties of Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same except under circumstances that will not result in a violation of the Securities Act or any other federal or state securities laws. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisios of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company is under no obligation and may not be able to satisfy.

 

(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company and thatthe Company has made no assurances that a public market will ever exist for the Securities.

 

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(e) Legends . The Registered Holdr understands that the Securities, and any securities issued in respect of or exchange for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6. Termination . This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) the date that is four years after the Date of Issuance (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “ Significant Transaction ”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

7. Piggyback Registrations . The Company shall notify the Registered Holders in writing at least thirty (30) days prior to the initial filing of any future registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to any employee benefit plan, acquisition or a corporate reorganization,), and will afford each Registered Holder an opportunity to include in such registration statement all or any part of the Warrant Shares then held by such Registered Holder that are not currently included in another registration statement. Each Registered Holder desiring to include in any such registration statement all or any part of the Warrant Shares held by such Registered Holder shall within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Warrant Shares such Registered Holder wishes to include in such registration statement. If a Registered Holder decides not to include all of its Warrant Shares in any registration statement thereafter filed by the Company, such Registered Holder shall nevertheless continue to have the right to include any Warrant Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

 

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8. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

9. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of the Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

10. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

11. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

12. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

13. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

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14. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

15. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

16. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

17. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

18. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded from this Warrant, the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

19. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

20. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

21. Lock-up Agreement . In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, the Registered Holder agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days, but subject to such extensions as may be required by the underwriters in order to publish research reports while complying with Rule 2711 of the Financial Industry Regulatory Authority, Inc.) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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IN WITNESS WHEREOF , the parties have executed this Common Stock Purchase Warrant as of the date first forth above.

 

  BONE BIOLOGICS, INC.
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer and Director
     
  Address: 100 Rancho Road
    Suite 7 - #231
    Thousand Oaks, CA 91362

 

  THE MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.
     
  By: /s/ Michael J. Kawas 
  Name: Michael J. Kawas
  Title: Executive Vice President and Chief Financial Officer
     
  Address: 100 Rancho Road
    Suite 7 - #231
    Thousand Oaks, CA 91362

 

[Signature Page to Common Stock Purchase Warrant] 

 

 
 

 

EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To: Bone Biologics, Inc. Dated:

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. [CW-482] (the “ Warrant ”), hereby irrevocably elects to (a) purchase _____ shares of the Common Stock covered by the Warrant and herewith makes payment of $ _________, representing the full purchase price for such shares at the price per share provided for in the Warrant, or (b) exercise the Warrant for _______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of the Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 5 of the Warrant and by its signature below hereby makes such representations and warranties to the Company. Defined terms used but not defined in this Purchase/Exercise Form shall have the meanings assigned to them in the Warrant.

 

  Signature:  
  Name (print):  
  Title (if applic.):  
  Company (if applic.):  
     
 
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, _________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee   Address/Fax Number   No. of Shares

 

 

 

 

 

 

Dated:     Signature:  
         
         
         
      Witness:  

 

 
 

 

SALE AND ASSIGNMENT OF CONVERTIBLE PROMISSORY NOTE

 

and Common Stock Purchase Warrant

 

This Sale and Assignment of Convertible Promissory Note and Common Stock Purchase Warrant (this “ Assignment ”), dated as of July [ ], 2014 (the “ Effective Date ”), is entered into by and among the Musculoskeletal Transplant Foundation, Inc. (the “ Holder ” or “ Assignor ”) and Orthofix Holdings Inc. (“ Assignee ”).

 

WHEREAS, Bone Biologics, Inc. issued a Convertible Promissory Note, dated May 27, 2014, in the original principal amount of $250,000 (the “ Note ”), as well as a Common Stock Purchase Warrant, numbered CW-482 (the “ Warrant ”), to Assignor;

 

WHEREAS, Assignor desires to sell and assign the principal amount and all interest that has accrued on that principal amount and all collateral rights, title and interests under the Note to Assignee, and Assignee is willing to purchase such Note and accept such assignment on the terms and conditions set forth herein;

 

WHEREAS, Assignor desires to sell and assign to Assignee all of Assignor’s rights, title and interests under the Warrant, and Assignee is willing to purchase such Warrant and to accept such assignment on the terms and conditions set forth herein;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1. Assignment and Satisfaction of Note . Assignor hereby sells, transfers and assigns to Assignee its entire right, title and interest in $250,000 of principal and the accrued interest thereon of the Note, and Assignee hereby accepts such assignment in full satisfaction of any and all obligations of Assignor under the Note.
   
2. Assignment and Assumption of Warrant . Effective as of the date hereof, Assignor hereby sells, assigns, conveys, transfers and sets over unto Assignee all of Assignor’s right, title and interest in and to the Warrant, and Assignee hereby accepts such assignment and agrees to be bound by and subject to all of the terms and conditions set forth in the Warrant, including but not limited to the transfer restrictions set forth in Section 3 therein, in the same manner as Assignor is bound by those provisions of the Warrant.
   
3. Payment . As collective consideration for the sale by Assignor of the Note and Warrant, Assignee shall pay on the date hereof $250,000 to Assignor.
   
4. Representations and Warranties . Assignor represents and warrants to Assignee that as of immediately prior to the sale and transfer effected hereunder, Assignor is the record and beneficial owner of the Note and Warrant, in each case, free and clear of any liens, restrictions, security interests, claims, rights of another or encumbrances.

 

 
 

 

5. Successors and Assigns . This Assignment and all of the terms, conditions and provisions hereof shall inure to the benefit of, and be binding upon, the respective successors and assigns of the parties hereto.
   
6. Governing Law . This Assignment shall be construed under and enforced in accordance with the laws of the State of California.
   
7. Counterparts . This Assignment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
   
8. Further Instruments . The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Assignment.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Assignment as of the day specified above.

 

  Assignor:
  THE MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.
     
  By: /s/ Michael J. Kawas
  Name: Michael J. Kawas
  Title: Executive Vice President and Chief Financial Officer
     
  Address: 125 May Street
    Edison, NJ 08837
     
  Assignee:
  Orthofix Holdings, Inc.
     
  By: /s/ Mark A. Heggestad
  Name: Mark A. Heggestad
  Title: Chief Financial Officer
     
  Address: 3451 Plana Parkway
    Lewisville, TX 75056

 

[Signature Page to Sale and Assignment of Convertible Promissory Note and Common Stock Purchase Warrant]

 

 
 

 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

 

Warrant No. CW-484 Number of Shares: 166,667
Date of Issuance: July 1, 2014 (subject to adjustment)

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that Orthofix Holdings Inc., or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 6 below), up to 166,667 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of $0.0001 par value per share common stock of the Company (the “ Common Stock ”), at an exercise price of $1.50 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless the Registered Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

 
 

 

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

  X =

Y (A-B)  

 
    A  

 

  Where X = The number of shares of Common Stock to be issued to the Registered Holder.
     
  Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
     
  A = The fair market value of one share of Common Stock (at the date of such calculation).
     
  B = The Exercise Price (as adjusted to the date of such calculation).

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

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(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of the Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to a Significant Transaction as described in Section 6(b) below, in which case the fair market value per share of the Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within three business days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of the Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

(b) Reclassification, Etc. In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

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(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

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5. Representations and Warranties of Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same except under circumstances that will not result in a violation of the Securities Act or any other federal or state securities laws. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company may not be able to satisfy.

 

(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company and that the Company has made no assurances that a public market will ever exist for the Securities.

 

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(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchanged for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6. Termination . This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) the date that is four years after the Date of Issuance (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “ Significant Transaction ”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

7. The Merger. The Company intends to enter into an Agreement and Plan of Merger pursuant to which the Company will merge (the “ Merger ”) with and into a subsidiary (“ Sub ”) of AFH Acquisition X, Inc., a Delaware corporation (“ BB Corp. ”), resulting in the Company becoming a wholly-owned subsidiary of BB Corp. Upon consummation of the Merger, BB. Corp will change its name to “Bone Biologics, Corp.,” and the separate existence of Sub will end. If the Merger is consummated, BB Corp. will, upon consummation of the Merger, issue a new warrant (the “ New Warrant ”) to the Registered Holder. The New Warrant will contain terms substantially identical to the terms contained in this Warrant. Upon the Registered Holder’s receipt of the New Warrant, the New Warrant will become effective, and this Warrant will become null and void.

 

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8. Piggyback Registrations. The Company shall notify the Registered Holders in writing at least thirty (30) days prior to the initial filing of any future registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to any employee benefit plan, acquisition or a corporate reorganization,), and will afford each Registered Holder an opportunity to include in such registration statement all or any part of the Warrant Shares then held by such Registered Holder that are not currently included in another registration statement. Each Registered Holder desiring to include in any such registration statement all or any part of the Warrant Shares held by such Registered Holder shall within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Warrant Shares such Registered Holder wishes to include in such registration statement. If a Registered Holder decides not to include all of its Warrant Shares in any registration statement thereafter filed by the Company, such Registered Holder shall nevertheless continue to have the right to include any Warrant Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

 

9. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

10. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of the Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

11. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

12. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

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13. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

14. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

15. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

16. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

17. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

18. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

19. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision or provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provision or provisions were so excluded and shall be enforceable in accordance with its terms.

 

20. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

21. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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IN WITNESS WHEREOF , the parties have executed this Common Stock Purchase Warrant as of the date first forth above.

 

  BONE BIOLOGICS, INC.
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer
     
  Address: 100 Rancho Road
    Suite 7 - #231
    Thousand Oaks, CA 91362
     
  ORTHOFIX HOLDINGS INC.
     
  By: /s/ Mark A. Heggestad
  Name: Mark A. Heggestad
  Title: Chief Financial Officer
     
  Address: Attn: Mark A. Heggestad
    Chief Financial Officer
    3451 Plano Parkway
    Lewisville, TX 75056

 

[Signature Page to Common Stock Purchase Warrant]

 

 
 

 

EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To: Bone Biologics, Inc. Dated:  

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. CW-484 (the “ Warrant ”), hereby irrevocably elects to (a) purchase _____ shares of the Common Stock covered by the Warrant and herewith makes payment of $ _________, representing the full purchase price for such shares at the price per share provided for in the Warrant, or (b) exercise the Warrant for _______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of the Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 5 of the Warrant and by its signature below hereby makes such representations and warranties to the Company. Defined terms used but not defined in this Purchase/Exercise Form shall have the meanings assigned to them in the Warrant.

 

  Signature:  
     

  Name (print):  

     
  Title (if applic.):  

     
  Company (if applic.):  

 

 
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, _________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee   Address/Fax Number   No. of Shares

  

 

 

 

 

Dated:_________________   Signature:  
       
       
       
    Witness:  

 

 
 

 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

 

Warrant No. CW-47 Number of Shares: 500,000
Date of Issuance: July 3, 2014  

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that AFH Holding & Advisory, LLC, or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 6 below), up to 500,000 shares of $0.001 par value per share common stock of the Company (the “ Common Stock ”), at an exercise price of $1.00 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

This Warrant has been issued in consideration for the acquisition of a publicly-reporting shell company.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless the Registered Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

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(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

  X =

Y (A-B)  

 
    A  

   

  Where X = The number of shares of Common Stock to be issued to the Registered Holder.
     
  Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
     
  A = The fair market value of one share of Common Stock (at the date of such calculation).
     
  B = The Exercise Price (as adjusted to the date of such calculation).

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

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(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of the Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to a Significant Transaction as described in Section 6(b) below, in which case the fair market value per share of the Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within three business days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of the Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

3
 

 

(b) Reclassification, Etc . In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

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(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

5. Representations and Warranties of Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same except under circumstances that will not result in a violation of the Securities Act or any other federal or state securities laws. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

5
 

 

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder acknowledges that the Company has no obligation to register or qualify the Securities for resale. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company is under no obligation and may not be able to satisfy.

 

(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company and that the Company has made no assurances that a public market will ever exist for the Securities.

 

(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchange for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 “

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6
 

 

6. Termination . This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) February , 2020, (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “ Significant Transaction ”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

7. Piggyback Registrations . The Company shall notify the Registered Holders in writing at least thirty (30) days prior to the initial filing of any future registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to any employee benefit plan, acquisition or a corporate reorganization,), and will afford each Registered Holder an opportunity to include in such registration statement all or any part of the Warrant Shares then held by such Registered Holder that are not currently included in another registration statement. Each Registered Holder desiring to include in any such registration statement all or any part of the Warrant Shares held by such Registered Holder shall within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Warrant Shares such Registered Holder wishes to include in such registration statement. If a Registered Holder decides not to include all of its Warrant Shares in any registration statement thereafter filed by the Company, such Registered Holder shall nevertheless continue to have the right to include any Warrant Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

 

8. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

9. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of the Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

10. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

7
 

 

11. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

12. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

13. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

14. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

15. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

16. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

17. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

18. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision shall be excluded from this Warrant, the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

 

19. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

8
 

 

20. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

21. Lock-up Agreement . In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing such offering of the Company’s securities, the Registered Holder agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days, but subject to such extensions as may be required by the underwriters in order to publish research reports while complying with Rule 2711 of the Financial Industry Regulatory Authority, Inc.) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the Company’s initial public offering.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

9
 

 

IN WITNESS WHEREOF , the parties have executed this Common Stock Purchase Warrant as of the date first forth above.

 

  BONE BIOLOGICS, INC.
   
  By: /s/ Michael Schuler
     
  Name: Michael Schuler
     
  Title: Chief Executive Officer
     
  Address: 100 Rancho Road
Suite 7 - #231
Thousand Oaks, CA 91362

 

  Facsimile Number:  

 

 
 

 

EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To: Bone Biologics, Corp. Dated:  

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. [CW- __] (the “ Warrant ”), hereby irrevocably elects to (a) purchase _____ shares of the Common Stock covered by the Warrant and herewith makes payment of $_______, representing the full purchase price for such shares at the price per share provided for in the Warrant, or (b) exercise the Warrant for _______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of the Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 5 of the Warrant and by its signature below hereby makes such representations and warranties to the Company. Defined terms used but not defined in this Purchase/Exercise Form shall have the meanings assigned to them in the Warrant.

 

  Signature:  
     

  Name (print):  

     
  Title (if applic.):  

     
  Company (if applic.):  

 

 
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, ______________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee   Address/Fax Number   No. of Shares

 

 

 

 

 

Dated:_________________   Signature:  
       
       
       
    Witness:  

 

 
 

 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

 

Warrant No. CW-485 Number of Shares: 12,625
Date of Issuance: July 11, 2014 (subject to adjustment)

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that Catherine Doll, or her registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 6 below), up to 12,625 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of $0.0001 par value per share common stock of the Company (the “ Common Stock ”), at an exercise price of $0.00 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless the Registered Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

 
 

 

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

  X =

Y(A-B)  

 
    A  

   

Where X = The number of shares of Common Stock to be issued to the Registered Holder.
     
  Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
     
  A = The fair market value of one share of Common Stock (at the date of such calculation).
     
  B = The Exercise Price (as adjusted to the date of such calculation).

   

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of the Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to a Significant Transaction as described in Section 6(b) below, in which case the fair market value per share of the Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

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(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within three business days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of the Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

(b) Reclassification, Etc . In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

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(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

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5. Representations and Warranties of the Registered Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same except under circumstances that will not result in a violation of the Securities Act or any other federal or state securities laws. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company may not be able to satisfy.

 

(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company and that the Company has made no assurances that a public market will ever exist for the Securities.

 

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(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchanged for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6. Termination . This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) the date that is four years after the Date of Issuance (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “ Significant Transaction ”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

7. The Merger . The Company intends to enter into an Agreement and Plan of Merger pursuant to which the Company will merge (the “ Merger ”) with and into a subsidiary (“ Sub ”) of AFH Acquisition X, Inc., a Delaware corporation (“ BB Corp. ”), resulting in the Company becoming a wholly-owned subsidiary of BB Corp. Upon consummation of the Merger, BB. Corp will change its name to “Bone Biologics, Corp.,” and the separate existence of Sub will end. If the Merger is consummated, BB Corp. will, upon consummation of the Merger, issue a new warrant (the “ New Warrant ”) to the Registered Holder. The New Warrant will contain terms substantially identical to the terms contained in this Warrant. Upon the Registered Holder’s receipt of the New Warrant, the New Warrant will become effective, and this Warrant will become null and void.

 

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8. Piggyback Registrations . The Company shall notify the Registered Holders in writing at least thirty (30) days prior to the initial filing of any future registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to any employee benefit plan, acquisition or a corporate reorganization,), and will afford each Registered Holder an opportunity to include in such registration statement all or any part of the Warrant Shares then held by such Registered Holder that are not currently included in another registration statement. Each Registered Holder desiring to include in any such registration statement all or any part of the Warrant Shares held by such Registered Holder shall within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Warrant Shares such Registered Holder wishes to include in such registration statement. If a Registered Holder decides not to include all of its Warrant Shares in any registration statement thereafter filed by the Company, such Registered Holder shall nevertheless continue to have the right to include any Warrant Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

 

9. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

10. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of the Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

11. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

12. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

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13. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

14. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

15. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

16. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

17. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

18. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

19. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision or provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provision or provisions were so excluded and shall be enforceable in accordance with its terms.

 

20. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

21. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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IN WITNESS WHEREOF , the parties have executed this Common Stock Purchase Warrant as of the date first forth above.

 

  BONE BIOLOGICS, INC.:
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer
     
  Address: 100 Rancho Road
    Suite 7 - #231
    Thousand Oaks, CA 91362

 

  CATHERINE DOLL
     
  By: /s/ Catherine Doll
  Name: Catherine Doll
     
  Address: The Gilson Group, LLC.
    2967 Michelson Drive, Suite G102
Irvine, CA 92612

 

[Signature Page to Common Stock Purchase Warrant]

 

 
 

 

EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To:          Bone Biologics Inc. Dated:

  

The undersigned, pursuant to the provisions set forth in the attached Warrant No. CW-485 (the “ Warrant ”), hereby irrevocably elects to (a) purchase _____ shares of the Common Stock covered by the Warrant and herewith makes payment of $ _________, representing the full purchase price for such shares at the price per share provided for in the Warrant, or (b) exercise the Warrant for _______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of the Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 5 of the Warrant and by its signature below hereby makes such representations and warranties to the Company. Defined terms used but not defined in this Purchase/Exercise Form shall have the meanings assigned to them in the Warrant.

 

  Signature:  
     
  Name (print):  
     
  Title (if applic.):  
     
  Company (if applic.):  

 

 
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, _________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee Address/Fax Number   No. of Shares

 

 

 

 

 

Dated:     Signature:  
          
         
         
      Witness:  

 

 
 

 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

 

Warrant No. CW-486 Number of Shares: 46,667
Date of Issuance: July 3, 2014 (subject to adjustment)

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that Forefront Capital Markets, LLC, or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 6 below), up to 46,667 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of $0.0001 par value per share common stock of the Company (the “ Common Stock ”), at an exercise price of $1.00 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless the Registered Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

 
 

 

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

X =    Y (A - B)  
   A  

 

Where X = The number of shares of Common Stock to be issued to the Registered Holder.
     
  Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
     
  A = The fair market value of one share of Common Stock (at the date of such calculation).
     
  B = The Exercise Price (as adjusted to the date of such calculation).

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

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(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of the Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to a Significant Transaction as described in Section 6(b) below, in which case the fair market value per share of the Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within three business days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

(i) a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

(ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of the Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

(b) Reclassification, Etc. In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

- 3 -
 

 

(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

( a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

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5. Representations and Warranties of the Registered Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same except under circumstances that will not result in a violation of the Securities Act or any other federal or state securities laws. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company may not be able to satisfy.

 

(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company and that the Company has made no assurances that a public market will ever exist for the Securities.

 

- 5 -
 

 

(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchanged for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6. Termination . This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) the date that is five years after the Date of Issuance (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “ Significant Transaction ”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

7. The Merger. The Company intends to enter into an Agreement and Plan of Merger pursuant to which the Company will merge (the “ Merger ”) with and into a subsidiary (“ Sub ”) of AFH Acquisition X, Inc., a Delaware corporation (“ BB Corp. ”), resulting in the Company becoming a wholly-owned subsidiary of BB Corp. Upon consummation of the Merger, BB. Corp will change its name to “Bone Biologics, Corp.,” and the separate existence of Sub will end. If the Merger is consummated, BB Corp. will, upon consummation of the Merger, issue a new warrant (the “ New Warrant ”) to the Registered Holder. The New Warrant will contain terms substantially identical to the terms contained in this Warrant. Upon the Registered Holder’s receipt of the New Warrant, the New Warrant will become effective, and this Warrant will become null and void.

 

- 6 -
 

 

8. Piggyback Registrations. The Company shall notify the Registered Holders in writing at least thirty (30) days prior to the initial filing of any future registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to any employee benefit plan, acquisition or a corporate reorganization,), and will afford each Registered Holder an opportunity to include in such registration statement all or any part of the Warrant Shares then held by such Registered Holder that are not currently included in another registration statement. Each Registered Holder desiring to include in any such registration statement all or any part of the Warrant Shares held by such Registered Holder shall within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Warrant Shares such Registered Holder wishes to include in such registration statement. If a Registered Holder decides not to include all of its Warrant Shares in any registration statement thereafter filed by the Company, such Registered Holder shall nevertheless continue to have the right to include any Warrant Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

 

9. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

10. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of the Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

11. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

12. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

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13. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

14. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

15. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

16. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

 

17. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

18. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

19. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision or provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provision or provisions were so excluded and shall be enforceable in accordance with its terms.

 

20. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

21. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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IN WITNESS WHEREOF , the parties have executed this Common Stock Purchase Warrant as of the date first forth above.

 

  BONE BIOLOGICS, INC.:
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer
     
  Address: 100 Rancho Road
    Suite 7 - #231
    Thousand Oaks, CA 91362

  

  FOREFRONT CAPITAL MARKETS, LLC:
     
  By: /s/ Francis J. Argenziano
  Name: Francis J. Argenziano
  Title: Senior Managing Director, Investment Banking
     
  Address: Forefront Capital Markets, LLC
    590 Madison Ave, 35th Floor
    New York, NY 10022

 

[Signature Page to Common Stock Purchase Warrant]

 

 
 

 

EXHIBIT A

 

  PURCHASE/EXERCISE FORM

 

To: Bone Biologics, Inc. Dated:

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. CW-486 (the “ Warrant ”), hereby irrevocably elects to (a) purchase _____ shares of the Common Stock covered by the Warrant and herewith makes payment of $ _________, representing the full purchase price for such shares at the price per share provided for in the Warrant, or (b) exercise the Warrant for _______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of the Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 5 of the Warrant and by its signature below hereby makes such representations and warranties to the Company. Defined terms used but not defined in this Purchase/Exercise Form shall have the meanings assigned to them in the Warrant.

 

  Signature:  
  Name (print):  
  Title (if applic.):  
  Company (if applic.):  

   

 
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, _________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee   Address/Fax Number   No. of Shares

 

 

 

 

 

Dated:     Signature:  
         
         
         
      Witness:  

 

 
 

 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

 

Warrant No. CW-487 Number of Shares: 625,000
Date of Issuance: September 1, 2014 (subject to adjustment)

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that Musculoskeletal Transplant Foundation, Inc., or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 6 below), up to 625,000 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of $0.0001 par value per share common stock of the Company (the “ Common Stock ”), at an exercise price of $1.62 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless the Registered Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

X =    Y (A - B)  
   A  

 

  Where X = The number of shares of Common Stock to be issued to the Registered Holder.
       
  Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
       
  A = The fair market value of one share of Common Stock (at the date of such calculation).
       
  B = The Exercise Price (as adjusted to the date of such calculation).

 

 
 

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of the Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to a Significant Transaction as described in Section 6(b) below, in which case the fair market value per share of the Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within three business days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and

 

in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of the Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

(b) Reclassification, Etc . In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

2
 

 

(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

5. Representations and Warranties of the Registered Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same except under circumstances that will not result in a violation of the Securities Act or any other federal or state securities laws. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company may not be able to satisfy.

 

3
 

 

(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company and that the Company has made no assurances that a public market will ever exist for the Securities.

 

(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchanged for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6. Termination . This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) the date that is seven (7) years after the Date of Issuance (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “ Significant Transaction ”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

7. The Merger . The Company intends to enter into an Agreement and Plan of Merger pursuant to which the Company will merge (the “ Merger ”) with and into a subsidiary (“ Sub ”) of AFH Acquisition X, Inc., a Delaware corporation (“ BB Corp. ”), resulting in the Company becoming a wholly-owned subsidiary of BB Corp. Upon consummation of the Merger, BB. Corp will change its name to “Bone Biologics, Corp.,” and the separate existence of Sub will end. If the Merger is consummated, BB Corp. will, upon consummation of the Merger, issue a new warrant (the “ New Warrant ”) to the Registered Holder. The New Warrant will contain terms substantially identical to the terms contained in this Warrant. Upon the Registered Holder’s receipt of the New Warrant, the New Warrant will become effective, and this Warrant will become null and void.

 

8. Piggyback Registrations . The Company shall notify the Registered Holders in writing at least thirty (30) days prior to the initial filing of any future registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to any employee benefit plan, acquisition or a corporate reorganization,), and will afford each Registered Holder an opportunity to include in such registration statement all or any part of the Warrant Shares then held by such Registered Holder that are not currently included in another registration statement. Each Registered Holder desiring to include in any such registration statement all or any part of the Warrant Shares held by such Registered Holder shall within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Warrant Shares such Registered Holder wishes to include in such registration statement. If a Registered Holder decides not to include all of its Warrant Shares in any registration statement thereafter filed by the Company, such Registered Holder shall nevertheless continue to have the right to include any Warrant Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

 

9. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

4
 

 

10. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of the Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

11. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

12. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

13. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

14. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

15. Headings . The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

16. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of New Jersey, without giving effect to principles of conflicts of law.

 

17. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

18. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

19. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision or provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provision or provisions were so excluded and shall be enforceable in accordance with its terms.

 

20. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

21. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

5
 

 

IN WITNESS WHEREOF , the parties have executed this Common Stock Purchase Warrant as of the date first forth above.

 

  BONE BIOLOGICS, INC.:
   
  By:

/s/ Michael Schuler

  Name: Michael Schuler
  Title: Chief Executive Officer
  Address:

100 Rancho Road

Suite 7 - #231

Thousand Oaks, CA 91362

     
  MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.:
   
  By: /s/ Michael J. Kawas
  Name: Michael J. Kawas
  Title: Executive Vice President
and Chief Financial Officer
  Address:

Musculoskeletal Transplant

Foundation, Inc.

125 May Street, Suite 300

Edison, NJ 08837590

 

 
 

 

EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To: Bone Biologics, Inc. Dated:

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. CW-487 (the “ Warrant ”), hereby irrevocably elects to (a) purchase _____ shares of the Common Stock covered by the Warrant and herewith makes payment of $ ________, representing the full purchase price for such shares at the price per share provided for in the Warrant, or (b) exercise the Warrant for ________ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of the Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 5 of the Warrant and by its signature below hereby makes such representations and warranties to the Company. Defined terms used but not defined in this Purchase/Exercise Form shall have the meanings assigned to them in the Warrant.

 

  Signature:  
  Name (print):  
  Title (if applic.):  
  Company (if applic.):  

 

A- 1
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, ____________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee Address/Fax Number No. of Shares

 

 

 

 

 

 

Dated:     Signature:  
         
         
         
      Witness:  

 

B- 2
 

 

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “ Agreemen t”) is made as of ____________, 2014 by and among BONE BIOLOGICS, CORP., a Delaware corporation (the “ Company ”), MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC., a California Corporation (“ MTF ”), AFH HOLDING AND ADVISORY, LLC, a Delaware limited liability company (“ AFH ”) and HANKY INVESTMENT COMPANY, L.P. (‘HIC’) (MTF, HIC and AFH each a “ Stockholder ” and collectively referred to as the “ Stockholders ”).

 

RECITALS

 

A. The Company, AFH Acquisition X, Inc. (“ AFH Acquisition ”), a wholly-owned subsidiary of AFH, Bone Biologics Acquisition Corp., a wholly-owned subsidiary of AFH Acquisition (“ Merger Sub ”), and Bone Biologics, Inc. (“ Bone Bio ”) has entered into that certain Agreement and Plan of Merger, dated ______________ (the “ Merger Agreement ”)

 

B. Under the terms of the Merger Agreement, the Merger Sub merged with and into Bone Bio, the separate corporate existence of Merger Sub ceased and the Bone Bio continued as the surviving corporation and a wholly owned subsidiary of AFH Acquisition (the “ Merger ”). In connection with the Merger, AFH Acquisition changed its name to Bone Biologics, Corp., herein also referred to as the “ Company .”

 

C. The Stockholders hold certain shares of common stock, par value $ 0.001 (“ Common Stock ”), in the Company (the “ Shares ”).

 

D. Pursuant to the terms of the Merger Agreement, MTF and AFH have certain demand registration rights and unlimited piggyback registration rights for the Shares.

 

AGREEMENTS

 

In consideration of the premises and the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Definitions . In addition to terms defined elsewhere herein, as used in this Agreement, the terms:

 

“Affiliate” of any particular person or entity means any other person or entity controlling, controlled by or under common control with such particular person or entity and, for any person that is a partnership, will also include any general or limited partner of such partnership.

 

“Business Day” means any day other than Saturday, Sunday, or a day on which commercial banks in California or New York are obligated by any legal requirement to close.

 

 
 

 

“Commission” means the Securities and Exchange Commission.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Initial Public Offering” means the Company’s first underwritten Public Offering.

 

“Public Offering” means any offering by the Company of its equity securities to the public pursuant to an effective registration statement under the Securities Act or any comparable statement under any comparable federal statute then in effect.

 

“Registrable Shares” means at any time (i) any shares of Common Stock beneficially held, directly or indirectly, by MTF, HIC and AFH as of the date of this agreement, respectively; and (ii) any shares of Common Stock then issuable directly or indirectly upon the conversion or exercise of other securities or which were issued as a dividend or other distribution with respect to or in replacement of such shares referred to in (i); provided, however, that Registrable Shares shall not include any shares which have been sold pursuant to an effective registration statement under the Securities Act or which have been sold to the public pursuant to Rule 144 under the Securities Act or any other available exemption to the Securities Act. For purposes of this Agreement, a person will be deemed to be a holder of Registrable Shares whenever such person has the then existing right to acquire such Registrable Shares (by conversion or otherwise), whether or not such acquisition actually has been effected (it being understood, however, that any Registrable Shares which are not shares of Common Stock shall be converted into or exercised for shares of Common Stock immediately prior to the filing of any registration pursuant to which such Common Stock is to be registered).

 

“Securities Act” means the Securities Act of 1933, as amended.

 

2. Demand Registration .

 

2.1 Requests for Registration . Subject to the terms of this Agreement, on or before thirty (30) days after the date the Current Form 8K regarding the Merger Agreement is filed with the Commission (the “ 8K Filing Date ”), the Company will seek registration under the Securities Act of all or part of their Registrable Shares on Form S-1 or any similar long-form registration (“ Long-Form Registration ”) or, if available, on Form S-2 or S-3 or any similar short-form registration (“ Short-Form Registration ”) (either of such registrations, a “ Demand Registration ”). Within five (5) days of the 8K Filing Date, the Company will, subject to Section 2.2 below, give written notice of its intent to make a Demand Registration to all other holders of Registrable Shares and will include in such registration all Registrable Shares with respect to which the Company has received written requests for inclusion within twenty-five (25) days after delivery of the Company’s notice. MTF, HIC and AFH will each be entitled to request two (2) Long-Form Registrations or Short-Form Registrations, in which the Company will pay, in each case, all Registration Expenses (as defined in Section 6 below). A registration will not constitute one of the permitted Demand Registrations until it has become effective and the holder of the Registrable Shares, as applicable, have been able to register and sell at least fifty percent (50%) of its Registrable Shares, respectively, requested to be included in such registration. The Company shall be entitled to include in any Demand Registration shares to be sold by the Company for its own account, provided that in the event that the number of shares included by the Company exceeds fifty percent (50%) of the shares registered in such registration, such registration will not count as a Demand Registration hereunder.

 

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2.2 Priority . The Company will include in any Demand Registration any Registrable Shares, or any other securities; provided, however, if the Demand Registration is an underwritten offering and the managing underwriter(s) advise the Company in writing that in their opinion the number of securities requested to be included exceeds the number of securities which can reasonably be sold in such offering, the Company will include in such registration, first, the Registrable Shares requested to be included in such Demand Registration pro rata among the holders of such Registrable Shares on the basis of the number of shares which such holders requested to be included in such registration, and second, the other securities to be included in such Demand Registration pro rata among the holders of such shares on the basis of the number of shares which such holders requested to be included in such registration.

 

2.3 Selection of Underwriters . MTF and AFH, as applicable, shall have the right to select the managing underwriter(s) to administer the offering anticipated by any of their Demand Registrations, subject, in each case, to the Company’s approval which will not be unreasonably withheld or delayed, and the Company shall have the right to select the managing underwriters for all other registrations and provided further that such managing underwriter(s) selected by MTF and AFH as applicable, shall be qualified nationally recognized underwriters. In the event that MTF and/or AFH shall have selected an underwriter, such Stockholder shall be required to pay any expenses related to such underwriter including any legal expenses of the Company related to such offering.

 

3. Piggyback Registration .

 

3.1 Right to Piggyback . Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a Demand Registration hereunder) and the registration form to be used may be used for the registration of any Registrable Shares (a “ Piggyback Registration ”), the Company will give prompt written notice to all holders of the Registrable Shares of its intention to effect such a registration and will include in such registration all Registrable Shares (in accordance with the priorities set forth in Sections 3.2 and 3.3 below) with respect to which the Company has received written requests for inclusion within fifteen (15) days after the delivery of the Company’s notice.

 

3.2 Priority on Primary Registrations . If a Piggyback Registration is an underwritten primary registration on behalf of the Company and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can reasonably be sold in such offering, the Company will include in such registration first , the securities that the Company proposes to sell, second, the Registrable Shares requested to be included in such registration, pro rata among the holders of such Registrable Shares on the basis of the number of shares which such holders requested to be included in such registration, and third, other securities requested to be included in such registration.

 

3
 

 

3.3 Priority on Secondary Registrations . If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company’s securities other than a Demand Registration and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can reasonably be sold in such offering, the Company will include in such registration first , the securities requested to be included therein by the holders requesting such registration, the Registrable Shares requested to be included in such registration, pro rata among the holders of such securities on the basis of the number of shares which by such holders requested to be included in such registration, and, second, other securities requested to be included in such registration.

3.4 Selection of Underwriters . In connection with any Piggyback Registration in which MTF and/or AFH elected to include Registrable Shares, the Company shall have the right to select the managing underwriters.

 

4. Holdback Agreements .

 

4.1 Holders’ Agreements . Each holder of Registrable Shares agrees not to effect any public sale or distribution of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the six (6) months following, the effective date of the Merger Agreement.

 

5. Registration Procedures . Whenever the holders of Registrable Shares have requested that any Registrable Shares be registered pursuant to this Agreement, the Company will use its commercially reasonable best efforts to effect the registration of such Registrable Shares in accordance with the terms of this Agreement.

 

(a) prepare and file with the Commission a registration statement with respect to such Registrable Shares and use its best efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus, or any amendments or supplements thereto, the Company will furnish copies of all such documents proposed to be filed to the counsel or counsels for the sellers of the Registrable Shares covered by such registration statement);

(b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus(es) used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than twelve months or until all Registrable Securities registered pursuant to such registration statement have been sold.

(c) notify each seller of such Registrable Shares, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading and, at the request of any such seller, the Company will use commercially reasonable efforts to prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the sellers of such Registrable Shares, such prospectus will not contain any untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading.

 

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(d) use commercially reasonable efforts to cause all such Registrable Shares to be listed on each securities exchange or national quotation system on which similar securities issued by the Company are then listed or quoted;

 

(e) enter into an underwriting agreement in customary form if requested by the holders of a majority of the Registrable Shares being sold or the underwriters, if any, reasonably request in order to facilitate the disposition of such Registrable Shares;

(f) advise each stockholder of such Registrable Shares, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such registration statement or preventing the use of any related prospectus or suspending the qualification of any Common Stock included in such registration statement for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and promptly use all reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;

 

(g) at least forty eight (48) hours prior to the filing of any registration statement or prospectus, or any amendment or supplement to such registration statement or prospectus, furnish a copy thereof to each seller of such Registrable Shares; and

 

(h) at the request of any seller of such Registrable Shares in connection with an underwritten offering, furnish on the date or dates provided for in the underwriting agreement: (i) an opinion of counsel, addressed to the underwriters and the sellers of Registrable Shares, covering such matters as such underwriters and sellers may reasonably request, including such matters as are customarily furnished in connection with an underwritten offering; (ii) a letter or letters from the independent certified public accountants of the Company addressed to the underwriters and the sellers of Registrable Shares, covering such matters as such underwriters and sellers may reasonably request, in which letter(s) such accountants shall state, without limiting the generality of the foregoing, that they are independent certified public accountants within the meaning of the Securities Act and that in their opinion the financial statements and other financial data of the Company included in the registration statement, the prospectus(es), or any amendment or supplement thereto, comply in all material respects with the applicable accounting requirements of the Securities Act; and (iii) officers or employees for participation in the “road shows” for such underwritten offering provided that the Stockholders shall be required to pay the costs of such items.

 

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6. Registration Expenses .

 

6.1 Company’s Expenses . All expenses incident to the Company’s performance of or compliance with this Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the Company and all independent certified public accountants (including all special audit and financial statement costs), and other persons retained by the Company (all such expenses being herein called “Registration Expenses”), will be borne by the Company.

6.2 Holder’s Expenses . Notwithstanding anything to the contrary contained herein, each holder of Registrable Shares will pay all discounts and commissions attributable to their respective shares and all attorney fees and disbursements for counsel they retain in connection with the registration of Registrable Shares, as the case may be.

 

7. Indemnification .

7.1 By the Company . The Company agrees to indemnify, to the extent permitted by law, each holder of Registrable Shares, its officers, directors and trustees and each person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including without limitation, attorney’s fees) caused by or relating to any action or proceeding arising out of or based upon any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus, or any amendment thereof or supplement thereto, or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except such indemnification shall not be available to a holder, its officers and directors or controlling person insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder’s failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto. In connection with an underwritten offering, the Company will indemnify such underwriters, their officers and directors and each person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Shares. The payments required by this Section 7.1 will be made periodically during the course of the investigation or defense, as and when bills are received or expenses incurred.

 

7.2 By Each Holder . In connection with any registration statement in which a holder of Registrable Shares is participating, each such holder will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will indemnify the Company, its directors and officers and each person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus, or any amendment thereof or supplement thereto, or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided that the obligation to indemnify will be several, not joint and several, among such holders of Registrable Shares and the liability of each such holder of Registrable Shares will be limited to and in proportion to the net amount received by such holder from the sale of Registrable Shares, as the case may be, pursuant to such registration statement.

 

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7.3 Procedure . Any person entitled to indemnification hereunder will (a) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that the indemnifying party is prejudiced by the failure to give such notice), and (b) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) and which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

 

7.4   Contribution . If the indemnification provided for in this Section 7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses to which such indemnified party would be otherwise entitled under Section 7, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. In no event shall any person be required to contribute an amount greater than the dollar amount of the proceeds received by such person with respect to the sale of any Registrable Shares.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The contribution provided for in this Section 7.4 shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party.

 

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7.5 Survival . The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director, trustee or controlling person of such indemnified party and will survive the transfer of securities. The Company also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event the Company’s indemnification is unavailable for any reason.

 

8. Compliance with Rule 144 . In the event that the Company (a) registers a class of securities under Section 12 of the Exchange Act, (b) issues an offering circular meeting the requirements of Regulation A under the Securities Act or (c) commences to file reports under Section 13 or 15(d) of the Exchange Act, then at the request of any holder who proposes to sell securities in compliance with Rule 144 of the Commission, the Company will (i) forthwith furnish to such holder a written statement of compliance with the filing requirements of the Commission as set forth in Rule 144, as such rule may be amended from time to time and (ii) make available to the public and such holders such information as will enable the holders to make sales pursuant to Rule 144.

 

9. Participation in Underwritten Registrations . No person may participate in any registration hereunder which is underwritten unless such person (a) agrees to sell its securities on the basis provided in any underwriting arrangements approved by such person or persons entitled hereunder to approve such arrangements, (b) completes and executes all customary questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, (c) provides all customary information reasonably requested by the Company or underwriter in connection with such registration, including copies of customary documents, instruments and agreements and (d) complies with all applicable federal and state securities laws in connection with such registration.

 

10. Miscellaneous .

 

10.1 Successors and Assigns . This Agreement is not assignable by any Stockholder without the express written consent of the Company. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto, whether so expressed or not. In addition, and whether or not any express assignment has been made, the provisions of this Agreement which are for the benefit of holders of Registrable Shares are also for the benefit of, and enforceable by, any subsequent holders of such Shares.

 

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10.2 Severability . 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 prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

 

10.3 Descriptive Headings . The descriptive headings of this Agreement are inserted for convenience of reference only and do not constitute a part of and shall not be utilized in interpreting this Agreement.

 

10.4 Notices . Any notices and other communications hereunder shall be in writing and shall be deemed given and received (i) on the date of delivery if delivered personally, (ii) on the date of confirmation of receipt (or, the first Business Day following such receipt if the date is not a Business Day) if delivered by a nationally recognized overnight courier service (providing written proof of delivery), such as Federal Express, (iii) on the date of confirmation of receipt (or, the first Business Day following receipt if the date is not a Business Day) if sent via facsimile to the parties hereto at the following address, or at such other address for a party as shall be specified by like notice, provided that a notice of change in address shall not be deemed to have been given until received by the addressee:

 

If to the Company, to:      
  Bone Biologics, Corp.  
    175 May Street, Suite 400  
    Edison, NJ 08837  
    Attention:  Michael Schuler  
    Facsimile No.:  (732) 661-2152  
    Telephone No.:  (732) 661-2589  
       
  with a copy (which shall not constitute notice) to:  
       
    DLA Piper LLP (US)  
    550 S. Hope Street  
    Los Angeles, CA 90071  
    Attention:  Ann Lawrence  
    Facsimile:  (213) 330-7555  
    Telephone:  (213) 330-7755  

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If to the AFH, to:   AFH Holding and Advisory, LLC  
    4751 Wilshire Blvd., Suite 110  
    Los Angeles, CA 90010  
    Attention:  Eugene Leydiker  
    Facsimile No.:  (323) 692-4126  
    Telephone No.:  (323) 692-4026  
       
  with a copy (which shall not constitute notice) to:  
       
    Reed Smith LLP  
    599 Lexington Avenue  
    New York, N.Y. 10022  
    Attention:  Bill Haddad  
    Facsimile No.:  (212) 521-5450  
    Telephone No.:  (212) 549-0379  
       
If to the MTF, to:      
    Musculoskeletal Transplant Foundation  
    125 May Street  
    Edison, NJ 08837  
    Attention: Bruce Stroever, President, CEO  
    Facsimile No.: (732) 661-2297  
    Telephone No.:  (732) 661-0202  

 

10.5 Governing Law . All questions concerning the construction, validity and interpretation of this Agreement, and the performance of the obligations imposed by this Agreement, shall be governed by the laws of the State of Delaware applicable to contracts made and wholly to be performed in that state.

 

10.6 Final Agreement . This Agreement, together with the Merger and all other agreements entered into by the parties hereto, constitutes the complete and final agreement of the parties concerning the matters referred to herein, and supersedes all prior agreements and understandings.

 

10.7 Execution in Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and such counterparts together shall constitute one instrument.

 

10.8 No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, regardless of which party drafted this Agreement.

 

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10.9 Amendment . Except as otherwise expressly provided herein, the provisions of this Agreement may be amended or waived at any time only by the written agreement of the Company, MTF and AFH. Any waiver, permit, consent or approval of any kind or character on the part of any such holder of any provisions or conditions of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in such writing.

 

10.10 Waiver of Jury Trial . Each of the parties hereto hereby irrevocably waives any and all right to trial by jury of any claim or cause of action in any legal proceeding arising out of or related to this Agreement or the transactions or events contemplated hereby or any course of conduct, course of dealing, statements (whether verbal or written) or actions of any party hereto. The parties hereto each agree that any and all such claims and causes of action shall be tried by a court trial without a jury. Each of the parties hereto further waives any right to seek to consolidate any such legal proceeding in which a jury trial has been waived with any other legal proceeding in which a jury trial cannot or has not been waived.

 

[The Rest of this Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement on the date first set forth above.

 

  BONE BIOLOGICS, CORP.
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Its: Chief Executive Officer and Director
     
  AFH HOLDING AND ADVISORY, LLC
     
  By: /s/ Amir F. Heshmatpour
  Name: Amir F. Heshmatpour
  Its: Managing Director
     
  THE MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.
     
  By: /s/ Michael J. Kawas
  Name: Michael J. Kawas
  Its: Executive Vice President and Chief Financial Officer

 

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BONE BIOLOGICS, CORP.

 

CONVERTIBLE NOTE PURCHASE AGREEMENT

 

This Convertible Note Purchase Agreement (the “ Agreement ”) is made as of the 19th day of September 2014, by and between Bone Biologics, Corp., a Delaware corporation (the “ Company ”), and Musculoskeletal Transplant Foundation, Inc., a District of Columbia non- profit corporation (“ MTF ”).

 

RECITALS

 

A. The Company and MTF have a strategic business relationship to address various matters of mutual interest. In furtherance thereof, the Company and MTF have from time to time entered into transactions pursuant to which MTF has supported the Company’s product development activities and the Company has established MTF as the exclusive supplier to the Company of human allograft tissue.

 

B. As the parties continue discussions for a broader relationship, MTF has made available a loan to the Company, which the Company intends to use to support the Company’s product development activities, including, without limitation, protein development and production and animal trials, consistent with the Company’s ongoing development plans.

 

C. To memorialize and evidence the funds loaned by MTF to the Company, the Company desires to issue and sell to MTF, and MTF desires to purchase, a convertible promissory note in the form attached to this Agreement as Exhibit A (the “ Note ”), which shall be convertible on the terms stated therein into shares of Common Stock (as hereinafter defined) of the Company.

 

AGREEMENT

 

In consideration of the mutual promises contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties to this Agreement agree as follows:

 

1. Definitions . As used herein, the following terms shall have the following respective meanings:

 

(a) Accessions shall have the meaning given that term in the UCC.

 

(b) Account shall have the meaning given that term in the UCC.

 

(c) Account Debtor shall have the meaning given that term in the UCC.

 

(d) AFH shall have the meaning set forth in Section 2(a) hereof.

 

(e) Agreement shall have the meaning set forth in the preamble hereto.

 

(f) BBI shall have the meaning set forth in Section 2(a) hereof.

 

 
 

 

(g) “ Chattel Paper ” shall have the meaning given that term in the UCC.

 

(h) “ Collateral ” shall mean all personal property of the Company, including, without limitation, all: (a) Accounts, (b) Chattel Paper, (c) Commercial Tort Claims, (d) Deposit Accounts, (e) Documents, (f) Equipment, (g) Fixtures, (h) General Intangibles (including Payment Intangibles), (i) Goods, (j) Instruments, (k) Inventory, (l) Investment Property, (m) Letter-of-Credit Rights, (n) Software, (o) Supporting Obligations, (p) money, policies and certificates of insurance, deposits, cash, cash equivalents, or other property, (q) all books, records, and information relating to any of the foregoing ((a) through (p)) and/or the Company’s business, and all rights of access to such books, records, and information, and all property in which such books, records, and information are stored, recorded and maintained, all insurance proceeds, refunds, and premium rebates, including, without limitation, proceeds of fire and credit insurance, whether any of such proceeds, refunds, and premium rebates arise out of any of the foregoing ((a) through (q)) or otherwise, (s) all Liens, guaranties, rights, remedies, and privileges pertaining to any of the foregoing ((a) through (r)), including the right of stoppage in transit, and (t) any of the foregoing, whether now owned or now due, in which the Company has an interest, or hereafter acquired, arising, or to become due, in which the Company obtains an interest, and all products, Proceeds, substitutions, and Accessions of or to any of the foregoing; provided, however, that the Collateral shall not include, and the security interest shall not attach to, any Excluded Property.

 

(i) Commercial Tort Claim shall have the meaning given that term in the UCC.

 

(j) “ Common Stock ” shall have the meaning set forth in the Section 7(d) hereof.

 

(k) Company shall have the meaning set forth in the preamble hereto.

 

(l) Copyright Licenses shall mean any and all agreements providing for the granting of any right in or to Copyrights (whether the Company is licensee or licensor thereunder).

 

(m) Copyrights shall mean all United States and foreign copyrights (including community designs), including but not limited to copyrights in software and databases, and all Mask Works (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or unregistered, and, with respect to any and all of the foregoing: (i) all registrations and applications therefor, (ii) all extensions and renewals thereof, (iii) all rights corresponding thereto throughout the world, (iv) all rights to sue for past, present and future infringements thereof, and (v) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages and proceeds of suit.

 

(n) “ Credit Agreement ” shall have the meaning set forth in the Section 3(c) hereof.

 

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(o) Deposit Account shall have the meaning given that term in the UCC and shall also include all demand, time, savings, passbook, or similar accounts maintained with a bank or other financial institution.

 

(p) Documents shall have the meaning given that term in the UCC.

 

(q) Equipment shall mean “equipment”, as defined in the UCC, and shall also mean all furniture, store fixtures, motor vehicles, rolling stock, machinery, office equipment, plant equipment, tools, dies, molds, and other goods, property, and assets which are used and/or were purchased for use in the operation or furtherance of the Company’s business, and any and all Accessions or additions thereto, and substitutions therefor.

 

(r) “ Equity Securities ” shall have the meaning set forth in the Section 7(a) hereof.

 

(s) “ Exclusivity Period ” shall have the meaning set forth in the Section 9(a) hereof.

 

(t) “ Field ” shall have the meaning set forth in the Section 9(a) hereof.

 

(u) Fixtures shall have the meaning given that term in the UCC.

 

(v) “General Intangibles” shall have the meaning given that term in the UCC., and shall also include, without limitation, all: Payment Intangibles; rights to payment for credit extended; deposits; amounts due to the Company; credit memoranda in favor of the Company; warranty claims; tax refunds and abatements; insurance refunds and premium rebates; all means and vehicles of investment or hedging, including, without limitation, options, warrants, and futures contracts; records; customer lists; telephone numbers; goodwill; causes of action; judgments; rights to collect payments under any settlement or other agreement; literary rights; rights to performance; royalties; license and/or franchise fees; rights of admission; licenses; franchises; license agreements, including all rights of the Company to enforce same; permits, certificates of convenience and necessity, and similar rights granted by any governmental authority; developmental ideas and concepts; proprietary processes; blueprints, drawings, designs, diagrams, plans, reports, and charts; catalogs; technical data; tapes, disks, semi-conductors chips and printouts; Intellectual Property; proposals; cost estimates, and reproductions on paper, or otherwise, of any and all concepts or ideas, and any matter related to, or connected with, the design, development, manufacture, sale, marketing, leasing, or use of any or all property produced, sold, or leased, by or credit extended or services performed, by the Company, whether intended for an individual customer or the general business of the Company, or used or useful in connection with research by the Company.

 

(w) Goods shall have the meaning given that term in the UCC.

 

(x) Instruments shall have the meaning given that term in the UCC.

 

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(y) Intellectual Property shall mean, collectively, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets, and the Trade Secret Licenses.

 

(z) Inventory shall have the meaning given that term in the UCC, and shall also include, without limitation, all: (a) Goods which (i) are leased by a person as lessor, (ii) are held by a person for sale or lease or to be furnished under a contract of service, (iii) are furnished by a person under a contract of service, or (iv) consist of raw materials, work in process, or materials used or consumed in a business; (b) Goods of said description in transit; (c) Goods of said description which are returned, repossessed or rejected; and (d) packaging, advertising, and shipping materials related to any of the foregoing.

 

(aa) Investment Property shall have the meaning given that term in the UCC.

 

(bb) Letter-of-Credit Right shall have the meaning given that term in the UCC and shall also mean any right to payment or performance under a letter of credit, whether or not the beneficiary has demanded, or is at the time entitled to demand, payment or performance.

 

(cc) Lien shall mean any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.

 

(dd) “ Loan Agreement ” shall have the meaning set forth in the Section 3(b) hereof.

 

(ee) Merger shall have the meaning set forth in Section 2(a) hereof.

 

(ff) Merger Agreement shall have the meaning set forth in Section 2(a) hereof.

 

(gg) Merger Sub shall have the meaning set forth in Section 2(a) hereof.

 

(hh) MTF shall have the meaning set forth in the preamble hereto.

 

(ii) “ MTF Distributorship Agreement ” shall have the meaning set forth in the Section 9(b) hereof.

 

(jj) “ Note ” shall have the meaning set forth in the recitals hereto.

 

(kk) Patent Licenses shall mean all agreements providing for the granting of any right in or to Patents (whether the Company is licensee or licensor thereunder).

 

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(ll) “ Patents shall mean all United States and foreign patents and certificates of invention, or similar industrial property rights, and applications therefore, including, but not limited to: (i) each patent and patent application set forth on Schedule 1 attached hereto, (ii) each patent and patent application related thereto, (iii) all reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations thereof, (iv) all rights corresponding thereto throughout the world, (v) all inventions and improvements described therein, (vi) all rights to sue for past, present and future infringements thereof, (vii) all licenses, claims, damages, and proceeds of suit arising therefrom, and (ix) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit.

 

(mm) Payment Intangible shall have the meaning given that term in the UCC and shall also mean any General Intangible under which the Account Debtor’s primary obligation is a monetary obligation.

 

(nn) “ Preferred Stock ” shall have the meaning set forth in the Section 7(d) hereof.

 

(oo) “ Prior Notes ” shall have the meaning set forth in the Section 2(b) hereof.

 

(pp) Proceeds shall mean: (i) all “proceeds” as defined in Article 9 of the UCC, and (ii) whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary.

 

(qq) “ Product ” shall have the meaning set forth in the Section 9(a) hereof.

 

(rr) “ Related Documents ” shall have the meaning set forth in the Section 3(d) hereof.

 

(ss) “ Securities ” shall mean the Note and shares of the Common Stock issuable upon conversion thereof (and the securities issuable upon conversion of such shares of Common Stock).

 

(tt) “ Securities Act ” shall have the meaning set forth in the Section 7(a) hereof.

 

(uu) Software shall have the meaning given that term in the UCC.

 

(vv) Supporting Obligation shall have the meaning given that term in the UCC and shall also refer to a Letter-of-Credit Right or secondary obligation that supports the payment or performance of an Account, Chattel Paper, a Document, a General Intangible, an Instrument, or Investment Property.

 

(ww) Trademark Licenses shall mean any and all agreements providing for the granting of any right in or to Trademarks, irrespective of whether the Company is licensee or licensor thereunder.

 

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(xx) “ Trademarks shall mean all United States, and foreign trademarks, trade names, corporate names, company names, business names, fictitious business names, Internet domain names, service marks, certification marks, collective marks, logos, other source or business identifiers, designs and general intangibles of a like nature, and all registrations and applications therefore for any of the foregoing including, but not limited to: (i) the registrations and applications set forth on Schedule 1 attached hereto (ii) all extensions or renewals of any of the foregoing, (iii) all of the goodwill of the business connected with the use of and symbolized by the foregoing, (iv) the right to sue for past, present and future infringement or dilution of any of the foregoing or for any injury to goodwill, and (v) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit.

 

(yy) Trade Secret Licenses shall mean any and all agreements providing for the granting of any right in or to Trade Secrets, irrespective of whether the Company is licensee or licensor thereunder.

 

(zz) Trade Secrets shall mean all trade secrets and all other confidential or proprietary information and know-how whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating, or referring in any way to such Trade Secret, including but not limited to: (i) the right to sue for past, present and future misappropriation or other violation of any Trade Secret, and (ii) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit.

 

(aaa) UCC shall mean the Uniform Commercial Code as from time to time in effect in the State of New Jersey; provided, however, that, in the event that, by reason of mandatory provisions of law, any of the attachment, perfection or priority of MTF’s and MTF’s security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New Jersey, the term UCC shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions.

 

2. Condition Precedent .

 

(a) On September 19, 2014, AFH Acquisition X, Inc. (“ AFH ”) and its wholly-owned subsidiary, Bone Biologics Acquisition Corp. (“ Merger Sub ”) entered into an Agreement and Plan of Merger, dated September 19, 2014 (“ Merger Agreement ”), by and among AFH, Bone Biologics, Inc. (“ BBI ”) and Merger Sub. Pursuant to the terms of the Merger Agreement, BBI intends to merge with Merger Sub, with BBI as the surviving entity (“ Merger ”). After the Merger, AFH shall cease to be a shell company, as defined in the rules of the Securities and Exchange Commission, and AFH will officially change its name to “Bone Biologics, Corp.”

 

(b) This Agreement shall become effective only upon surrender by MTF of the certain (i) Promissory Note issued by BBI to MTF, dated as of November 4, 2008, in the face amount of $250,000; (ii) Promissory Note issued by BBI to MTF, dated as of March 16, 2009, in the face amount of $400,000; (iii) Promissory Note issued by BBI to MTF, dated as of August 24, 2009, in the face amount of $16,420; and (iv) Tranched Promissory Note issued by BBI to MTF, dated as of September 30, 2009, in the face amount of $445,400, each as may have been amended from time to time (collectively, the “ Prior Notes ”).

 

6
 

 

3. Cancelation of Prior Notes; Termination of Other Agreements . Should the condition precedent set forth in Section 2(b) not occur on or before September 20, 2014, this Agreement shall be null and void and the Prior Notes shall be promptly returned to MTF. Notwithstanding the foregoing, upon the occurrence of the condition precedent set forth in Section 2:

 

(a) the Prior Notes shall be canceled, null, void and of no further effect;

 

(b) the certain Loan Agreement, dated as of November 4, 2008, between MTF and BBI, as may have been amended from time to time (the “ Loan Agreement ”), shall be terminated, null, void and of no further effect;

 

(c) the certain Credit Agreement, dated as of March 17, 2009, between MTF and BBI, as may have been amended from time to time (the “ Credit Agreement ”), shall be terminated, null, void and of no further effect; and

 

(d) all documents and agreements issued in connection with the Loan Agreement and Credit Agreement, including, without limitation, guarantees, each as may have been amended from time to time (the “ Related Documents ”), shall be terminated, null, void and of no further effect.

 

4. Issuance of Note . In consideration for cancelation of the Prior Notes and termination of the Loan Agreement, Credit Agreement and Related Documents, subject to the terms and conditions of this Agreement, the Company shall contemporaneously herewith execute and deliver the Note to MTF, in the aggregate principal amount of Three Million Six Hundred Fifty Nine Thousand Three Hundred and Twenty Eight Dollars ($3,659,328), which such amount shall be adjusted as set forth in the Note.

 

5. Grant of Security .

 

(a) Grant of Security . The Company hereby grants to MTF a security interest in and continuing lien on all of the Company’s right, title and interest in, to and under the Collateral.

 

(b) Certain Limited Exclusions . Notwithstanding anything herein to the contrary, in no event shall the Collateral include or the security interest granted under Section 5(a) hereof attach to: any lease, license, contract, property rights or agreement to which the Company is a party or any of its rights or interests thereunder if and for so long as the grant of such security interest shall constitute or result in (i) the abandonment, invalidation or unenforceability of any right, title or interest of the Company therein or (ii) in a breach or termination pursuant to the terms of, or a default under, any such lease, license, contract, property right or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (as defined herein) (or any successor provision or provisions) of any relevant jurisdiction or any applicable law (including the Bankruptcy Code) or principles of equity), provided however that the Collateral shall include and such security interest shall attach immediately at such time as the condition causing such abandonment, invalidation or unenforceability shall be remedied and to the extent severable, shall attach immediately to any portion of such lease, license, contract, property rights or agreement that does not result in any of the consequences specified in (i) or (ii) above.

 

7
 

 

6. Security for Obligations; the Company Remains Liable .

 

(a) Security for Obligations . This Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under section 362(a) of the Bankruptcy Code, 11 U.S.C. §362(a) (any successor provision thereof)) with respect to the Company.

 

(b) Continuing Liability Under Collateral . Notwithstanding anything herein to the contrary, (i) the Company shall remain liable for all obligations under the Collateral and nothing contained herein is intended or shall be a delegation of duties to MTF, (ii) the Company shall remain liable under each of the agreements included in the Collateral, to perform all of the obligations undertaken by it thereunder all in accordance with and pursuant to the terms and provisions thereof and MTF shall not have any obligation or liability under any of such agreements by reason of or arising out of this Agreement or any other document related thereto nor shall MTF have any obligation to make any inquiry as to the nature or sufficiency of any payment received by it or have any obligation to take any action to collect or enforce any rights under any agreement included in the Collateral, and (iii) the exercise by MTF of any of its rights hereunder shall not release the Company from any of its duties or obligations under the contracts and agreements included in the Collateral.

 

7. Representations and Warranties of the Company . The Company hereby represents and warrants to MTF that:

 

(a) Organization, Good Standing and Qualification . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business or properties. For purposes hereof, “ Equity Securities ” shall have the meaning set forth under Rule 405 (or any successor rule) promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the “ Securities Act ”).

 

8
 

 

(b) Authorization . All corporate action on the part of the Company, its officers, directors and shareholders necessary for the authorization, execution and delivery of this Agreement and the authorization, sale, issuance and delivery of the Note (and of the Securities issuable, respectively, upon conversion of the Note and of the shares of Common Stock issuable upon such conversion), and the performance of all obligations of the Company under this Agreement and the Note has been taken, including, without limitation, the approval by the directors and shareholders of the Company. The Agreement and the Note, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

(c) Conflicts . Neither the execution and delivery of this Agreement or the Note, nor the consummation of the transactions contemplated in this Agreement or the Note, will violate any provision of the certificate of incorporation or by-laws of the Company or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any court, government, or governmental agency or instrumentality, domestic or foreign, binding upon the Company, or conflict with or result in any breach of or event of termination under any of the terms of, or the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest or other charge or encumbrance of any nature pursuant to, the terms of any contract or agreement to which the Company is a party or by which the Company or any of its properties or assets is bound.

 

(d) Capitalization . The Articles of Incorporation of the Company have been duly filed with the Secretary of State of Delaware. The authorized capital stock of the Company consists of 100,000,000 shares of common stock, $0.001 par value (“ Common Stock ”) and 20,000,000 shares of preferred stock, $0.001 par value (“ Preferred Stock ”). All of the outstanding shares of Common Stock and Preferred Stock have been validly issued and are fully-paid and non-assessable; and the shares of Common Stock issuable upon conversion of the Note, when issued and delivered upon such conversion, will be validly issued, fully-paid and non-assessable shares of Common Stock, in each case free and clear of any mortgages, deed of trust, pledge, lien, security interest or any charge or encumbrance of any nature. There are no contracts, agreements, arrangements (written or oral) or other documents to which the Company is a party regulating or controlling or otherwise affecting the voting or disposition of any shares of stock of the Company, or the management thereof.

 

(e) Operations. The Company is not the subject of any material claim, suit or proceeding before any court or governmental agency and is not delinquent in any material respects in the payment of any taxes or is in violation in any material respect of any law, rule or regulation.

 

(f) Intellectual Property . The Company owns, or is licensed or has the rights necessary to use, or is negotiating to license or obtain the rights to use, all intellectual property material to its business as proposed to be conducted.

 

9
 

 

(g) Disclosure . No representation or warranty made under any provisions hereof, and none of the information furnished by the Company to MTF, or any authorized representative of MTF, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading.

 

8. Representations and Warranties of MTF . MTF hereby represents and warrants to the Company that:

 

(a) Authorization . MTF has full power and authority to enter into this Agreement. This Agreement, when executed and delivered by MTF, will constitute a valid and legally binding obligation of MTF, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies.

 

(b) Purchase Entirely for Own Account . This Agreement is made with MTF in reliance upon MTF’s representation to the Company, which by MTF’s execution of this Agreement, MTF hereby confirms, that the Securities to be acquired by MTF will be acquired for investment for MTF’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that MTF has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, MTF further represents that MTF does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. MTF has not been formed for the specific purpose of acquiring any of the Securities.

 

(c) Knowledge . MTF is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Note.

 

(d) Restricted Securities . MTF understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of MTF’s representations as expressed herein. MTF understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, MTF must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. MTF acknowledges that the Company has no obligation to register or qualify the Securities for resale. MTF further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of MTF’s control, and which the Company is under no obligation and may not be able to satisfy.

 

10
 

 

(e) No Public Market . MTF understands that no public market now exists for any of the securities issued by the Company, that the Company has made no assurances that a public market will ever exist for the Securities.

 

(f) Legends . MTF understands that the Securities, and any securities issued in respect thereof or exchange therefor, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(g) Accredited Investor . MTF is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

 

9. Distribution Rights .

 

(a) From and after the date hereof and until the satisfaction in full or conversion of the entire principal amount of the Note (and all interest accrued thereon) in accordance with the terms of the Note (subject to extension as hereinafter set forth, the “ Exclusivity Period ”), the Company shall not, directly or indirectly (itself or through any other person or entity), whether as principal, agent, distributor, representative, stockholder or otherwise, distribute or provide any invention, device, instrument, apparatus and/or other product or service (collectively, a “ Product ”) with application in the field of spine surgery (the “ Field ”), worldwide or in any territory thereof, except pursuant to the terms and provisions of an MTF Distributorship Agreement (as hereinafter defined). If an Event of Default (as defined in the Note) shall at any time occur, the Exclusivity Period shall automatically be extended through the period that expires on the tenth anniversary of the date of this Agreement.

 

(b) In the event that, during the Exclusivity Period, the Company desires to distribute any Product in the Field, the Company shall deliver written notice thereof to MTF, which shall set forth with particularity the design, use and status of such Product and shall, when applicable, enclose a prototype. MTF shall, within 60 days of receipt of such notice, submit to the Company a proposal for an exclusive, worldwide distributorship arrangement (each, an “ MTF Distributorship Agreement ”) with respect to such Product for applications within the Field, whereupon the parties shall collaborate with each other in good faith so as to complete arrangements reasonably acceptable to each whereby MTF shall exclusively distribute such Product, worldwide, for applications within the Field.

 

11
 

 

10. Miscellaneous .

 

(a) Successors and Assigns . The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

(b) Governing Law . This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

 

(c) Counterparts . This Agreement may be executed in two or more counter-parts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

(d) Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

(e) Notices . Any notice required or permitted by this Agreement or the Note shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written notice.

 

(f) Finder’s Fee . Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. MTF agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which MTF or any of its officers, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless MTF from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

 

(g) Amendments and Waivers . Any term of this Agreement may be amended or waived only with the written consent of the Company and MTF. Any amendment or waiver effected in accordance with this Section 10(g) shall be binding upon MTF and the Company, and their respective successors and assigns.

 

12
 

 

(h) Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

 

(i) Entire Agreement . This Agreement, and the documents referred to herein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled.

 

(j) Shareholders, Officers and Directors Not Liable . In no event shall any shareholder, officer or director of the Company be liable for any amounts due or payable pursuant to the Note.

 

(k) Survival of Representations . Each representation, warranty, covenant and agreement of the parties hereto herein contained shall survive the execution and delivery of this Agreement and the Note, and the satisfaction or conversion of the Note or nay other event, notwithstanding any investigation at any time made by or on behalf of any party hereto.

 

[Signature Page Follows]

 

13
 

 

The parties have executed this Convertible Note Purchase Agreement as of the date first written above.

 

  BONE BIOLOGICS, CORP.
   
  By: /s/ William Jay Treat
  Name: William Jay Treat
  Title: President and Chief Technology Officer
  Address:

175 May Street
Suite 400
Edison, NJ 08837
Attn: Chief Financial Officer

     
  MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.
   
  By: /s/ Michael J. Kawas
  Name: Michael J. Kawas
  Title: Executive Vice President and Chief Financial Officer
  Address: 125 May Street
Suite 300
Edison, New Jersey 08837
Attn: Chief Financial Officer

 

[Signature Page to Convertible Note Purchase Agreement]

 

 
 

 

SCHEDULE 1

 

(INTELLECTUAL PROPERTY)

 

(A) Copyrights

 

None

 

(B) Copyright Licenses

 

None

 

(C) Patents

 

None

 

(D) Patent Licenses:

 

Exclusive License Agreement, dated March 15, 2006, between Grantor and the Regents of the University of California (“Regents”), as amended by that certain First Amendment to License Agreement No. 2006-03-0536, dated September 1, 2007, as further amended by that certain Second Amendment to Exclusive License Agreement, dated May 29, 2008, and as further amended by that certain Third Amendment to Exclusive License Agreement, dated December 4, 2008, each between the Regents and Grantor.

 

(E) Trademarks

   

None

 

(F) Trademark Licenses

 

None

 

(G) Trade Secret Licenses

 

None

 

(H) Intellectual Property Exception

 

None

 

 
 

 

EXHIBIT A

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

BONE BIOLOGICS, CORP.

 

CONVERTIBLE PROMISSORY NOTE

 

$3,659,328 September 19, 2014

 

SECTION 1. General . For value received, BONE BIOLOGICS, CORP. , a Delaware corporation (the “ Maker ”), hereby promises to pay to MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC. , a District of Columbia non-profit corporation, or its successors/assigns, the principal amount of Three Million Six Hundred Fifty Nine Thousand Three Hundred and Twenty Eight Dollars ($3,659,328), payable on the Maturity Date (as hereinafter defined) (subject to prepayment in whole or in part in the manner provided in Section 3 hereof), in such coin or currency of the United States of America as at the time of payment shall be legal tender therein for the payment of public and private debts; and, to pay interest on the unpaid balance of the principal amount hereof from the date hereof at a rate equal to eight and one-half percent (8.5%) per annum, compounded annually, in like coin or currency, together with payment of the principal hereunder, and to pay interest at such rate on any overdue principal and (to the extent permitted by law) on any overdue interest, from the due date hereof until the obligation of the Maker with respect to the payment thereof shall be discharged; all payments and prepayments of principal of this Note and all payments of the interest on this Note to be made at 125 May Street, Suite 300, Edison, New Jersey 08837, or such other location as shall be specified in writing by the holder of this Note to the Maker.

 

SECTION 2. Definitions . As used herein, the following terms shall have the following respective meanings:

 

The term “ Affiliate ” shall mean any person who is a director or officer of the subject referenced or is a person or entity which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with the subject referenced; and, for purposes of the foregoing, the term “ control ” shall mean the possession, directly or indirectly of the power to direct or cause the direction of the management and policies of a party, whether through the ownership of voting securities, by contract or otherwise.

 

The term “ Common Stock ” shall mean shares of the common stock, $0.001 par value, of the Maker as constituted on the Issuance Date (including any stock into which it may be changed, reclassified or converted).

 

A- 1
 

 

The term “ Conversion Price ” shall have the meaning set forth in Section 7.1 hereof.

 

The term “ Conversion Rights ” shall have the meaning set forth in Section 7 hereof.

 

The term “ Convertible Securities ” shall have the meaning set forth in Paragraph (b) of Section 7.5 hereof.

 

The term “ Equity Securities ” shall have the meaning set forth under Rule 405 (or any successor rule) promulgated by the United States Securities and Exchange Commission under the Securities Act, whether or not said act applies to the Maker or its securities.

 

The term “ Event of Default ” shall have the meaning set forth in Section 6 hereof.

 

The term “ Excluded Shares ” shall have the meaning set forth in Paragraph (a) of Section 7.5 hereof.

 

The term “ Issuance Date ” shall mean the date first set forth in this Note.

 

The term “ Make r” shall mean Bone Biologics, Corp., a Delaware corporation, the maker of this Note, and shall also mean any successor Maker which shall become such in the manner prescribed in Section 5 hereof.

 

The term “ Maturity Date ” shall mean March 31, 2015.

 

The term “ Next Equity Financing ” shall mean a private placement of Equity Securities of the Company in an amount up to $10,000,000.

 

The term “ New Note ” shall have the meaning set forth in Section 7.2 hereof.

 

The term “ Note ” shall mean this Note and any Note executed and delivered by the Maker in exchange or replacement for this Note pursuant to Section 8 hereof.

 

The term “ Options ” shall have the meaning set forth in Paragraph (b) of Section 7.5 hereof.

 

The term “ Purchase Agreement ” shall mean the Convertible Note Purchase Agreement dated even date herewith between the Maker and Musculoskeletal Transplant Foundation, Inc.

 

The term “ Securities Act ” shall mean the Securities Act of 1933, as amended.

 

The term “ Subject Valuation ” shall mean the quotient obtained by dividing (x) the subscription price per share or other unit of the principal Equity Security sold or to be sold in the Next Equity Financing (calculated on the basis of the same subscription price payable by investors generally) by (y) the number of shares of Common Stock with respect to which such share or other unit is then or will become exercisable, convertible or exchangeable, as the case may be.

 

A- 2
 

 

The term “ Subsidiary ” shall mean: (x) any present or future Maker at least a majority of the outstanding voting stock of which shall at the time be owned, directly or indirectly through Subsidiaries, by the Maker, or which is otherwise controlled by the Maker, and (y) any partnership, association, joint venture or other entity in which the Maker, directly or indirectly, through Subsidiaries, has a 50% or more equity interest at the time or which is otherwise controlled by the Maker. For purposes hereof, outstanding voting stock shall be deemed to be capital stock of any class or classes, however designated, having ordinary voting power for the election of the members of the board of directors or other governing body of such Maker.

 

SECTION 3. Optional Prepayment . The Maker shall have the right at any time prior to the Maturity Date to prepay the whole, or any part, of the unpaid principal amount of this Note, without premium or penalty, provided that interest on the principal amount hereof to be so prepaid accrued to the date of such prepayment shall be paid concurrently therewith and subject to exercise (at any time prior to the date fixed for prepayment) of the Conversion Rights contained in Section 7 hereof. Notices of prepayment shall be given by the Maker by mail and shall be mailed to the holder of this Note not less than 30 days from the date fixed for prepayment. In case this Note is to be prepaid in part only, such notice shall specify the principal amount hereof to be prepaid. Upon giving of notice of prepayment as aforesaid, this Note or portion hereof so specified for prepayment shall on the prepayment date specified in such notice become due and payable, and from and after the prepayment date so specified (unless the Maker shall default in making such prepayment) interest on the principal of this Note or portion hereof so specified for prepayment shall cease to accrue, and the principal of this Note or portion hereof so specified for prepayment shall be paid by the Maker at the prepayment price aforesaid.

 

SECTION 4. General Covenants . The Maker covenants and agrees with the holder of this Note as follows:

 

4.1 The Maker shall punctually pay or cause to be paid the principal of and interest on this Note according to the terms hereof.

 

4.2 The Maker shall and shall cause each Subsidiary to:

 

(a) pay and discharge promptly, or cause to be paid and discharged promptly all taxes, assessments and governmental charges or levies imposed upon it or upon its income or upon any of its property, real, personal or mixed, or upon any part thereof, as well as all claims of any kind (including claims for labor, materials and supplies which, if unpaid, might by law become a lien or charge upon its property), provided, however, that neither the Maker nor any Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings and if the Maker or such Subsidiary shall have set aside on its books reserves (segregated to the extent required by sound accounting practice) reasonably deemed by it adequate with respect thereto;

 

(b) except as otherwise specifically permitted in this Note and as contemplated by Section 5 hereof, do or cause to be done all things necessary or appropriate to preserve and keep in full force and effect its corporate existence, rights and franchises, and use its best efforts to qualify as a foreign Maker entitled to do business in every jurisdiction in which the failure so to qualify would materially adversely effect on its business or properties;

 

A- 3
 

 

(c) comply in all material respects with all applicable federal, state, county and municipal laws, ordinances, rules, and regulations now in force or hereafter enacted; and

 

(d) maintain its books, accounts and records in accordance with generally accepted accounting principles and permit any person or entity designated by reasonable, advance notice from the holder of this Note to visit and inspect at reasonable hours any of its properties, books and financial records, and to make copies thereof and take extracts therefrom.

 

4.3 The Maker shall give prompt written notice to the holder of this Note after any officer of the Maker knows or has reason to know that: (a) a default or an Event of Default hereunder, or any condition, event or act which with the giving of notice or the passage or lapse of time, or both, would constitute such an Event of Default, has occurred and is continuing, together with a specification of the same and the steps if any being taken to remedy the same; or (b) any other circumstance or event would have a material adverse effect on the Maker’s business, properties, operations, income, assets, prospects or condition, financial or otherwise.

 

SECTION 5. Consolidation Merger or Disposition of Assets . The Maker shall not consolidate with, merge into, or sell or otherwise dispose of all or substantially all its properties as an entirety to, any person unless:

 

(a) the successor formed by or resulting from such consolidation or merger or to which such sale or other disposition shall have been made shall be a Maker organized under the laws of the United States of America or any State, district or territory thereof;

 

(b) such successor Maker shall expressly assume the due and punctual payment of the principal of and interest on this Note according to its tenor, and the due and punctual performance and observance of all the covenants, agreements and conditions of this Note to be performed or observed by the Maker to the same extent as if such successor Maker had been the original maker of this Note (and such assumption shall, upon the request of the holder of this Note, be evidenced by the endorsing of an appropriate legend upon this Note, and any Note executed pursuant to Section 8 hereof after such assumption shall, unless executed in the name of such Maker, have a similar legend endorsed thereon); and

 

(c) immediately after such consolidation, merger, sale or other disposition, such successor Maker shall not be in default in the performance of any of the covenants, agreements or conditions contained in this Note and no condition, act or event (with the giving of notice, passage of time, or otherwise) would result in such default.

 

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SECTION 6. Events of Default and Remedies .

 

6.1 The entire unpaid principal amount of this Note, together with all accrued interest hereon, at the option of the holder hereof exercised by written notice to the Maker, shall forthwith become and be due and payable if any one or more of the following events (herein called “ Events of Default ”) shall have occurred (for any reason whatsoever and whether such happening shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) and be continuing at the time of such notice, that is to say:

 

(a) if default shall be made in the due and punctual payment of the principal of this Note when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, and such default shall have continued for a period of ten days;

 

(b) if default shall be made in the due and punctual payment of any interest on this Note when and as such interest shall become due and payable, and such default shall have continued for a period of ten days;

 

(c) if default shall be made in the performance or observance of any covenant, agreement or condition contained in Section 5 or Section 7.6 hereof;

 

(d) if default shall be made in the performance or observance of any of the other covenants, agreements or conditions of the Maker or any Subsidiary contained in this Note or in the Purchase Agreement, and such default shall have continued for a period of 30 days;

 

(e) if any representation or warranty made by the Maker under the Purchase Agreement or in any document or certificate furnished by the Maker pursuant thereto shall prove to be inaccurate in any material respect when made;

 

(f) if this Note or the Purchase Agreement shall cease to be enforceable in accordance with its terms against the Maker, or the Maker shall so state in writing;

 

(g) if the Maker or any Subsidiary shall default beyond any period of grace provided with respect thereto in the payment of principal of, premium, if any, or interest on any obligation in respect of borrowed money when due, whether by acceleration or otherwise; or if the Maker or any Subsidiary shall default in the performance or observance of any other agreement, term or condition contained in such obligation or in any agreement under which any such obligation is created, if the effect of any such default is to cause the holder or holders of such obligations (or a trustee on behalf of such holder or holders) to cause such obligation to become due prior to the date of its stated maturity, unless such holder or holders or trustee shall have waived such default after its occurrence or unless such holder or holders or trustee shall have failed to give any notice required to create an event of default thereunder;

 

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(h) if final judgment for the payment of money shall be rendered by a court of record against the Maker or any Subsidiary and the Maker or such Subsidiary shall not discharge the same or provide for its discharge in accordance with its terms, or shall not procure a stay of execution thereon within 30 days from the date of entry thereof and, within the period during which execution of such judgment shall have been stayed, appeal therefrom, and cause the execution thereof to be stayed during such appeal;

 

(i) if the Maker or any Subsidiary shall: (i) admit in writing its inability to pay its debts generally as they become due; (ii) file a petition in bankruptcy or a petition to take advantage of any insolvency act; (iii) make an assignment for the benefit of creditors; (iv) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property; (v) on a petition in bankruptcy filed against it, be adjudicated a bankrupt; or (vi) file a petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any State, district or territory thereof;

 

(j) if a court of competent jurisdiction shall enter, except at the direct or indirect request of the holder of this Note, an order, judgment, or decree appointing, without the consent of the Maker or any Subsidiary, a receiver of the Maker or any Subsidiary or of the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of the Maker or any Subsidiary under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any State, district or territory thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within 60 days from the date of entry thereof; or

 

(k) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Maker or any Subsidiary or of the whole or any substantial part of its property and such custody or control shall not be terminated or stayed within 60 days from the date of assumption of such custody or control.

 

6.2 In the case any one or more of the Events of Default specified in Section 6.1 hereof shall have occurred and be continuing, the holder of this Note may proceed to protect and enforce its rights either by suit in equity and/or by action at law, whether for the specific performance of any covenant or agreement contained in this Note, or the holder of this Note may proceed to enforce the payment of all sums due upon this Note or to enforce any other legal or equitable right of the holder of this Note. In the event an Event of Default shall have occurred and the holder of this Note shall employ attorneys, or incur other costs and expenses for the collection of payments due or to become due, or for the enforcement or performance or observance of any obligation or agreement of the Maker under this Note, the Maker agrees that it will pay to the holder, on demand, the reasonable fees of such attorney together with all other costs and expenses incurred by the holder.

 

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6.3 No remedy herein conferred upon the holder is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

 

6.4 No course of dealing between the Maker and the holder or any delay on the part of the holder hereof in exercising any rights hereunder shall operate as a waiver of any rights of the holder hereof.

 

SECTION 7. Conversion . The holder of this Note shall have conversion rights as follows (the “ Conversion Rights ”):

 

7.1 Permissive and Mandatory Conversion . The entire outstanding principal amount of this Note, and all accrued and unpaid interest hereon, or any portion thereof, may be convertible to Common Stock in Maker at any time upon the request of Holder, in the manner set forth in Section 7.2. Further, to the extent not previously converted to Common Stock in Maker at the request of Holder: (i) fifty-percent (50%) of the face value of this Note, plus fifty-percent (50%) of all accrued and unpaid interest hereon, shall be converted to Common Stock in Maker upon the Next Equity Financing; and (ii) all remaining value in this Note, plus all remaining accrued and unpaid interest hereon, shall be converted to Common Stock in Maker, following the Next Equity Financing, upon the consummation of Maker’s initial public offering. The number of shares of Common Stock issued upon such conversion shall be determined by dividing the amount to be converted by the conversion price, determined as hereafter provided, in effect on the date of such partial or complete conversion (“ Conversion Price ”). Upon any conversion of this Note, or any portion hereof, appropriate cash adjustment shall be made for or on account of any interest accrued up to the date of conversion, or for or on account of any dividends on any shares of Common Stock issued upon such conversion. The initial Conversion Price shall be $1.00. Such initial Conversion Price shall be subject to adjustment as hereinafter provided.

 

7.2 Mechanics of Conversion . Upon the occurrence of any of the enumerated events set forth in the Section 7.1, the holder of this Note shall surrender this Note (accompanied, if requested by the Maker, by a duly executed instrument of transfer), at the office of the Maker, and shall state in writing the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Maker shall, as soon as practicable thereafter, issue and deliver at such office to such holder, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid; and in the event of conversion of only a part of the amount outstanding hereon, the Maker shall execute and deliver to or on the order of the holder hereof at said office, at the expense of the Maker, a new note (“ New Note ”) in an amount equal to the unconverted portion hereof, which New Note shall be dated and bear interest from the date to which interest shall have been paid on such converted portion. Such conversion shall be deemed to have been made immediately prior to the close of business on (i) the date of such surrender of this Note as aforesaid, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten public offering of securities registered pursuant to the Securities Act, the conversion may, at the option of any holder hereof, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event any persons entitled to receive Common Stock upon conversion of this Note, shall not be deemed to have converted this Note, or portion hereof, until immediately prior to the closing of such sale of securities.

 

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7.3 Conversion Price Adjustments for Certain Splits and Combinations . The Conversion Price shall be subject to adjustment form time to time as follows:

 

(a) Stock Splits and Dividends . In the event the Maker should at any time after the Issuance Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or Options or Convertible Securities entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock without payment of any consideration by such holder for the additional shares of Common Stock, Options or Convertible Securities (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion hereof shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Options or Convertible Securities with the number of shares issuable with respect to Options or Convertible Securities determined from time to time as provided in Section 7.3(c) below.

 

(b) Reverse Stock Splits . If the number of shares of Common Stock outstanding at any time after the Issuance Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion hereof shall be decreased in proportion to such decrease in outstanding shares.

 

(c) The following provisions shall apply for purposes of this Section 7.3:

 

(i) The aggregate maximum number of shares of Common Stock deliverable upon conversion, exchange or exercise of any Options or Convertible Securities (assuming the satisfaction of any conditions to convertibility, exchangeability or exercisability, including, without limitation, the passage of time, but without taking into account potential anti-dilution adjustments) shall be deemed to have been issued at the time such Options or Convertible Securities were issued.

 

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(ii) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to the Maker upon conversion or exercise of such Options or Convertible Securities including, but not limited to, a change resulting from the anti-dilution provisions thereof, the Conversion Price, to the extent in any way affected by or computed using such Options or Convertible Securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the conversion, exchange or exercise of such Options or Convertible Securities.

 

(iii) Upon the termination or expiration of the convertibility, exchangeability or exercisability of any such Options or Convertible Securities, the Conversion Price, to the extent in any way affected by or computed using such Options or Convertible Securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and Options or Convertible Securities which remain convertible, exchangeable or exercisable) actually issued upon the conversion, exchange or exercise of such Options or Convertible Securities.

 

7.4 Other Distributions . While this Note is outstanding, unless waived by the holder hereof the Maker shall not declare a distribution (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 7) on the Common Stock payable in securities of other persons, evidences of indebtedness issued by the Maker or other persons, assets (excluding cash dividends) or options or rights not referred to in Section 7.3(a).

 

7.5 Conversion Price Adjustments for Certain Issuance of Securities . Notwithstanding anything to the contrary herein, the provisions of this Section 7.5 shall neither apply to nor be triggered by the Merger.

 

(a) If and whenever after the Issuance Date, the Maker shall issue or sell any shares of its Common Stock for a consideration per share less than the Conversion Price in effect immediately prior to the time of such issue or sale, or without consideration, then, forthwith upon each such issue or sale, the Conversion Price shall be reduced to the price equal to the consideration per share in such issuance or sale. In addition, the provisions of this paragraph (a) shall not apply to the issuance of any Excluded Shares. For purposes hereof, “ Excluded Shares ” shall refer to any issuances of shares of Common Stock (or options therefor) from time to time to employees, consultants, service providers, vendors and directors of the Maker directly or pursuant to stock option plans authorized by the Board of Directors of the Maker.

 

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(b) For purposes of this Section 7.5 the following additional clauses shall apply:

 

(i) Issuance of Rights or Options . In case at any time the Maker shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or securities convertible into or exchangeable for Common Stock (such rights or options being herein called “ Options ” and such convertible or exchangeable stock or securities being herein called “ Convertible Securities ”) whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (x) the total amount, if any, received or receivable by the Maker as consideration for the granting of such Options, plus the aggregate amount of additional consideration payable to the Maker upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Conversion Price in effect immediately prior to the time of the granting of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued for such price per share as of the date of granting of such Options and thereafter shall be deemed to be outstanding. Except as otherwise provided in sub-paragraph (iii) of this paragraph (b), no adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities.

 

(ii) Issuance of Convertible Securities . In case the Maker shall in any manner issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by the Maker as consideration for the issue or sale of such Convertible Securities, plus the aggregate amount of additional consideration, if any, payable to the Maker upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Conversion Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued for such price per share as of the date of the issue or sale of such Convertible Securities and thereafter shall be deemed to be outstanding, provided that (I) except as otherwise provided in sub-paragraph (iii) of paragraph (b), no adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities, and (II) if any such issue or sale of such Convertible Securities is made upon exercises of any Options to purchase any such Convertible Securities for which adjustments of the Conversion Price have been or are to be made pursuant to other provisions of this sub-paragraph (ii), no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

 

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(iii) Change in Option Price or Exercise Rate . Upon the happening of any of the following events, namely, if the purchase price provided for in any Option referred to in sub-paragraph (i) of this paragraph (b), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in sub-paragraphs (i) or (ii) of this paragraph (b), or the rate at which any Convertible Securities referred to in paragraph (a) of this Section 7.5 are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of provisions designed to protect against dilution), the Conversion Price in effect at the time of such event shall forthwith be readjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold; and on the expiration of any such Option or the termination of any such right to convert or exchange such Convertible Securities, the Conversion Price then in effect hereunder shall forthwith be increased to the Conversion Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued, and the Common Stock issuable thereunder shall no longer be deemed to be outstanding. If the purchase price provided for in any such Option referred to in sub-paragraph (i) of this paragraph (b) or the rate at which any Convertible Securities referred to in sub-paragraph (i) or (ii) of this paragraph (b) are convertible into or exchangeable for Common Stock shall be reduced at any time under or by reason of provisions with respect thereto designed to protect against dilution, then, in case of the delivery of Common Stock upon the exercise of any such Option or upon conversion or exchange of any such Convertible Securities, the Conversion Price then in effect hereunder shall forthwith be adjusted to such respective amount as would have been obtained had such Option or Convertible Securities never been issued as to such Common Stock and had adjustments been made upon the issuance of the shares of Common Stock delivered as aforesaid, but only if as a result of such adjustment the Conversion Price then in effect hereunder is thereby reduced.

 

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7.6 Recapitalizations . If at any time or from time to time there shall be a recapitalization or reclassification of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 7) provision shall be made so that the holder of this Note shall thereafter be entitled to receive upon conversion hereof, the number of shares of stock or other securities or property of the Maker or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization or reclassification. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the holder of this Note after the recapitalization or reclassification to the end that the provisions of this Section 7 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion hereof) shall be applicable after that event and be as nearly equivalent as practicable.

 

7.7 No Impairment . The Maker will not, through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Maker, but will at all times in good faith assist in the carrying out of all the provisions of this Section 7 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holder of this Note against impairment.

 

7.8 No Fractional Shares and Certificate as to Adjustments .

 

(a) No fractional shares shall be issued upon the conversion of this Note. In lieu of fractional shares, the Maker will pay cash in an amount equal to the fair value of such fractional shares, based on the fair market value of the shares of Common Stock, as determined in good faith by the Board of Directors, as of the time when those who would otherwise be entitled to receive such fractional shares is determined. The number of shares issuable upon such conversion shall be determined on the basis of the total amount hereof, the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

 

(b) Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 7, the Maker, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of this Note a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. In the event of a Next Equity Financing a notice of adjustment as aforesaid of the Conversion Price then to be effective shall be delivered no later than 30 days prior to such event. The Maker shall, upon the written request at any time of any holder of this Note furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustment and readjustment, (ii) the Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion hereof.

 

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7.9 Notices of Record Date . In the event of any taking by the Maker of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Maker shall mail to the holder of this Note at least 10 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

 

7.10 Reservation of Stock Issuable Upon Conversion . The Maker shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of this Note, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all amounts outstanding on this Note; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all amounts outstanding on this Note, in addition to such other remedies as shall be available to the holder of this Note, the Maker will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to the Maker’s certificate of incorporation.

 

7.11 Notices . Any notice required by the provisions of this Section 7 to be given to the holder of this Note shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to such holder at his address appearing on the books of the Maker. In case at any time:

 

(a) the Maker shall declare to the holders of its shares of Common Stock any cash dividend at a rate in excess of the rate of the last cash dividend theretofore paid;

 

(b) the Maker shall declare any dividend upon its shares of Common Stock payable in stock or make any special dividend or other distribution (other than a cash dividend to the holders of its shares of Common Stock);

 

(c) the Maker shall offer for subscription pro rata to the holders of its shares of Common Stock any additional shares of stock of any class or other rights;

 

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(d) there shall be a recapitalization or reclassification of the Common Stock; or

 

(e) there shall be a Next Equity Financing;

 

then, in any one or more of said cases, the Maker shall give written notice to each holder of this Note of the date on which (A) the books of the Maker shall close or a record shall be taken for such dividend, distribution or subscription rights, or (B) such reclassification or recapitalization; or Next Equity Financing, shall take place, as the case may be. Such notice shall also specify the date as of which the holders of shares of Common Stock of record shall participate in such dividend, distribution or subscription rights or shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such recapitalization or reclassification, as the case may be. Such written notice shall be given at least 30 days prior to the action in question and not less than 30 days prior to the record date or the date on which the Maker’s transfer books are closed in respect thereto.

 

7.12 Taxes . The issuance of certificates of shares of Common Stock upon the conversion of this Note shall be made without charge to the holder thereof for any issuance tax in respect thereto; provided, however, that the Maker shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of this Note.

 

7.13 Closing of Books . The Maker will at no time close its transfer books against the transfer of any shares of Common Stock issued or issuable upon the conversion of this Note in any manner which interferes with the timely conversion of this Note.

 

SECTION 8. Exchange or Replacement of Note .

 

8.1 The holder of this Note, at its option, may in person or by duly authorized attorney surrender this Note for exchange, at the principal executive offices of the Maker, and at the expense of the Maker receive in exchange therefor a new Note in the same aggregate principal amount as the aggregate unpaid principal amount of the Note so surrendered, bearing interest at the same annual rate as the Note so surrendered and otherwise in substantially the form of the Note so surrendered, each such new Note to be dated as of the date to which interest has been paid on the note so surrendered and to be in such principal amount and payable to the holder of this Note. Five days’ prior written notice of the holders intention to make such exchange shall be given to the Maker.

 

8.2 Upon receipt by the Maker of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note, and (in case of loss, theft or destruction) of indemnity reasonably satisfactory to it, and upon surrender and cancellation of this Note, if mutilated, the Maker, upon reimbursement to it of all reasonable expenses incidental thereto, will make and deliver a new Note, of like tenor, in lieu of this Note. Any Note made and delivered in accordance with the provisions of this Section 8 shall be dated as of the date to which interest has been paid on this Note.

 

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SECTION 9. Notices . All notices, requests or instructions hereunder shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid as follows:

 

  (1) if to the Maker:
     
    Bone Biologics, Corp.
    175 May Street, Suite 400
    Edison, NJ 08837
    Attn: Chief Financial Officer
     
  (2) if to the holder of this Note:
     
    Musculoskeletal Transplant Foundation, Inc.
    125 May Street, Suite 300
    Edison, New Jersey 08837
    Attn: Chief Financial Officer

 

Any of the above addresses may be changed at any time by notice given as provided above; provided, however, that any such notice of change of address shall be effective only upon receipt.

 

SECTION 10. Captions . Captions and section titles contained herein are inserted as a matter of convenience and for reference only and are not intended to define, limit, extend or describe the scope of this Note or the intent of any provision hereof.

 

SECTION 11. Severability . In the event that one or more of the provisions of this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

 

SECTION 12. Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within such state.

 

SECTION 13. Related Agreements . This Note is issued pursuant to the Purchase Agreement and is entitled to the benefits thereof. Copies of such agreement may be obtained by any holder of this Note at the principal executive offices of the Maker.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF , the undersigned has executed this Note as of the date first above written.

 

ATTEST:   BONE BIOLOGICS, CORP.
         
By:     By:  
Name:     Name: William Jay Treat
Title:     Title: President and Chief Technology Officer

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

 

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

BONE BIOLOGICS, CORP.

 

CONVERTIBLE PROMISSORY NOTE

 

$3,659,328 September 19, 2014

 

SECTION 1. General . For value received, BONE BIOLOGICS, CORP. , a Delaware corporation (the “ Maker ”), hereby promises to pay to MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC. , a District of Columbia non-profit corporation, or its successors/assigns, the principal amount of Three Million Six Hundred Fifty Nine Thousand Three Hundred and Twenty Eight Dollars ($3,659,328), payable on the Maturity Date (as hereinafter defined) (subject to prepayment in whole or in part in the manner provided in Section 3 hereof), in such coin or currency of the United States of America as at the time of payment shall be legal tender therein for the payment of public and private debts; and, to pay interest on the unpaid balance of the principal amount hereof from the date hereof at a rate equal to eight and one-half percent (8.5%) per annum, compounded annually, in like coin or currency, together with payment of the principal hereunder, and to pay interest at such rate on any overdue principal and (to the extent permitted by law) on any overdue interest, from the due date hereof until the obligation of the Maker with respect to the payment thereof shall be discharged; all payments and prepayments of principal of this Note and all payments of the interest on this Note to be made at 125 May Street, Suite 300, Edison, New Jersey 08837, or such other location as shall be specified in writing by the holder of this Note to the Maker.

 

SECTION 2. Definitions . As used herein, the following terms shall have the following respective meanings:

 

The term “ Affiliate ” shall mean any person who is a director or officer of the subject referenced or is a person or entity which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with the subject referenced; and, for purposes of the foregoing, the term “ control ” shall mean the possession, directly or indirectly of the power to direct or cause the direction of the management and policies of a party, whether through the ownership of voting securities, by contract or otherwise.

 

The term “ Common Stock ” shall mean shares of the common stock, $0.001 par value, of the Maker as constituted on the Issuance Date (including any stock into which it may be changed, reclassified or converted).

 

The term “ Conversion Price ” shall have the meaning set forth in Section 7.1 hereof.

 

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The term “ Conversion Rights ” shall have the meaning set forth in Section 7 hereof.

 

The term “ Convertible Securities ” shall have the meaning set forth in Paragraph (b) of Section 7.5 hereof.

 

The term “ Equity Securities ” shall have the meaning set forth under Rule 405 (or any successor rule) promulgated by the United States Securities and Exchange Commission under the Securities Act, whether or not said act applies to the Maker or its securities.

 

The term “ Event of Default ” shall have the meaning set forth in Section 6 hereof.

 

The term “ Excluded Shares ” shall have the meaning set forth in Paragraph (a) of Section 7.5 hereof.

 

The term “ Issuance Date ” shall mean the date first set forth in this Note.

 

The term “ Make r” shall mean Bone Biologics, Corp., a Delaware corporation, the maker of this Note, and shall also mean any successor Maker which shall become such in the manner prescribed in Section 5 hereof.

 

The term “ Maturity Date ” shall mean March 31, 2015.

 

The term “ Next Equity Financing ” shall mean a private placement of Equity Securities of the Company in an amount up to $10,000,000.

 

The term “ New Note ” shall have the meaning set forth in Section 7.2 hereof.

 

The term “ Note ” shall mean this Note and any Note executed and delivered by the Maker in exchange or replacement for this Note pursuant to Section 8 hereof.

 

The term “ Options ” shall have the meaning set forth in Paragraph (b) of Section 7.5 hereof.

 

The term “ Purchase Agreement ” shall mean the Convertible Note Purchase Agreement dated even date herewith between the Maker and Musculoskeletal Transplant Foundation, Inc.

 

The term “ Securities Act ” shall mean the Securities Act of 1933, as amended.

 

The term “ Subject Valuation ” shall mean the quotient obtained by dividing (x) the subscription price per share or other unit of the principal Equity Security sold or to be sold in the Next Equity Financing (calculated on the basis of the same subscription price payable by investors generally) by (y) the number of shares of Common Stock with respect to which such share or other unit is then or will become exercisable, convertible or exchangeable, as the case may be.

 

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The term “ Subsidiary ” shall mean: (x) any present or future Maker at least a majority of the outstanding voting stock of which shall at the time be owned, directly or indirectly through Subsidiaries, by the Maker, or which is otherwise controlled by the Maker, and (y) any partnership, association, joint venture or other entity in which the Maker, directly or indirectly, through Subsidiaries, has a 50% or more equity interest at the time or which is otherwise controlled by the Maker. For purposes hereof, outstanding voting stock shall be deemed to be capital stock of any class or classes, however designated, having ordinary voting power for the election of the members of the board of directors or other governing body of such Maker.

 

SECTION 3. Optional Prepayment . The Maker shall have the right at any time prior to the Maturity Date to prepay the whole, or any part, of the unpaid principal amount of this Note, without premium or penalty, provided that interest on the principal amount hereof to be so prepaid accrued to the date of such prepayment shall be paid concurrently therewith and subject to exercise (at any time prior to the date fixed for prepayment) of the Conversion Rights contained in Section 7 hereof. Notices of prepayment shall be given by the Maker by mail and shall be mailed to the holder of this Note not less than 30 days from the date fixed for prepayment. In case this Note is to be prepaid in part only, such notice shall specify the principal amount hereof to be prepaid. Upon giving of notice of prepayment as aforesaid, this Note or portion hereof so specified for prepayment shall on the prepayment date specified in such notice become due and payable, and from and after the prepayment date so specified (unless the Maker shall default in making such prepayment) interest on the principal of this Note or portion hereof so specified for prepayment shall cease to accrue, and the principal of this Note or portion hereof so specified for prepayment shall be paid by the Maker at the prepayment price aforesaid.

 

SECTION 4. General Covenants . The Maker covenants and agrees with the holder of this Note as follows:

 

4.1 The Maker shall punctually pay or cause to be paid the principal of and interest on this Note according to the terms hereof.

 

4.2 The Maker shall and shall cause each Subsidiary to:

 

(a) pay and discharge promptly, or cause to be paid and discharged promptly all taxes, assessments and governmental charges or levies imposed upon it or upon its income or upon any of its property, real, personal or mixed, or upon any part thereof, as well as all claims of any kind (including claims for labor, materials and supplies which, if unpaid, might by law become a lien or charge upon its property), provided, however, that neither the Maker nor any Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings and if the Maker or such Subsidiary shall have set aside on its books reserves (segregated to the extent required by sound accounting practice) reasonably deemed by it adequate with respect thereto;

 

(b) except as otherwise specifically permitted in this Note and as contemplated by Section 5 hereof, do or cause to be done all things necessary or appropriate to preserve and keep in full force and effect its corporate existence, rights and franchises, and use its best efforts to qualify as a foreign Maker entitled to do business in every jurisdiction in which the failure so to qualify would materially adversely effect on its business or properties;

 

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(c) comply in all material respects with all applicable federal, state, county and municipal laws, ordinances, rules, and regulations now in force or hereafter enacted; and

 

(d) maintain its books, accounts and records in accordance with generally accepted accounting principles and permit any person or entity designated by reasonable, advance notice from the holder of this Note to visit and inspect at reasonable hours any of its properties, books and financial records, and to make copies thereof and take extracts therefrom.

 

4.3 The Maker shall give prompt written notice to the holder of this Note after any officer of the Maker knows or has reason to know that: (a) a default or an Event of Default hereunder, or any condition, event or act which with the giving of notice or the passage or lapse of time, or both, would constitute such an Event of Default, has occurred and is continuing, together with a specification of the same and the steps if any being taken to remedy the same; or (b) any other circumstance or event would have a material adverse effect on the Maker’s business, properties, operations, income, assets, prospects or condition, financial or otherwise.

 

SECTION 5. Consolidation Merger or Disposition of Assets . The Maker shall not consolidate with, merge into, or sell or otherwise dispose of all or substantially all its properties as an entirety to, any person unless:

 

(a) the successor formed by or resulting from such consolidation or merger or to which such sale or other disposition shall have been made shall be a Maker organized under the laws of the United States of America or any State, district or territory thereof;

 

(b) such successor Maker shall expressly assume the due and punctual payment of the principal of and interest on this Note according to its tenor, and the due and punctual performance and observance of all the covenants, agreements and conditions of this Note to be performed or observed by the Maker to the same extent as if such successor Maker had been the original maker of this Note (and such assumption shall, upon the request of the holder of this Note, be evidenced by the endorsing of an appropriate legend upon this Note, and any Note executed pursuant to Section 8 hereof after such assumption shall, unless executed in the name of such Maker, have a similar legend endorsed thereon); and

 

(c) immediately after such consolidation, merger, sale or other disposition, such successor Maker shall not be in default in the performance of any of the covenants, agreements or conditions contained in this Note and no condition, act or event (with the giving of notice, passage of time, or otherwise) would result in such default.

 

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SECTION 6. Events of Default and Remedies .

 

6.1 The entire unpaid principal amount of this Note, together with all accrued interest hereon, at the option of the holder hereof exercised by written notice to the Maker, shall forthwith become and be due and payable if any one or more of the following events (herein called “ Events of Default ”) shall have occurred (for any reason whatsoever and whether such happening shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) and be continuing at the time of such notice, that is to say:

 

(a) if default shall be made in the due and punctual payment of the principal of this Note when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, and such default shall have continued for a period of ten days;

 

(b) if default shall be made in the due and punctual payment of any interest on this Note when and as such interest shall become due and payable, and such default shall have continued for a period of ten days;

 

(c) if default shall be made in the performance or observance of any covenant, agreement or condition contained in Section 5 or Section 7.6 hereof;

 

(d) if default shall be made in the performance or observance of any of the other covenants, agreements or conditions of the Maker or any Subsidiary contained in this Note or in the Purchase Agreement, and such default shall have continued for a period of 30 days;

 

(e) if any representation or warranty made by the Maker under the Purchase Agreement or in any document or certificate furnished by the Maker pursuant thereto shall prove to be inaccurate in any material respect when made;

 

(f) if this Note or the Purchase Agreement shall cease to be enforceable in accordance with its terms against the Maker, or the Maker shall so state in writing;

 

(g) if the Maker or any Subsidiary shall default beyond any period of grace provided with respect thereto in the payment of principal of, premium, if any, or interest on any obligation in respect of borrowed money when due, whether by acceleration or otherwise; or if the Maker or any Subsidiary shall default in the performance or observance of any other agreement, term or condition contained in such obligation or in any agreement under which any such obligation is created, if the effect of any such default is to cause the holder or holders of such obligations (or a trustee on behalf of such holder or holders) to cause such obligation to become due prior to the date of its stated maturity, unless such holder or holders or trustee shall have waived such default after its occurrence or unless such holder or holders or trustee shall have failed to give any notice required to create an event of default thereunder;

 

(h) if final judgment for the payment of money shall be rendered by a court of record against the Maker or any Subsidiary and the Maker or such Subsidiary shall not discharge the same or provide for its discharge in accordance with its terms, or shall not procure a stay of execution thereon within 30 days from the date of entry thereof and, within the period during which execution of such judgment shall have been stayed, appeal therefrom, and cause the execution thereof to be stayed during such appeal;

 

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(i) if the Maker or any Subsidiary shall: (i) admit in writing its inability to pay its debts generally as they become due; (ii) file a petition in bankruptcy or a petition to take advantage of any insolvency act; (iii) make an assignment for the benefit of creditors; (iv) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property; (v) on a petition in bankruptcy filed against it, be adjudicated a bankrupt; or (vi) file a petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any State, district or territory thereof;

 

(j) if a court of competent jurisdiction shall enter, except at the direct or indirect request of the holder of this Note, an order, judgment, or decree appointing, without the consent of the Maker or any Subsidiary, a receiver of the Maker or any Subsidiary or of the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of the Maker or any Subsidiary under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any State, district or territory thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within 60 days from the date of entry thereof; or

 

(k) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Maker or any Subsidiary or of the whole or any substantial part of its property and such custody or control shall not be terminated or stayed within 60 days from the date of assumption of such custody or control.

 

6.2 In the case any one or more of the Events of Default specified in Section 6.1 hereof shall have occurred and be continuing, the holder of this Note may proceed to protect and enforce its rights either by suit in equity and/or by action at law, whether for the specific performance of any covenant or agreement contained in this Note, or the holder of this Note may proceed to enforce the payment of all sums due upon this Note or to enforce any other legal or equitable right of the holder of this Note. In the event an Event of Default shall have occurred and the holder of this Note shall employ attorneys, or incur other costs and expenses for the collection of payments due or to become due, or for the enforcement or performance or observance of any obligation or agreement of the Maker under this Note, the Maker agrees that it will pay to the holder, on demand, the reasonable fees of such attorney together with all other costs and expenses incurred by the holder.

 

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6.3 No remedy herein conferred upon the holder is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

 

6.4 No course of dealing between the Maker and the holder or any delay on the part of the holder hereof in exercising any rights hereunder shall operate as a waiver of any rights of the holder hereof.

 

SECTION 7. Conversion . The holder of this Note shall have conversion rights as follows (the “ Conversion Rights ”):

 

7.1 Permissive and Mandatory Conversion . The entire outstanding principal amount of this Note, and all accrued and unpaid interest hereon, or any portion thereof, may be convertible to Common Stock in Maker at any time upon the request of Holder, in the manner set forth in Section 7.2. Further, to the extent not previously converted to Common Stock in Maker at the request of Holder: (i) fifty-percent (50%) of the face value of this Note, plus fifty-percent (50%) of all accrued and unpaid interest hereon, shall be converted to Common Stock in Maker upon the Next Equity Financing; and (ii) all remaining value in this Note, plus all remaining accrued and unpaid interest hereon, shall be converted to Common Stock in Maker, following the Next Equity Financing, upon the consummation of Maker’s initial public offering. The number of shares of Common Stock issued upon such conversion shall be determined by dividing the amount to be converted by the conversion price, determined as hereafter provided, in effect on the date of such partial or complete conversion (“ Conversion Price ”). Upon any conversion of this Note, or any portion hereof, appropriate cash adjustment shall be made for or on account of any interest accrued up to the date of conversion, or for or on account of any dividends on any shares of Common Stock issued upon such conversion. The initial Conversion Price shall be $1.00. Such initial Conversion Price shall be subject to adjustment as hereinafter provided.

 

7.2 Mechanics of Conversion . Upon the occurrence of any of the enumerated events set forth in the Section 7.1, the holder of this Note shall surrender this Note (accompanied, if requested by the Maker, by a duly executed instrument of transfer), at the office of the Maker, and shall state in writing the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Maker shall, as soon as practicable thereafter, issue and deliver at such office to such holder, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid; and in the event of conversion of only a part of the amount outstanding hereon, the Maker shall execute and deliver to or on the order of the holder hereof at said office, at the expense of the Maker, a new note (“ New Note ”) in an amount equal to the unconverted portion hereof, which New Note shall be dated and bear interest from the date to which interest shall have been paid on such converted portion. Such conversion shall be deemed to have been made immediately prior to the close of business on (i) the date of such surrender of this Note as aforesaid, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten public offering of securities registered pursuant to the Securities Act, the conversion may, at the option of any holder hereof, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event any persons entitled to receive Common Stock upon conversion of this Note, shall not be deemed to have converted this Note, or portion hereof, until immediately prior to the closing of such sale of securities.

 

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7.3 Conversion Price Adjustments for Certain Splits and Combinations . The Conversion Price shall be subject to adjustment form time to time as follows:

 

(a) Stock Splits and Dividends . In the event the Maker should at any time after the Issuance Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or Options or Convertible Securities entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock without payment of any consideration by such holder for the additional shares of Common Stock, Options or Convertible Securities (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion hereof shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Options or Convertible Securities with the number of shares issuable with respect to Options or Convertible Securities determined from time to time as provided in Section 7.3(c) below.

 

(b) Reverse Stock Splits . If the number of shares of Common Stock outstanding at any time after the Issuance Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion hereof shall be decreased in proportion to such decrease in outstanding shares.

 

(c) The following provisions shall apply for purposes of this Section 7.3:

 

(i) The aggregate maximum number of shares of Common Stock deliverable upon conversion, exchange or exercise of any Options or Convertible Securities (assuming the satisfaction of any conditions to convertibility, exchangeability or exercisability, including, without limitation, the passage of time, but without taking into account potential anti-dilution adjustments) shall be deemed to have been issued at the time such Options or Convertible Securities were issued.

 

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(ii) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to the Maker upon conversion or exercise of such Options or Convertible Securities including, but not limited to, a change resulting from the anti-dilution provisions thereof, the Conversion Price, to the extent in any way affected by or computed using such Options or Convertible Securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the conversion, exchange or exercise of such Options or Convertible Securities.

 

(iii) Upon the termination or expiration of the convertibility, exchangeability or exercisability of any such Options or Convertible Securities, the Conversion Price, to the extent in any way affected by or computed using such Options or Convertible Securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and Options or Convertible Securities which remain convertible, exchangeable or exercisable) actually issued upon the conversion, exchange or exercise of such Options or Convertible Securities.

 

7.4 Other Distributions . While this Note is outstanding, unless waived by the holder hereof the Maker shall not declare a distribution (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 7) on the Common Stock payable in securities of other persons, evidences of indebtedness issued by the Maker or other persons, assets (excluding cash dividends) or options or rights not referred to in Section 7.3(a).

 

7.5 Conversion Price Adjustments for Certain Issuance of Securities . Notwithstanding anything to the contrary herein, the provisions of this Section 7.5 shall neither apply to nor be triggered by the Merger.

 

(a) If and whenever after the Issuance Date, the Maker shall issue or sell any shares of its Common Stock for a consideration per share less than the Conversion Price in effect immediately prior to the time of such issue or sale, or without consideration, then, forthwith upon each such issue or sale, the Conversion Price shall be reduced to the price equal to the consideration per share in such issuance or sale. In addition, the provisions of this paragraph (a) shall not apply to the issuance of any Excluded Shares. For purposes hereof, “ Excluded Shares ” shall refer to any issuances of shares of Common Stock (or options therefor) from time to time to employees, consultants, service providers, vendors and directors of the Maker directly or pursuant to stock option plans authorized by the Board of Directors of the Maker.

 

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(b) For purposes of this Section 7.5 the following additional clauses shall apply:

 

(i) Issuance of Rights or Options . In case at any time the Maker shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or securities convertible into or exchangeable for Common Stock (such rights or options being herein called “ Options ” and such convertible or exchangeable stock or securities being herein called “ Convertible Securities ”) whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (x) the total amount, if any, received or receivable by the Maker as consideration for the granting of such Options, plus the aggregate amount of additional consideration payable to the Maker upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Conversion Price in effect immediately prior to the time of the granting of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued for such price per share as of the date of granting of such Options and thereafter shall be deemed to be outstanding. Except as otherwise provided in sub-paragraph (iii) of this paragraph (b), no adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities.

 

(ii) Issuance of Convertible Securities . In case the Maker shall in any manner issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by the Maker as consideration for the issue or sale of such Convertible Securities, plus the aggregate amount of additional consideration, if any, payable to the Maker upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Conversion Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued for such price per share as of the date of the issue or sale of such Convertible Securities and thereafter shall be deemed to be outstanding, provided that (I) except as otherwise provided in sub-paragraph (iii) of paragraph (b), no adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities, and (II) if any such issue or sale of such Convertible Securities is made upon exercises of any Options to purchase any such Convertible Securities for which adjustments of the Conversion Price have been or are to be made pursuant to other provisions of this sub-paragraph (ii), no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

 

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(iii) Change in Option Price or Exercise Rate . Upon the happening of any of the following events, namely, if the purchase price provided for in any Option referred to in sub-paragraph (i) of this paragraph (b), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in sub-paragraphs (i) or (ii) of this paragraph (b), or the rate at which any Convertible Securities referred to in paragraph (a) of this Section 7.5 are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of provisions designed to protect against dilution), the Conversion Price in effect at the time of such event shall forthwith be readjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold; and on the expiration of any such Option or the termination of any such right to convert or exchange such Convertible Securities, the Conversion Price then in effect hereunder shall forthwith be increased to the Conversion Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued, and the Common Stock issuable thereunder shall no longer be deemed to be outstanding. If the purchase price provided for in any such Option referred to in sub-paragraph (i) of this paragraph (b) or the rate at which any Convertible Securities referred to in sub-paragraph (i) or (ii) of this paragraph (b) are convertible into or exchangeable for Common Stock shall be reduced at any time under or by reason of provisions with respect thereto designed to protect against dilution, then, in case of the delivery of Common Stock upon the exercise of any such Option or upon conversion or exchange of any such Convertible Securities, the Conversion Price then in effect hereunder shall forthwith be adjusted to such respective amount as would have been obtained had such Option or Convertible Securities never been issued as to such Common Stock and had adjustments been made upon the issuance of the shares of Common Stock delivered as aforesaid, but only if as a result of such adjustment the Conversion Price then in effect hereunder is thereby reduced.

 

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7.6 Recapitalizations . If at any time or from time to time there shall be a recapitalization or reclassification of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 7) provision shall be made so that the holder of this Note shall thereafter be entitled to receive upon conversion hereof, the number of shares of stock or other securities or property of the Maker or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization or reclassification. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the holder of this Note after the recapitalization or reclassification to the end that the provisions of this Section 7 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion hereof) shall be applicable after that event and be as nearly equivalent as practicable.

 

7.7 No Impairment . The Maker will not, through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Maker, but will at all times in good faith assist in the carrying out of all the provisions of this Section 7 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holder of this Note against impairment.

 

7.8 No Fractional Shares and Certificate as to Adjustments .

 

(a) No fractional shares shall be issued upon the conversion of this Note. In lieu of fractional shares, the Maker will pay cash in an amount equal to the fair value of such fractional shares, based on the fair market value of the shares of Common Stock, as determined in good faith by the Board of Directors, as of the time when those who would otherwise be entitled to receive such fractional shares is determined. The number of shares issuable upon such conversion shall be determined on the basis of the total amount hereof, the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

 

(b) Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 7, the Maker, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of this Note a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. In the event of a Next Equity Financing a notice of adjustment as aforesaid of the Conversion Price then to be effective shall be delivered no later than 30 days prior to such event. The Maker shall, upon the written request at any time of any holder of this Note furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustment and readjustment, (ii) the Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion hereof.

 

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7.9 Notices of Record Date . In the event of any taking by the Maker of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Maker shall mail to the holder of this Note at least 10 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

 

7.10 Reservation of Stock Issuable Upon Conversion . The Maker shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of this Note, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all amounts outstanding on this Note; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all amounts outstanding on this Note, in addition to such other remedies as shall be available to the holder of this Note, the Maker will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to the Maker’s certificate of incorporation.

 

7.11 Notices . Any notice required by the provisions of this Section 7 to be given to the holder of this Note shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to such holder at his address appearing on the books of the Maker. In case at any time:

 

(a) the Maker shall declare to the holders of its shares of Common Stock any cash dividend at a rate in excess of the rate of the last cash dividend theretofore paid;

 

(b) the Maker shall declare any dividend upon its shares of Common Stock payable in stock or make any special dividend or other distribution (other than a cash dividend to the holders of its shares of Common Stock);

 

(c) the Maker shall offer for subscription pro rata to the holders of its shares of Common Stock any additional shares of stock of any class or other rights;

 

(d) there shall be a recapitalization or reclassification of the Common Stock; or

 

(e) there shall be a Next Equity Financing;

 

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then, in any one or more of said cases, the Maker shall give written notice to each holder of this Note of the date on which (A) the books of the Maker shall close or a record shall be taken for such dividend, distribution or subscription rights, or (B) such reclassification or recapitalization; or Next Equity Financing, shall take place, as the case may be. Such notice shall also specify the date as of which the holders of shares of Common Stock of record shall participate in such dividend, distribution or subscription rights or shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such recapitalization or reclassification, as the case may be. Such written notice shall be given at least 30 days prior to the action in question and not less than 30 days prior to the record date or the date on which the Maker’s transfer books are closed in respect thereto.

 

7.12 Taxes . The issuance of certificates of shares of Common Stock upon the conversion of this Note shall be made without charge to the holder thereof for any issuance tax in respect thereto; provided, however, that the Maker shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of this Note.

 

7.13 Closing of Books . The Maker will at no time close its transfer books against the transfer of any shares of Common Stock issued or issuable upon the conversion of this Note in any manner which interferes with the timely conversion of this Note.

 

SECTION 8. Exchange or Replacement of Note .

 

8.1 The holder of this Note, at its option, may in person or by duly authorized attorney surrender this Note for exchange, at the principal executive offices of the Maker, and at the expense of the Maker receive in exchange therefor a new Note in the same aggregate principal amount as the aggregate unpaid principal amount of the Note so surrendered, bearing interest at the same annual rate as the Note so surrendered and otherwise in substantially the form of the Note so surrendered, each such new Note to be dated as of the date to which interest has been paid on the note so surrendered and to be in such principal amount and payable to the holder of this Note. Five days’ prior written notice of the holders intention to make such exchange shall be given to the Maker.

 

8.2 Upon receipt by the Maker of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note, and (in case of loss, theft or destruction) of indemnity reasonably satisfactory to it, and upon surrender and cancellation of this Note, if mutilated, the Maker, upon reimbursement to it of all reasonable expenses incidental thereto, will make and deliver a new Note, of like tenor, in lieu of this Note. Any Note made and delivered in accordance with the provisions of this Section 8 shall be dated as of the date to which interest has been paid on this Note.

 

14
 

 

SECTION 9. Notices . All notices, requests or instructions hereunder shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid as follows:

 

  (1) if to the Maker:
     
    Bone Biologics, Corp.
    175 May Street, Suite 400
    Edison, NJ 08837
    Attn: Chief Financial Officer
     
  (2) if to the holder of this Note:
     
    Musculoskeletal Transplant Foundation, Inc.
    125 May Street, Suite 300
    Edison, New Jersey 08837
    Attn: Chief Financial Officer

 

Any of the above addresses may be changed at any time by notice given as provided above; provided, however, that any such notice of change of address shall be effective only upon receipt.

 

SECTION 10. Captions . Captions and section titles contained herein are inserted as a matter of convenience and for reference only and are not intended to define, limit, extend or describe the scope of this Note or the intent of any provision hereof.

 

SECTION 11. Severability . In the event that one or more of the provisions of this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

 

SECTION 12. Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within such state.

 

SECTION 13. Related Agreements . This Note is issued pursuant to the Purchase Agreement and is entitled to the benefits thereof. Copies of such agreement may be obtained by any holder of this Note at the principal executive offices of the Maker.

 

[Signature Page Follows]

 

15
 

 

IN WITNESS WHEREOF , the undersigned has executed this Note as of the date first above written.

 

ATTEST:   BONE BIOLOGICS, CORP.
         
By: /s/ Deina H. Walsh   By: /s/ William Jay Treat
Name: Deina H. Walsh   Name: William Jay Treat
Title: Witness   Title: President and Chief Technology Officer

 

[Signature Page to Convertible Promissory Note]

 

 
 

 

 

PROMISSORY NOTE

(Secured)

 

$340,000.00 July 31, 2014

 

For value received , the undersigned, Bone Biologics, Inc., a California corporation (the “ Company ”), hereby promises to pay to AFH Holding and Advisory, LLC (“ AFH ”), at 4751 Wilshire Blvd., Suite 110, Los Angeles, CA 90010, or any other place designated in a writing submitted by AFH to the Company, the principal sum of Three-Hundred Forty Thousand Dollars and 00/100 ($340,000.00), together with interest thereon, as calculated below. All sums owing under this Promissory Note (this “ Note ”) are payable in lawful money of the United States of America, in immediately available funds.

 

1. Interest . Interest on all sums owing on this Note shall accrue at a rate of eight and one-half percent (8.5%) per annum, commencing ninety days after the Effective Date and continuing until the Maturity Date, and at a rate of eight and one-half percent (8.5%) per annum, commencing on the Maturity Date and continuing until this Note is paid in full, based on a three hundred sixty (360) day year and charged on the basis of actual days elapsed.

 

2. Payment . The Company shall make payments of principal to AFH commencing on the Initial Date. Payments of principal by the Company to AFH shall be made as follows: $250,000.00 contemporaneous with the Company closing on a total of $1,500,000.00 in the Offering (the “ Initial Date ”); and $90,000.00 contemporaneous with the Company closing on a total of $2,040,000.00 in the Offering. For purposes of this Note, the term “ Offering ” shall mean that certain upcoming offering pursuant to which the Company will be selling between $1,000,000.00 and $5,000,000.00 worth of its $0.001 par value per share common stock to investors. Payments to third-parties out of the proceeds of the Offering shall be made in accordance with the terms of that certain Amended and Restated Letter of Intent, dated May 7, 2014, by and among the Company, the Musculoskeletal Transplant Foundation, Inc., a District of Columbia Corporation (“ MTF ”), and AFH.

 

3. Maturity Date . If not already due and payable in accordance with the terms of Section 2, the outstanding principal balance shall be due and payable in full six (6) months after the Effective Date (the “ Maturity Date ”); provided, however, that the Company may pay all or any portion of such outstanding principal at any time before such date without penalty.

 

4. Late Fee . If any installment is not received by AFH within ten (10) Business Days of being due, the Company will pay a late fee of five percent (5%) of the overdue amount as a late fee. Acceptance of any late fee shall not constitute a waiver of default with respect to the overdue amount, and such late fee shall be paid by the Company in addition to any other costs, attorneys’ fees, and remedies to which AFH may be entitled as a result of an Event of Default under this Note.

 

 
 

 

5. Events of Default . At the option of AFH, the entire unpaid principal amount of this Note and any accrued interest thereon shall become immediately due and payable if an Event of Default shall occur. Each of the following events shall constitute an Event of Default hereunder:

 

a. The failure to pay when due the amount of any interest or principal payment required to be paid hereunder, which failure continues for thirty (30) days after the Company receives written notice of such nonpayment;

 

b. A petition or action for relief shall be filed by or against the Company, pursuant to the Federal Bankruptcy Code (Title 11, U.S. Codes) in effect from time to time, or under any other law relating to bankruptcy, insolvency, reorganization, moratorium, creditor composition, arrangement or other relief from debts; the appointment of a receiver, trustee, custodian or liquidator of or for any property of the Company; or upon the insolvency, dissolution, or termination of the business of the Company;

 

c. The Company shall (i) admit in writing its inability to pay its debts generally as they mature; (ii) make an assignment for the benefit of creditors or commence proceedings for its dissolution; or (iii) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business;

 

d. Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; and

 

e. The Company fails to comply with any covenant, condition or provision contained in this Note or materially breaches any provision hereof, and such failure continues or such breach is not corrected within thirty (30) days after the Company receives written notice of such failure or such breach.

 

6. Attorneys’ Fees . If any attorney is engaged by AFH to enforce or defend any provision of this Note, or as a consequence of any default hereunder, with or without the filing of any legal action or proceeding, then the Company shall pay to AFH immediately upon demand all attorneys’ fees and all costs incurred by AFH in connection therewith, together with interest thereon from the date of such demand until paid at the rate of interest applicable to the principal balance owing hereunder as if such unpaid attorneys’ fees and costs had been added to the principal.

 

7. Waiver . AFH’s acceptance of partial or delinquent payment from the Company, or AFH’s failure or delay in exercising any right hereunder, shall not constitute a waiver of any obligation of the Company hereunder, or any right of AFH hereunder, and shall not affect in any way the right to require full performance at any time thereafter. Any waiver of any term of this Note and any amendment to this Note must be made in writing and signed by AFH and the Company, and shall in all cases be limited to the express terms of such waiver or amendment. No previous waiver by AFH with respect to the terms of this Note shall constitute a waiver of any later breach, default, or failure of any condition under this Note. Except as otherwise provided in this Note, the Company waives: statutes of limitation; presentment; notice of dishonor; notice of default or delinquency; notice of acceleration; notice of protest and nonpayment; notice of cost, expenses or losses and interest thereon; notice of late charges; and diligence in taking any action to collect any sums owing under this Note or in any proceeding against any of the rights or interests in or to properties securing payment of this Note, if any.

 

2
 

 

8. Security . As security for payment of this Note, AFH will receive a Standby Letter of Credit from MTF for the full principal of this Note pursuant to the terms of that certain Agreement, by and among the Company, AFH Acquisition X, Inc. and Bone Biologics Acquisition Corp. , in the form attached hereto as Exhibit A.

 

9. Order of Payments . Payments shall be applied first to any fees or other costs owed to AFH in connection with the enforcement and collection of this Note as provided by this Note, thereafter to the outstanding amount of interest, if any, and thereafter to the outstanding principal amount.

 

10. Bank Account Designated by AFH . Payments shall be made by electronic transfer to the bank account designated in writing by AFH.

 

11. Transfer of Note . AFH may assign or pledge all or part of its rights under this Note. Whenever in this Note there is reference made to AFH, such reference shall be deemed to include as applicable, a reference to the respective successors and assigns of AFH. The provisions of this Note shall be binding upon and shall inure to the benefit of said successors and assigns.

 

12. General Provisions . This Note is intended by AFH and the Company as the complete and final expression of their agreement concerning the subject matter herein. It supersedes all prior understandings or agreements with respect thereto and may be changed only by a writing signed by AFH and the Company. No course of dealing, or parole or extrinsic evidence shall be used to modify or supplement the express terms of this Note. If any provision of this Note is found to be illegal, invalid, or unenforceable, such provision shall be enforced to the maximum extent permitted, but if fully unenforceable, such provision shall be severable, and this Note shall be construed as if such provision had never been a part of this Note, and the remaining provisions shall continue in full force and effect. The provisions hereof are binding upon the successors of the Company and inure to the benefit of the successors of AFH. Each right, power, and remedy provided in this Note shall be cumulative and shall be in addition to every other right, power, and remedy provided in this Note now or hereafter existing at law, in equity or otherwise. The section and paragraph headings contained in this Note are for reference purposes only and shall not affect in any way the meaning or interpretation of this Note. The term “ Business Day ” means any day other than Saturday, Sunday, or a day on which commercial banks in California or New York are obligated by any legal requirement to close.

 

13. Governing Law . This Note shall be construed and enforced in accordance with the laws of the State of California, except to the extent that Federal laws preempt the laws of the State of California, and all persons and entities in any manner obligated under this Note consent to the jurisdiction and venue of the Federal and State of California courts situated in Los Angeles, California, and also consent to service of process by any means authorized by California or Federal law.

 

14. Effective Date . This Note is made effective as of the date first set forth above (the “ Effective Date ”).

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

3
 

   

IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed and delivered as of the Effective Date.

 

  THE COMPANY:    Bone Biologics, Inc.,
    a California corporation
       
    By: /s/ Michael Schuler
      Michael Schuler, Chief Executive Officer

 

[Signature Page to Promissory Note]

 

 
 

  

EXHIBIT A

 

FORM OF LETTER OF CREDIT

 

 
 

  

 

 

CERTIFIED TRUE COPY

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 1

 

DATE: JULY 25, 2014

 

IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 68105133
 
 

ISSUING BANK

BANK OF AMERICA, N.A.

ONE FLEET WAY

PA6-580-02-30

SCRANTON, PA 18507-1999

   

BENEFICIARY

AFH HOLDING & ADVISORY, LLC

AMIR F HESHMATPOUR

CHAIRMAN & MANAGING DIRECTOR

9595 WILSHIRE BLVD SUITE 700

APPLICANT

MUSCULOSKELETAL TRANSPLANT

FOUNDATION, INC.

125 MAY STREET

EDISON, NJ 08837

   
BEVERLY HILLS, CA 90212  

 

AMOUNT

NOT EXCEEDING USD 340,000.00

NOT EXCEEDING THREE HUNDRED FORTY THOUSAND AND 00/100’S US DOLLARS

 

EXPIRATION

JULY 25, 2015 AT OUR COUNTERS

 

GENTLEMEN:

 

WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER 68105133 IN YOUR FAVOR.

 

THIS CREDIT IS AVAILABLE WITH BANK OF AMERICA BY PAYMENT AGAINST PRESENTATION OF BENEFICIARY’S DRAFT(S) AT SIGHT DRAWN ON BANK OF AMERICA N.A.

 

DRAFT(S) MUST BE ACCOMPANIED BY:

 

1. THE ORIGINAL LETTER OF CREDIT AND ALL AMENDMENTS, IF ANY.
   
2. AN AFFIDAVIT SIGNED BY AFH HOLDING AND ADVISORY LLC, CERTIFYING ONE OF THE FOLLOWING:

 

QUOTE

 

A. BONE BIOLOGICS HAS FAILED TO RECEIVE EXTERNAL FUNDING TO EXTINGUISH THE FULL AMOUNT OF $340,000 OR A PORTION THEREOF STILL OWED UNDER THE PURCHASE AGREEMENT TO ACQUIRE AFH ACQUISITION X, OR HAS NOT PAID AMOUNTS DUE AND OUTSTANDING. AS OF THE DATE OF THIS DRAWING SUCH PAYMENT HAS NOT BEEN RECEIVED, AND THEREFORE WE DRAW IN

 

CERTIFIED TRUE COPY

 

 
 

 

 

 

CERTIFIED TRUE COPY

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 2

 

THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: 68105133

 

THE AMOUNT OF $___________ OWED BY BONE BILOGICS.

 

UNQUOTE

 

QUOTE

 

B. BONE BIOLOGICS HAS RECEIVED EXTERNAL FUNDING TO EXTINGUISH THE FULL AMOUNT OF $340,000 OR A PORTION THEREOF STILL OWED UNDER THE PURCHASE AGREEMENT TO ACQUIRE AFH ACQUISITION X, BUT HAS NOT PAID AMOUNTS DUE AND OUTSTANDING. AS OF THE DATE OF THIS DRAWING SUCH PAYMENT HAS NOT BEEN RECEIVED, AND THEREFORE WE DRAW IN THE AMOUNT OF $ OWED BY BONE BILOGICS.

UNQUOTE

 

PARTIAL DRAWINGS AND MULTIPLE DRAWINGS ARE ALLOWED.

 

DRAFT(S) MUST STATE “DRAWN UNDER BANK OF AMERICA N.A., STANDBY LETTER OF CREDIT NUMBER 68105133 DATED JULY 22, 2015.”

 

DRAFT(S) AND DOCUMENTS SHALL BE PRESENTED AT OUR OFFICES AT BANK OF AMERICA, N.A. ONE FLEET WAY, PA6-580 - 02-30, SCRANTON, PA 18507-1999, ATTN: GLOBAL TRADE OPERATIONS, STANDBY UNIT.

 

THIS LETTER OF CREDIT IS TRANSFERABLE IN FULL AND NOT IN PART. ANY TRANSFER MADE HEREUNDER MUST CONFORM STRICTLY TO THE TERMS HEREOF AND TO THE CONDITIONS OF RULE 6 OF THE INTERNATIONAL STANDBY PRACTICES (ISP98) FIXED BY THE INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 590. SHOULD YOU WISH TO EFFECT A TRANSFER UNDER THIS CREDIT, SUCH TRANSFER WILL BE SUBJECT TO THE RETURN TO US OF THE ORIGINAL CREDIT INSTRUMENT, ACCOMPANIED BY OUR FORM OF TRANSFER, PROPERLY COMPLETED AND SIGNED BY AN AUTHORIZED SIGNATORY OF YOUR FIRM, BEARING YOUR BANKERS STAMP AND SIGNATURE AUTHENTICATION AND PAYMENT OF OUR TRANSFER FEE. SUCH TRANSFER FORM TRANSFER FORM IS AVAILABLE UPON REQUEST.

 

COMMUNICATIONS WITH RESPECT TO THIS LETTER OF CREDIT SHALL BE IN WRITING AND SHALL BE ADDRESSED TO US AT ONE FLEET WAY, PA6-580 - 02 - 30, SCRANTON, PA 18507-1999, ATTN: GLOBAL TRADE OPERATIONS, STANDBY UNIT, PHONE: 1-800-370-7519, SPECIFICALLY REFERRING TO THE NUMBER OF THIS LETTER OF CREDIT.

 

EXCEPT AS OTHERWISE EXPRESSLY STATED HEREIN, THIS CREDIT IS ISSUED SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES (ISP98), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 590.

 

IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS TRANSACTION, PLEASE CALL 800-370-7519 OPT 1 .

 

   
AUTHORIZED SIGNATURE  

 

THIS DOCUMENT CONSISTS OF 2 PAGE(S).

 

CERTIFIED TRUE COPY

 

 
 

 

 

 

BANK OF AMERICA – CONFIDENTIAL PAGE: 1
   
DATE: JULY 28, 2014  
   
AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 68105133
 
AMENDMENT NUMBER 1  
   
 

ISSUING BANK

BANK OF AMERICA, N.A.

ONE FLEET WAY

PA6-580-02-30

SCRANTON, PA 18507-1999

   

BENEFICIARY

AFH HOLDING & ADVISORY, LLC

AMIR F HESHMATPOUR

CHAIRMAN & MANAGING DIRECTOR

10830 MASSACHUSETTS AVE

APPLICANT

MUSCULOSKELETAL TRANSPLANT

FOUNDATION, INC.

125 MAY STREET

EDISON, NJ 08837

   

PENTHOUSE SUITE

LOS ANGELES, CA 90 024

 

 

 

THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF THE ABOVE CRED: AND MUST BE ATTACHED THERETO.

 

THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS:

 

THE BENEFICIARY HAS BEEN AMENDED TO:

AFH HOLDING & ADVISORY, LLC

AMIR F HESHMATPOUR

CHAIRMAN & MANAGING DIRECTOR

10830 MASSACHUSETTS AVE

 

PENTHOUSE SUITE

LOS ANGELES, CA 90024

 

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

 

IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT, PLEASE CALL 800-370-7519 OPT 1 .

 

   
AUTHORIZED SIGNATURE  

 

THIS DOCUMENT CONSISTS OF 1 PAGE(S).

 

ORIGINAL

 

 
 

 

DATED this 15th day of September 2014

 

MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.

 

AND

 

BONE BIOLOGICS, INC.

 

 

 

LOAN AGREEMENT

 

 

 

 
 

 

THIS LOAN AGREEMENT is made the 15th day of September 2014

 

BETWEEN:

 

(1) MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC. , a non-profit corporation organized under the laws of the District of Columbia, located at 125 May St., Suite 300, Edison, New Jersey 08837; and
   
(2) BONE BIOLOGICS, INC. , a California corporation, located at 100 Rancho Road, Suite 7-231, Thousand Oaks, California 91362.

 

WHEREAS , AFH Acquisition X, Inc. (“ AFH ”) and its wholly-owned subsidiary, Bone Biologics Acquisition Corp. (“ Merger Sub ”) intend to enter into an Agreement and Plan of Merger (the “ Merger Agreement ”), by and among AFH, the Borrower and Merger Sub.

 

WHEREAS , pursuant to the terms of the Merger Agreement, the Borrower intends to merge with Merger Sub, with the Borrower as the surviving entity (the “ Merger ”);

 

WHEREAS , after the Merger, AFH shall cease to be a shell company, as defined in the rules of the Securities and Exchange Commission, and AFH will officially change its name to “Bone Biologics, Corp.”

 

WHEREAS , Lender has agreed to loan funds to Borrower on the terms and conditions set forth herein.

 

NOW IT IS HEREBY AGREED as follows:

 

1. DEFINITIONS AND INTERPRETATIONS

 

  1.1 In this Agreement unless the context otherwise requires the following terms shall have the respective meanings attached thereto:

 

  “this Agreement” means this Loan Agreement, dated September 15, 2014, between the Borrower and the Lender, as the same may be amended, modified or supplemented, from time to time.
     
  the Loan means the amounts loaned under this Agreement and memorialized in the Note, which amounts shall not exceed $500,000.00 (Five Hundred Thousand Dollars).
     
  the Borrower means Bone Biologics, Inc.
     
  Business Day means any day on which the clearing banks are open for business in New Jersey.
     
  the Lender means Musculoskeletal Transplant Foundation, Inc.

 

 
 

 

 

  Repayment Date means the earlier to occur of (i) the date on which at least $1 million is loaned to or invested in Bone Biologics, Corp. or (ii) December 31, 2014.
     
  “the Obligations” means (a) all payment and performance obligations of every kind, nature and description of Borrower under this Agreement (including, without limitation, with any interest, fees and other charges on the Loan that would accrue but for the filing of a bankruptcy action, whether or not such claim is allowed in such bankruptcy action), whether such obligations are direct or indirect, arising in connection with an interest rate swap agreement or other similar interest rate hedging agreement or otherwise, absolute or contingent, due or not due, contractual or tortuous, liquidated or unliquidated, arising by operation of law or otherwise, now existing or hereafter arising, and (b) (to the extent not included in the preceding clause (a)) the obligation of Borrower or any obligor to pay an amount equal to the amount of any and all damage which Lender may suffer by reason of a breach by such Person of any obligation, covenant or undertaking with respect to this Agreement.

 

  1.2 Unless otherwise specified, words importing the singular include the plural, words importing any gender include every gender and words importing persons include bodies corporate and unincorporated, and (in each case) vice versa.
     
  1.3 The headings in this Agreement are for convenience only and shall not affect its interpretation.
     
  1.4 References to this Agreement include the Recitals, the Clauses, Schedules and Attachments to this Agreement as any of them shall be amended, varied or supplemented from time to time and references to a Clause, Schedule or Attachment are references to Clauses of or Schedules or Attachments to this Agreement.

 

2. Advances

  

Subject to the terms and conditions of this Agreement, upon the execution and delivery of this Agreement and the Lender’s receipt of an original Promissory Note in the form attached hereto as Exhibit A (the “ Note ”), Borrower may, on or before October 31, 2014, request from Lender, and Lender shall provide to Borrower, advances in an amount not to exceed $250,000. After October 31, 2014 and prior to the Repayment Date, Borrower may request from Lender additional advances not to exceed an aggregate principal Note balance of $500,000. All advance made to Borrower shall be immediately recorded on Exhibit 1 to the Note.

 

- 2 -
 

 

3. Interest

  

Interest at the annual rate of eight and one-half percent (8.5) shall accrue annually on the Loan commencing on the date of the advance of the Loan and shall be payable by Borrower on a quarterly basis.

 

4. Repayment

 

  4.1 The Borrower shall repay the Loan together with any amount of interest accrued thereon on the Repayment Date in U.S. dollars by wire transfer to such bank account as the Lender shall communicate in writing to the Borrower.  For avoidance of doubt, to the extent at least $1 million is loaned to or invested in Bone Biologics, Corp. prior to December 31, 2014, the parties agree that once all fees in connection with the Merger and the private placement have been paid by Bone Biologics, Corp., Bone Biologics, Corp. will use any additional proceeds received in the private placement to pay all outstanding principal, interest and penalties then outstanding with respect to this Agreement, including the Note.
     
  4.3 In further consideration of this Agreement and the Loan, Borrower shall grant to Lender 625,000 warrants, in the form attached hereto as Exhibit B, in Borrower at a strike price of $1.62.

 

5. Early Repayment

 

  5.1 The Borrower may at any time prior to the Repayment Date pay the Loan or any part thereof, provided that any partial repayment of the Loan must be paid in multiples of USD $10,000.00.
     
  5.2 No amount repaid, whether under clause 5.1 or otherwise, may be redrawn.
     
  5.3 The Lender may in its discretion demand payment of a fee equivalent to one month’s interest in the event that the full amount of the Loan is repaid before the Repayment Date.

 

6. Payments

 

  6.1 All payments made by the Borrower to the Lender under this Agreement shall be made without set-off or counterclaim and without any deduction by credit to such bank account as the Lender may designate.  If the Borrower is compelled to make any deductions for taxes or otherwise, additional amounts shall be paid by Borrower to Lender to ensure receipt by the Lender of the full amount, which the Lender would have received, but for such deduction.
     
  6.2 If any due date for a payment under this Agreement is not a Business Day, the due date will be extended to the next Business Day.

 

- 3 -
 

 

7. Events of default

 

If any of the events of default (each, an “ Event of Default ”) occurs then and at any time thereafter the Lender may by written notice terminate its obligations hereunder, additional funds otherwise available under the Loan may not be drawn, and the Loan shall be immediately due and payable, including accrued interest, in accordance with Clause 4:

 

  7.1 If the Borrower fails to pay any sum when due under this Agreement or the Note or to comply with any other term of this Agreement or the Note; or
     
  7.2 Any information given or warranty or representation made by or at the request of the Borrower proving inaccurate; or
     
  7.3 Commencement of insolvency proceedings against the Borrower, the Borrower becomes unable to pay its debts as they fall due, or reaches a compromise with its creditors; or
     
  7.4 It becomes illegal for the Lender to make or maintain any of its obligations hereunder; or
     
  7.5 Any other circumstances which may reasonably lead the Lender to believe that his position might be prejudiced or that the Borrower’s obligations will not be met.

 

8. Miscellaneous payments

 

The Borrower will pay the following:

 

  8.1 Any stamp duties payable in connection with this Agreement;
     
  8.2 Such amount as is necessary to indemnify the Lender against the consequences of any non-compliance or event of default specified in Clause 7;
     
  8.3 All costs, including legal fees incurred by the Lender in connection with the preparation, preservation of rights under, administration and enforcement of this Agreement; and
     
  8.4 Losses flowing from any judgment, claim or proof being payable in a different currency from that agreed.

 

- 4 -
 

 

9. No waiver

 

No failure or delay by the Lender in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof or prejudice any other or further exercise by the Lender of any of its rights or remedies under this Agreement. The rights and remedies in this Agreement are cumulative and not exclusive of any right or remedies provided by law.

 

10. Assignment

 

Following consummation of the Merger, Borrower agrees to use best commercial efforts to assign the Loan and Note to Bone Biologics, Corp. and Lender agrees to support such assignment. Except as set forth in the immediately preceding sentence, neither party may without the prior written consent of the other party, assign all or any of its rights under this Agreement and this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal successors and assigns.

 

11. Entire Agreement

 

  11.1 This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and may not be amended or modified in any respect or to any extent whatsoever, except by an instrument in writing, executed by each of the parties hereto.
     
  11.2 This Agreement may be executed in any number of counterparts or duplicates each of which shall be an original, but the counterparts or duplicates shall together constitute one and the same agreement.

 

12. Severability

 

In the event that any of the provisions contained herein shall be invalid or unenforceable, then the remaining provisions shall be construed as if such invalid or unenforceable provisions were not contained herein;

 

13. Notices

 

  13.1 Any notice or other communication in connection with this Agreement or with any arbitration under this Agreement shall be in writing in English (a “ Notice ”) and shall be sufficiently given or served if delivered or sent:

 

in the case of the Lender to:

 

  Musculoskeletal Transplant Foundation, Inc.  
  125 May Street, Suite 300  
  Edison, NJ 08837  
  Attn: Michael J. Kawas, Executive Vice President and Chief Financial Officer
  Fax: (805) 496-8937  

 

- 5 -
 

 

in the case of the Borrower to:

 

  Bone Biologics, Inc.  
  175 May Street, Suite 400  
  Edison, NJ 08837  
  Attn: William Jay Treat, President and Chief Technology Officer
  Fax: (732) 661-2152  

 

or (in either case) to such other address or fax number as the relevant party may have notified to the other in accordance with this Clause.

 

  13.2 Any Notice may be delivered by hand or sent by registered mail or fax, provided that in the case of Notices sent by fax, a copy of the Notice is sent by hand or registered mail to the relevant party within two Business Days of the date on which the fax is sent.  Without prejudice to the foregoing, any Notice shall, unless the contrary is proved by the addressee, be deemed to have been received, if sent by fax, on the next Business Day in the place to which it is sent, if sent by registered mail, the seventh business day after posting, or if delivered by hand, at the time of delivery.

 

14. Governing Law

 

This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and shall be governed by the laws of the State of New Jersey without regard to conflict or choice of law principles.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF the parties have duly executed and delivered this Agreement the day and year first above written:

 

SIGNED for and on behalf of: MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.:

 

/s/ Michael J. Kawas  
Name: Michael J. Kawas  
Title: Executive Vice President and Chief Financial Officer  

 

SIGNED for and on behalf of BONE BIOLOGICS, INC.:

 

/s/ William Jay Treat  
Name: William Jay Treat  
Name: President and Chief Technology Officer  

  

 
 

 

EXHIBIT A

 

PROMISSORY NOTE

 

 
 

 

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

 

PROMISSORY NOTE

 

September 15, 2014

 

For value received, Bone Biologics, Inc., a California corporation (“ Borrower or the Company ”) promises to pay to Musculoskeletal Transplant Foundation, Inc., a District of Columbia non-profit corporation or its assigns (“ Lender ”) the aggregate principal amount of $500,000.00 or so much thereof as may be advanced from time to time by Lender to Borrower under this Promissory Note (the “ Note ”) upon their mutual agreement as evidenced by their initials on the attached grid (each, an “ Advance ” and collectively, the “ Advances ”) with simple interest on the outstanding principal amount at the rate eight and one-half percent (8.5%) per annum. Interest shall commence with the date hereof and shall continue on the outstanding principal until paid in full. Interest shall be computed on the basis of a year of 365 days for the actual number of days elapsed.

 

1. All payments of interest and principal shall be in lawful money of the United States of America. All payments shall be applied first to accrued interest, and thereafter to principal.

 

2. All Advances and prepayments made on account of principal hereof shall be recorded on the grid attached hereto as Exhibit 1 and made a part hereof and initialed by Borrower and Lender where indicated. Each Advance shall be subject to the mutual consent of the Borrower and Lender; provided that nothing set forth in this Note or otherwise shall obligate Lender to make any Advance hereunder. The aggregate principal amount of all Advances shall not exceed $500,000.00.

 

3. This Note and all outstanding principal and accrued and unpaid interest shall be due and payable upon demand of the Lender at any time after the date that is 30 days after the most recent Advance made under this Note.

 

4. Borrower may prepay this Note at any time.

 

5. Borrower hereby waives demand, notice, presentment, protest and notice of dishonor.

 

6. Borrower shall use the Advances made hereunder only for operations and general working capital needs.

 

7. If there shall be any Event of Default (as defined herein) hereunder, at the option and upon the declaration of the holder of this Note, and notwithstanding anything to the contrary herein, this Note shall accelerate and all principal and unpaid accrued interest shall become due and payable and additional funds otherwise available under this Note will not be Advanced. The occurrence of any one or more of the following shall constitute an Event of Default (each, an “ Event of Default ”):

 

1
 

 

(a) Borrower files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing;

 

(b) An involuntary petition is filed against Borrower (unless such petition is dismissed or discharged within sixty (60) days under any bankruptcy statute now or hereafter in effect, or a custodian, receive, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of Borrower; or

 

(c) Borrower uses any of the proceeds of the Advances for any purpose other than as set forth in Paragraph 6 hereof.

 

8. This Note shall be governed by and construed under the laws of the State of New Jersey, as applied to agreements among New Jersey residents, made and to be performed entirely within the State of New Jersey, without giving effect to conflicts of laws principles.

 

9. Notwithstanding any provision contained herein, if at any time the rate of interest on this Note shall be deemed by any competent court of law, governmental agency or tribunal to exceed the maximum rate of interest permitted to be charged by Lender to Borrower under applicable law, then, during such time as such rate of interest would be deemed excessive, that portion of each sum paid attributable to that portion of such interest rate exceeding the maximum rate so permitted shall be deemed a voluntary prepayment of principal.

 

10. Any term of this Note may be amended or waived with the written consent of Borrower and the Lender.

 

11. This Note may not be transferred or assigned, other than to Bone Biologics, Corp., without the prior written consent of the Lender.

 

[Signature Page Follows]

 

2
 

 

IN WITNESS WHEREOF , the undersigned has executed this Note as of the date first above written.

 

ATTEST:

BONE BIOLOGICS, INC.

         
By:     By:  
Name:     Name: William Jay Treat
Title:     Title: President and Chief Technology Officer

 

 
 

 

EXHIBIT 1

 

ADVANCES AND PREPAYMENTS OF PRINCIPAL

 

    Amount of   Amount of   Principal Balance   Initials
    Loan Made   Loan Prepaid   Remaining   (Borrower
Date   This Date   This Date   Unpaid   and Lender)
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 

 

 
 

 

EXHIBIT B

 

FORM OF WARRANT AGREEMENT

 

 
 

 

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

 

 

Warrant No. CW-487 Number of Shares:  625,000
Date of Issuance:  September 1, 2014 (subject to adjustment)

 

BONE BIOLOGICS, INC.

 

Common Stock Purchase Warrant

 

Bone Biologics, Inc., a California corporation (the “ Company ”), for value received, hereby certifies that Musculoskeletal Transplant Foundation, Inc., or its registered assigns (the “ Registered Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at any time after the date hereof and on or before the Expiration Date (as defined in Section 6 below), up to 625,000 shares (as adjusted from time to time pursuant to the provisions of this Warrant) of $0.0001 par value per share common stock of the Company (the “ Common Stock ”), at an exercise price of $1.62 per share. The shares issuable upon exercise of this Warrant and the exercise price per share, as adjusted from time to time pursuant to the provisions of this Warrant, are sometimes hereinafter referred to as the “ Warrant Stock ” and the “ Exercise Price ,” respectively.

 

1. Exercise .

 

(a) Manner of Exercise . This Warrant may be exercised by the Registered Holder, at any time and from time to time on or before the Expiration Date, in whole or in part, by surrendering this Warrant, with the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise (the “ Purchase Price ”), unless the Registered Holder exercises its net issue rights as set forth in Section 1(c) below. The Purchase Price may be paid by cash, check, wire transfer or by the surrender of promissory notes or other instruments representing indebtedness of the Company to the Registered Holder.

 

(b) Effective Time of Exercise . Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above. At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(d) below shall be deemed to have become the holder or holders of record of the Warrant Stock to be represented by such certificates.

 

 
 

 

(c) Net Issue Exercise .

 

(i) In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election on the purchase/exercise form appended hereto as Exhibit A duly executed by such Registered Holder or such Registered Holder’s duly authorized attorney, in which event the Company shall issue to such Registered Holder a number of shares of Common Stock computed using the following formula:

 

X =

Y (A-B)  

 
    A  

 

Where X = The number of shares of Common Stock to be issued to the Registered Holder.
     
  Y = The number of shares of Common Stock purchasable under this Warrant (at the date of such calculation).
     
  A = The fair market value of one share of Common Stock (at the date of such calculation).
     
  B = The Exercise Price (as adjusted to the date of such calculation).

 

(ii) For purposes of this Section 1(c), the fair market value of one share of Common Stock on the date of calculation shall mean:

 

(A) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s Registration Statement relating to such public offering has been declared effective by the Securities and Exchange Commission, then the fair market value of Common Stock shall be the initial “Price to Public” per share specified in the final prospectus with respect to the offering;

 

(B) if this Warrant is exercised after, and not in connection with, the Company’s initial public offering, and if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market or actively traded over-the-counter:

 

(1) if the Company’s Common Stock is traded on a securities exchange or The Nasdaq Stock Market, the fair market value shall be deemed to be the average of the closing prices over a 30 day period ending three days before the date of calculation; or

 

(2) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid or sales price (whichever is applicable) over the 30 day period ending three days before the date of calculation; or

 

- 2 -
 

 

(C) if neither (A) nor (B) is applicable, the fair market value shall be at the highest price per share which the Company could obtain on the date of calculation from a willing buyer (not a current employee or director) for shares of the Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of Directors, unless the Company is at such time subject to a Significant Transaction as described in Section 6(b) below, in which case the fair market value per share of the Common Stock shall be deemed to be the value of the consideration per share received by the holders of such stock pursuant to such acquisition.

 

(d) Delivery to Registered Holder . As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within three business days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

 

a certificate or certificates for the number of shares of Warrant Stock to which such Registered Holder shall be entitled, and in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor and with the same date, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered Holder upon such exercise as provided in Section 1(a) above (without giving effect to any adjustment thereof).

 

2. Adjustments .

 

(a) Stock Splits and Dividends . If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of the Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding shares of the Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

(b) Reclassification, Etc . In case of any reclassification or change of the outstanding securities of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 2(a); and in each such case, the terms of this Section 2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.

 

- 3 -
 

 

(c) Adjustment Certificate . When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers .

 

(a) Unregistered Security . Each holder of this Warrant acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Securities Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

 

Transferability . Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company.

 

(b) Warrant Register . The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided , however , that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4. No Impairment . The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

 

- 4 -
 

 

5. Representations and Warranties of the Registered Holder . The Registered Holder hereby represents and warrants to the Company as follows:

 

(a) Purchase Entirely for Own Account . The Registered Holder acknowledges that this Warrant is given to the Registered Holder in reliance upon the Registered Holder’s representation to the Company, which by its acceptance of this Warrant the Registered Holder hereby confirms, that the Warrant, and the Warrant Stock (collectively, the “ Securities ”) being acquired by the Registered Holder are being acquired for investment for the Registered Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Registered Holder has no present intention of selling, granting any participation in, or otherwise distributing the same except under circumstances that will not result in a violation of the Securities Act or any other federal or state securities laws. By executing this Warrant, the Registered Holder further represents that the Registered Holder does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Registered Holder represents that it has full power and authority to execute this Warrant. The Registered Holder has not been formed for the specific purpose of acquiring any of the Securities.

 

(b) Disclosure of Information . The Registered Holder has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management. The Registered Holder understands that such discussions, as well as any written information issued by the Company, were intended to describe the aspects of the Company’s business which it believes to be material.

 

(c) Restricted Securities . The Registered Holder understands that the Securities have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Registered Holder’s representations as expressed herein. The Registered Holder understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Registered Holder must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Registered Holder further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Registered Holder’s control, and which the Company may not be able to satisfy.

 

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(d) No Public Market . The Registered Holder understands that no public market now exists for any of the securities issued by the Company and that the Company has made no assurances that a public market will ever exist for the Securities.

 

(e) Legends . The Registered Holder understands that the Securities, and any securities issued in respect of or exchanged for the Securities, may bear one or all of the following legends:

 

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

 

(f) Accredited Investor . The Registered Holder is either an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act or has such knowledge and experience (or is relying on a purchaser representative who has such knowledge and experience) in financial and business matters that the Registered Holder is capable of evaluating the merits and risks of acquiring the Securities.

 

6. Termination . This Warrant (and the right to purchase Warrant Stock upon exercise hereof) shall terminate upon the earliest to occur of the following (the “ Expiration Date ”): (a) the date that is seven (7) years after the Date of Issuance (b) the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company) or any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of (each a “ Significant Transaction ”), provided that this Section 6(b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to an equity financing in which the Company is the surviving corporation, or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act. In the event of a Significant Transaction, the Registered Holder shall thereafter be entitled to purchase the kind and amount of shares of stock and other securities and property (including cash) which the Registered Holder would have been entitled to receive had this Warrant been exercised immediately prior to the effective date of such Significant Transaction.

 

7. The Merger . The Company intends to enter into an Agreement and Plan of Merger pursuant to which the Company will merge (the “ Merger ”) with and into a subsidiary (“ Sub ”) of AFH Acquisition X, Inc., a Delaware corporation (“ BB Corp. ”), resulting in the Company becoming a wholly-owned subsidiary of BB Corp. Upon consummation of the Merger, BB. Corp will change its name to “Bone Biologics, Corp.,” and the separate existence of Sub will end. If the Merger is consummated, BB Corp. will, upon consummation of the Merger, issue a new warrant (the “ New Warrant ”) to the Registered Holder. The New Warrant will contain terms substantially identical to the terms contained in this Warrant. Upon the Registered Holder’s receipt of the New Warrant, the New Warrant will become effective, and this Warrant will become null and void.

 

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8. Piggyback Registrations . The Company shall notify the Registered Holders in writing at least thirty (30) days prior to the initial filing of any future registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to any employee benefit plan, acquisition or a corporate reorganization,), and will afford each Registered Holder an opportunity to include in such registration statement all or any part of the Warrant Shares then held by such Registered Holder that are not currently included in another registration statement. Each Registered Holder desiring to include in any such registration statement all or any part of the Warrant Shares held by such Registered Holder shall within twenty (20) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Warrant Shares such Registered Holder wishes to include in such registration statement. If a Registered Holder decides not to include all of its Warrant Shares in any registration statement thereafter filed by the Company, such Registered Holder shall nevertheless continue to have the right to include any Warrant Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

 

9. Reservation of Stock . The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

10. Exchange of Warrants . Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of the Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

11. Replacement of Warrants . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

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12. No Rights as Stockholder . Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

13. No Fractional Shares . No fractional shares of Common Stock will be issued in connection with any exercise hereunder. In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

14. Amendment or Waiver . Any term of this Warrant may be amended or waived only by an instrument in writing signed by the party against which enforcement of the amendment or waiver is sought.

 

15. Headings. The headings in this Warrant are used for convenience only and are not to be considered in construing or interpreting any provision of this Warrant.

 

16. Governing Law . This Warrant shall be governed, construed and interpreted in accordance with the laws of the State of New Jersey, without giving effect to principles of conflicts of law.

 

17. Successors and Assigns . Unless otherwise provided in this Warrant, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties. Nothing in this Warrant, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Warrant, except as expressly provided in this Warrant.

 

18. Counterparts . This Warrant may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

19. Severability . If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision or provisions shall be excluded from this Warrant, and the balance of this Warrant shall be interpreted as if such provision or provisions were so excluded and shall be enforceable in accordance with its terms.

 

20. Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Warrant, upon any breach or default of any other party under this Warrant, 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. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Warrant, or any waiver on the part of any party of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

21. Notices . Unless otherwise provided herein, any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier or sent by facsimile, or 48 hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, or as subsequently modified by written notice.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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IN WITNESS WHEREOF , the parties have executed this Common Stock Purchase Warrant as of the date first forth above.

 

  BONE BIOLOGICS, INC.:
     
  By:  
  Name: Michael Schuler
  Title: Chief Executive Officer
     
  Address: 100 Rancho Road
    Suite 7 - #231
    Thousand Oaks, CA 91362

 

  MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.:
     
  By:  
  Name:   Michael J. Kawas
  Title: Executive Vice President
    and Chief Financial Officer
     
  Address: Musculoskeletal Transplant
    Foundation, Inc.
    125 May Street, Suite 300
    Edison, NJ 08837590

 

 
 

 

EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To:          Bone Biologics, Inc. Dated:

 

The undersigned, pursuant to the provisions set forth in the attached Warrant No. CW-487 (the “Warrant”), hereby irrevocably elects to (a) purchase _____ shares of the Common Stock covered by the Warrant and herewith makes payment of $ _________, representing the full purchase price for such shares at the price per share provided for in the Warrant, or (b) exercise the Warrant for _______ shares purchasable under the Warrant pursuant to the Net Issue Exercise provisions of Section 1(c) of the Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 5 of the Warrant and by its signature below hereby makes such representations and warranties to the Company. Defined terms used but not defined in this Purchase/Exercise Form shall have the meanings assigned to them in the Warrant.

 

  Signature:  
     
  Name (print):  
     
  Title (if applic.):  
     
  Company (if applic.):  

 

 
 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, _________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

Name of Assignee Address/Fax Number   No. of Shares

 

 

 

 

 

 

Dated:     Signature:  
          
         
         
      Witness:    

 

 
 

 

EXHIBIT C

 

FORM OF ASSIGNMENT AGREEMENT

 

 
 

 

ASSIGNMENT, ASSUMPTION AND CONSENT AGREEMENT

 

This ASSIGNMENT, ASSUMPTION AND CONSENT AGREEMENT (the “Assignment”) is entered into as of September ___, 2014, between Bone Biologics, Inc. (“BBI”) and Bone Biologics, Corp. (“BBD”), and with the consent of Musculoskeletal Transplant Foundation, Inc. (“MTF”). BBI and BBC are collectively referred to herein as the “parties.”

 

RECITALS

 

WHEREAS, BBI and MTF are parties to that certain Loan Agreement, dated as of September 15, 2014 (the “Loan Agreement”);

 

WHEREAS, pursuant to the Loan Agreement, MTF agreed to advance to BBI an amount not to exceed $500,000;

 

WHEREAS, the advances by MTF to BBI under the Loan Agreement are memorialized in a Promissory Note issued by BBI to MTF, dated as of September 15, 2014, in the maximum principal amount of $500,000 (the “Note” and together with the “Loan Agreement,” the “Assigned Obligations”);

 

WHEREAS, pursuant to the Loan Agreement, BBI is obligated to use best commercial efforts to assign the Assigned Obligations to BBC and MTF is obligated to support BBI in such efforts;

 

WHEREAS, BBC desires to acquire from BBI all of BBI’s right, title and interest in the Assigned Obligations, and BBI desires to assign such right, title and interest to BBC, subject to the terms and conditions set forth in this Assignment; and

 

WHEREAS, MTF wishes to formally consent to such assignment in accordance with the terms of this Assignment.

 

NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, BBI and BBC hereby agree as follows, with the consent of MTF:

 

1. Assignment . This Assignment shall be effective on September ___, 2014 (the “Effective Date”). On the Effective Date, all of BBI’s right, title and interest in, and all of its obligations under, the Assigned Agreement shall be automatically assigned to and assumed by BBC without any further act of the parties.

 

2. Assumption . BBC hereby agrees to accept the assignment in the manner set forth above and to assume all of BBI’s obligations under the Assigned Agreement, whether existing as of the Effective Date or arising thereafter.

 

3. Notice Addresses . The address and facsimile transmission number of BBI, BBC and MTF, for purposes of notices under this Assignment, are specified with the signatures below.

 

4. MTF Consent . MTF consents to the foregoing, if and to the extent required by the terms and provisions of the Assigned Obligations.

 

 
 

 

5. Third Parties . The parties intend that MTF is a third party beneficiary of this Assignment.

 

6. Miscellaneous .

 

(a) Governing Law . This Assignment shall be governed by and construed under and in accordance with the internal laws of the State of New Jersey.

 

(b) Headings . The headings in this Assignment are inserted for convenience only and shall not constitute a part hereof.

 

(c) Successors and Assigns . This Assignment shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns.

 

(d) Counterparts; Facsimile Signature . This Assignment may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same agreement. Each of the parties to this Assignment agrees that a signature affixed to a counterpart of this Assignment and delivered by facsimile or other electronic transmission by any person is intended to be its, his or her signature and shall be valid, binding and enforceable against such person.

 

[Signature Page Follows]

 

- 2 -
 

 

IN WITNESS WHEREOF, the parties have executed this Assignment, Assumption and Consent Agreement as of the date first written above.

 


SIGNED for and on behalf of BONE BIOLOGICS, INC.:

 

     
Name: William Jay Treat  
Title: President and Chief Technology Officer  

 

SIGNED for and on behalf of BONE BIOLOGICS, CORP.:

 

     
Name: W illiam Jay Treat  
Title: President and Chief Technology Officer  

 

SIGNED , solely for purposes of Paragraph 4 of this Agreement, for and on behalf of MUSCULOSKELETAL TRANSPLANT FOUNDATION, INC.:

 

     
Name: Michael J. Kawas  
Title: Executive Vice President and  
Chief Financial Officer  

 

- 3 -
 

 

 

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

 

PROMISSORY NOTE

 

September 15, 2014

 

For value received, Bone Biologics, Inc., a California corporation (“ Borrower or the Company ”) promises to pay to Musculoskeletal Transplant Foundation, Inc. , a District of Columbia non-profit corporation or its assigns (“ Lender ”) the aggregate principal amount of $500,000.00 or so much thereof as may be advanced from time to time by Lender to Borrower under this Promissory Note (the “ Note ”) upon their mutual agreement as evidenced by their initials on the attached grid (each, an “ Advance ” and collectively, the “ Advances ”) with simple interest on the outstanding principal amount at the rate eight and one-half percent (8.5%) per annum. Interest shall commence with the date hereof and shall continue on the outstanding principal until paid in full. Interest shall be computed on the basis of a year of 365 days for the actual number of days elapsed.

 

All payments of interest and principal shall be in lawful money of the United States of America. All payments shall be applied first to accrued interest, and thereafter to principal.

 

All Advances and prepayments made on account of principal hereof shall be recorded on the grid attached hereto as Exhibit 1 and made a part hereof and initialed by Borrower and Lender where indicated. Each Advance shall be subject to the mutual consent of the Borrower and Lender; provided that nothing set forth in this Note or otherwise shall obligate Lender to make any Advance hereunder. The aggregate principal amount of all Advances shall not exceed $500,000.00.

 

This Note and all outstanding principal and accrued and unpaid interest shall be due and payable upon demand of the Lender at any time after the date that is 30 days after the most recent Advance made under this Note.

 

Borrower may prepay this Note at any time.

 

Borrower hereby waives demand, notice, presentment, protest and notice of dishonor.

 

Borrower shall use the Advances made hereunder only for operations and general working capital needs.

 

If there shall be any Event of Default (as defined herein) hereunder, at the option and upon the declaration of the holder of this Note, and notwithstanding anything to the contrary herein, this Note shall accelerate and all principal and unpaid accrued interest shall become due and payable and additional funds otherwise available under this Note will not be Advanced. The occurrence of any one or more of the following shall constitute an Event of Default (each, an “ Event of Default ”):

 

1
 

 

Borrower files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing;

 

An involuntary petition is filed against Borrower (unless such petition is dismissed or discharged within sixty (60) days under any bankruptcy statute now or hereafter in effect, or a custodian, receive, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of Borrower; or

 

Borrower uses any of the proceeds of the Advances for any purpose other than as set forth in Paragraph 6 hereof.

 

This Note shall be governed by and construed under the laws of the State of New Jersey, as applied to agreements among New Jersey residents, made and to be performed entirely within the State of New Jersey, without giving effect to conflicts of laws principles.

 

Notwithstanding any provision contained herein, if at any time the rate of interest on this Note shall be deemed by any competent court of law, governmental agency or tribunal to exceed the maximum rate of interest permitted to be charged by Lender to Borrower under applicable law, then, during such time as such rate of interest would be deemed excessive, that portion of each sum paid attributable to that portion of such interest rate exceeding the maximum rate so permitted shall be deemed a voluntary prepayment of principal.

 

Any term of this Note may be amended or waived with the written consent of Borrower and the Lender.

 

This Note may not be transferred or assigned, other than to Bone Biologics, Corp., without the prior written consent of the Lender.

 

[Signature Page Follows]

 

2
 

 

IN WITNESS WHEREOF , the undersigned has executed this Note as of the date first above written.

 

ATTEST:   BONE BIOLOGICS, INC.
         
By: /s/ Jamie Worth   By: /s/ William Jay Treat
Name: Jamie Worth   Name: William Jay Treat
Title: Director of H.R.,   Title: President and Chief
  AFH Holding & Advisory, LLC     Technology Officer

 

3
 

 

EXHIBIT 1

 

ADVANCES AND PREPAYMENTS OF PRINCIPAL

 

Date  

Amount of
Loan Made
This Date

  Amount of
Loan Prepaid
This Date
  Principal Balance
Remaining
Unpaid
  Initials
(Borrower
and Lender)
                 
                 
                 
                 
                 
                 
                 
                 

 

4
 

 

 

 

CERTIFIED TRUE COPY

 

BANK OF AMERICA – CONFIDENTIAL PAGE:  1

 

DATE: JULY 25, 2014

 

IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 68105133

 

 

ISSUING BANK

BANK OF AMERICA, N.A.

ONE FLEET WAY

PA6-580-02-30

SCRANTON, PA 18507-1999 

   

BENEFICIARY

AFH HOLDING & ADVISORY, LLC

AMIR F HESHMATPOUR

CHAIRMAN & MANAGING DIRECTOR

9595 WILSHIRE BLVD SUITE 700 

APPLICANT

MUSCULOSKELETAL TRANSPLANT

FOUNDATION, INC.

125 MAY STREET

EDISON, NJ 08837

   

BEVERLY HILLS, CA 90212 

 

 

AMOUNT

NOT EXCEEDING USD 340,000.00

NOT EXCEEDING THREE HUNDRED FORTY THOUSAND AND 00/100’S US DOLLARS

 

EXPIRATION

JULY 25, 2015 AT OUR COUNTERS

 

GENTLEMEN:

 

WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER 68105133 IN YOUR FAVOR.

 

THIS CREDIT IS AVAILABLE WITH BANK OF AMERICA BY PAYMENT AGAINST PRESENTATION OF BENEFICIARY’S DRAFT(S) AT SIGHT DRAWN ON BANK OF AMERICA N.A.

 

DRAFT(S) MUST BE ACCOMPANIED BY:

 

1. THE ORIGINAL LETTER OF CREDIT AND ALL AMENDMENTS, IF ANY.

 

2. AN AFFIDAVIT SIGNED BY AFH HOLDING AND ADVISORY LLC, CERTIFYING ONE OF THE FOLLOWING:

 

QUOTE

 

A. BONE BIOLOGICS HAS FAILED TO RECEIVE EXTERNAL FUNDING TO EXTINGUISH THE FULL AMOUNT OF $340,000 OR A PORTION THEREOF STILL OWED UNDER THE PURCHASE AGREEMENT TO ACQUIRE AFH ACQUISITION X, OR HAS NOT PAID AMOUNTS DUE AND OUTSTANDING. AS OF THE DATE OF THIS DRAWING SUCH PAYMENT HAS NOT BEEN RECEIVED, AND THEREFORE WE DRAW IN THE AMOUNT OF $___________ OWED BY BONE BILOGICS.

 

 
 

  

 

 

CERTIFIED TRUE COPY

 

BANK OF AMERICA – CONFIDENTIAL PAGE:  2

 

UNQUOTE

 

QUOTE

 

B. BONE BIOLOGICS HAS RECEIVED EXTERNAL FUNDING TO EXTINGUISH THE FULL AMOUNT OF $340,000 OR A PORTION THEREOF STILL OWED UNDER THE PURCHASE AGREEMENT TO ACQUIRE AFH ACQUISITION X, BUT HAS NOT PAID AMOUNTS DUE AND OUTSTANDING. AS OF THE DATE OF THIS DRAWING SUCH PAYMENT HAS NOT BEEN RECEIVED, AND THEREFORE WE DRAW IN THE AMOUNT OF $ OWED BY BONE BILOGICS.

 

UNQUOTE

 

PARTIAL DRAWINGS AND MULTIPLE DRAWINGS ARE ALLOWED.

 

DRAFT(S) MUST STATE “DRAWN UNDER BANK OF AMERICA N.A., STANDBY LETTER OF CREDIT NUMBER 68105133 DATED JULY 22, 2015.”

 

DRAFT(S) AND DOCUMENTS SHALL BE PRESENTED AT OUR OFFICES AT BANK OF AMERICA, N.A. ONE FLEET WAY, PA6-580 - 02-30, SCRANTON, PA 18507-1999, ATTN: GLOBAL TRADE OPERATIONS, STANDBY UNIT.

 

THIS LETTER OF CREDIT IS TRANSFERABLE IN FULL AND NOT IN PART. ANY TRANSFER MADE HEREUNDER MUST CONFORM STRICTLY TO THE TERMS HEREOF AND TO THE CONDITIONS OF RULE 6 OF THE INTERNATIONAL STANDBY PRACTICES (ISP98) FIXED BY THE INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 590. SHOULD YOU WISH TO EFFECT A TRANSFER UNDER THIS CREDIT, SUCH TRANSFER WILL BE SUBJECT TO THE RETURN TO US OF THE ORIGINAL CREDIT INSTRUMENT, ACCOMPANIED BY OUR FORM OF TRANSFER, PROPERLY COMPLETED AND SIGNED BY AN AUTHORIZED SIGNATORY OF YOUR FIRM, BEARING YOUR BANKERS STAMP AND SIGNATURE AUTHENTICATION AND PAYMENT OF OUR TRANSFER FEE. SUCH TRANSFER FORM TRANSFER FORM IS AVAILABLE UPON REQUEST.

 

COMMUNICATIONS WITH RESPECT TO THIS LETTER OF CREDIT SHALL BE IN WRITING AND SHALL BE ADDRESSED TO US AT ONE FLEET WAY, PA6-580 - 02 - 30, SCRANTON, PA 18507-1999, ATTN: GLOBAL TRADE OPERATIONS, STANDBY UNIT, PHONE: 1-800-370-7519, SPECIFICALLY REFERRING TO THE NUMBER OF THIS LETTER OF CREDIT.

 

EXCEPT AS OTHERWISE EXPRESSLY STATED HEREIN, THIS CREDIT IS ISSUED SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES (ISP98), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 590.

 

IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS TRANSACTION, PLEASE CALL 800-370-7519 OPT 1 .

 

 
 

 

 

 

CERTIFIED TRUE COPY

 

BANK OF AMERICA – CONFIDENTIAL PAGE:  3

 

THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER: 68105133

 

 

 

AUTHORIZED SIGNATURE

THIS DOCUMENT CONSISTS OF 3 PAGE(S).

 

 
 

 

 

 

BANK OF AMERICA – CONFIDENTIAL 

PAGE:  1

 

DATE: JULY 28, 2014 

 

AMENDMENT TO IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: 68105133 

 

AMENDMENT NUMBER 1 

 

 

ISSUING BANK

BANK OF AMERICA, N.A.

ONE FLEET WAY

PA6-580-02-30

SCRANTON, PA 18507-1999 

   

BENEFICIARY

AFH HOLDING & ADVISORY, LLC

AMIR F HESHMATPOUR

CHAIRMAN & MANAGING DIRECTOR

10830 MASSACHUSETTS AVE

APPLICANT

MUSCULOSKELETAL TRANSPLANT

FOUNDATION, INC.

125 MAY STREET

EDISON, NJ 08837 

 

PENTHOUSE SUITE

LOS ANGELES, CA 90 024

 

  THIS AMENDMENT IS TO BE CONSIDERED AN INTEGRAL PART OF THE ABOVE CRED: AND MUST BE ATTACHED THERETO.

 

THE ABOVE MENTIONED CREDIT IS AMENDED AS FOLLOWS:

 

THE BENEFICIARY HAS BEEN AMENDED TO:

AFH HOLDING & ADVISORY, LLC

AMIR F HESHMATPOUR

CHAIRMAN & MANAGING DIRECTOR

10830 MASSACHUSETTS AVE

 

PENTHOUSE SUITE

LOS ANGELES, CA 90024

 

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

 

IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS AMENDMENT, PLEASE CALL 800-370-7519 OPT 1 .

 

 
 

 

 

 

BANK OF AMERICA – CONFIDENTIAL 

PAGE:  2

 

 

 

AUTHORIZED SIGNATURE

THIS DOCUMENT CONSISTS OF 2 PAGE(S).

 

 
 

 

 

 

 

RETURN TO TREASURY AGREEMENT

 

THIS AGREEMENT is made as of the 19th day of September, 2014.

 

BETWEEN:

 

AFH Acquisition X, Inc. , a company incorporated under the laws of the State of Delaware and having an address at 269 S. Beverly Drive, Suite 1600, Beverly Hills, California 90212

 

(the “ Company ”)

 

AND:

 

AFH Holding & Advisory, LLC , a limited liability company formed under the laws of the state of Delaware and having an address of 10830 Massachusetts Ave., Penthouse, Los Angeles, CA 90024

 

(the “ Shareholder ”)

 

WHEREAS:

 

A. The Shareholder is the registered and beneficial owner of 4,400,000 shares of the Company’s common stock and has agreed to return 1,146,400 shares held by the Shareholder (the “Shares”) to the treasury of the Company; and

 

B. In connection with and in order to facilitate the acquisition (the “ Acquisition ”) of Bone Biologics, Inc. by the Company, the Shareholder has agreed to return the Shares to the treasury of the Company for the sole purpose of the Company retiring the Shares without any consideration.

 

NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

Surrender of Shares

 

1. Subject only to the closing of the Acquisition, the Shareholder hereby surrenders to the Company the Shares and delivers to the Company herewith share certificates representing the Shares, duly endorsed for transfer in blank, signatures guaranteed. The Company hereby acknowledges receipt from the Shareholder of the certificate(s) for the sole purpose of retiring the Shares pursuant to this Agreement. To the extent that the certificate surrendered represents an amount of shares in excess of the Shares, a new stock certificate will be issued to the Shareholder equal to such excess amount of shares of common stock.

 

Retirement of Shares

 

2. Concurrent with or immediately following the closing of the Acquisition, the Company shall forthwith retire the Shares pursuant to Section 243 of the Delaware General Corporation Law.

 

Representations and Warranties

 

3. The Shareholder represents and warrants to the Company that he is the owner of the Shares and that he has good and marketable title to the Shares and that the Shares are free and clear of all liens, security interests or pledges of any kind whatsoever.

 

 
- 2 -

 

Release

 

4. The Shareholder, together with the Shareholder’s heirs, executors, administrators, and assigns, does hereby remise, release and forever discharge the Company, its directors, officers, shareholders, employees and agents, and their respective successors and assigns, of and from all claims, causes of action, suits and demands whatsoever which the Shareholder ever had, now has or may have, howsoever arising out of the original grant and the retirement of the Shares.

 

General

 

5. Each of the parties will execute and deliver such further and other documents and do and perform such further and other acts as any other party may reasonably require to carry out and give effect to the terms and intention of this Agreement.

 

6. Time is expressly declared to be the essence of this Agreement.

 

7. The provisions contained herein constitute the entire agreement among the Company and the Shareholder respecting the subject matter hereof and supersede all previous communications, representations and agreements, whether verbal or written, among the Company and the Shareholder with respect to the subject matter hereof.

 

8. This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns.

 

9. This Agreement is not assignable without the prior written consent of the parties hereto.

 

10. This Agreement may be executed in counterparts, each of which when executed by any party will be deemed to be an original and all of which counterparts will together constitute one and the same Agreement. Delivery of executed copies of this Agreement by telecopier will constitute proper delivery, provided that originally executed counterparts are delivered to the parties within a reasonable time thereafter.

 

11. The Company has obtained legal advice concerning this Agreement and has requested that the Shareholder obtain independent legal advice with respect to same before executing it. In executing this Agreement, the Shareholder represents and warrants to the Company that he has been advised to obtain independent legal advice, and that prior to the execution of this Agreement he has obtained independent legal advice or has, in his discretion, knowingly and willingly elected not to do so.

 

[THE REMAINDER OF THIS PAGE HAS BEEN INTESTINALLY LEFT BLANK.]

 

 
- 3 -

 

IN WITNESS WHEREOF the parties have executed this Agreement effective as of the day and year first above written.

 

AFH ACQUISITION X, INC.

 

Per: /s/ Amir Heshmatpour  
  Authorized Signatory – AFH Holding & Advisory, LLC  

 

 
 

 

 

 

 

September 7, 2014

 

To: Bone Biologics, Inc. (the “ Company ”)
To: Musculoskeletal Transplant Foundation (“ MTF”)

 

(each, a “ Party ” and together with AFH Holding & Advisory (“ AFH Advisory ”), the “ Parties ”)

 

Dear Sirs,

 

Side Letter Agreement (the “Agreement”)

 

The purpose of this Agreement is to set out the terms among the Parties for their relationship in respect of the Company.

 

BACKGROUND

 

  A. The Parties entered into that certain Amended and Restated Letter of Intent (the “LOI”) dated May 7, 2014, as amended, with respect to the transactions described below wherein it is contemplated that, among other things the Company  shall consummate a business combination (the “Business Combination”) with a Delaware corporation (“Acquisition Co.”) publicly reporting pursuant to the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), pursuant to a reverse merger or other similar transaction, as agreed to by the parties resulting in the Company becoming a public company (“PubCo”).
     
  B. Pursuant to the terms of the LOI, after the consummation of the Business Combination, AFH Advisory shall use its reasonable best efforts to assist Acquisition Co. in certain other transactions, including procuring one or more investors for a private financing, whether debt or equity, of a minimum of $2.5 million and up to a maximum of $5.0 million (the “ Private Placement ”).
     
  C. The Parties have agreed that AFH Advisory and MTF will receive certain compensation in case certain commercial milestones are achieved by specified times following the closing of the Private Placement.

 

AGREEMENT

 

In consideration of the foregoing, and upon execution of this Agreement, the Parties agree as follows:

 

1. MILESTONES
   
1.1 The Company and/or Pubco will use commercially reasonable efforts to achieve the following milestones (the “ Milestone Targets ”) by the specified times (the “ Milestone Periods ”) following the closing of the Private Placement:

 

  (i) Complete media screening studies of cell line within two (2) to three (3) months:
     
  (ii) Initiate manufacturing of master cell bank within three (3) to four (4) months;

 

 

 

 
 

 

 

 

  (iii) Initiate formulation studies for the cGMP manufacturing process once sufficient Nell-1 material is available within approximately eight (8) to ten (10) months;
     
  (iv) Initiate a pre-clinical bioreactor production run for toxicology material within nine (9) to twelve (12) months following the closing of the Private Placement;
     
  (v) Initiate pre-clinical toxicology studies to include carcinogenicity and reproductive within approximately eleven (11) to thirteen (13) months;
     
  (vi) Finalize refinement of the manufacturing process within approximately twelve (12) to fourteen (14) months;
     
  (vii) Initiate cGMP bioreactor run within twelve (12) to fourteen (14) months or after completion of (v), and
     
  (viii) Request an IDE meeting to review the clinical safety plan within eighteen (18) to twenty (20) months.

 

2. COMPENSATION
   
2.1 AFH Advisory and MTF will each receive restricted shares equal to and not to exceed 2.5% of the fully diluted shares of the Company at the time of the completion of the Milestone Targets. Notwithstanding anything contained herein to the contrary, it is understood that such 2.5% will be aggregated with all other applicable amounts in calculating the 10% of fully diluted shares of the Company owed to AFH Advisory in the form of the Advisor Shares (as such term is defined in the LOI).
   
3. MISCELLANEOUS PROVISIONS
   
3.1 Governing Law, Dispute Resolution and Jurisdiction .  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the conflicts of laws principles thereof.  Each party hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Delaware and of the United States of America located in the State of Delaware for any disputes, controversies, or claims arising out of or relating to this Agreement and the transactions contemplated hereby.  The parties hereby irrevocably waive any objection to jurisdiction and venue for any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The parties agree to submit to the in personam jurisdiction of such courts.  The prevailing party in any such dispute shall be entitled to recover from the other party its reasonable attorneys’ fees, costs and expenses.
   
3.2 Counterparts .  This Agreement may be signed in two or more counterparts, each of which shall constitute an original, and all of which together shall constitute one and the same agreement.  The exchange of copies of this Agreement and of signature pages by facsimile transmission or by email transmission in portable digital format, or similar format, shall constitute effective execution and delivery of such instrument(s) as to the parties and may be used in lieu of the original for all purposes.  Signatures of the parties transmitted by facsimile or by email transmission in portable digital format, or similar format, shall be deemed to be their original signatures.
   
3.3 Entire Agreement .  This Agreement constitutes the complete and entire agreement between the parties pertaining to the subject matter contained herein and supersedes all prior and contemporaneous discussions, negotiations, understandings, agreements, representations, and understandings of the Parties, whether oral or written, expressed or implied.  Each of the Parties acknowledge that no other party, nor any agent or attorney of any other party, has made any promise, representation, or warranty whatsoever, express or implied, and not contained herein, concerning the subject matter hereof to induce the party to execute or authorize the execution of this Agreement, and acknowledges that the party has not executed or authorized the execution of this instrument in reliance upon any such promise, representation, or warranty not contained herein.

 

 

 

 
 

 

 

 

If you agree to the foregoing, please return a signed copy of this Agreement to the undersigned no later than September 8 , 2014, after which time this Agreement will expire if not so accepted.

 

Very truly yours,

 

AFH HOLDING AND ADVISORY, LLC  
     
By: /s/ Amir F. Heshmatpour  
Name: Amir F. Heshmatpour  
Title: Managing Director  
     
BONE BIOLOGICS, INC.  
     
By: /s/ Michael Schuler  
Name: Michael Schuler  
Title: CEO  
     
THE MUSCULOSKELETAL TRANSPLANT FOUNDATION  
     
By: /s/ Michael J. Kawas  
Name: Michael J. Kawas  
Title: EVP/CFO  

 

 

 

 
 

 

 

 

December 18, 2013

 

Amir Farrokh Heshmatpour

President and CFO

AFH Acquisition XI, Inc.

9595 Wilshire Blvd., Suite 700,

Beverly Hills. CA 90212

 

Michael Schuler

Chief Executive Officer

Bone Biologics, Inc.

100 Rancho Road, Suite 7

Thousand Oaks, CA 91362

 

RE: Placement Agent Agreement for the Private Placement of Securities

 

Dear Messrs. Heshmatpour & Schuler:

 

This letter confirms our agreement that AFH Acquisition X, Inc., a company incorporated in the State of California and Bone Biologics, Inc., a company incorporated in California, with corporate headquarters at the address stated above (together collectively with its affiliates and subsidiaries, the “ Company ” or “ Bone Bio ”) has engaged Forefront Capital Markets, LLC, a Delaware limited liability company, headquartered at 590 Madison Ave, 34th FI, New York, NY 10022 (together with its affiliates and subsidiaries, “ Forefront ” or the “ Placement Agent ”) to act as the Company’s exclusive Placement Agent in connection with the proposed private placement offering in the minimum amount of $2.5 million gross (the “ Minimum Amount ”) and maximum amount of $5.0 million gross with a 15% overallotment option) (the “ Private Placement Offering ”) and subsequent private investment in public enterprise offering of a minimum of $4 million gross and a maximum of $8 million gross (the “ PIPE Offering ”), at a pre-money valuation of the Company currently contemplated to be approximately $25 million pre private placement and $40 million pre PIPE (collectively the “ Offerings ”) of equity, debt or equity-linked securities (the “ Securities ”) of the Company. The Placement Agent shall be provided with a 15% over-allotment option for each of the Offerings. The terms of the Securities and the gross proceeds of such Offerings will be substantially negotiated between the Placement Agent and the Company with one or more accredited investors (described below).

 

Placement Agent acknowledges and agrees that closing of the Private Placement Offering is contingent upon the consummation of a reverse merger or other business combination (the “ Business Combination ”) with Bone Bio. and AFH Acquisition X, Inc. have executed a non-binding letter of intent and cannot provide any assurance that the Business Combination will be consummated. All funds from subscribers to the Private Placement Offering shall be deposited with a third-party escrow agent and returned to subscribers in the event that the Business Combination is not consummated.

 

Members FINRA & SIPC

590 Madison Ave. 34th Fl. New York, NY 10022

Phone 1 212 607 8150 http://forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 2

 

Upon your acceptance of this engagement letter indicated by your signature below. (the “ Agreement ”) this Agreement will confirm the terms of the engagement between the Placement Agent and the Company.

 

1. Appointment .

 

(a) Subject to the terms and conditions of this Agreement, the Company hereby retains the Placement Agent to act as the Company’s exclusive Placement Agent in connection with the Offerings for a period of 90 days from the date hereof for the Private Placement Offering (the “ Initial Exclusivity Period ”). The Placement Agent shall be entitled to appoint a co-lead placement agent or book runner upon the mutual consent of the Company. In the event that the Minimum Amount is raised within the 90 day period, the Initial Exclusivity Period shall be extended to 12 months and the Placement Agent shall be granted a right of first refusal in accordance with Section 5 of this Agreement. As Placement Agent, Forefront will advise and assist the Company in issuing the Securities to one or more accredited investors, as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (“ Investors ”). The Company retains the right to determine all of the terms and conditions of the Offerings and to accept or reject any proposals submitted to it in its sole and absolute discretion.

 

(b) During the Term of this Agreement (as such term is hereinafter defined), neither the Company nor any of its subsidiaries will, directly or indirectly, solicit or otherwise encourage the submission of any proposal or offer (“ Investment Proposal ”) from any person or entity relating to any issuance of the Company’s or any of its subsidiaries’ Securities or participate in any discussions regarding an Investment Proposal with the exception of exclusions noted on Exhibit B. The term “Investment Proposal” shall not include any commercial banking loans to the Company.

 

2. Information .

 

(a) The Company recognizes that, in completing its engagement hereunder, the Placement Agent will be using and relying on publicly available information and on data, material and other information furnished to Placement Agent by the Company or their respective affiliates and agents. The Company will cooperate with the Placement Agent and furnish, and cause to be furnished, to the Placement Agent, any and all information and data concerning the Company, their respective subsidiaries and the Offerings that the Placement Agent deems appropriate, including, without limitation, the Company’s acquisition plans and plans for raising capital or additional financing that is reasonably requested by the Placement Agent (the “ Information ”), which may include a private placement memorandum, if any (the “ Private Placement Materials ”). Any Information and Private Placement Materials forwarded to prospective Investors will be in a form acceptable to the Placement Agent and its counsel. The Company represents and warrants that all Information and Private Placement Materials, including, but not limited to, the Company’s financial statements, will be complete and correct in all material respects and will not to the best of their knowledge contain any untrue statement of a material fact or omit to state a material fact necessary in order to make such statements therein not misleading.

 

Members FINRA & SIPC

590 Madison Ave. 34th Fl. New York, NY 10022

Phone 1 212 607 8150 http://forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 3

 

(b) It is further agreed that the Placement Agent gill conduct a due diligence investigation of the Company and the Company will reasonably cooperate with such investigation as a condition or the Placement Agent’s obligations hereunder. The Company recognizes and confirms that the Placement Agent: (i) will use and rely primarily on the Information, the Private Placement Materials and information available From generally recognized public sources in performing the services contemplated by this letter without having independently verified the same; (ii) is authorized as the Placement Agent to transmit to any prospective investors information or a copy or copies of the Private Placement Materials, forms of subscription documents and any other legal documentation supplied to the Placement Agent for transmission to any prospective investors by or on behalf of the Company or by any of the Company’s officers, representatives or agents, in connection with the performance of the Placement Agent’s services hereunder or any transaction contemplated hereby; (iii) does not assume responsibility for the accuracy or completeness of the Information or the Private Placement Materials and such other information, if any provided to the Investors; (iv) will not make an appraisal of any assets of the Company; and (v) retains the right to continue to perform due diligence of the Company, their respective businesses, officers and directors during the term of the Agreement.

 

(c) Until the date that is two years from the termination of this agreement, the Placement Agent will keep all information obtained from the Company confidential except information that: (i) is in the public domain as of the date hereof or hereafter enters the public domain without a breach by the Placement Agent, (ii) was known or became known by the Placement Agent prior to the Company’s disclosure thereof to the Placement Agent, (iii) becomes known to the Placement Agent from a source other than the Company, and other than by the breach of an obligation of confidentiality owed to the Company, (iv) is disclosed by the Company to a third party without restrictions on its disclosure, (v) is independently developed by the Placement Agent or (vi) is required to be disclosed by the Placement Agent or its officers, directors, employees, agents, attorneys and to its other advisors and financial sources, pursuant to any order of a court of competent jurisdiction, industry or regulatory authority or other governmental body or as may otherwise be required by law.

 

(d) The Company recognizes that in order for the Placement Agent to perform properly its obligations in a professional manner, the Company will keep the Placement Agent informed of and, to the extent practicable, permit the Placement Agent to participate in meetings and discussions between the Company and any third party relating to the matters covered by the terms of the Placement Agent’s engagement. If at any time during the course of the Placement Agent’s engagement, the Company becomes aware of any material change in any of the information previously furnished to the Placement Agent, it will promptly advise the Placement Agent of such change.

 

3. Compensation . As compensation For the services rendered hereunder, the Company agrees to the following:

 

Members FINRA & SIPC

590 Madison Ave. 34th Fl. New York, NY 10022

Phone 1 212 607 8150 http://forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 4

 

(a) The Company agrees to pay the Placement Agent a cash fee payable upon each closing of the Offerings (the “ Placement Fee ”) contemplated by this Agreement (“ Closing ”) equal to 8.0% of the gross proceeds received by the Company at each Closing.

 

(b) The Company shall deliver to the Placement Agent and/or its designees a warrant to purchase shares of the Company’s common stock (the “ Agent Warrant ”) equal to 8.0% of the Company’s common stock underlying the Securities issued in the Offerings. Such Agent Warrant will be issued at each Closing and shall provide, among other things, that the Agent Warrant shall: (i) be exercisable at the price of the Securities (or the exercise price of the Securities) issued to the Investors in the Offering, (ii) expire five (5) years from the date of issuance, (iii) include customary registration rights, including the registration rights provided to the Investors, (iv) contain provisions for cashless exercise and (v) include such other terms that are normal and customary for warrants of this type. In addition, upon the exercise of any common stock purchase warrants that the Company issues to investors in the Offerings, the Company agrees to pay the Placement Agent a warrant solicitation fee in an amount equal to 5% of the gross funds received by the Company from investors exercising such warrants. The warrant solicitation fee shall be paid at the time the Warrants are exercised by such investors.

 

(c) Notwithstanding Sections 3(a) and (b), the Placement Agent shall only be entitled to receive a Placement Fee of 4.0% and Agent Warrant of 4.0% (collectively, the “ Management Fee ”) on the gross proceeds from investors introduced to the Company by either AFH Holdings and Advisory, LLC, Bone Bio or their respective officers and directors as set forth on Exhibit B hereto as may be amended by the Company. Bone Bio or AFH from time to time or as provided to Placement Agent directly by AFH Holdings and Advisory, LLC.

 

(d) The Company agrees to pay the Placement Agent a cash fee equal to 3.0% of the gross proceeds received by the Company from any financing of non-convertible debt securities without any other equity linked securities issued in such offering (“ Debt Placement Fee ”) during the Initial Exclusivity Period and applicable periods in accordance with Section 1 of the Agreement, provided, however, that Placement Agent shall not be entitled to the Debt Placement Fee on any amounts received by the Company directly from Amir Heshmatpour or any Officer or member of the Board of Directors of the Company to include the MusculoSkeletal Transplant Foundation.

 

(e) The Company agrees to issue the Placement Agent and/or its designees a warrant (the “ Advisory Warrants ”) to purchase shares of the Company’s common stock (the “ Common Stock ”) equal to 2.0% of the Company’s post-merger and financing fully diluted shares outstanding immediately prior to the Closing in the event this Agreement is still in effect and a Closing occurs and the reverse merger is consummated within 120 days of the date hereof. Such Advisory Warrant will become due and payable and be issued at the initial Closing immediately prior to the consummation of the reverse merger and shall provide, among other things, that the Advisory Warrant shall: (i) be exercisable at $0.01 per share (ii) expire five (5) years from the date of issuance, (iii) include customary registration rights, including the registration rights provided to the Investors, (iv) contain provisions for cashless exercise and (v) include such other terms that are normal and customary for warrants of this type.

 

Members FINRA & SIPC

590 Madison Ave. 34th Fl. New York, NY 10022

Phone 1 212 607 8150 http://forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 5

 

(f) The Company will reimburse the Placement Agent in a timely manner, no later than net 30 clays after presentation of support for all expenses relating to the Offerings, including, but not limited to, printing, road show, background checks, travel and entertainment and other related expenses to the Offering as well as the legal fees incurred by the Placement Agent in connection with the Offering, provided, however, that (i) any single expense item in excess of $500 (other than legal expenses) and (ii) all expenses in excess of $1,000 in any one month must be approved in advance by the Company, and provided further, that the Company’s Placement Agent reimbursement obligation for legal expenses of the Placement Agent shall not exceed $15,000 unless approved in advance by the Company and shall be paid. Such reimbursements shall be made promptly (but in no event more than 30 days after submission of those expenses to the Company) upon submission by the Placement Agent.

 

(g) If the Company pays the Placement Agent via bank wire for any of the fees and reimbursed expenses described in all of this Section 3 Compensation , then all bank wiring fees will be incurred by the Company.

 

(h) Placement Agent agrees that in the event that the Business Combination is not consummated, Placement Agent shall not the entitled to receive the Placement Agent Fee, Agent Warrant, Advisory Warrant or any other compensation.

 

4. Term of Engagement .

 

(a) This Agreement will remain in effect until the 90 day anniversary[1] from the date of this Agreement after which either party shall have the right to terminate the Agreement on 30 days prior written notice to the other party, unless the Minimum Amount has been raised prior to the 90 day anniversary, in which event the Agreement will remain in effect until the 6 month anniversary from the date of this Agreement (the ’’ Termination Date ”). The period of time during which this Agreement remains in effect is referred to herein from time to time as the “Term”. The Placement Agent will continuously provide the Company with a list of Investors who were introduced by the Placement Agent. If within 12 months after the Termination Date, the Company completes any public or private financing of any Securities (other than the exercise by any person or entity of any options, warrants or other convertible securities other than the warrants issued pursuant to this Agreement) with any of the Investors who the Placement Agent introduced the Offerings as set forth on the list described above, excluding investors introduced to the Company by Bone Bio or AFH as set forth on Exhibit B hereto as may be amended by the Company or AFH from time to time, the Company will pay to The Placement Agent upon the closing of such financing the compensation set forth in all of Section 3 Compensation as a “Source Fee”.

 

(b) Notwithstanding anything herein to the contrary, subject to the 12 months limitation described in Section 4(a) above, the obligation to pay the compensation and expenses described in Section 3, this Section 4, Sections 5, 7 and 9-18, and all of Exhibit A attached (the terms of which are incorporated by reference hereto), will survive any termination or expiration of this Agreement. The termination of this Agreement shall not affect the Company’s obligation to pay fees to the extent provided for in Section 3 herein and shall not affect the Company’s obligation to reimburse the expenses accruing prior to such termination to the extent provided for herein.

 

Members FINRA & SIPC

590 Madison Ave. 34th Fl. New York, NY 10022

Phone 1 212 607 8150 http://forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 6

 

5. Right of Participation . In the event of Closing the Minimum Amount of the Private Placement Offering within the Initial Exclusivity Period of 90 days, the Placement Agent shall be granted the right of first refusal to act as the lead underwriter, placement agent or mergers and acquisition advisor, as the case may be, in the public or private offering by the Company or business combination of the Company (or any of its subsidiaries) within the 12 months following the latest Closing Date and with a minimum of 50% of the Securities placed and 50% of the underwriting, management, advisory or placement agent fees, provided, however, that the Placement Agent shall only be entitled to receive the Management Fee on the gross proceeds received by the Company at each Closing from investors introduced to the Company by either AFH Holdings and Advisory, LLC, Bone Bio or their respective officers and directors as set forth on Exhibit B hereto as may be amended by the Company, Bone Bio or AFH from time to time.

 

6. Certain Placement Procedures . The Company and the Placement Agent each represents to the other that it has not taken and it will not take any action, directly or indirectly, so as to cause the Offering to fail to be entitled to rely upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “ Act ”). In effecting the Offering, the Company and the Placement Agent each agrees to comply in all material respects with applicable provisions of the Act and any regulations thereunder and any applicable state laws and requirements. The Company agrees that an representations and warranties made by it to any investor in the Offering shall be deemed also to be made to the Placement Agent for its benefit. The Company agrees that it shall cause any opinion of its counsel delivered to any Investors in the Offering also to be addressed and delivered to the Placement Agent.

 

7. Indemnification . The Company agrees to indemnify the Placement Agent in accordance with the indemnification and other provisions attached to the Agreement as Exhibit A (the “ Indemnification Provisions ”), which provisions are incorporated herein by reference and shall survive the termination or expiration or the Agreement.

 

8. Other Activities . The Company acknowledges that The Placement Agent has been, and may in the future be, engaged to provide services as an underwriter, placement agent, finder, advisor and investment banker to other companies in the industry in which the Company is involved. Subject to the confidentiality provisions of The Placement Agent contained in Section 2 hereof, the Company acknowledges and agrees that nothing contained in this Agreement shall limit or restrict the right of The Placement Agent or of any member, manager, officer, employee, agent or representative of The Placement Agent, to be a member, manager, partner, officer, director, employee, agent or representative of, investor in, or to engage in, any other business, whether or not of a similar nature to the Company’s business, nor to limit or restrict the right of The Placement Agent to render services or any kind to and other corporation, firm, individual or association; provided that The Placement Agent and any of its member, manager, officer, employee, agent or representative shall not use the Information to the detriment of the Company.

 

Members FINRA & SIPC

590 Madison Ave. 34th Fl. New York, NY 10022

Phone 1 212 607 8150 http://forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 7

 

9. Governing Law; Jurisdiction; Waiver of Jury Trial . This Agreement will be governed as to validity, interpretation, construction, effect and in all other respects by the internal laws of the State of New York. The Company, Bone Bio and The Placement Agent each (i) agree that any legal suit, action or proceeding arising out of or relating to this Agreement shall be instituted exclusively in the New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (ii) waives any objection to the venue of any such suit, action or proceeding, and the right to assert that such forum is an inconvenient forum, and (iii) irrevocably consents to the jurisdiction of the New York State Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. Each of the Company, Bone Bio and The Placement Agent further agrees to accept and acknowledge service of any and all process that may be served in and such suit, action or proceeding in the New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York and agree that service of process upon it mailed by certified mail to its address shall be deemed in every respect effective service of process in any such suit, action or proceeding. The parties hereby expressly waive all rights to trial by jury in any suit, action or proceeding arising under this Agreement.

 

10. Securities Law Compliance . The Company, at its own expense, will use its best efforts to obtain any registration or qualification required to sell and Securities under the Blue Sky laws of any applicable State or U.S. Territory jurisdictions as well as any foreign jurisdiction.

 

11. Representations and Warranties . The Company, Bone Bio and The Placement Agent each respectively represent and warrant that: (a) it has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder; (b) this Agreement has been duly authorized and executed and constitutes a legal, valid and binding agreement of such party enforceable in accordance with its terms; and (c) the execution and delivery or this Agreement and the consummation of the transactions contemplated hereby does not conflict with or result in a breach of (i) such party’s certificate of incorporation or by-laws or (ii) any agreement to which such party is a party or by which any of its property or assets is bound.

 

12. Parties; Assignment; Independent Contractor . This Agreement has been and is made solely for the benefit of the Placement Agent, Bone Bio and the Company and each of the persons, agents, employees, officers, directors and controlling persons referred to in Exhibit A and their respective heirs, executors, personal representatives, successors and assigns, and nothing contained in this Agreement will confer any rights upon, nor will this Agreement be construed to create any rights in, any person who is not party to such Agreement, other than as set forth in this paragraph. The rights and obligations of either party under this Agreement may not be assigned without the prior written consent of the other party hereto and any other purported assignment will be null and void. The Placement Agent has been retained under this Agreement as an independent contractor, and it is understood and agreed that this Agreement does not create a fiduciary relationship between The Placement Agent and the Company or their respective Boards of Directors. The Placement Agent shall not be considered to be the agent of the Company or Bone Bio for any purpose whatsoever and The Placement Agent is not granted any right or authority to assume or create any obligation or liability, express or implied, on the Company’s or Bone Bio’s behalf, or to bind the Company or Bone Bio in any manner whatsoever.

 

Members FINRA & SIPC

590 Madison Ave. 34th Fl. New York, NY 10022

Phone 1 212 607 8150 http://forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 8

 

 

13. Validity . In case any term of this Agreement will be held invalid, illegal or unenforceable, in whole or in part, the validity of any of the other terms of this Agreement will not in any way be affected thereby.

 

14. Counterparts . This Agreement may be executed in counterparts and each of such counterparts will for all purposes be deemed to be an original, and such counterparts will together constitute one and the same instrument.

 

15. Amendments . This Agreement may not be modified or amended except in a writing duly executed by the parties hereto.

 

16. Notices . All notices will be in writing and will be effective when delivered in person or by courier or sent registered mail and confirmed by the other party by email or registered mail to the party to whom it is addressed at the following addresses or such other address as such party may advise the other in writing:

 

To Forefront:   David Wasitowski
    Forefront Capital Markets, LLC
    590 Madison Ave, 34th Floor
    New York, NY 10022
    Phone: 212-607-8150
     
To Bone Biologics:   Michael Schuler
    Chief Executive Officer
    Bone Biologics, Inc.
    100 Rancho Road, Suite 7
    Thousand Oaks, CA 91362
    Phone: 818-324-2742
     
    With a copy to:
    Ann Lawrence
    DLA Piper LLP US
    550 South Hope Street
    Los Angeles, CA 90071
    Ann.lawrence@dlapiper.com
    Phone: 213-330-7755
     
To AFH:   Amir Farrokh Heshmatpour
  AFH Acquisitions X, Inc. 
  9595 Wilshire Blvd., Suite 700,
  Beverly Hills, CA 90212
  Phone: 310-492-9898

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 9

 

17. Commercially Reasonable Best Efforts Engagement . The Company acknowledges and agrees that the Placement Agent will use its -commercially reasonable best efforts” in connection with the Offering and that this Agreement does not constitute a commitment by the Placement Agent to purchase the Securities or introduce the Company to Investors. The Placement Agent will in its sole discretion determine the reasonableness of its efforts and is under no obligation to perform at any level other than what it deems reasonable. It is expressly understood and acknowledged that The Placement Agent’s engagement for the Offering does not constitute any commitment, express or implied, on the part of The Placement Agent or of any of its affiliates to purchase or place the Company’s securities or to provide any type of financing.

 

18. Press Announcements . The Company agrees that the Placement Agent shall have the right at its own expense to place information and advertisements describing The Placement Agent’s services to the Company hereunder in the Placement Agent’s various marketing materials and website as well as financial trade publications and/ or newspapers and journals, provided that Placement Agent shall submit a copy of any such advertisement to the Company for approval, such approval not to be unreasonably withheld, conditioned or delayed.

 

Members FINRA & SIPC

590 Madison Ave. 34th Fl. New York, NY 10022

Phone 1 212 607 8150 http://forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 10

 

If the terms of our engagement as set forth in this letter are satisfactory to you, please sign and date the enclosed copy of this letter and return it to us. We look forward to working with you and your management team.

 

  Very truly yours,
   
  Forefront Capital Markets, LLC
     
  By: /s/ Francis J. Argenziano
    Francis J. Argenziano
    Senior Managing Director, Investment Banking
     
  By: /s/ David Wasitowski
    David Wasitowski
    President & CFO

 

Agreed to and accepted to as of the date first appearing above: Bone Biologics, Inc.

 

By: /s/ Michael Schuler  
  Michael Schuler  
  Chief Executive Officer  
     
AFH Acquisition X, Inc.  
     
By: /s/ Amir F. Heshmatpour  
  Amir F. Heshmatpour  
  President and Chief Financial Officer  

 

[Signature Page to the Agreement; Exhibit A — Indemnification Provisions and Exhibit B -Excluded Investors follows]

 

Members FINRA & SIPC

590 Madison Ave. 34th Fl. New York, NY 10022

Phone 1 212 607 8150 http://forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 11

 

Exhibit A

 

INDEMNIFICATION PROVISIONS

 

Capitalized terms used in this Exhibit shall have the meanings ascribed to such terms in the Agreement to which this Exhibit is attached.

 

The Company agrees to indemnify and hold harmless the Placement Agent and each of the other Indemnified Parties (as hereinafter defined) from and against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements, and any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise (including, without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing, pursuing or defending any such action, suit, proceeding or investigation (whether or not in connection with litigation in which any Indemnified Party is a party)) (collectively, “ Losses ”), directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with, the Placement Agent’s acting for the Company, including, without limitation, any act or omission by the Placement Agent in connection with its acceptance of or the performance or non-performance of its obligations under the Agreement between the Company and Placement Agent to which these indemnification provisions are attached and form a part, any breach by the Company of any representation, warranty, covenant or agreement contained in the Agreement (or in any instrument, document or agreement relating thereto, including any agency agreement), or the enforcement by Placement Agent of its rights under the Agreement or these indemnification provisions, except to the extent that any such Losses are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the gross negligence or reckless or willful misconduct of the Indemnified Party seeking indemnification hereunder. The Company also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with the engagement of Placement Agent by the Company or for any other reason, except to the extent that any such liability is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from such Indemnified Party’s gross negligence or reckless or willful misconduct.

 

These Indemnification Provisions shall extend to the following persons (collectively, the “ Indemnified Parties ”): Placement Agent, its present and former affiliated entities, managers, members, officers, employees, legal counsel, agents and controlling persons (within the meaning of the federal securities laws), and the officers, directors, partners, stockholders, members, managers, employees, legal counsel, agents and controlling persons of any of them. These indemnification provisions shall be in addition to any liability which the Company may otherwise have to any Indemnified Party.

 

If any action, suit, proceeding or investigation is commenced, as to which an Indemnified Party proposes to demand indemnification, it shall notify the Company with reasonable promptness (within 7 business days): provided , however , that any failure by an Indemnified Party to notify the Company shall not relieve the Company from its obligations hereunder. An Indemnified Party shall have the right to retain counsel of its own choice to represent it, and the fees, expenses and disbursements of such counsel for the Indemnified parties shall be borne by the Company. Any such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the Company and any counsel designated by the Company. The Company shall be liable for any settlement of any claim against any Indemnified Party made with the Company’s written consent. The Company shall not, without the prior written consent or the Placement Agent, settle or compromise an claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent (i) includes, as an unconditional term thereof, the giving by the claimant to all or the Indemnified Parties of an unconditional release from all liability in respect of such claim, and (ii) does not contain any Factual or legal admission by or with respect to an Indemnified Party or an adverse statement with respect to the character, professionalism, expertise or reputation of an Indemnified Party or any action or inaction of any Indemnified Party.

 

Members FINRA & SIPC

590 Madison Ave. 34th Fl. New York, NY 10022

Phone 1 212 607 8150 http://forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 12

 

In order to provide for just and equitable contribution, if a claim for indemnification pursuant to these indemnification provisions is made but it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, then the Company shall contribute to the Losses to which any Indemnified Party may be subject (i) in accordance with the relative benefits received by the Company and its stockholders, subsidiaries and affiliates, on the one hand, and the Indemnified Party, on the other hand, and (ii) if (and only if) the allocation provided in clause (i) of this sentence is not permitted by applicable law, in such proportion as to reflect not only the relative benefits, but also the relative fault of the Company, on the one hand, and the Indemnified Party, on the other hand, in connection with the statements, acts or omissions which resulted in such Losses as well as any relevant equitable considerations. No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for fraudulent misrepresentation. The relative benefits received (or anticipated to be received) by the Company and its stockholders, subsidiaries and affiliates shall be deemed to be equal to the aggregate consideration payable or receivable by such parties in connection with the transaction or transactions to which the Agreement relates relative to the amount of fees actually received by Placement Agent in connection with such transaction or transactions. Notwithstanding the foregoing, in no event shall the amount contributed by all Indemnified Parties exceed the amount of fees previously received by Placement Agent pursuant to the Agreement.

 

Neither termination nor completion or the Agreement shall affect these Indemnification Provisions which shall remain operative and in full force and effect. The Indemnification Provisions shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnified Parties and their respective successors, assignees, heirs and personal representatives.

 

Members FINRA & SIPC

590 Madison Ave. 34th Fl. New York, NY 10022

Phone 1 212 607 8150 http://forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement
Page 13

 

Exhibit B

 

EXCLUDED INVESTORS

 

Friends and Family of Amir Heshmatpour included in the listing attached or otherwise as provided by Amir Heshmatpour or AFH Holdings and Advisory to Placement Agent
MusculoSkeletal Transplant Foundation

Orthofix, Inc.

Baxter, Inc.

John Booth

Michael Finnegan

Bruce Hazuka

 

 
   

 

 

September 22, 2014

 

Michael Schuler

Chief Executive Officer

Bone Biologics, Inc.
100 Rancho Road, Suite 7
Thousand Oaks, CA 91362

 

RE: Placement Agent Agreement for the Private Placement of Securities Revised as of September 22, 2014

 

Dear Mr. Schuler:

 

This letter confirms our agreement that AFH Acquisition X, Inc., a company incorporated in the State of California and Bone Biologics, Inc., a company incorporated in California, with corporate headquarters at the address stated above (together collectively with its affiliates and subsidiaries, the “ Company ” or “ Bone Bio ”) has engaged Forefront Capital Markets, LLC, a Delaware limited liability company, headquartered at 590 Madison Ave, 34th Fl, New York, NY 10022 (together with its affiliates and subsidiaries, “ Forefront” or the “ Placement Agent ”) to act as the Company’s exclusive Placement Agent in connection with the proposed private placement offering in the amount of up to $10 million with a 15% overallotment option) (the “ Offering ”), at a pre-money valuation of the Company currently contemplated to be approximately $60 million pre private placement money. The Placement Agent shall be provided with a 15% over-allotment option for the Offering. The terms of the Securities and the gross proceeds of such Offerings will be substantially negotiated between the Placement Agent and the Company with one or more accredited investors (described below).

 

Placement Agent acknowledges and agrees that closing of the Private Placement Offering is contingent upon the consummation of a reverse merger or other business combination (the “ Business Combination ”) with Bone Bio. and AFH Acquisition X, Inc. have executed a non-binding letter of intent and cannot provide any assurance that the Business Combination will be consummated. All funds from subscribers to the Private Placement Offering shall be deposited with a third-party escrow agent and distributed in accordance with the escrow instructions.

 

Upon your acceptance of this engagement letter indicated by your signature below, (the “ Agreement ”) this Agreement will confirm the terms of the engagement between the Placement Agent and the Company.

 

1. Appointment .

 

(a) Subject to the terms and conditions of this Agreement, the Company hereby retains the Placement Agent to act as the Company’s exclusive Placement Agent in connection with the Offerings for a period of through December 31, 2014 for the Private Placement Offering. The Placement Agent shall be entitled to appoint a co-lead placement agent or book runner upon the mutual consent of the Company. In the event that the Amount is raised within the raise period, the Initial Exclusivity Period may be extended to 12 months at the discretion of the Company. The Placement Agent shall be granted a right of first refusal in accordance with Section 5 of this Agreement. As Placement Agent, Forefront will advise and assist the Company in issuing the Securities to one or more accredited investors, as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (“ Investors ”). The Company retains the right to determine all of the terms and conditions of the Offerings and to accept or reject any proposals submitted to it in its sole and absolute discretion.

 

Members FINRA & SIPC

590 Madison Ave, 34th Fl, New York, NY 10022

Phone +1 212.607.8150 * http://www.forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement Amendment
Page 2

 

(b) During the Term of this Agreement (as such term is hereinafter defined), neither the Company nor any of its subsidiaries will, directly or indirectly, solicit or otherwise encourage the submission of any proposal or offer (“ Investment Proposal ”) from any person or entity relating to any issuance of the Company’s or any of its subsidiaries’ Securities or participate in any discussions regarding an Investment Proposal with the exception of exclusions noted on Exhibit B. The term “Investment Proposal” shall not include any commercial banking loans to the Company.

 

2. Information .

 

(a) The Company recognizes that, in completing its engagement hereunder, the Placement Agent will be using and relying on publicly available information and on data, material and other information furnished to Placement Agent by the Company or their respective affiliates and agents. The Company will cooperate with the Placement Agent and furnish, and cause to be furnished, to the Placement Agent, any and all information and data concerning the Company, their respective subsidiaries and the Offerings that the Placement Agent deems appropriate, including, without limitation, the Company’s acquisition plans and plans for raising capital or additional financing that is reasonably requested by the Placement Agent (the “ Information ”), which may include a private placement memorandum, if any (the “ Private Placement Materials ”). Any Information and Private Placement Materials forwarded to prospective Investors will be in a form acceptable to the Placement Agent and its counsel. The Company represents and warrants that all Information and Private Placement Materials, including, but not limited to, the Company’s financial statements, will be complete and correct in all material respects and will not to the best of their knowledge contain any untrue statement of a material fact or omit to state a material fact necessary in order to make such statements therein not misleading.

 

(b) It is further agreed that the Placement Agent will conduct a due diligence investigation of the Company and the Company will reasonably cooperate with such investigation as a condition of the Placement Agent’s obligations hereunder. The Company recognizes and confirms that the Placement Agent: (i) will use and rely primarily on the Information, the Private Placement Materials and information available from generally recognized public sources in performing the services contemplated by this letter without having independently verified the same; (ii) is authorized as the Placement Agent to transmit to any prospective investors information or a copy or copies of the Private Placement Materials, forms of subscription documents and any other legal documentation supplied to the Placement Agent for transmission to any prospective investors by or on behalf of the Company or by any of the Company’s officers, representatives or agents, in connection with the performance of the Placement Agent’s services hereunder or any transaction contemplated hereby; (iii) does not assume responsibility for the accuracy or completeness of the Information or the Private Placement Materials and such other information, if any provided to the Investors; (iv) will not make an appraisal of any assets of the Company; and (v) retains the right to continue to perform due diligence of the Company, their respective businesses, officers and directors during the term of the Agreement.

 

Members FINRA & SIPC

590 Madison Ave, 34th Fl, New York, NY 10022

Phone +1 212.607.8150 * http://www.forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement Amendment
Page 3

 

(c) Until the date that is two years from the termination of this agreement, the Placement Agent will keep all information obtained from the Company confidential except information that: (i) is in the public domain as of the date hereof or hereafter enters the public domain without a breach by the Placement Agent, (ii) was known or became known by the Placement Agent prior to the Company’s disclosure thereof to the Placement Agent, (iii) becomes known to the Placement Agent from a source other than the Company, and other than by the breach of an obligation of confidentiality owed to the Company, (iv) is disclosed by the Company to a third party without restrictions on its disclosure, (v) is independently developed by the Placement Agent or (vi) is required to be disclosed by the Placement Agent or its officers, directors, employees, agents, attorneys and to its other advisors and financial sources, pursuant to any order of a court of competent jurisdiction, industry or regulatory authority or other governmental body or as may otherwise be required by law.

 

(d) The Company recognizes that in order for the Placement Agent to perform properly its obligations in a professional manner, the Company will keep the Placement Agent informed of and, to the extent practicable, permit the Placement Agent to participate in meetings and discussions between the Company and any third party relating to the matters covered by the terms of the Placement Agent’s engagement. If at any time during the course of the Placement Agent’s engagement, the Company becomes aware of any material change in any of the information previously furnished to the Placement Agent, it will promptly advise the Placement Agent of such change.

 

3. Compensation . As compensation for the services rendered hereunder, the Company agrees to the following:

 

(a) The Company agrees to pay the Placement Agent a cash fee payable upon each closing of the Offerings (the “ Placement Fee ”) contemplated by this Agreement (“ Closing ”) equal to 8.0% of the gross proceeds received by the Company at each Closing.

 

(b) The Company shall deliver to the Placement Agent and/or its designees a warrant to purchase shares of the Company’s common stock (the “ Agent Warrant ”) equal to 8.0% of the Company’s common stock underlying the Securities issued in the Offerings. Such Agent Warrant will be issued at each Closing and shall provide, among other things, that the Agent Warrant shall: (i) be exercisable at the price of the Securities (or the exercise price of the Securities) issued to the Investors in the Offering, (ii) expire five (5) years from the date of issuance, (iii) include customary registration rights, including the registration rights provided to the Investors, (iv) contain provisions for cashless exercise and (v) include such other terms that are normal and customary for warrants of this type.

 

(c) Notwithstanding Sections 3(a) and (b), the Placement Agent shall only be entitled to receive a Placement Fee of 4.0% and Agent Warrant of 4.0% (collectively, the “ Management Fee ”) on the gross proceeds from investors introduced to the Company by either AFH Holdings and Advisory, LLC, Bone Bio or their respective officers and directors as set forth on Exhibit B hereto as may be amended by the Company, Bone Bio or AFH from time to time or as provided to Placement Agent directly by AFH Holdings and Advisory, LLC.

 

(d) The Company agrees to pay the Placement Agent a cash fee equal to 3.0% of the gross proceeds received by the Company from any financing of non-convertible debt securities without any other equity linked securities issued in such offering (“ Debt Placement Fee ”) during the Initial Exclusivity Period and applicable periods in accordance with Section 1 of the Agreement, provided, however, that Placement Agent shall not be entitled to the Debt Placement Fee on any amounts received by the Company directly from Amir Heshmatpour or any Officer or member of the Board of Directors of the Company to include the MusculoSkeletal Transplant Foundation.

 

Members FINRA & SIPC

590 Madison Ave, 34th Fl, New York, NY 10022

Phone +1 212.607.8150 * http://www.forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement Amendment
Page 4

 

(e) The Company agrees to issue the Placement Agent and/or its designees a warrant (the “ Advisory Warrants ”) to purchase shares of the Company’s common stock (the “ Common Stock ”) equal to 2.0% of the Company’s post-merger and financing fully diluted shares outstanding upon the Closing of $2.5 million of investors on which the Placement Agent is eligible to receive compensation as outlined in all of section 3 of this Agreement (the $1,000,000 investment from Orthofix shall not be included in any calculation of $2.5 million). If $2.5 million is closed specifically with regards to section 3 (a) of this agreement within 60 days from the filing date of the merger 8K than an additional 2.0% for a total of 4% shall be granted to the Advisor.

 

(f) The Company will reimburse the Placement Agent in a timely manner, no later than net 30 days after presentation of support for all expenses relating to the Offerings, including, but not limited to, printing, road show, background checks, travel and entertainment and other related expenses to the Offering as well as the legal fees incurred by the Placement Agent in connection with the Offering, provided, however, that (i) any single expense item in excess of $500 (other than legal expenses) and (ii) all expenses in excess of $1,000 in any one month must be approved in advance by the Company, and provided further, that the Company’s Placement Agent reimbursement obligation for legal expenses of the Placement Agent shall not exceed $15,000 unless approved in advance by the Company and shall be paid. Such reimbursements shall be made promptly (but in no event more than 30 days after submission of those expenses to the Company) upon submission by the Placement Agent.

 

(g) If the Company pays the Placement Agent via bank wire for any of the fees and reimbursed expenses described in all of this Section 3 Compensation , then all bank wiring fees will be incurred by the Company.

 

(h) Placement Agent agrees that in the event that the Business Combination is not consummated, Placement Agent shall not be entitled to receive the Placement Agent Fee, Agent Warrant, Advisory Warrant or any other compensation.

 

4. Term of Engagement .

 

(a) This Agreement will remain in effect until December 31, 2014 after which either party shall have the right to terminate the Agreement on 30 days prior written notice to the other party.The Placement Agent will continuously provide the Company with a list of Investors who were introduced by the Placement Agent. If within 12 months after the Termination Date, the Company completes any public or private financing of any Securities (other than the exercise by any person or entity of any options, warrants or other convertible securities other than the warrants issued pursuant to this Agreement) with any of the Investors who the Placement Agent introduced the Offerings as set forth on the list described above, excluding investors introduced to the Company by Bone Bio or AFH as set forth on Exhibit B hereto as may be amended by the Company or AFH from time to time, the Company will pay to The Placement Agent upon the closing of such financing the compensation set forth in all of Section 3 Compensation as a “Source Fee”.

 

(b) Notwithstanding anything herein to the contrary, subject to the 12 months limitation described in Section 4(a) above, the obligation to pay the compensation and expenses described in Section 3, this Section 4, Sections 5, 7 and 9-18, and all of Exhibit A attached (the terms of which are incorporated by reference hereto), will survive any termination or expiration of this Agreement. The termination of this Agreement shall not affect the Company’s obligation to pay fees to the extent provided for in Section 3 herein and shall not affect the Company’s obligation to reimburse the expenses accruing prior to such termination to the extent provided for herein.

 

Members FINRA & SIPC

590 Madison Ave, 34th Fl, New York, NY 10022

Phone +1 212.607.8150 * http://www.forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement Amendment
Page 5

 

 

5. Right of Participation . In the event of Closing $2.5 million as defined in 3(e) of this Agreement within the Term defined in 4(a), the Placement Agent shall be granted the right of first refusal to participate as as underwriter, placement agent or mergers and acquisition advisor, as the case may be, in the public or private offering by the Company or business combination of the Company (or any of its subsidiaries) within the 12 months following the latest Closing Date and with a minimum of 25% of the Securities placed and 25% of the underwriting, management, advisory or placement agent fees, provided, however, that the Placement Agent shall only be entitled to receive the Management Fee on the gross proceeds received by the Company at each Closing from investors introduced to the Company by either AFH Holdings and Advisory, LLC, Bone Bio or their respective officers and directors as set forth on Exhibit B hereto as may be amended by the Company, Bone Bio or AFH from time to time.

 

6. Certain Placement Procedures . The Company and the Placement Agent each represents to the other that it has not taken and it will not take any action, directly or indirectly, so as to cause the Offering to fail to be entitled to rely upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “ Act ”). In effecting the Offering, the Company and the Placement Agent each agrees to comply in all material respects with applicable provisions of the Act and any regulations thereunder and any applicable state laws and requirements. The Company agrees that any representations and warranties made by it to any Investor in the Offering shall be deemed also to be made to the Placement Agent for its benefit. The Company agrees that it shall cause any opinion of its counsel delivered to any Investors in the Offering also to be addressed and delivered to the Placement Agent.

 

7 . Indemnification . The Company agrees to indemnify the Placement Agent in accordance with the indemnification and other provisions attached to the Agreement as Exhibit A (the “ Indemnification Provisions ”), which provisions are incorporated herein by reference and shall survive the termination or expiration of the Agreement.

 

8. Other Activities . The Company acknowledges that The Placement Agent has been, and may in the future be, engaged to provide services as an underwriter, placement agent, finder, advisor and investment banker to other companies in the industry in which the Company is involved. Subject to the confidentiality provisions of The Placement Agent contained in Section 2 hereof, the Company acknowledges and agrees that nothing contained in this Agreement shall limit or restrict the right of The Placement Agent or of any member, manager, officer, employee, agent or representative of The Placement Agent, to be a member, manager, partner, officer, director, employee, agent or representative of, investor in, or to engage in, any other business, whether or not of a similar nature to the Company’s business, nor to limit or restrict the right of The Placement Agent to render services of any kind to any other corporation, firm, individual or association; provided that The Placement Agent and any of its member, manager, officer, employee, agent or representative shall not use the Information to the detriment of the Company.

 

9. Governing Law; Jurisdiction; Waiver of Jury Trial . This Agreement will be governed as to validity, interpretation, construction, effect and in all other respects by the internal laws of the State of New York. The Company, Bone Bio and The Placement Agent each (i) agree that any legal suit, action or proceeding arising out of or relating to this Agreement shall be instituted exclusively in the New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (ii) waives any objection to the venue of any such suit, action or proceeding, and the right to assert that such forum is an inconvenient forum, and (iii) irrevocably consents to the jurisdiction of the New York State Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. Each of the Company, Bone Bio and The Placement Agent further agrees to accept and acknowledge service of any and all process that may be served in any such suit, action or proceeding in the New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York and agree that service of process upon it mailed by certified mail to its address shall be deemed in every respect effective service of process in any such suit, action or proceeding. The parties hereby expressly waive all rights to trial by jury in any suit, action or proceeding arising under this Agreement.

 

Members FINRA & SIPC

590 Madison Ave, 34th Fl, New York, NY 10022

Phone +1 212.607.8150 * http://www.forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement Amendment
Page 6

 

 

10. Securities Law Compliance . The Company, at its own expense, will use its best efforts to obtain any registration or qualification required to sell any Securities under the Blue Sky laws of any applicable State or U.S. Territory jurisdictions as well as any foreign jurisdiction.

 

11. Representations and Warranties . The Company, Bone Bio and The Placement Agent each respectively represent and warrant that: (a) it has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder; (b) this Agreement has been duly authorized and executed and constitutes a legal, valid and binding agreement of such party enforceable in accordance with its terms; and (c) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby does not conflict with or result in a breach of (i) such party’s certificate of incorporation or by-laws or (ii) any agreement to which such party is a party or by which any of its property or assets is bound.

 

12. Parties; Assignment; Independent Contractor . This Agreement has been and is made solely for the benefit of the Placement Agent, Bone Bio and the Company and each of the persons, agents, employees, officers, directors and controlling persons referred to in Exhibit A and their respective heirs, executors, personal representatives, successors and assigns, and nothing contained in this Agreement will confer any rights upon, nor will this Agreement be construed to create any rights in, any person who is not party to such Agreement, other than as set forth in this paragraph. The rights and obligations of either party under this Agreement may not be assigned without the prior written consent of the other party hereto and any other purported assignment will be null and void. The Placement Agent has been retained under this Agreement as an independent contractor, and it is understood and agreed that this Agreement does not create a fiduciary relationship between The Placement Agent and the Company or their respective Boards of Directors. The Placement Agent shall not be considered to be the agent of the Company or Bone Bio for any purpose whatsoever and The Placement Agent is not granted any right or authority to assume or create any obligation or liability, express or implied, on the Company’s or Bone Bio’s behalf, or to bind the Company or Bone Bio in any manner whatsoever.

 

13. Validity . In case any term of this Agreement will be held invalid, illegal or unenforceable, in whole or in part, the validity of any of the other terms of this Agreement will not in any way be affected thereby.

 

14. Counterparts . This Agreement may be executed in counterparts and each of such counterparts will for all purposes be deemed to be an original, and such counterparts will together constitute one and the same instrument.

 

Members FINRA & SIPC

590 Madison Ave, 34th Fl, New York, NY 10022

Phone +1 212.607.8150 * http://www.forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement Amendment
Page 7

 

 

15. Amendments . This Agreement may not be modified or amended except in a writing duly executed by the parties hereto.

 

16. Notices . All notices will be in writing and will be effective when delivered in person or by courier or sent registered mail and confirmed by the other party by email or registered mail to the party to whom it is addressed at the following addresses or such other address as such party may advise the other in writing:

 

To Forefront:   David Wasitowski
    Forefront Capital Markets, LLC
    590 Madison Ave, 34th Floor
    New York, NY 10022
    Phone: 212-607-8150
     
To Bone Biologics:   Michael Schuler
    Chief Executive Officer
    Bone Biologics, Inc.
    100 Rancho Road, Suite 7
    Thousand Oaks, CA 91362
    Phone: 818-324-2742
     
    With a copy to:
    Ann Lawrence
    DLA Piper LLP US
    550 South Hope Street
    Los Angeles, CA 90071
    Ann.lawrence@dlapiper.com
    Phone: 213-330-7755

 

17. Commercially Reasonable Best Efforts Engagement . The Company acknowledges and agrees that the Placement Agent will use its “commercially reasonable best efforts” in connection with the Offering and that this Agreement does not constitute a commitment by the Placement Agent to purchase the Securities or introduce the Company to Investors. The Placement Agent will in its sole discretion determine the reasonableness of its efforts and is under no obligation to perform at any level other than what it deems reasonable. It is expressly understood and acknowledged that The Placement Agent’s engagement for the Offering does not constitute any commitment, express or implied, on the part of The Placement Agent or of any of its affiliates to purchase or place the Company’s securities or to provide any type of financing.

 

18. Press Announcements . The Company agrees that the Placement Agent shall have the right at its own expense to place information and advertisements describing The Placement Agent’s services to the Company hereunder in the Placement Agent’s various marketing materials and website as well as financial trade publications and/ or newspapers and journals, provided that Placement Agent shall submit a copy of any such advertisement to the Company for approval, such approval not to be unreasonably withheld, conditioned or delayed.

 

Members FINRA & SIPC

590 Madison Ave, 34th Fl, New York, NY 10022

Phone +1 212.607.8150 * http://www.forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement Amendment
Page 8

 

If the terms of our engagement as set forth in this letter are satisfactory to you, please sign and date the enclosed copy of this letter and return it to us. We look forward to working with you and your management team.

 

  Very truly yours,
   
  Forefront Capital Markets, LLC
     
  By: /s/ Francis J. Argenziano
    Francis J. Argenziano
    Senior Managing Director
     
     
  By: /s/ David Wasitowski
    David Wasitowski
    President & CFO

 

Agreed to and accepted to as of the date first appearing above:

 

Bone Biologics, Inc.

 

By: /s/ Michael Schuler  
  Michael Schuler  
  Chief Executive Officer  

 

[Signature Page to the Agreement; Exhibit A – Indemnification Provisions and Exhibit B – Excluded Investors follows]

 

Members FINRA & SIPC

590 Madison Ave, 34th Fl, New York, NY 10022

Phone +1 212.607.8150 * http://www.forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement Amendment
Page 9

 

Exhibit A

 

INDEMNIFICATION PROVISIONS

 

Capitalized terms used in this Exhibit shall have the meanings ascribed to such terms in the Agreement to which this Exhibit is attached.

 

The Company agrees to indemnify and hold harmless the Placement Agent and each of the other Indemnified Parties (as hereinafter defined) from and against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements, and any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise (including, without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing, pursuing or defending any such action, suit, proceeding or investigation (whether or not in connection with litigation in which any Indemnified Party is a party)) (collectively, “ Losses ”), directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with, the Placement Agent’s acting for the Company, including, without limitation, any act or omission by the Placement Agent in connection with its acceptance of or the performance or non-performance of its obligations under the Agreement between the Company and Placement Agent to which these indemnification provisions are attached and form a part, any breach by the Company of any representation, warranty, covenant or agreement contained in the Agreement (or in any instrument, document or agreement relating thereto, including any agency agreement), or the enforcement by Placement Agent of its rights under the Agreement or these indemnification provisions, except to the extent that any such Losses are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the gross negligence or reckless or willful misconduct of the Indemnified Party seeking indemnification hereunder. The Company also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with the engagement of Placement Agent by the Company or for any other reason, except to the extent that any such liability is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from such Indemnified Party’s gross negligence or reckless or willful misconduct.

 

These Indemnification Provisions shall extend to the following persons (collectively, the “ Indemnified Parties ”): Placement Agent, its present and former affiliated entities, managers, members, officers, employees, legal counsel, agents and controlling persons (within the meaning of the federal securities laws), and the officers, directors, partners, stockholders, members, managers, employees, legal counsel, agents and controlling persons of any of them. These indemnification provisions shall be in addition to any liability which the Company may otherwise have to any Indemnified Party.

 

If any action, suit, proceeding or investigation is commenced, as to which an Indemnified Party proposes to demand indemnification, it shall notify the Company with reasonable promptness (within 7 business days); provided , however , that any failure by an Indemnified Party to notify the Company shall not relieve the Company from its obligations hereunder. An Indemnified Party shall have the right to retain counsel of its own choice to represent it, and the fees, expenses and disbursements of such counsel for the Indemnified parties shall be borne by the Company. Any such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the Company and any counsel designated by the Company. The Company shall be liable for any settlement of any claim against any Indemnified Party made with the Company’s written consent. The Company shall not, without the prior written consent of the Placement Agent, settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent (i) includes, as an unconditional term thereof, the giving by the claimant to all of the Indemnified Parties of an unconditional release from all liability in respect of such claim, and (ii) does not contain any factual or legal admission by or with respect to an Indemnified Party or an adverse statement with respect to the character, professionalism, expertise or reputation of any Indemnified Party or any action or inaction of any Indemnified Party.

 

Members FINRA & SIPC

590 Madison Ave, 34th Fl, New York, NY 10022

Phone +1 212.607.8150 * http://www.forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement Amendment
Page 10

 

In order to provide for just and equitable contribution, if a claim for indemnification pursuant to these indemnification provisions is made but it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, then the Company shall contribute to the Losses to which any Indemnified Party may be subject (i) in accordance with the relative benefits received by the Company and its stockholders, subsidiaries and affiliates, on the one hand, and the Indemnified Party, on the other hand, and (ii) if (and only if) the allocation provided in clause (i) of this sentence is not permitted by applicable law, in such proportion as to reflect not only the relative benefits, but also the relative fault of the Company, on the one hand, and the Indemnified Party, on the other hand, in connection with the statements, acts or omissions which resulted in such Losses as well as any relevant equitable considerations. No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for fraudulent misrepresentation. The relative benefits received (or anticipated to be received) by the Company and its stockholders, subsidiaries and affiliates shall be deemed to be equal to the aggregate consideration payable or receivable by such parties in connection with the transaction or transactions to which the Agreement relates relative to the amount of fees actually received by Placement Agent in connection with such transaction or transactions. Notwithstanding the foregoing, in no event shall the amount contributed by all Indemnified Parties exceed the amount of fees previously received by Placement Agent pursuant to the Agreement.

 

Neither termination nor completion of the Agreement shall affect these Indemnification Provisions which shall remain operative and in full force and effect. The Indemnification Provisions shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnified Parties and their respective successors, assignees, heirs and personal representatives.

 

Members FINRA & SIPC

590 Madison Ave, 34th Fl, New York, NY 10022

Phone +1 212.607.8150 * http://www.forefrontcapitalmarkets.com

 

 
Bone Biologics, Inc.
Placement Agent Agreement Amendment
Page 11

 

Exhibit B

 

EXCLUDED INVESTORS

 

Friends and Family of Amir Heshmatpour included in the listing attached or otherwise as provided by Amir Heshmatpour or AFH Holdings and Advisory to Placement Agent

MusculoSkeletal Transplant Foundation

Orthofix, Inc.

Baxter, Inc.

John Booth

Michael Finnegan

Bruce Hazuka

 

 
   

 

Bone Biologics, Corp.

100 Rancho Rd., Suite 7 - 231

Thousand Oaks, CA 91362

 

July 2, 2014

 

Dr. Chia Soo

115 North Doheny Drive

Beverly Hills, CA 90211

 

Re: Director Offer Letter

 

Dear Dr. Soo:

 

Bone Biologics, Corp. (the “ Company ”), is pleased to offer you a position as a member of its Board of Directors (the “ Board ”), effective upon the filing of a Form 8K (the “ 8K ”) with the Securities Exchange Comission (the “ SEC ”) by the Company. We believe that your background and experience will be a significant asset to the Company, and we look forward to your participation on the Board. Should you choose to accept this position as a member of the Board, this letter agreement (this “ Agreement ”) shall constitute an agreement between you and the Company and contains all the terms and conditions relating to the services that you agree to provide the Company.

 

Bone Biologics, Inc. (“ BB Inc. ”) entered into a letter agreement with AFH Holding & Advisory, LLC and the Musculoskeletal Transplant Foundation, Inc. that contemplates a merger (the “ Merger ”) in which BB Inc. will become a wholly-owned subsidiary of the Company. After consummation of the Merger, the Board will consist of seven (7) members. Within four days of the consummation of the Merger, the Company will file the 8K with the SEC.

 

1. Term . This Agreement is effective as of the date of the filing of the 8k. Your term as director shall continue subject to the provisions in Section 9 below or until your successor is duly elected and qualified. The position shall be up for re-election each year at the annual shareholders’ meeting and upon re-election (unless a staggered board is implemented), the terms and provisions of this Agreement shall remain in full force and effect.

 

2. Services . You shall render services as a member of the Board and as a member of one or more committees of the Board (hereinafter your “ Duties ”). During the term of this Agreement, you shall attend and participate in such number of meetings of the Board and any committees on which you serve as a member as regularly or specially called. You may attend and participate at each such meeting, via teleconference, video conference or in person. You shall consult with the other members of the Board as necessary via telephone, electronic mail or other forms of correspondence.

 

3. Services for Others . You shall be free to represent or perform services for other persons during the term of this Agreement. However, you agree that you do not presently perform and do not intend to perform, during the term of this Agreement, similar Duties, consulting or other services for companies whose businesses are or would be, in any way, competitive with the Company’s Business (as defined below), except for companies previously disclosed by you to the Company in writing. Should you propose to perform similar Duties, consulting or other services for any such company, you agree to notify the Company in writing in advance (specifying the name of the organization for whom you propose to perform such services) and to provide information to the Company sufficient to allow it to determine if the performance of such services would conflict with areas of interest to the Company. For purposes of this Agreement, the term “ Company’s Business ” shall have the same meaning as the definition for the term “Field of Use” in that certain Exclusive Licensing Agreement, dated March 15, 2006, by and between the Company and the Regents of the University of California, as amended (the “ UCLA Exclusive License ”), except that the term Company’s Business shall also include all patents prosecuted and funded by the Company or BB, Inc.

 

 
 

 

4. Compensation . Assuming your material compliance with the terms of this Offer Letter, compensation for your services to the Company shall be as described in this section.

 

a. You will receive a retainer of $25,000 annually.

 

b. You shall receive an option to purchase 50,000 shares of the Company’s $0.001 par value per share Common Stock (“ Common Stock ”) at an exercise price of $1.00 per share upon completion of your first year of service as a member of the Board. These options will have a term of 10 years.

 

c. You shall receive $50,000 worth of Common Stock upon completion of each year of service as a member of the Board. Such issuances of Common Stock shall be split into four installments, each valued at $12,500 and distributed quarterly on the date that the Company files its Form 10-Q or Form 10-K, as applicable, with the SEC. The Common Stock will be valued at the average of the trading price for shares of Common Stock over the 10 day period prior to the issuance.

 

d. You shall be reimbursed for reasonable expenses incurred by you in connection with the performance of your Duties (including travel expenses for in-person meetings).

 

5. D&O Insurance Policy . The Company maintains an insurance policy for officers and directors (the “ D&O Insurance Policy ”), and the Company shall include you as an insured under the D&O insurance policy during the term of this Agreement.

 

6. No Assignment . Because of the personal nature of the services to be rendered by you, this Agreement may not be assigned by you without the prior written consent of the Company.

 

7. Confidential Information; Non-Disclosure . In consideration of your access to certain Confidential Information (as defined below) of the Company, in connection with your business relationship with the Company, you hereby represent and agree as follows:

 

a. Definition . For purposes of this Agreement the term “ Confidential Information ” means:

 

i. Any information which the Company possesses that has been created, discovered or developed by or for the Company, and which has or could have commercial value or utility in the Company’s Business;

 

ii. work performed at or for the University of California, Los Angeles (“ UCLA ”), that is or was funded under a research or consulting agreement with the Company or BB, Inc., as well as work performed at or for UCLA that lead or leads to any patent prosecuted and funded by the Company or BB, Inc.; and

 

 
 

 

iii. Any information which is related to the Company’s Business and is generally not known by non-Company personnel.

 

iv. Confidential Information includes, without limitation, trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, know-how, software, formats, marketing plans, and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics and agreements.

 

b. Exclusions . Notwithstanding the foregoing, the term Confidential Information shall not include:

 

i. Any information which becomes generally available to the public other than as a result of a breach of the confidentiality portions of this Agreement, or any other agreement requiring confidentiality between the Company and you;

 

ii. work performed at or for UCLA that neither is nor was funded under a research or consulting agreement with the Company or BB, Inc. and that neither lead nor leads to any patent prosecuted and funded by the Company or BB, Inc.;

 

iii. Information received from a third party in rightful possession of such information who is not restricted from disclosing such information; and

 

iv. Information known by you prior to receipt of such information from the Company, which prior knowledge can be demonstrated..

 

c. Documents . You agree that, without the express written consent of the Company, you will not remove from the Company's premises, any notes, formulas, programs, data, records, machines or any other documents or items which in any manner contain or constitute Confidential Information, nor will you make reproductions or copies of same. You shall promptly return any such documents or items, along with any reproductions or copies to the Company upon the Company's demand, upon termination of this Agreement, or upon your termination or Resignation, as defined in Section 9 herein.

 

d. Confidentiality . You agree that you will hold in trust and confidence all Confidential Information and will not disclose to others, directly or indirectly, any Confidential Information or anything relating to such information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company. You further agree that you will not use any Confidential Information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company, and that the provisions of this paragraph (d) shall survive termination of this Agreement.

 

 
 

 

e. Ownership . You agree that in connection with your Duties as a member of the Board the Company shall own all right, title and interest (including patent rights, copyrights, trade secret rights, mask work rights, trademark rights, and all other intellectual and industrial property rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), works of authorship, mask works, designations, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by you during the term of this Agreement arising out of your Duties as a member of the Board (collectively, “ Inventions” ), and you will promptly disclose and provide all Inventions to the Company. You agree to assist the Company, at its expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights assigned.

 

8. Non-Solicitation . During the term of your appointment, you shall not directly solicit for employment any employee of the Company with whom you have had contact due to your appointment.

 

9. Termination and Resignation . Your membership on the Board may be terminated for any or no reason by a vote of the stockholders holding at least a majority of the shares of the Company’s issued and outstanding shares entitled to vote. Your membership on the Board may be terminated for any or no reason at any meeting of the Board or by written consent of, a majority of the Board at any time, or if you have been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. You may also terminate your membership on the Board for any or no reason by delivering your written notice of resignation to the Company (“ Resignation ”), and such Resignation shall be effective upon the time specified therein or, if no time is specified, upon receipt of the notice of resignation by the Company. Upon the effective date of the termination or Resignation, your right to compensation hereunder will terminate subject to the Company's obligations to pay you any compensation (including the vested portion of the Shares) that you have already earned and to reimburse you for approved expenses already incurred in connection with your performance of your Duties as of the effective date of such termination or Resignation. Any Shares that have not vested as of the effective date of such termination or Resignation shall be forfeited and cancelled.

 

10. Governing Law . All questions with respect to the construction and/or enforcement of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of the State of Delaware applicable to agreements made and to be performed entirely in the State of Delaware.

 

11. Entire Agreement; Amendment; Waiver; Counterparts . This Agreement expresses the entire understanding with respect to the subject matter hereof and supersedes and terminates any prior oral or written agreements with respect to the subject matter hereof. Any term of this Agreement may be amended and observance of any term of this Agreement may be waived only with the written consent of the parties hereto. Waiver of any term or condition of this Agreement by any party shall not be construed as a waiver of any subsequent breach or failure of the same term or condition or waiver of any other term or condition of this Agreement. The failure of any party at any time to require performance by any other party of any provision of this Agreement shall not affect the right of any such party to require future performance of such provision or any other provision of this Agreement. This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement, and may be executed using facsimiles of signatures, and a facsimile of a signature shall be deemed to be the same, and equally enforceable, as an original of such signature.

 

 
 

 

12. Indemnification . The Company shall, to the maximum extent provided under applicable law, indemnify and hold you harmless from and against any expenses, including reasonable attorney’s fees, judgments, fines, settlements and other legally permissible amounts (“ Losses ”), incurred in connection with any proceeding arising out of, or related to, your performance of your Duties, other than any such Losses incurred as a result of your negligence or willful misconduct. The Company shall advance to you any expenses, including reasonable attorneys’ fees and costs of settlement, incurred in defending any such proceeding to the maximum extent permitted by applicable law. Such costs and expenses incurred by you in defense of any such proceeding shall be paid by the Company in advance of the final disposition of such proceeding promptly upon receipt by the Company of (a) written request for payment; (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought; and (c) an undertaking adequate under applicable law made by or on your behalf to repay the amounts so advanced if it shall ultimately be determined pursuant to any non-appealable judgment or settlement that you are not entitled to be indemnified by the Company.

 

13. Not an Employment Agreement . This Agreement is not an employment agreement, and shall not be construed or interpreted to create any right for you to continue employment with the Company.

 

14. Acknowledgement . You accept this Agreement subject to all the terms and provisions of this Agreement. You agree to accept as binding, conclusive, and final all decisions or interpretations of the Board of any questions arising under this Agreement.

 

[Remainder of Page Intentionally Left Blank; Signature page follows]

 

 
 

 

This Agreement has been executed and delivered by the undersigned and is made effective as of the date set first set forth above.

 

  Sincerely,
   
  BONE BIOLOGICS, CORP.
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer

 

AGREED AND ACCEPTED:  
   
/s/ Chia Soo  
Name: Chia Soo  

  

 
 

 

 

Bone Biologies, Corp.
175 May St. Suite 400
Edison, NJ 08837

 

July 1, 2014

 

Bruce Stroever, CEO
Musculoskeletal Transplant Foundation
125 May Street
Edison, NJ 08837

 

Re:    Director Offer Letter

 

Dear Mr. Stroever:

 

Bone Biologies, Corp. (the “ Company ”), is pleased to offer you a position as a member of its Board of Directors (the “ Board ”), effective upon the filing of a Form 8K (the “ 8K ”) with the Securities Exchange Commission (the “ SEC ”) by the Company. Initially, you shall be appointed to serve as the Chairman of the Board. We believe that your background and experience will be a significant asset to the Company, and we look forward to your participation on the Board. Should you choose to accept this position as a member of the Board, this letter agreement (this “ Agreement ”) shall constitute an agreement between you and the Company and contains all the terms and conditions relating to the services that you agree to provide the Company.

 

Bone Biologies, Inc. (“ BB Inc .”) entered into a letter agreement with AFH Holding & Advisory, LLC and the Musculoskeletal Transplant Foundation, Inc. that contemplates a merger (the “ Merger ”) in which BB Inc. will become a wholly-owned subsidiary of the Company. After consummation of the Merger, the Board will consist of seven (7) members. Within four days of the consummation of the Merger, the Company will file the 8K with the SEC.

 

1. Term . This Agreement is effective as of the date of the filing of the 8k. Your term as director shall continue subject to the provisions in Section 9 below or until your successor is duly elected and qualified. The position shall be up for re-election each year at the annual shareholder’s meeting and upon re-election (unless a staggered board is implemented), the terms and provisions of this Agreement shall remain in full force and effect.

 

2. Services . You shall render services as a member of the Board and as a member of one or more committees of the Board (hereinafter your “ Duties ”). During the term of this Agreement, you shall attend and participate in such number of meetings of the Board and any committees on which you serve as a member as regularly or specially called. You may attend and participate at each such meeting, via teleconference, video conference or in person. You shall consult with the other members of the Board as necessary via telephone, electronic mail or other forms of correspondence.

 

3. Services for Others . You shall be free to represent or perform services for other persons during the term of this Agreement. However, you agree that you do not presently perform and do not intend to perform, during the term of this Agreement, similar Duties, consulting or other services for companies whose businesses are or would be, in any way, competitive with the Company (except for companies previously disclosed by you to the Company in writing). Should you propose to perform similar Duties, consulting or other services for any such company, you agree to notify the Company in writing in advance (specifying the name of the organization for whom you propose to perform such services) and to provide information to the Company sufficient to allow it to determine if the performance of such services would conflict with areas of interest to the Company.

 

 
 

 

4. Compensation . Assuming your material compliance with the terms of this Offer Letter, compensation for your services to the Company shall be as described in the “Management Consulting Agreement” between Musculoskeletal Transplant Foundation, Inc. and the Company.

 

5. D&O Insurance Policy . The Company maintains an insurance policy for officers and directors (the “ D&O Insurance Policy ”), and the Company shall include you as an insured under the D&O insurance policy during the term of this Agreement.

 

6. No Assignment . Because of the personal nature of the services to be rendered by you, this Agreement may not be assigned by you without the prior written consent of the Company.

 

7. Confidential Information: Non-Disclosure . In consideration of your access to certain Confidential Information (as defined below) of the Company, in connection with your business relationship with the Company, you hereby represent and agree as follows:

 

a.   Definition . For purposes of this Agreement the term “ Confidential Information ” means:

 

i. Any information which the Company possesses that has been created, discovered or developed by or for the Company, and which has or could have commercial value or utility in the business in which the Company is engaged; or

 

ii. Any information which is related to the business of the Company and is generally not known by non-Company personnel.

 

iii. Confidential Information includes, without limitation, trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, know-how, software, formats, marketing plans, and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics and agreements.

 

b. Exclusions . Notwithstanding the foregoing, the term Confidential Information shall not include:

 

i. Any information which becomes generally available to the public other than as a result of a breach of the confidentiality portions of this Agreement, or any other agreement requiring confidentiality between the Company and you;

 

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ii. Information received from a third party in rightful possession of such information who is not restricted from disclosing such information; and

 

iii. Information known by you prior to receipt of such information from the Company, which prior knowledge can be documented.

 

c. Documents . You agree that, without the express written consent of the Company, you will not remove from the Company’s premises, any notes, formulas, programs, data, records, machines or any other documents or items which in any manner contain or constitute Confidential Information, nor will you make reproductions or copies of same. You shall promptly return any such documents or items, along with any reproductions or copies to the Company upon the Company’s demand, upon termination of this Agreement, or upon your termination or Resignation, as defined in Section 9 herein.

 

d. Confidentiality . You agree that you will hold in trust and confidence all Confidential Information and will not disclose to others, directly or indirectly, any Confidential Information or anything relating to such information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company. You further agree that you will not use any Confidential Information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company, and that the provisions of this paragraph (d) shall survive termination of this Agreement.

 

e. Ownership . You agree that Company shall own all right, title and interest (including patent rights, copyrights, trade secret rights, mask work rights, trademark rights, and all other intellectual and industrial property rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), works of authorship, mask works, designations, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by you during the term of this Agreement and that arise out of your Duties (collectively, “ Inventions ”) and you will promptly disclose and provide all Inventions to the Company. You agree to assist the Company, at its expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights assigned.

 

8. Non-Solicitation . During the term of your appointment, you shall not directly solicit for employment any employee of the Company with whom you have had contact due to your appointment.

 

9. Termination and Resignation . Your membership on the Board may be terminated for any or no reason by a vote of the stockholders holding at least a majority of the shares of the Company’s issued and outstanding shares entitled to vote. Your membership on the Board may be terminated for any or no reason at any meeting of the Board or by written consent of, a majority of the Board at any time, or if you have been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. You may also terminate your membership on the Board for any or no reason by delivering your written notice of resignation to the Company (“ Resignation ”), and such Resignation shall be effective upon the time specified therein or, if no time is specified, upon receipt of the notice of resignation by the Company. Upon the effective date of the termination or Resignation, your right to compensation hereunder will terminate subject to the Company’s obligations to pay you any compensation (including the vested portion of the Shares) that you have already earned and to reimburse you for approved expenses already incurred in connection with your performance of your Duties as of the effective date of such termination or Resignation. Any Shares that have not vested as of the effective date of such termination or Resignation shall be forfeited and cancelled.

 

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10.   Governing Law . All questions with respect to the construction and/or enforcement of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of the State of Delaware applicable to agreements made and to be performed entirely in the State of Delaware.

 

11.    Entire Agreement: Amendment: Waiver; Counterparts . This Agreement expresses the entire understanding with respect to the subject matter hereof and supersedes and terminates any prior oral or written agreements with respect to the subject matter hereof. Any term of this Agreement may be amended and observance of any term of this Agreement may be waived only with the written consent of the parties hereto. Waiver of any term or condition of this Agreement by any party shall not be construed as a waiver of any subsequent breach or failure of the same term or condition or waiver of any other term or condition of this Agreement. The failure of any party at any time to require performance by any other party of any provision of this Agreement shall not affect the right of any such party to require future performance of such provision or any other provision of this Agreement. This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement, and may be executed using facsimiles of signatures, and a facsimile of a signature shall be deemed to be the same, and equally enforceable, as an original of such signature.

 

12.   Indemnification . The Company shall, to the maximum extent provided under applicable law, indemnify and hold you harmless from and against any expenses, including reasonable attorney’s fees, judgments, fines, settlements and other legally permissible amounts (“ Losses ”), incurred in connection with any proceeding arising out of, or related to, your performance of your Duties, other than any such Losses incurred as a result of your negligence or willful misconduct. The Company shall advance to you any expenses, including reasonable attorneys’ fees and costs of settlement, incurred in defending any such proceeding to the maximum extent permitted by applicable law. Such costs and expenses incurred by you in defense of any such proceeding shall be paid by the Company in advance of the final disposition of such proceeding promptly upon receipt by the Company of (a) written request for payment; (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought; and (c) an undertaking adequate under applicable law made by or on your behalf to repay the amounts so advanced if it shall ultimately be determined pursuant to any non-appealable judgment or settlement that you are not entitled to be indemnified by the Company.

 

13.   Not an Employment Agreement . This Agreement is not an employment agreement, and shall not be construed or interpreted to create any right for you to continue employment with the Company.

 

14.   Acknowledgement . You accept this Agreement subject to all the terms and provisions of this Agreement. You agree to accept as binding, conclusive, and final all decisions or interpretations of the Board of Directors of the Company of any questions arising under this Agreement.

 

[Remainder of Page Intentionally Left Blank; Signature page follows]

 

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This Agreement has been executed and delivered by the undersigned and is made effective as of the date set first set forth above.

 

  Sincerely,
   
  BONE BIOLOGIES, CORP.
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer

 

AGREED AND ACCEPTED:  
     
  /s/ Bruce Stroever  
Name: Bruce Stroever  

 

 
 

 

Bone Biologics, Corp.

100 Rancho Rd., Suite 7 - 231

Thousand Oaks, CA 91362

 

June __, 2014

 

John Booth

7 Red Pine Rd

North Oaks, MN 55127

 

Re: Director Offer Letter

 

Dear Mr. Booth:

 

Bone Biologics, Corp. (the “ Company ”), is pleased to offer you a position as a member of its Board of Directors (the “ Board ”), effective upon the filing of a Form 8K (the “ 8K ”) with the Securities Exchange Comission (the “ SEC ”) by the Company. Initially, you shall serve as the chair of the Board’s Compensation Committee. We believe that your background and experience will be a significant asset to the Company, and we look forward to your participation on the Board. Should you choose to accept this position as a member of the Board, this letter agreement (this “ Agreement ”) shall constitute an agreement between you and the Company and contains all the terms and conditions relating to the services that you agree to provide the Company.

 

Bone Biologics, Inc. (“ BB Inc. ”) entered into a letter agreement with AFH Holding & Advisory, LLC and the Musculoskeletal Transplant Foundation, Inc. that contemplates a merger (the “ Merger ”) in which BB Inc. will become a wholly-owned subsidiary of the Company. After consummation of the Merger, the Board will consist of seven (7) members. Within four days of the consummation of the Merger, the Company will file the 8K with the SEC.

 

1.  Term . This Agreement is effective as of the date of the filing of the 8k. Your term as director shall continue subject to the provisions in Section 9 below or until your successor is duly elected and qualified. The position shall be up for re-election each year at the annual shareholder’s meeting and upon re-election (unless a staggered board is implemented), the terms and provisions of this Agreement shall remain in full force and effect.

 

2.  Services . You shall render services as a member of the Board and as a member of one or more committees of the Board (hereinafter your “ Duties ”). During the term of this Agreement, you shall attend and participate in such number of meetings of the Board and any committees on which you serve as a member as regularly or specially called. You may attend and participate at each such meeting, via teleconference, video conference or in person. You shall consult with the other members of the Board as necessary via telephone, electronic mail or other forms of correspondence.

 

3.  Services for Others . You shall be free to represent or perform services for other persons during the term of this Agreement. However, you agree that you do not presently perform and do not intend to perform, during the term of this Agreement, similar Duties, consulting or other services for companies whose businesses are or would be, in any way, competitive with the Company (except for companies previously disclosed by you to the Company in writing). Should you propose to perform similar Duties, consulting or other services for any such company, you agree to notify the Company in writing in advance (specifying the name of the organization for whom you propose to perform such services) and to provide information to the Company sufficient to allow it to determine if the performance of such services would conflict with areas of interest to the Company.

 

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4.  Compensation . Assuming your material compliance with the terms of this Offer Letter, compensation for your services to the Company shall be as described in this section.

 

a. You will receive a retainer of $25,000 annually.

 

b. For so long as you serve as the chair of the Compensation Committee of the Board, you shall receive an additional retainer of $5,000 annually.

 

c. You shall receive an option to purchase 50,000 shares of the Company’s $0.001 par value per share Common Stock (“ Common Stock ”) at an exercise price of $1.00 per share upon completion of your first year of service as a member of the Board. These options will have a term of 10 years.

 

d. You shall receive $50,000 worth of Common Stock upon completion of each year of service as a member of the Board. Such issuances of Common Stock shall be split into four installments, each valued at $12,500 and distributed quarterly on the date that the Company files its Form 10-Q or Form 10-K, as applicable, with the SEC. The Common Stock will be valued at the average of the trading price for shares of Common Stock over the 10 day period prior to the issuance.

 

e. You shall be reimbursed for reasonable expenses incurred by you in connection with the performance of your Duties (including travel expenses for in-person meetings).

 

5. D&O Insurance Policy . The Company maintains an insurance policy for officers and directors (the “ D&O Insurance Policy ”), and the Company shall include you as an insured under the D&O insurance policy during the term of this Agreement.

 

6.  No Assignment . Because of the personal nature of the services to be rendered by you, this Agreement may not be assigned by you without the prior written consent of the Company.

 

7.  Confidential Information; Non-Disclosure . In consideration of your access to certain Confidential Information (as defined below) of the Company, in connection with your business relationship with the Company, you hereby represent and agree as follows:

 

a.  Definition . For purposes of this Agreement the term “ Confidential Information ” means:

 

i. Any information which the Company possesses that has been created, discovered or developed by or for the Company, and which has or could have commercial value or utility in the business in which the Company is engaged; or

 

ii. Any information which is related to the business of the Company and is generally not known by non-Company personnel.

 

iii. Confidential Information includes, without limitation, trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, know-how, software, formats, marketing plans, and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics and agreements.

 

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b. Exclusions . Notwithstanding the foregoing, the term Confidential Information shall not include:

 

i. Any information which becomes generally available to the public other than as a result of a breach of the confidentiality portions of this Agreement, or any other agreement requiring confidentiality between the Company and you;

 

ii. Information received from a third party in rightful possession of such information who is not restricted from disclosing such information; and

 

iii. Information known by you prior to receipt of such information from the Company, which prior knowledge can be documented.

 

c. Documents . You agree that, without the express written consent of the Company, you will not remove from the Company’s premises, any notes, formulas, programs, data, records, machines or any other documents or items which in any manner contain or constitute Confidential Information, nor will you make reproductions or copies of same. You shall promptly return any such documents or items, along with any reproductions or copies to the Company upon the Company’s demand, upon termination of this Agreement, or upon your termination or Resignation, as defined in Section 9 herein.

 

d. Confidentiality . You agree that you will hold in trust and confidence all Confidential Information and will not disclose to others, directly or indirectly, any Confidential Information or anything relating to such information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company. You further agree that you will not use any Confidential Information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company, and that the provisions of this paragraph (d) shall survive termination of this Agreement.

 

e. Ownership . You agree that Company shall own all right, title and interest (including patent rights, copyrights, trade secret rights, mask work rights, trademark rights, and all other intellectual and industrial property rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), works of authorship, mask works, designations, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by you during the term of this Agreement and that arise out of your Duties (collectively, “ Inventions” ) and you will promptly disclose and provide all Inventions to the Company. You agree to assist the Company, at its expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights assigned.

 

8. Non-Solicitation . During the term of your appointment, you shall not directly solicit for employment any employee of the Company with whom you have had contact due to your appointment.

 

3
 

 

9.  Termination and Resignation . Your membership on the Board may be terminated for any or no reason by a vote of the stockholders holding at least a majority of the shares of the Company’s issued and outstanding shares entitled to vote. Your membership on the Board may be terminated for any or no reason at any meeting of the Board or by written consent of, a majority of the Board at any time, or if you have been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. You may also terminate your membership on the Board for any or no reason by delivering your written notice of resignation to the Company (“ Resignation ”), and such Resignation shall be effective upon the time specified therein or, if no time is specified, upon receipt of the notice of resignation by the Company. Upon the effective date of the termination or Resignation, your right to compensation hereunder will terminate subject to the Company’s obligations to pay you any compensation (including the vested portion of the Shares) that you have already earned and to reimburse you for approved expenses already incurred in connection with your performance of your Duties as of the effective date of such termination or Resignation. Any Shares that have not vested as of the effective date of such termination or Resignation shall be forfeited and cancelled.

 

10.  Governing Law . All questions with respect to the construction and/or enforcement of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of the State of Delaware applicable to agreements made and to be performed entirely in the State of Delaware.

 

11. Entire Agreement; Amendment; Waiver; Counterparts . This Agreement expresses the entire understanding with respect to the subject matter hereof and supersedes and terminates any prior oral or written agreements with respect to the subject matter hereof. Any term of this Agreement may be amended and observance of any term of this Agreement may be waived only with the written consent of the parties hereto. Waiver of any term or condition of this Agreement by any party shall not be construed as a waiver of any subsequent breach or failure of the same term or condition or waiver of any other term or condition of this Agreement. The failure of any party at any time to require performance by any other party of any provision of this Agreement shall not affect the right of any such party to require future performance of such provision or any other provision of this Agreement. This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement, and may be executed using facsimiles of signatures, and a facsimile of a signature shall be deemed to be the same, and equally enforceable, as an original of such signature.

 

12. Indemnification . The Company shall, to the maximum extent provided under applicable law, indemnify and hold you harmless from and against any expenses, including reasonable attorney’s fees, judgments, fines, settlements and other legally permissible amounts (“ Losses ”), incurred in connection with any proceeding arising out of, or related to, your performance of your Duties, other than any such Losses incurred as a result of your negligence or willful misconduct. The Company shall advance to you any expenses, including reasonable attorneys’ fees and costs of settlement, incurred in defending any such proceeding to the maximum extent permitted by applicable law. Such costs and expenses incurred by you in defense of any such proceeding shall be paid by the Company in advance of the final disposition of such proceeding promptly upon receipt by the Company of (a) written request for payment; (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought; and (c) an undertaking adequate under applicable law made by or on your behalf to repay the amounts so advanced if it shall ultimately be determined pursuant to any non-appealable judgment or settlement that you are not entitled to be indemnified by the Company.

 

4
 

 

13.  Not an Employment Agreement . This Agreement is not an employment agreement, and shall not be construed or interpreted to create any right for you to continue employment with the Company.

 

14.  Acknowledgement . You accept this Agreement subject to all the terms and provisions of this Agreement. You agree to accept as binding, conclusive, and final all decisions or interpretations of the Board of Directors of the Company of any questions arising under this Agreement.

 

[Remainder of Page Intentionally Left Blank; Signature page follows]

 

5
 

 

This Agreement has been executed and delivered by the undersigned and is made effective as of the date set first set forth above.

 

  Sincerely,
   
  BONE BIOLOGICS, CORP.
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer

 

AGREED AND ACCEPTED:  
     
  /s/ John Booth 8/22/14
Name: John Booth  

 

[Signature Page to Director Offer Letter - John Booth]

 

 
 

 

Bone Biologics, Corp.

100 Rancho Rd., Suite 7 - 231

Thousand Oaks, CA 91362

 

June 23, 2014

 

Jimmy Delshad

269 South Beverly Drive, Suite 903

Beverly Hills, CA 90212

 

Re: Director Offer Letter

 

Dear Mr. Delshad:

 

Bone Biologics, Corp. (the “ Company ”), is pleased to offer you a position as a member of its Board of Directors (the “ Board ”), effective upon the filing of a Form 8K (the “ 8K ”) with the Securities Exchange Comission (the “ SEC ”) by the Company. We believe that your background and experience will be a significant asset to the Company, and we look forward to your participation on the Board. Should you choose to accept this position as a member of the Board, this letter agreement (this “ Agreement ”) shall constitute an agreement between you and the Company and contains all the terms and conditions relating to the services that you agree to provide the Company.

 

Bone Biologics, Inc. (“ BB Inc. ”) entered into a letter agreement with AFH Holding & Advisory, LLC and the Musculoskeletal Transplant Foundation, Inc. that contemplates a merger (the “ Merger ”) in which BB Inc. will become a wholly-owned subsidiary of the Company. After consummation of the Merger, the Board will consist of seven (7) members. Within four days of the consummation of the Merger, the Company will file the 8K with the SEC.

 

1. Term . This Agreement is effective as of the date of the filing of the 8k. Your term as director shall continue subject to the provisions in Section 9 below or until your successor is duly elected and qualified. The position shall be up for re-election each year at the annual shareholder’s meeting and upon re-election (unless a staggered board is implemented), the terms and provisions of this Agreement shall remain in full force and effect.

 

2. Services . You shall render services as a member of the Board and as a member of one or more committees of the Board (hereinafter your “ Duties ”). During the term of this Agreement, you shall attend and participate in such number of meetings of the Board and any committees on which you serve as a member as regularly or specially called. You may attend and participate at each such meeting, via teleconference, video conference or in person. You shall consult with the other members of the Board as necessary via telephone, electronic mail or other forms of correspondence.

 

3. Services for Others . You shall be free to represent or perform services for other persons during the term of this Agreement. However, you agree that you do not presently perform and do not intend to perform, during the term of this Agreement, similar Duties, consulting or other services for companies whose businesses are or would be, in any way, competitive with the Company (except for companies previously disclosed by you to the Company in writing). Should you propose to perform similar Duties, consulting or other services for any such company, you agree to notify the Company in writing in advance (specifying the name of the organization for whom you propose to perform such services) and to provide information to the Company sufficient to allow it to determine if the performance of such services would conflict with areas of interest to the Company.

 

1
 

 

4. Compensation . Assuming your material compliance with the terms of this Offer Letter, compensation for your services to the Company shall be as described in this section.

 

a. You will receive a retainer of $25,000 annually.

 

b. You shall receive an option to purchase 50,000 shares of the Company’s $0.001 par value per share Common Stock (“ Common Stock ”) at an exercise price of $1.00 per share upon completion of your first year of service as a member of the Board. These options will have a term of 10 years.

 

c. You shall receive $50,000 worth of Common Stock upon completion of each year of service as a member of the Board. Such issuances of Common Stock shall be split into four installments, each valued at $12,500 and distributed quarterly on the date that the Company files its Form 10-Q or Form 10-K, as applicable, with the SEC. The Common Stock will be valued at the average of the trading price for shares of Common Stock over the 10 day period prior to the issuance.

 

d. You shall be reimbursed for reasonable expenses incurred by you in connection with the performance of your Duties (including travel expenses for in-person meetings).

 

5. D&O Insurance Policy . The Company maintains an insurance policy for officers and directors (the “ D&O Insurance Policy ”), and the Company shall include you as an insured under the D&O insurance policy during the term of this Agreement.

 

6. No Assignment . Because of the personal nature of the services to be rendered by you, this Agreement may not be assigned by you without the prior written consent of the Company.

 

7. Confidential Information; Non-Disclosure . In consideration of your access to certain Confidential Information (as defined below) of the Company, in connection with your business relationship with the Company, you hereby represent and agree as follows:

 

a. Definition . For purposes of this Agreement the term “ Confidential Information ” means:

 

i. Any information which the Company possesses that has been created, discovered or developed by or for the Company, and which has or could have commercial value or utility in the business in which the Company is engaged; or

 

ii. Any information which is related to the business of the Company and is generally not known by non-Company personnel.

 

iii. Confidential Information includes, without limitation, trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, know-how, software, formats, marketing plans, and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics and agreements.

 

2
 

 

b. Exclusions . Notwithstanding the foregoing, the term Confidential Information shall not include:

 

i. Any information which becomes generally available to the public other than as a result of a breach of the confidentiality portions of this Agreement, or any other agreement requiring confidentiality between the Company and you;

 

ii. Information received from a third party in rightful possession of such information who is not restricted from disclosing such information; and

 

iii. Information known by you prior to receipt of such information from the Company, which prior knowledge can be documented.

 

c. Documents . You agree that, without the express written consent of the Company, you will not remove from the Company's premises, any notes, formulas, programs, data, records, machines or any other documents or items which in any manner contain or constitute Confidential Information, nor will you make reproductions or copies of same. You shall promptly return any such documents or items, along with any reproductions or copies to the Company upon the Company's demand, upon termination of this Agreement, or upon your termination or Resignation, as defined in Section 9 herein.

 

d. Confidentiality . You agree that you will hold in trust and confidence all Confidential Information and will not disclose to others, directly or indirectly, any Confidential Information or anything relating to such information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company. You further agree that you will not use any Confidential Information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company, and that the provisions of this paragraph (d) shall survive termination of this Agreement.

 

e. Ownership . You agree that Company shall own all right, title and interest (including patent rights, copyrights, trade secret rights, mask work rights, trademark rights, and all other intellectual and industrial property rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), works of authorship, mask works, designations, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by you during the term of this Agreement and that arise out of your Duties (collectively, “ Inventions” ) and you will promptly disclose and provide all Inventions to the Company. You agree to assist the Company, at its expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights assigned.

 

8. Non-Solicitation . During the term of your appointment, you shall not directly solicit for employment any employee of the Company with whom you have had contact due to your appointment.

 

3
 

 

9. Termination and Resignation . Your membership on the Board may be terminated for any or no reason by a vote of the stockholders holding at least a majority of the shares of the Company’s issued and outstanding shares entitled to vote. Your membership on the Board may be terminated for any or no reason at any meeting of the Board or by written consent of, a majority of the Board at any time, or if you have been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. You may also terminate your membership on the Board for any or no reason by delivering your written notice of resignation to the Company (“ Resignation ”), and such Resignation shall be effective upon the time specified therein or, if no time is specified, upon receipt of the notice of resignation by the Company. Upon the effective date of the termination or Resignation, your right to compensation hereunder will terminate subject to the Company's obligations to pay you any compensation (including the vested portion of the Shares) that you have already earned and to reimburse you for approved expenses already incurred in connection with your performance of your Duties as of the effective date of such termination or Resignation. Any Shares that have not vested as of the effective date of such termination or Resignation shall be forfeited and cancelled.

 

10. Governing Law . All questions with respect to the construction and/or enforcement of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of the State of Delaware applicable to agreements made and to be performed entirely in the State of Delaware.

 

11. Entire Agreement; Amendment; Waiver; Counterparts . This Agreement expresses the entire understanding with respect to the subject matter hereof and supersedes and terminates any prior oral or written agreements with respect to the subject matter hereof. Any term of this Agreement may be amended and observance of any term of this Agreement may be waived only with the written consent of the parties hereto. Waiver of any term or condition of this Agreement by any party shall not be construed as a waiver of any subsequent breach or failure of the same term or condition or waiver of any other term or condition of this Agreement. The failure of any party at any time to require performance by any other party of any provision of this Agreement shall not affect the right of any such party to require future performance of such provision or any other provision of this Agreement. This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement, and may be executed using facsimiles of signatures, and a facsimile of a signature shall be deemed to be the same, and equally enforceable, as an original of such signature.

 

12. Indemnification . The Company shall, to the maximum extent provided under applicable law, indemnify and hold you harmless from and against any expenses, including reasonable attorney’s fees, judgments, fines, settlements and other legally permissible amounts (“ Losses ”), incurred in connection with any proceeding arising out of, or related to, your performance of your Duties, other than any such Losses incurred as a result of your negligence or willful misconduct. The Company shall advance to you any expenses, including reasonable attorneys’ fees and costs of settlement, incurred in defending any such proceeding to the maximum extent permitted by applicable law. Such costs and expenses incurred by you in defense of any such proceeding shall be paid by the Company in advance of the final disposition of such proceeding promptly upon receipt by the Company of (a) written request for payment; (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought; and (c) an undertaking adequate under applicable law made by or on your behalf to repay the amounts so advanced if it shall ultimately be determined pursuant to any non-appealable judgment or settlement that you are not entitled to be indemnified by the Company.

 

4
 

 

13. Not an Employment Agreement . This Agreement is not an employment agreement, and shall not be construed or interpreted to create any right for you to continue employment with the Company.

 

14. Acknowledgement . You accept this Agreement subject to all the terms and provisions of this Agreement. You agree to accept as binding, conclusive, and final all decisions or interpretations of the Board of Directors of the Company of any questions arising under this Agreement.

 

[Remainder of Page Intentionally Left Blank; Signature page follows]

 

5
 

 

This Agreement has been executed and delivered by the undersigned and is made effective as of the date set first set forth above.

 

  Sincerely,
   
  BONE BIOLOGICS, CORP.
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer

 

AGREED AND ACCEPTED:  
   
/s/ Jimmy Delshad  
Name: Jimmy Delshad  

 

[Signature Page to Director Offer Letter - Jimmy Delshad]

 

 
 

 

 

Bone Biologics, Corp.

100 Rancho Rd., Suite 7 - 231

Thousand Oaks, CA 91362

 

June 25, 2014

 

Steve Warnecke

1026 Anaconda Drive

Castle Rock, CO 80108

 

Re: Director Offer Letter

 

Dear Mr. Warnecke:

 

Bone Biologics, Corp. (the “ Company ”), is pleased to offer you a position as a member of its Board of Directors (the “ Board ”), effective upon the filing of a Form 8K (the “ 8K ”) with the Securities Exchange Comission (the “ SEC ”) by the Company. Initially, you shall serve as the chair of the Board’s Audit Committee. We believe that your background and experience will be a significant asset to the Company, and we look forward to your participation on the Board. Should you choose to accept this position as a member of the Board, this letter agreement (this “ Agreement ”) shall constitute an agreement between you and the Company and contains all the terms and conditions relating to the services that you agree to provide the Company.

 

Bone Biologics, Inc. (“ BB Inc. ”) entered into a letter agreement with AFH Holding & Advisory, LLC and the Musculoskeletal Transplant Foundation, Inc. that contemplates a merger (the “ Merger ”) in which BB Inc. will become a wholly-owned subsidiary of the Company. After consummation of the Merger, the Board will consist of seven (7) members. Within four days of the consummation of the Merger, the Company will file the 8K with the SEC.

 

1. Term . This Agreement is effective as of the date of the filing of the 8k. Your term as director shall continue subject to the provisions in Section 9 below or until your successor is duly elected and qualified. The position shall be up for re-election each year at the annual shareholder’s meeting and upon re-election (unless a staggered board is implemented), the terms and provisions of this Agreement shall remain in full force and effect.

 

2. Services . You shall render services as a member of the Board and as a member of one or more committees of the Board (hereinafter your “ Duties ”). During the term of this Agreement, you shall attend and participate in such number of meetings of the Board and any committees on which you serve as a member as regularly or specially called. You may attend and participate at each such meeting, via teleconference, video conference or in person. You shall consult with the other members of the Board as necessary via telephone, electronic mail or other forms of correspondence.

 

3. Services for Others . You shall be free to represent or perform services for other persons during the term of this Agreement. However, you agree that you do not presently perform and do not intend to perform, during the term of this Agreement, similar Duties, consulting or other services for companies whose businesses are or would be, in any way, competitive with the Company (except for companies previously disclosed by you to the Company in writing). Should you propose to perform similar Duties, consulting or other services for any such company, you agree to notify the Company in writing in advance (specifying the name of the organization for whom you propose to perform such services) and to provide information to the Company sufficient to allow it to determine if the performance of such services would conflict with areas of interest to the Company.

 

1
 

 

4. Compensation . Assuming your material compliance with the terms of this Offer Letter, compensation for your services to the Company shall be as described in this section.

 

a. You will receive a retainer of $25,000 annually.

 

b. For so long as you serve as the chair of the Audit Committee of the Board, you shall receive an additional retainer of $5,000 annually.

 

c. You shall receive an option to purchase 50,000 shares of the Company’s $0.001 par value per share Common Stock (“ Common Stock ”) at an exercise price of $1.00 per share upon completion of your first year of service as a member of the Board. These options will have a term of 10 years.

 

d. You shall receive $50,000 worth of Common Stock upon completion of each year of service as a member of the Board. Such issuances of Common Stock shall be split into four installments, each valued at $12,500 and distributed quarterly on the date that the Company files its Form 10-Q or Form 10-K, as applicable, with the SEC. The Common Stock will be valued at the average of the trading price for shares of Common Stock over the 10 day period prior to the issuance.

 

e. You shall be reimbursed for reasonable expenses incurred by you in connection with the performance of your Duties (including travel expenses for in-person meetings).

 

5. D&O Insurance Policy . The Company maintains an insurance policy for officers and directors (the “ D&O Insurance Policy ”), and the Company shall include you as an insured under the D&O insurance policy during the term of this Agreement.

 

6. No Assignment . Because of the personal nature of the services to be rendered by you, this Agreement may not be assigned by you without the prior written consent of the Company.

 

7. Confidential Information; Non-Disclosure . In consideration of your access to certain Confidential Information (as defined below) of the Company, in connection with your business relationship with the Company, you hereby represent and agree as follows:

 

a. Definition . For purposes of this Agreement the term “ Confidential Information ” means:

 

i. Any information which the Company possesses that has been created, discovered or developed by or for the Company, and which has or could have commercial value or utility in the business in which the Company is engaged; or

 

ii. Any information which is related to the business of the Company and is generally not known by non-Company personnel.

 

iii. Confidential Information includes, without limitation, trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, know-how, software, formats, marketing plans, and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics and agreements.

 

2
 

 

b. Exclusions . Notwithstanding the foregoing, the term Confidential Information shall not include:

 

i. Any information which becomes generally available to the public other than as a result of a breach of the confidentiality portions of this Agreement, or any other agreement requiring confidentiality between the Company and you;

 

ii. Information received from a third party in rightful possession of such information who is not restricted from disclosing such information; and

 

iii. Information known by you prior to receipt of such information from the Company, which prior knowledge can be documented.

 

c. Documents . You agree that, without the express written consent of the Company, you will not remove from the Company’s premises, any notes, formulas, programs, data, records, machines or any other documents or items which in any manner contain or constitute Confidential Information, nor will you make reproductions or copies of same. You shall promptly return any such documents or items, along with any reproductions or copies to the Company upon the Company’s demand, upon termination of this Agreement, or upon your termination or Resignation, as defined in Section 9 herein.

 

d. Confidentiality . You agree that you will hold in trust and confidence all Confidential Information and will not disclose to others, directly or indirectly, any Confidential Information or anything relating to such information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company. You further agree that you will not use any Confidential Information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company, and that the provisions of this paragraph (d) shall survive termination of this Agreement.

 

e. Ownership . You agree that Company shall own all right, title and interest (including patent rights, copyrights, trade secret rights, mask work rights, trademark rights, and all other intellectual and industrial property rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), works of authorship, mask works, designations, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by you during the term of this Agreement and that arise out of your Duties (collectively, “ Inventions” ) and you will promptly disclose and provide all Inventions to the Company. You agree to assist the Company, at its expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights assigned.

 

8. Non-Solicitation . During the term of your appointment, you shall not directly solicit for employment any employee of the Company with whom you have had contact due to your appointment.

 

3
 

 

9. Termination and Resignation . Your membership on the Board may be terminated for any or no reason by a vote of the stockholders holding at least a majority of the shares of the Company’s issued and outstanding shares entitled to vote. Your membership on the Board may be terminated for any or no reason at any meeting of the Board or by written consent of, a majority of the Board at any time, or if you have been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. You may also terminate your membership on the Board for any or no reason by delivering your written notice of resignation to the Company (“ Resignation ”), and such Resignation shall be effective upon the time specified therein or, if no time is specified, upon receipt of the notice of resignation by the Company. Upon the effective date of the termination or Resignation, your right to compensation hereunder will terminate subject to the Company’s obligations to pay you any compensation (including the vested portion of the Shares) that you have already earned and to reimburse you for approved expenses already incurred in connection with your performance of your Duties as of the effective date of such termination or Resignation. Any Shares that have not vested as of the effective date of such termination or Resignation shall be forfeited and cancelled.

 

10. Governing Law . All questions with respect to the construction and/or enforcement of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of the State of Delaware applicable to agreements made and to be performed entirely in the State of Delaware.

 

11. Entire Agreement; Amendment; Waiver; Counterparts . This Agreement expresses the entire understanding with respect to the subject matter hereof and supersedes and terminates any prior oral or written agreements with respect to the subject matter hereof. Any term of this Agreement may be amended and observance of any term of this Agreement may be waived only with the written consent of the parties hereto. Waiver of any term or condition of this Agreement by any party shall not be construed as a waiver of any subsequent breach or failure of the same term or condition or waiver of any other term or condition of this Agreement. The failure of any party at any time to require performance by any other party of any provision of this Agreement shall not affect the right of any such party to require future performance of such provision or any other provision of this Agreement. This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement, and may be executed using facsimiles of signatures, and a facsimile of a signature shall be deemed to be the same, and equally enforceable, as an original of such signature.

 

12. Indemnification . The Company shall, to the maximum extent provided under applicable law, indemnify and hold you harmless from and against any expenses, including reasonable attorney’s fees, judgments, fines, settlements and other legally permissible amounts (“ Losses ”), incurred in connection with any proceeding arising out of, or related to, your performance of your Duties, other than any such Losses incurred as a result of your negligence or willful misconduct. The Company shall advance to you any expenses, including reasonable attorneys’ fees and costs of settlement, incurred in defending any such proceeding to the maximum extent permitted by applicable law. Such costs and expenses incurred by you in defense of any such proceeding shall be paid by the Company in advance of the final disposition of such proceeding promptly upon receipt by the Company of (a) written request for payment; (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought; and (c) an undertaking adequate under applicable law made by or on your behalf to repay the amounts so advanced if it shall ultimately be determined pursuant to any non-appealable judgment or settlement that you are not entitled to be indemnified by the Company.

 

4
 

 

13. Not an Employment Agreement . This Agreement is not an employment agreement, and shall not be construed or interpreted to create any right for you to continue employment with the Company.

 

14. Acknowledgement . You accept this Agreement subject to all the terms and provisions of this Agreement. You agree to accept as binding, conclusive, and final all decisions or interpretations of the Board of Directors of the Company of any questions arising under this Agreement.

 

[Remainder of Page Intentionally Left Blank; Signature page follows]

 

5
 

 

This Agreement has been executed and delivered by the undersigned and is made effective as of the date set first set forth above.

 

  Sincerely,
     
  BONE BIOLOGICS, CORP.
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer

 

AGREED AND ACCEPTED:  
   
  /s/ Steve Warnecke   
Name: Steve Warnecke  

 

[Signature Page to Director Offer Letter - Steve Warnecke]

 

 
 

 

 

Bone Biologics, Corp.

100 Rancho Rd., Suite 7 - 231

Thousand Oaks, CA 91362

June 25, 2014

 

William Coffin

3966 Deervale Drive

Sherman Oaks, CA 91403

 

Re:    Director Offer Letter

 

Dear Mr. Coffin:

 

Bone Biologics, Corp. (the “ Company ”), is pleased to offer you a position as a member of its Board of Directors (the “ Board ”), effective upon the filing of a Form 8K (the “ 8K ”) with the Securities Exchange Comission (the “ SEC ”) by the Company. Initially, you shall serve as the chair of the Board’s Nominating and Corporate Governance Committee. We believe that your background and experience will be a significant asset to the Company, and we look forward to your participation on the Board. Should you choose to accept this position as a member of the Board, this letter agreement (this “ Agreement ”) shall constitute an agreement between you and the Company and contains all the terms and conditions relating to the services that you agree to provide the Company.

 

Bone Biologics, Inc. (“ BB Inc. ”) entered into a letter agreement with AFH Holding & Advisory, LLC and the Musculoskeletal Transplant Foundation, Inc. that contemplates a merger (the “ Merger ”) in which BB Inc. will become a wholly-owned subsidiary of the Company. After consummation of the Merger, the Board will consist of seven (7) members. Within four days of the consummation of the Merger, the Company will file the 8K with the SEC.

 

1.  Term . This Agreement is effective as of the date of the filing of the 8k. Your term as director shall continue subject to the provisions in Section 9 below or until your successor is duly elected and qualified. The position shall be up for re-election each year at the annual shareholder’s meeting and upon re-election (unless a staggered board is implemented), the terms and provisions of this Agreement shall remain in full force and effect.

 

2.  Services . You shall render services as a member of the Board and as a member of one or more committees of the Board (hereinafter your “ Duties ”). During the term of this Agreement, you shall attend and participate in such number of meetings of the Board and any committees on which you serve as a member as regularly or specially called. You may attend and participate at each such meeting, via teleconference, video conference or in person. You shall consult with the other members of the Board as necessary via telephone, electronic mail or other forms of correspondence.

 

3.  Services for Others . You shall be free to represent or perform services for other persons during the term of this Agreement. However, you agree that you do not presently perform and do not intend to perform, during the term of this Agreement, similar Duties, consulting or other services for companies whose businesses are or would be, in any way, competitive with the Company (except for companies previously disclosed by you to the Company in writing). Should you propose to perform similar Duties, consulting or other services for any such company, you agree to notify the Company in writing in advance (specifying the name of the organization for whom you propose to perform such services) and to provide information to the Company sufficient to allow it to determine if the performance of such services would conflict with areas of interest to the Company.

 

1
 

 

4.  Compensation . Assuming your material compliance with the terms of this Offer Letter, compensation for your services to the Company shall be as described in this section.

 

a. You will receive a retainer of $25,000 annually.

 

b. For so long as you serve as the chair of the Nominating and Coporate Governance Committee of the Board, you shall receive an additional retainer of $5,000 annually.

 

c. You shall receive an option to purchase 50,000 shares of the Company’s $0.001 Common Stock (“ Common Stock ”) at an exercise price of $1.00 per share upon completion of your first year of service as a member of the Board. These options will have a term of 10 years.

 

d. You shall receive $50,000 worth of Common Stock upon completion of each year of service as a member of the Board. Such issuances of Common Stock shall be split into four installments, each valued at $12,500 and distributed quarterly on the date that the Company files its Form 10-Q or Form 10-K, as applicable, with the SEC. The Common Stock will be valued at the average of the trading price for shares of Common Stock over the 10 day period prior to the issuance.

 

e. You shall be reimbursed for reasonable expenses incurred by you in connection with the performance of your Duties (including travel expenses for in-person meetings).

 

5. D&O Insurance Policy . The Company maintains an insurance policy for officers and directors (the “ D&O Insurance Policy ”), and the Company shall include you as an insured under the D&O insurance policy during the term of this Agreement.

 

6.  No Assignment . Because of the personal nature of the services to be rendered by you, this Agreement may not be assigned by you without the prior written consent of the Company.

 

7.  Confidential Information; Non-Disclosure . In consideration of your access to certain Confidential Information (as defined below) of the Company, in connection with your business relationship with the Company, you hereby represent and agree as follows:

 

a.  Definition . For purposes of this Agreement the term “ Confidential Information ” means:

 

i. Any information which the Company possesses that has been created, discovered or developed by or for the Company, and which has or could have commercial value or utility in the business in which the Company is engaged; or

 

ii. Any information which is related to the business of the Company and is generally not known by non-Company personnel.

 

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iii. Confidential Information includes, without limitation, trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, know-how, software, formats, marketing plans, and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics and agreements.

 

b. Exclusions . Notwithstanding the foregoing, the term Confidential Information shall not include:

 

i. Any information which becomes generally available to the public other than as a result of a breach of the confidentiality portions of this Agreement, or any other agreement requiring confidentiality between the Company and you;

 

ii. Information received from a third party in rightful possession of such information who is not restricted from disclosing such information; and

 

iii. Information known by you prior to receipt of such information from the Company, which prior knowledge can be documented.

 

c. Documents . You agree that, without the express written consent of the Company, you will not remove from the Company’s premises, any notes, formulas, programs, data, records, machines or any other documents or items which in any manner contain or constitute Confidential Information, nor will you make reproductions or copies of same. You shall promptly return any such documents or items, along with any reproductions or copies to the Company upon the Company’s demand, upon termination of this Agreement, or upon your termination or Resignation, as defined in Section 9 herein.

 

d. Confidentiality . You agree that you will hold in trust and confidence all Confidential Information and will not disclose to others, directly or indirectly, any Confidential Information or anything relating to such information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company. You further agree that you will not use any Confidential Information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company, and that the provisions of this paragraph (d) shall survive termination of this Agreement.

 

e. Ownership . You agree that Company shall own all right, title and interest (including patent rights, copyrights, trade secret rights, mask work rights, trademark rights, and all other intellectual and industrial property rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), works of authorship, mask works, designations, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by you during the term of this Agreement and that arise out of your Duties (collectively, “ Inventions” ) and you will promptly disclose and provide all Inventions to the Company. You agree to assist the Company, at its expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights assigned.

 

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8. Non-Solicitation . During the term of your appointment, you shall not directly solicit for employment any employee of the Company with whom you have had contact due to your appointment.

 

9. Termination and Resignation . Your membership on the Board may be terminated for any or no reason by a vote of the stockholders holding at least a majority of the shares of the Company’s issued and outstanding shares entitled to vote. Your membership on the Board may be terminated for any or no reason at any meeting of the Board or by written consent of, a majority of the Board at any time, or if you have been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony. You may also terminate your membership on the Board for any or no reason by delivering your written notice of resignation to the Company (“ Resignation ”), and such Resignation shall be effective upon the time specified therein or, if no time is specified, upon receipt of the notice of resignation by the Company. Upon the effective date of the termination or Resignation, your right to compensation hereunder will terminate subject to the Company’s obligations to pay you any compensation (including the vested portion of the Shares) that you have already earned and to reimburse you for approved expenses already incurred in connection with your performance of your Duties as of the effective date of such termination or Resignation. Any Shares that have not vested as of the effective date of such termination or Resignation shall be forfeited and cancelled.

 

10. Governing Law . All questions with respect to the construction and/or enforcement of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of the State of Delaware applicable to agreements made and to be performed entirely in the State of Delaware.

 

11. Entire Agreement; Amendment; Waiver; Counterparts . This Agreement expresses the entire understanding with respect to the subject matter hereof and supersedes and terminates any prior oral or written agreements with respect to the subject matter hereof. Any term of this Agreement may be amended and observance of any term of this Agreement may be waived only with the written consent of the parties hereto. Waiver of any term or condition of this Agreement by any party shall not be construed as a waiver of any subsequent breach or failure of the same term or condition or waiver of any other term or condition of this Agreement. The failure of any party at any time to require performance by any other party of any provision of this Agreement shall not affect the right of any such party to require future performance of such provision or any other provision of this Agreement. This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement, and may be executed using facsimiles of signatures, and a facsimile of a signature shall be deemed to be the same, and equally enforceable, as an original of such signature.

 

12. Indemnification . The Company shall, to the maximum extent provided under applicable law, indemnify and hold you harmless from and against any expenses, including reasonable attorney’s fees, judgments, fines, settlements and other legally permissible amounts (“ Losses ”), incurred in connection with any proceeding arising out of, or related to, your performance of your Duties, other than any such Losses incurred as a result of your negligence or willful misconduct. The Company shall advance to you any expenses, including reasonable attorneys’ fees and costs of settlement, incurred in defending any such proceeding to the maximum extent permitted by applicable law. Such costs and expenses incurred by you in defense of any such proceeding shall be paid by the Company in advance of the final disposition of such proceeding promptly upon receipt by the Company of (a) written request for payment; (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought; and (c) an undertaking adequate under applicable law made by or on your behalf to repay the amounts so advanced if it shall ultimately be determined pursuant to any non-appealable judgment or settlement that you are not entitled to be indemnified by the Company.

 

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13. Not an Employment Agreement . This Agreement is not an employment agreement, and shall not be construed or interpreted to create any right for you to continue employment with the Company.

 

14. Acknowledgement . You accept this Agreement subject to all the terms and provisions of this Agreement. You agree to accept as binding, conclusive, and final all decisions or interpretations of the Board of Directors of the Company of any questions arising under this Agreement.

 

[Remainder of Page Intentionally Left Blank; Signature page follows]

 

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This Agreement has been executed and delivered by the undersigned and is made effective as of the date set first set forth above.

 

  Sincerely,
   
  BONE BIOLOGICS, CORP.
     
  By: /s/ Michael Schuler
  Name: Michael Schuler
  Title: Chief Executive Officer

 

AGREED AND ACCEPTED:  
     
  /s/ William Coffin  
Name: William Coffin  

 

[Signature Page to Director Offer Letter - William Coffin]

 

 
 

 

 

MANAGEMENT CONSULTING AGREEMENT

 

This Management Consulting Agreement (this “ Agreement ”) is entered into as of September 19, 2014 with an effective date of September 19, 2014 (the “Effective Date” ), by and between Bone Biologics, Corp. , a Delaware corporation (the “Company” ), and the Musculoskeletal Transplant Foundation, Inc. ( Consultant” ).

 

1. Scope of Services.

 

1.1   Services. Consultant agrees to provide the services of Michael Schuler (“ Schuler ”) to serve as the Company’s Interim Chief Executive Officer (“ CEO ”) reporting directly to the Company’s Board of Directors (the “Board” ). To the extent determined by mutual agreement of the Company, Consultant, and Schuler, Schuler will provide services to the Company as listed on Exhibit A attached hereto (the “ Services ”). Such services, as outlined in Exhibit A, are subject to change as mutually agreed to between the Parties. The manner and means by which Schuler chooses to provide the Services under this Agreement are in Schuler’s sole discretion and control, subject to direction from Consultant. Schuler agrees to exercise the highest degree of professionalism in providing the Services under this Agreement. Consultant agrees to use its reasonable commercial efforts to perform the Services such that the results are satisfactory to the Company. Consultant may not subcontract or otherwise delegate its obligations under this Agreement without the Company’s prior written consent.

 

2.   Fees; Expenses. In consideration for the Services to be provided hereunder, the Company shall provide to Consultant the fees set forth under Exhibit B attached hereto. As a condition to receipt of reimbursement, Consultant shall be required to submit to the Company reasonable evidence that the amount involved was expended and related to the Services provided under this Agreement.

 

3.   Directors & Officers Insurance Coverage. Company shall provide proof of Directors & Officers insurance coverage from a responsible company. Company shall name Consultant and Schuler as an additional insureds on said policy to the extent they provide Services to Company, and shall provide Consultant and Shuler with an insurance certificate indicating the same.

 

4.   Independent Contractor Relationship. Consultant, and any of Consultant’s employees, including Schuler’s, relationship with the Company will be that of an independent contractor and nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship. As part of the Services, Schuler may be engaged to act on behalf of the Company in negotiations with investors, vendors, and other interested parties. In the event that Schuler participates in these negotiations, the representations made and the positions advanced will be those of the Company and, not Consultant. Consultant shall not be authorized to incur on behalf of the Company any potential liability in excess of $50,000 without the prior consent of the Board, which consent shall be evidenced in writing. Because Consultant and any of Consultant’s employees, including Schuler, are independent contractors, the Company will not withhold or make payments for social security; make unemployment insurance or disability insurance contributions; or obtain worker’s compensation insurance on Consultant’s behalf. Consultant agrees to accept exclusive liability for complying with all applicable state and federal laws, including obligations such as payment of taxes, social security, disability and other contributions based on fees paid to Consultant, its agents or employees under this Agreement. Consultant further agrees to make all necessary withholdings or payments for social security, make unemployment insurance and/or disability insurance contributions, and provide worker’s compensation insurance for Schuler during the term of the Agreement.

 

5. Confidential Information.

 

5.1   Confidential Information. Consultant agrees during the term of this Agreement and thereafter that it will (and will cause all of its agents, principals and employees to) take all steps reasonably necessary to hold the Company’s Confidential Information (as defined below) in trust and confidence, and not use the Confidential Information in any manner or for any purpose not expressly set forth in this Agreement, and not disclose any such Confidential Information to any third party without first obtaining the Company’s express written consent on a case-by-case basis. “Confidential Information” means any information disclosed by the Company to Consultant, or created by or on behalf of Consultant during the course of providing the Services hereunder, and includes, without limitation, any: (a) trade secrets, inventions, antibodies and other biological materials, cell lines, samples of assay components, mask works, ideas, processes, procedures, formulations, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques; (b) information regarding plans for research, developmental or experimental work, new products, clinical data, test data, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (c) information regarding the skills and compensation of the employees and other services providers of the Company. Notwithstanding the other provisions of this Agreement, nothing received by Consultant will be considered to be Confidential Information if (1) it has been previously published or is otherwise readily available to the public other than by a breach of any obligation of confidentiality or (2) it has been rightfully received by Consultant from a third party without any obligation of confidentiality.

 

 
 

 

5.2   Third Party Information. Consultant understands that the Company has received and will in the future receive from third parties confidential or proprietary information ( “Third Party Information” ) subject to a duty on the Company’s part to maintain the confidentiality of such information and use it only for certain limited purposes. Consultant agrees to hold Third Party Information in confidence and not to disclose to anyone (other than Company personnel) or to use, except in connection with performing the Services, Third Party Information unless expressly authorized in writing by an officer of the Company.

 

5.3   No Conflict of Interest. Consultant agrees and represents that it is not aware of any conflicts of interests or additional relationships that would preclude Schuler from performing the Services. Consultant and Schuler will provide written notice to the Company if any conflicts of interest arise. The Company will determine in its sole discretion if a conflict of interest arises.

 

5.4   Confidential Information of Others. Consultant represents and warrants that, as of the Effective Date, Consultant’s act of entering into this Agreement, acquiring any equity or other interest in the Company (if any), and providing the Services to the Company do not violate any outstanding agreement or obligation, of Consultant’s. Consultant further agrees that it will not perform any Services for the Company which would conflict with any agreement or obligation of Consultant or which would cause or result in any other person or entity having any ownership interest in any intellectual property of the Company, and will promptly notify the Company in writing in the event that any proposed Services may conflict with any such agreement or obligation, or result in such person or entity having any ownership interest. If the Company determines, in its sole discretion, that any of the foregoing has occurred or is likely to occur, the Company may terminate this Agreement immediately upon written notice.

 

6. Work Product and Intellectual Property Rights.

 

6.1   Disclosure of Work Product. As used in this Agreement, the term “Work Product” means any trade secrets, ideas, inventions (whether patentable or unpatentable), antibodies and other biological materials, cell lines, samples of assay components, mask works, processes, procedures, formulations, formulas, software source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques, trademarks, manufacturing techniques, or other copyrightable or patentable works. Consultant agrees to disclose promptly in writing to the Company, or any person designated by the Company, all Work Product which is solely or jointly conceived, made, reduced to practice, or learned by Consultant in the course of any work performed for the Company ( “Company Work Product” ).

 

6.2 Assignment of Company Work Product. Consultant irrevocably assigns to the Company all right, title and interest worldwide in and to the Company Work Product and all applicable intellectual property rights related to the Company Work Product, including without limitation, copyrights, trademarks, trade secrets, patents, moral rights, contract and licensing rights (the “Proprietary Rights” ). If Consultant has any rights to the Company Work Product that cannot be assigned to the Company, Consultant unconditionally and irrevocably waives the enforcement of such rights, and all claims and causes of action of any kind against the Company with respect to such rights, and agrees, at the Company’s request and expense, to consent to and join in any action to enforce such rights. If Consultant has any right to the Company Work Product that cannot be assigned to the Company or waived by Consultant, Consultant unconditionally and irrevocably grants to the Company during the term of such rights, an exclusive, irrevocable, perpetual, worldwide, fully paid and royalty-free license, with rights to sublicense through multiple levels of sublicensees, to reproduce, create derivative works of, distribute, publicly perform and publicly display by all means now known or later developed, such rights.

 

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6.3   Enforcement of Proprietary Rights. Consultant will assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights relating to Company Work Product in any and all countries. To that end Consultant will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, Consultant will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. Consultant’s obligation to assist the Company with respect to Proprietary Rights relating to such Company Work Product in any and all countries shall continue beyond the termination of this Agreement, but the Company shall compensate Consultant at a reasonable rate after such termination for the time actually spent by Consultant at the Company’s request on such assistance. In the event the Company is unable for any reason, after reasonable effort, to secure Consultant’s signature on any document needed in connection with the actions specified above, Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as its agent and attorney in fact, which appointment is coupled with an interest, to act for and in its behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by Consultant.

 

7.   Consultant Representations and Warranties. Consultant hereby represents and warrants that (a) no portion of the Services nor any element thereof will infringe the Proprietary Rights of any third party; (b) Consultant will, and will cause its employees and agents (including but not limited to Schuler) to comply with all applicable laws and regulations in connection with the performance of the Services and its other obligations hereunder; and (c) Consultant has full right and power to enter into and perform this Agreement without the consent of any third party or breach of any third party obligation.

 

8. Term and Termination

 

8.1 Term. This Agreement shall be effective as of the Effective Date and shall continue in effect until 6 months after effective date of agreement unless terminated earlier as provided herein. Thereafter, this Agreement shall automatically renew for successive three (3) month periods unless either party provides written notice to the other party at least 10 days in advance of the renewal term of its decision not to renew the term. This Agreement is intended to be temporary in nature, and will cease once the Company retains a permanent Chief Executive Officer.

 

8.2   Termination. Either Party may terminate this Agreement in the event of the other party’s material breach of this Agreement, if such breach is not cured within ten (10) days’ of written notice thereof from the non-breaching party. The Company may terminate this Agreement (a) immediately without notice in the event of Consultant’s breach of (or as provided in) Sections 4 through 6 hereof; or (b) for its convenience if the Company finds a replacement Chief Executive Officer, upon at least ten (10) days’ prior written notice to Consultant. Consultant may terminate this Agreement for its convenience upon at least thirty (30) days’ prior written notice to the Company.

 

8.3 Return of Company Property; Noninterference. Upon termination of the Agreement or earlier as requested by the Company, Consultant will deliver to the Company any and all drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Work Product, Third Party Information or Confidential Information of the Company. Consultant further agrees that any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Company personnel at any time with or without notice. During the term, and for a period of two (2) years immediately following the termination, of this Agreement, Consultant agrees not to solicit or induce any employee or other service provider of the Company to terminate or breach an employment, contractual or other relationship with the Company.

 

8.4    Survival. Sections 2 and 4 through 8 shall survive any termination or expiration of this Agreement.

 

9. General Provisions.

 

9.1   Severability. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

 

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9.2   Governing Law. This Agreement will be governed and construed in accordance with the laws of the State of California, without reference to its conflicts of laws principles. Each party hereby expressly consents to the personal jurisdiction of the state and federal courts located in Los Angeles County, California, with respect to any dispute arising out of or relating to this Agreement or the subject matter hereof.

 

9.3   No Assignment. This Agreement may not be assigned by Consultant without the Company’s consent, and any such attempted assignment shall be void and of no effect. The Company may assign this Agreement to any affiliate, successor or acquiror, whether by operation of law or otherwise.

 

9.4   Notices. All notices, requests and other communications under this Agreement must be in writing, and must be sent by registered or certified mail, postage prepaid and return receipt requested, overnight delivery, or facsimile.

 

9.5   Injunctive Relief. A breach of any of the promises or agreements contained in this Agreement may result in irreparable and continuing damage to the Company for which there may be no adequate remedy at law, and the Company is therefore entitled to seek injunctive relief as well as such other and further relief as may be appropriate.

 

9.6   Waiver. No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

 

9.7   Entire Agreement . This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions between the Company and Consultant. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged.

 

[ Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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In Witness Whereof, the parties have caused this Agreement to be executed by their duly authorized representative.

 

Company:  
   
Bone Biologics, Corp.  
     
By: /s/ Bruce Stroever  
Name: Bruce Stroever  
Title: Chairman of the Board of Directors  
Address: 175 May Street  
  Suite #400  
  Edison, NJ 08837  
     
Consultant:  
   
The Musculoskeletal Transplant Foundation, Inc.  
     
By: /s/ Bruce Stroever  
Name: Bruce Stroever  
Title: President and Chief Executive Officer  
Address:   125 May Street  
  Edison, NJ 08837  

 

[Signature Page to Consulting Agreement]

 
 

 

Exhibit A

 

DESCRIPTION OF SERVICES

 

The Services shall include the following (without limitation): those services customarily associated with a company’s most senior executive officer and those services otherwise assigned to Consultant by the Board. Schuler will continue to be an employee of Consultant, and will divide his efforts between Consultant and the Company consistent with industry best practices and his personal experience, consistent with direction from his employer, Consultant. In no event will Schuler devote more than 50% of his time to the Company. Schuler will not provide Services for the Company in excess of eight (8) hours in any given day, or forty (40) hours in any given week.

 

 
 

 

Exhibit B

 

FEES

 

Assuming Consultant’s material compliance with the terms of this Agreement, compensation for Consultant’s services to the Company shall be as described in this section.

 

Cash Fees :

 

Consultant shall be paid a retainer of $15,000/month. This amount shall be pro-rated based on the actual amount of time Schuler provides Services to the Company pursuant to this Agreement. Cash fees shall be paid within 30 days of receipt of invoice from Consultant.

 

Common Stock

 

Consultant shall receive warrants for 50,000 shares of the Company’s $0.001 Common Stock upon completion of the first year of service pursuant to this Agreement. Consultant shall thereafter receive $50,000 worth of Common Stock upon completion of each year of service as the Company’s Chief Executive Officer. Such issuances of Common Stock shall be split into four installments, each valued at $12,500 and distributed quarterly on the date that the Company files its Form 10-Q or Form 10-K, as applicable, with the SEC. The Common Stock will be valued at the average of the trading price for shares of Common Stock over the 10 day period prior to the issuance.

 

Reimbursement for Reasonable Expenses

 

Consultant shall be reimbursed for reasonable expenses incurred by Schuler in connection with the performance of Consultant’s Services. Such reasonable expenses will be billed by Consultant, and include but are not limited to travel expenses for in-person meetings. Reasonable expenses shall be paid within 30 days of receipt of invoice from Consultant.

 

 
 

 

 

MANAGEMENT CONSULTING AGREEMENT

 

This Management Consulting Agreement (this “ Agreement ”) is entered into as of September 19 with an effective date of September 19 (the “Effective Date” ), by and between Bone Biologics, Corp. , a Delaware corporation (the “Company” ), and the Musculoskeletal Transplant Foundation, Inc. ( Consultant” ).

 

1. Scope of Services.

 

1.1 Services. Consultant agrees to provide the services of Bruce Stroever (“ Stroever ”) to serve as the Company’s Chairman of the Board of Directors (“ Chairman ”). To the extent determined by mutual agreement of the Company, Consultant, and Stroever, Stroever will provide services to the Company as listed on Exhibit A attached hereto (the “ Services ”). Such services, as outlined in Exhibit A, are subject to change as mutually agreed to between the Parties. The manner and means by which Stroever chooses to provide the Services under this Agreement are in Stroever’s sole discretion and control, subject to direction from Consultant. Stroever agrees to exercise the highest degree of professionalism in providing the Services under this Agreement. Consultant agrees to use its reasonable commercial efforts to perform the Services such that the results are satisfactory to the Company. Consultant may not subcontract or otherwise delegate its obligations under this Agreement without the Company’s prior written consent.

 

2. Fees; Expenses. In consideration for the Services to be provided hereunder, the Company shall provide to Consultant the fees set forth under Exhibit B attached hereto. As a condition to receipt of reimbursement, Consultant shall be required to submit to the Company reasonable evidence that the amount involved was expended and related to the Services provided under this Agreement.

 

3. Directors & Officers Insurance Coverage. Company shall provide proof of Directors & Officers insurance coverage from a responsible company. Company shall name Consultant and Stroever as an additional insureds on said policy to the extent they provide Services to Company, and shall provide Consultant and Shuler with an insurance certificate indicating the same.

 

4. Independent Contractor Relationship. Consultant, and any of Consultant’s employees, including Stroever’s, relationship with the Company will be that of an independent contractor and nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship. As part of the Services, Stroever may be engaged to act on behalf of the Company in negotiations with investors, vendors, and other interested parties. In the event that Stroever participates in these negotiations, the representations made and the positions advanced will be those of the Company and, not Consultant. Consultant shall not be authorized to incur on behalf of the Company any potential liability in excess of $50,000 without the prior consent of the Board, which consent shall be evidenced in writing. Because Consultant and any of Consultant’s employees, including Stroever, are independent contractors, the Company will not withhold or make payments for social security; make unemployment insurance or disability insurance contributions; or obtain worker’s compensation insurance on Consultant’s behalf. Consultant agrees to accept exclusive liability for complying with all applicable state and federal laws, including obligations such as payment of taxes, social security, disability and other contributions based on fees paid to Consultant, its agents or employees under this Agreement. Consultant further agrees to make all necessary withholdings or payments for social security, make unemployment insurance and/or disability insurance contributions, and provide worker’s compensation insurance for Stroever during the term of the Agreement.

 

 
 

 

5. Confidential Information.

 

5.1 Confidential Information. Consultant agrees during the term of this Agreement and thereafter that it will (and will cause all of its agents, principals and employees to) take all steps reasonably necessary to hold the Company’s Confidential Information (as defined below) in trust and confidence, and not use the Confidential Information in any manner or for any purpose not expressly set forth in this Agreement, and not disclose any such Confidential Information to any third party without first obtaining the Company’s express written consent on a case-by-case basis. “Confidential Information” means any information disclosed by the Company to Consultant, or created by or on behalf of Consultant during the course of providing the Services hereunder, and includes, without limitation, any: (a) trade secrets, inventions, antibodies and other biological materials, cell lines, samples of assay components, mask works, ideas, processes, procedures, formulations, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques; (b) information regarding plans for research, developmental or experimental work, new products, clinical data, test data, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (c) information regarding the skills and compensation of the employees and other services providers of the Company. Notwithstanding the other provisions of this Agreement, nothing received by Consultant will be considered to be Confidential Information if (1) it has been previously published or is otherwise readily available to the public other than by a breach of any obligation of confidentiality or (2) it has been rightfully received by Consultant from a third party without any obligation of confidentiality.

 

5.2 Third Party Information. Consultant understands that the Company has received and will in the future receive from third parties confidential or proprietary information ( “Third Party Information” ) subject to a duty on the Company’s part to maintain the confidentiality of such information and use it only for certain limited purposes. Consultant agrees to hold Third Party Information in confidence and not to disclose to anyone (other than Company personnel) or to use, except in connection with performing the Services, Third Party Information unless expressly authorized in writing by an officer of the Company.

 

5.3 No Conflict of Interest. Consultant agrees and represents that it is not aware of any conflicts of interests or additional relationships that would preclude Stroever from performing the Services. Consultant and Stroever will provide written notice to the Company if any conflicts of interest arise. The Company will determine in its sole discretion if a conflict of interest arises.

 

5.4 Confidential Information of Others. Consultant represents and warrants that, as of the Effective Date, Consultant’s act of entering into this Agreement, acquiring any equity or other interest in the Company (if any), and providing the Services to the Company do not violate any outstanding agreement or obligation, of Consultant’s. Consultant further agrees that it will not perform any Services for the Company which would conflict with any agreement or obligation of Consultant or which would cause or result in any other person or entity having any ownership interest in any intellectual property of the Company, and will promptly notify the Company in writing in the event that any proposed Services may conflict with any such agreement or obligation, or result in such person or entity having any ownership interest. If the Company determines, in its sole discretion, that any of the foregoing has occurred or is likely to occur, the Company may terminate this Agreement immediately upon written notice.

 

6. Work Product and Intellectual Property Rights.

 

6.1 Disclosure of Work Product. As used in this Agreement, the term “Work Product” means any trade secrets, ideas, inventions (whether patentable or unpatentable), antibodies and other biological materials, cell lines, samples of assay components, mask works, processes, procedures, formulations, formulas, software source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques, trademarks, manufacturing techniques, or other copyrightable or patentable works. Consultant agrees to disclose promptly in writing to the Company, or any person designated by the Company, all Work Product which is solely or jointly conceived, made, reduced to practice, or learned by Consultant in the course of any work performed for the Company ( “Company Work Product” ).

 

6.2 Assignment of Company Work Product. Consultant irrevocably assigns to the Company all right, title and interest worldwide in and to the Company Work Product and all applicable intellectual property rights related to the Company Work Product, including without limitation, copyrights, trademarks, trade secrets, patents, moral rights, contract and licensing rights (the “Proprietary Rights” ). If Consultant has any rights to the Company Work Product that cannot be assigned to the Company, Consultant unconditionally and irrevocably waives the enforcement of such rights, and all claims and causes of action of any kind against the Company with respect to such rights, and agrees, at the Company’s request and expense, to consent to and join in any action to enforce such rights. If Consultant has any right to the Company Work Product that cannot be assigned to the Company or waived by Consultant, Consultant unconditionally and irrevocably grants to the Company during the term of such rights, an exclusive, irrevocable, perpetual, worldwide, fully paid and royalty-free license, with rights to sublicense through multiple levels of sublicensees, to reproduce, create derivative works of, distribute, publicly perform and publicly display by all means now known or later developed, such rights.

 

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6.3 Enforcement of Proprietary Rights. Consultant will assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights relating to Company Work Product in any and all countries. To that end Consultant will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, Consultant will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. Consultant’s obligation to assist the Company with respect to Proprietary Rights relating to such Company Work Product in any and all countries shall continue beyond the termination of this Agreement, but the Company shall compensate Consultant at a reasonable rate after such termination for the time actually spent by Consultant at the Company’s request on such assistance. In the event the Company is unable for any reason, after reasonable effort, to secure Consultant’s signature on any document needed in connection with the actions specified above, Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as its agent and attorney in fact, which appointment is coupled with an interest, to act for and in its behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by Consultant.

 

7. Consultant Representations and Warranties. Consultant hereby represents and warrants that (a) no portion of the Services nor any element thereof will infringe the Proprietary Rights of any third party; (b) Consultant will, and will cause its employees and agents (including but not limited to Stroever) to comply with all applicable laws and regulations in connection with the performance of the Services and its other obligations hereunder; and (c) Consultant has full right and power to enter into and perform this Agreement without the consent of any third party or breach of any third party obligation.

 

8. Term and Termination

 

8.1 Term. This Agreement shall be effective as of the Effective Date and shall continue in effect until 6 months after effective date of agreement unless terminated earlier as provided herein. Thereafter, this Agreement shall automatically renew for successive three (3) month periods unless either party provides written notice to the other party at least 10 days in advance of the renewal term of its decision not to renew the term. This Agreement is intended to be temporary in nature, and will cease once the Company retains a permanent Chief Executive Officer.

 

8.2 Termination. Either Party may terminate this Agreement in the event of the other party’s material breach of this Agreement, if such breach is not cured within ten (10) days’ of written notice thereof from the non-breaching party. The Company may terminate this Agreement (a) immediately without notice in the event of Consultant’s breach of (or as provided in) Sections 4 through 6 hereof; or (b) for its convenience if the Company finds a replacement Chief Executive Officer, upon at least ten (10) days’ prior written notice to Consultant. Consultant may terminate this Agreement for its convenience upon at least thirty (30) days’ prior written notice to the Company.

 

8.3 Return of Company Property; Noninterference. Upon termination of the Agreement or earlier as requested by the Company, Consultant will deliver to the Company any and all drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Work Product, Third Party Information or Confidential Information of the Company. Consultant further agrees that any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Company personnel at any time with or without notice. During the term, and for a period of two (2) years immediately following the termination, of this Agreement, Consultant agrees not to solicit or induce any employee or other service provider of the Company to terminate or breach an employment, contractual or other relationship with the Company.

 

8.4 Survival. Sections 2 and 4 through 8 shall survive any termination or expiration of this Agreement.

 

9. General Provisions.

 

9.1 Severability. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

 

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9.2 Governing Law. This Agreement will be governed and construed in accordance with the laws of the State of California, without reference to its conflicts of laws principles. Each party hereby expressly consents to the personal jurisdiction of the state and federal courts located in Los Angeles County, California, with respect to any dispute arising out of or relating to this Agreement or the subject matter hereof.

 

9.3 No Assignment. This Agreement may not be assigned by Consultant without the Company’s consent, and any such attempted assignment shall be void and of no effect. The Company may assign this Agreement to any affiliate, successor or acquiror, whether by operation of law or otherwise.

 

9.4 Notices. All notices, requests and other communications under this Agreement must be in writing, and must be sent by registered or certified mail, postage prepaid and return receipt requested, overnight delivery, or facsimile.

 

9.5 Injunctive Relief. A breach of any of the promises or agreements contained in this Agreement may result in irreparable and continuing damage to the Company for which there may be no adequate remedy at law, and the Company is therefore entitled to seek injunctive relief as well as such other and further relief as may be appropriate.

 

9.6 Waiver. No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

 

9.7 Entire Agreement . This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions between the Company and Consultant. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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In Witness Whereof, the parties have caused this Agreement to be executed by their duly authorized representative.

 

Company:  
   
Bone Biologics, Corp.  
     
By: /s/ William Jay Treat  
Name: William Jay Treat  
Title: President  
Address: 175 May Street  
  Suite #400  
  Edison, NJ 08837  

 

Consultant:  
     
The Musculoskeletal Transplant Foundation, Inc.  
     
By: /s/ Michael J. Kawas  
Name: Michael J. Kawas  
Title: Executive Vice President/Chief Financial Officer  
Address: 125 May Street  
  Edison, NJ 08837  

 

[Signature Page to Consulting Agreement]

 

 
 

 

Exhibit A

 

DESCRIPTION OF SERVICES

 

The Services shall include the following (without limitation): those services customarily associated with a company’s Chairman of the Board of Directors. During the term of this Agreement, Stroever shall attend and participate in such number of meetings of the Board and any committees on which you serve as a member as regularly or specially called. Stroever may attend and participate at each such meeting, via teleconference, video conference or in person. Stroever shall consult with the other members of the Board as necessary via telephone, electronic mail or other forms of correspondence. Stroever will continue to be an employee of Consultant, and will divide his efforts between Consultant and the Company consistent with industry best practices and his personal experience, consistent with direction from his employer, Consultant. In no event will Stroever devote more than 50% of his time to the Company. Stroever will not provide Services for the Company in excess of eight (8) hours in any given day, or forty (40) hours in any given week.

 

 
 

 

Exhibit B

 

FEES

 

Assuming Consultant’s material compliance with the terms of this Agreement, compensation for Consultant’s services to the Company shall be as described in this section.

 

Retainer :

 

Consultant shall be paid a retainer of $35,000 annually. This amount shall be pro-rated based on the actual amount of time Stroever provides Services to the Company pursuant to this Agreement. Cash fees shall be paid within 30 days of receipt of invoice from Consultant.

 

Common Stock

 

Consultant shall receive warrants for 50,000 shares of the Company’s $0.001 Common Stock upon completion of the first year of service pursuant to this Agreement. Consultant shall thereafter receive $50,000 worth of Common Stock upon completion of each year of service as the Company’s Chief Executive Officer. Such issuances of Common Stock shall be split into four installments, each valued at $12,500 and distributed quarterly on the date that the Company files its Form 10-Q or Form 10-K, as applicable, with the SEC. The Common Stock will be valued at the average of the trading price for shares of Common Stock over the 10 day period prior to the issuance.

 

Reimbursement for Reasonable Expenses

 

Consultant shall be reimbursed for reasonable expenses incurred by Stroever in connection with the performance of Consultant’s Services. Such reasonable expenses will be billed by Consultant, and include but are not limited to travel expenses for in-person meetings. Reasonable expenses shall be paid within 30 days of receipt of invoice from Consultant.

 

 
 

 

 

PRESIDENT AND CHIEF TECHNOLOGY OFFICER EMPLOYMENT AGREEMENT

 

This President and Chief Technology Officer Employment Agreement (this “ Agreement ”) is made effective as of September 19, 2014 (the “ Effective Date ”), by and between Bone Biologics, Corp., a Delaware corporation (“ Company ”), and William Jay Treat (“ Executive ”).

 

The parties agree as follows:

 

1. Employment . Commencing on the Effective Date, Company hereby employs Executive, and Executive hereby accepts such employment, upon the terms and conditions set forth herein.

 

2. Duties .

 

2.1 Position . Executive is employed as Company’s President and Chief Technology Officer and shall have the authority, duties and responsibilities assigned by Company’s Chief Executive Officer (“ CEO ”) both upon initial hire and as may be reasonably assigned from time to time. Executive shall perform faithfully and diligently all duties assigned to Executive. Subject to the terms and conditions set forth herein (including, but not limited to, the terms and conditions set forth in subsection 7.2 below) Company reserves the right to modify Executive’s position and duties at any time in its sole and absolute discretion.

 

2.2 Best Efforts/Full-time . Executive will expend Executive’s best efforts on behalf of Company, and will abide by all written policies of Company and directions of Company’s Board of Directors (the “ Board of Directors ”), as well as all applicable federal, state and local laws, regulations or ordinances. Executive will act in the best interest of Company at all times. Executive shall devote substantially all of Executive’s full business time and efforts to the performance of Executive’s assigned duties for Company, unless Executive notifies the Board of Directors in advance of Executive’s intent to engage in other paid work and receives the Board of Directors’ express written consent to do so. Executive has listed on Exhibit A other paid work that is currently ongoing, and agrees to make a good faith effort not to let that other paid work interfere with his work for Company.

 

2.3 Work Location . Executive’s principal place of work shall be located at an office location to be mutually selected by Executive and Company within 20 miles of Executive’s current residence (“ Primary Workplace ”), or such other location as the parties may agree upon from time to time. However, Executive’s principal place of work shall not be moved more than 30 miles without Executive’s prior written consent.

 

 
 

  

3. At-Will Employment .

 

3.1 Initial Term . The employment relationship pursuant to this Agreement shall be for an initial term commencing on the Effective Date set forth above and continuing for a period of two (2) years following such date (the " Initial Term "), unless sooner terminated in accordance with section 7 below.

 

3.2 Renewal . On completion of the Initial Term specified in subsection 3.1 above, this Agreement will automatically renew for subsequent one year terms unless either party provides thirty (30) days’ advance written notice to the other that Company/Executive does not wish to renew the Agreement for a subsequent one year period. In the event either party gives notice of nonrenewal pursuant to this subsection 3.2, this Agreement will expire at the end of the current term.

 

4. Compensation .

 

4.1 Base Salary . As compensation for Executive’s performance of Executive’s duties hereunder, Company shall pay to Executive an initial base salary of $300,000.00 per year, less required deductions for state and federal withholding tax, social security and all other employment taxes and payroll deductions, payable in accordance with Company’s normal payroll practices (but in any event Executive shall receive pro-rata payments of base salary at least once each calendar month). In the event Executive’s employment under this Agreement is terminated by either party, for any reason, Executive will earn the base salary as then in-effect prorated to the date of termination.

 

4.2 Incentive Compensation . During each calendar year beginning in 2014, Executive shall be eligible to earn an annual target bonus of thirty-five percent (35%) of Executive’s base salary (“ Target Bonus ”) as in-effect for the applicable calendar year (the “ Annual Bonus ”), subject to the achievement of personal and corporate objectives or milestones to be established by the Board of Directors, or any Compensation Committee thereof, (after considering any input or recommendations from Executive) within sixty (60) days following the beginning of each calendar year during Executive’s employment. In order to earn the Annual Bonus under this provision, the applicable objectives must be achieved and Executive must be employed by Company at the time the Annual Bonus is distributed by Company. The Annual Bonus, if any, shall be paid on or before March 15th of the calendar year following the year in which it is considered earned. The actual Annual Bonus paid may be more or less than the Target Bonus.

 

4.3 Performance and Salary Review. The Board of Directors will periodically review Executive’s performance on no less than an annual basis. Upward adjustments to salary or other compensation, if any, will be made by the Board of Directors, in its sole and absolute discretion.

 

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4.4 Stock Option . In addition, subject to the approval of the Board of Directors, Executive will be granted an option (the “ Option ”) to purchase 2.5% of the Company’s issued and outstanding shares of $0.001 par value per share Common Stock outstanding as of the date of closing of that certain merger of Bone Biologics Acquisition Corp. with and into Bone Biologics, Inc. pursuant to which Bone Biologics, Inc. will survive and become a wholly-owned subsidiary of Company. The Option will be granted under Company’s stock plan (as amended from time to time, the “ Plan ”) and related stock option documents. The Option is intended to be an “incentive stock option” (within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “ Code ”)) to the greatest extent permitted under the Code. The Option will have an exercise price per share equal to the fair market value of one share of Company’s common stock on the date of grant, as determined by the Board of Directors. As a condition of receipt of the Option, Executive will be required to sign Company’s standard form of stock option agreement (the “ Option Agreement ”) and the Option will be subject to the terms and conditions of the Plan, the Option Agreement and this Agreement. The Option will vest over a two-year period from the Effective Date subject to Executive’s continued Service (as defined in the Plan), with 33.33% of the shares subject to the Option becoming vested and exercisable on the date that this Agreement is executed, 33.33% of the shares subject to the Option becoming vested and exercisable on the date that is twelve (12) months after the Effective Date, and 33.34% of the shares subject to the Option vesting and becoming exercisable on the date that is twenty four (24) months after the Effective Date; provided, however, that all unvested shares subject to the Option (and any additional equity awards hereafter issued by Company to Executive pursuant to the Plan) shall fully vest and be exercisable if Executive’s Service ceases as a result of a Qualifying Termination (as defined below) occurring on or within twelve (12) months after a Change in Control (as defined in the Plan).

 

4.5 280G . If, due to the benefits provided under Section 4.4 above, Executive is subject to any excise tax due to characterization of any amounts payable under Section 4.4 as excess parachute payments pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (collectively, the “ Code ”), the amounts payable under Section 4.4 will be reduced (to the least extent possible) in order to avoid any “excess parachute payment” under section 280G(b)(1) of the Code.

 

5. Customary Fringe Benefits . Executive will be eligible to participate in any employee benefit plans, including paid life insurance policy and disability insurance, fringe benefits, perquisites or other arrangements maintained by Company on no less favorable terms than for other Company executives subject to the terms and conditions of Company’s benefit plan documents. Company reserves the right to change or eliminate the fringe benefits on a prospective basis, at any time, effective upon notice to Executive. If Company does not have an employee benefit plan then Executive will be reimbursed for customary fringe benefits expenses he actually incurs. To obtain reimbursement, expenses must be submitted promptly with supporting documentation and will be reimbursed in accordance with Company’s policy. Commencing on the Effective Date, Executive shall annually accrue and use four (4) weeks of paid vacation days subject to the terms and conditions of Company’s vacation policy as in effect from time to time. Any unused accrued vacation days shall be paid out to Executive in cash upon Executive’s termination of employment for any reason applying Executive’s rate of base salary as in-effect at such time.

 

6. Business Expenses . Executive will be promptly reimbursed for all reasonable, out-of-pocket business expenses incurred in the performance of Executive’s duties on behalf of Company. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation and will be reimbursed in accordance with Company’s policies. Any reimbursement Executive is entitled to receive shall (a) be paid no later than the last day of Executive’s tax year following the tax year in which the expense was incurred, (b) not be affected by any other expenses that are eligible for reimbursement in any tax year, and (c) not be subject to liquidation or exchange for another benefit.

 

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7. Termination of Executive’s Employment .

 

7.1 Termination for Cause by Company . Although Company anticipates a mutually rewarding employment relationship with Executive, Company may terminate Executive’s employment immediately at any time for Cause subject to the terms of this Agreement. For purposes of this Agreement, “ Cause ” is defined as: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Executive with respect to Executive’s obligations or otherwise relating to the business of Company; (b) any acts or conduct by Executive that are materially adverse to Company’s interests; (c) Executive’s material breach of this Agreement; (d) Executive’s material breach of Company’s Employee Proprietary Information and Inventions Agreement; (e) Executive’s conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude or that otherwise materially negatively impacts Executive’s ability to effectively perform Executive’s duties hereunder; (f) Executive’s willful neglect of duties as determined in the good faith discretion of the Board of Directors (provided that poor performance and/or subpar results by themselves do not constitute Cause); or (g) the winding down of Company’s business and/or dissolution or liquidation of Company (other than in connection with a change in control). In the event of termination of Executive’s employment based on clauses (a), (b) or (f) above, Executive will have fifteen (15) days following receipt of notice from Company to cure the issue, if curable. In the event Executive’s employment is terminated in accordance with this subsection 7.1, Executive shall be entitled to receive only Executive’s base salary then in effect, prorated to the date of termination plus all vacation days, and benefits accrued through the date of termination plus any earned (as determined by the Board of Directors) but unpaid bonus for a prior completed calendar year (collectively, “ Standard Entitlements ”). In addition, Executive shall be entitled to receive reimbursement of any business expenses, to the extent not previously reimbursed, in accordance with Section 6 above. Except for any terms and conditions of this Agreement that by their terms survive termination of Executive’s employment, all other Company obligations to Executive pursuant to this Agreement will become automatically terminated and completely extinguished. Executive will not be entitled to receive the Severance Package or other amounts described in subsection 7.2 below. For clarification, the foregoing is an exclusive list of the acts or omissions that shall be considered “Cause” for the termination of Executive’s employment by Company.

 

7.2 Qualifying Termination/Severance . Company may terminate Executive’s employment under this Agreement without Cause at any time on written notice to Executive and Executive may resign his employment for Good Reason as defined below (either of such terminations is a “ Qualifying Termination ”). As used in this Agreement, “ Good Reason " shall mean that any one or more of the following events have occurred without Executive’s express prior written consent:

 

(i) A material adverse change in Executive’s authority, duties and/or responsibilities such that Executive’s authority, duties and/or responsibilities are no longer commensurate with Executive being Company’s President or most senior technology officer;

 

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(ii) The relocation of the Primary Workplace to a location that increases Executive’s daily commute by more than thirty (30) miles from its location specified in subsection 2.3 above;

 

(iii) Any material breach by Company of any material term of this Agreement; or

 

(iv) Any material reduction by Company (or its successor) of (A) Executive’s base salary or (B) Executive’s Target Bonus, unless any such reduction is made as part of, and is generally consistent with, a general reduction of senior executive base salaries or target bonuses, respectively, in which case such a reduction shall not constitute Good Reason.

 

In order to resign Executive’s employment for Good Reason, Executive must within 60 days of Executive’s awareness of the applicable Good Reason event(s) provide Company with written notice informing Company about Executive’s intention to resign Executive’s employment for Good Reason unless such event(s) is cured or remedied by Company (“ Good Reason Notice “). Company will have 30 days after its receipt of such Good Reason Notice to cure or remedy the Good Reason event(s). If Company does not timely cure or remedy the Good Reason event(s), then Executive can resign Executive’s employment for Good Reason at any time within 30 days following the expiration of the 30 day cure/remedy period. This “Good Reason” definition and process is intended to constitute an involuntary separation from service as provided under Treasury Regulations Section 1.409A-1(n) and shall be interpreted accordingly.

 

In the event of a Qualifying Termination, Executive will receive the Standard Entitlements and shall be entitled to receive reimbursement of any business expenses, to the extent not previously reimbursed, in accordance with Section 6 above. In addition, Executive will receive (a) a “ Severance Payment ” in an amount which is equivalent to the greater of the remaining number of months left in the Initial Term or twelve (12) months of Executive’s base salary then in effect on the date of termination, payable in equal installments (but no less frequently than once per calendar month) for a duration equal to the greater of the remaining number of months left in the Initial Term or twelve (12) months (the “ Severance Period ”), in accordance with Company’s regular payroll cycle, beginning on the first payroll date following the date on which the general release referenced below has become effective and (b) payment (or reimbursement) of monthly premiums for Executive and Executive’s dependents’ group health care coverage continuation pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1986, for the Severance Period, provided Executive elects to continue and remains eligible for such benefits and does not become eligible for health coverage through another employer during the Severance Period (together with the Severance Payment, the “ Severance Package ”). Executive will only receive the Severance Package and other severance benefits and payments described if Executive: (i) complies with all surviving provisions of this Agreement as specified in subsection 15.8 below; and (ii) executes a separation agreement and release of claims agreement and such release has become effective in accordance with its terms prior to the 60th day following the termination date. Except for any terms and conditions of this Agreement that by their terms survive termination of Executive’s employment, all other Company obligations to Executive pursuant to this Agreement will become automatically terminated and completely extinguished.

 

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7.3 Voluntary Resignation by Executive . Executive may voluntarily resign Executive’s position with Company at any time without Good Reason. In the event of Executive’s resignation without Good Reason, Executive will be entitled to receive the Standard Entitlements. In addition, Executive shall be entitled to receive reimbursement of any business expenses, to the extent not previously reimbursed, in accordance with Section 6 above. Except for any terms and conditions of this Agreement that by their terms survive termination of Executive’s employment, all other Company obligations to Executive pursuant to this Agreement will become automatically terminated and completely extinguished. In addition, Executive will not be entitled to receive the Severance Package or other amounts described in subsection 7.2 above.

 

7.4 Termination upon Death or Disability . If Company terminates Executive’s employment as a result of Executive’s Disability (as defined below), or if Executive’s employment is terminated due to the death of Executive, then Executive shall become entitled to the Standard Entitlements. Except as provided below, Executive shall not be entitled to receive severance or other benefits except those (if any) as may then be established under Company’s then existing severance and benefit plans and policies and applicable to all employees at the time of Executive’s death or such Disability. Notwithstanding the foregoing, if Executive’s employment is terminated due to the death or Disability of Executive, then Executive shall be entitled to receive a Severance Payment in an amount which is equivalent to (i) the greater of the remaining number of months left in the Initial Term or twelve (12) months of Executive’s base salary then in effect on the date of termination, minus (ii) the aggregate amount that Employee is entitled to receive under Company’s paid life insurance policy or disability insurance policy, such remaining amount to be payable to Executive in equal installments (but no less frequently than once per calendar month) for the duration of the Severance Period, in accordance with Company’s regular payroll cycle, beginning on the first payroll date following the date on which the general release referenced in Section 7.2 has become effective. In the event of Executive’s death, all such payments contemplated in this Section 7.4 shall be made to such person as Executive will designate in a notice filed with Company or, if no such person is designated, to Executive’s estate. In addition, upon the Disability or death of Executive, Company shall pay (or reimburse) the monthly premiums for the continued benefit of Executive or Executive’s immediate family, as applicable, of group health care coverage continuation pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1986, for the Severance Period (in addition to the “Severance Payment” contemplated hereunder, the “ Severance Package ”). As used herein, the term “ Disability ” shall mean that Executive has been unable to perform Executive’s duties under this Agreement as the result of Executive’s incapacity due to physical or mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by Company or its insurers and reasonably acceptable to Executive or Executive’s legal representative (such Agreement as to acceptability not to be unreasonably withheld.). Termination resulting from Disability may only be effected after at least 30 days’ written notice by Company of its intention to terminate Executive’s employment. In the event that Executive resumes the performance of substantially all of Executive’s duties hereunder before the termination of Executive’s employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.

 

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7.5 Resignation of Other Positions . Should Executive’s employment terminate for any reason, Executive agrees to immediately resign all other positions Executive may hold with or on behalf of Company.

 

7.6 Application of Section 409A .

 

(a) Notwithstanding anything set forth in this Agreement to the contrary, no amount payable pursuant to this Agreement which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “ Section 409A Regulations ”) that is to be paid based upon Executive’s termination of employment shall be paid unless and until Executive has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that Executive is a “specified employee” within the meaning of the Section 409A Regulations as of the date of Executive’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of Executive’s separation from service shall be paid to Executive before the date (the “ Delayed Payment Date ”) which is the first day of the seventh month after the date of Executive’s separation from service or, if earlier, the date of Executive’s death following such separation from service. All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.

 

(b) Company intends that income provided to Executive pursuant to this Agreement or otherwise will not be subject to taxation under Section 409A of the Code and Company shall utilize commercially reasonable efforts in administering this Agreement and any payments or benefits to be provided to Executive to ensure that Executive is not subject to any such taxation. The provisions of this Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. However, Company does not guarantee any particular tax effect for income provided to Executive pursuant to this Agreement. In any event, except for Company’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to Executive, Company shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Executive pursuant to this Agreement.

 

(c) Notwithstanding anything herein to the contrary, the reimbursement of expenses or in-kind benefits provided pursuant to this Agreement shall be subject to the following conditions: (1) the expenses eligible for reimbursement or in-kind benefits in one taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits in any other taxable year; (2) the reimbursement of eligible expenses or in-kind benefits shall be made promptly, subject to Company’s applicable policies, but in no event later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

(d) For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

 

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8. No Conflict of Interest . During the term of Executive’s employment with Company, Executive must not engage in any work, paid or unpaid, or other activities that create a conflict of interest. Such work and/or activities shall include, but is not limited to, directly or indirectly competing with Company in any way, or acting as an officer, director, employee, consultant, advisor, stockholder, volunteer, lender, or agent of any business enterprise of the same nature as, or which is in direct competition with, the business in which Company is now engaged or in which Company becomes engaged during the term of Executive’s employment with Company, as may be determined by the Board of Directors in its sole discretion. If the Board of Directors believes such a conflict exists during the term of this Agreement, the Board of Directors may ask Executive to choose to discontinue the other work and/or activities or resign employment with Company (if Executive elects to not discontinue such other work or activities).

 

9. Nondisparagement . Executive agrees that during and after Executive’s employment with Company, Executive will not make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage or in any way criticize the personal and/or business reputations, practices or conduct of Company or any of its officers or directors and Company’s Board of Directors and majority shareholders will not make any voluntary statements, written or oral, or cause or encourage others to make any such statements that defame, disparage or in any way criticize the personal and/or business reputations, practices or conduct of Executive.

 

10. Confidential Information .

 

10.1 Confidentiality . In the course of Executive’s employment by Company, Executive will have access to Confidential Information (as defined below) of Company and its affiliates, subsidiaries, chapters, and members. Executive agrees to maintain the strict confidentiality of all Confidential Information during the term of this Agreement and thereafter. For purposes of this Agreement, " Confidential Information " shall mean all information and materials of Company, and all information and materials received by Company from third parties (including but not limited to affiliates, subsidiaries, chapters, and members of Company), which are not generally publicly available and all other information and materials which are of a proprietary or confidential nature, and are deemed by Company as such.

 

10.2 Intellectual Property . Executive recognizes and agrees that all copyrights, trademarks, patents, and other intellectual property rights to works or marks arising in, from or in connection with Executive's employment by Company, and that are within the scope of Executive's employment by Company, are the sole and exclusive property of Company. Executive agrees not to assert any such rights against Company or any third party. Executive agrees to assign, and hereby does assign, to Company all rights, if any, in or to such works or marks that may accrue to the Executive during the term of this Agreement.

 

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11. Agreement Not to Solicit Employees . During the term of this Agreement and for a period of twelve (12) months immediately following the termination of this Agreement, Executive shall not, either directly or indirectly, on his own behalf or in the service or on behalf of others, solicit or recruit (or attempt to solicit or recruit) any person employed by Company to or for any business, organization, program, or activity that competes with any program, activity or operation of Company.

 

12. Agreement Not to Compete . During the term of Executive's employment under this Agreement and for a period of twelve (12) months immediately following the termination of this Agreement, Executive shall not (except on behalf of or with the prior written consent of Company), either directly or indirectly, perform the same or substantially the same services that Executive performed for Company, whether as an employee or in any other capacity, on behalf of any trade or professional association, franchise company, nonprofit organization or business, which has the same or substantially the same membership or purposes as Company.

 

13. Injunctive Relief . Executive acknowledges that Executive’s breach of the covenants contained in Sections 8-12 (collectively “ Covenants ”) would cause irreparable injury to Company and agrees that in the event of any such breach, Company shall be entitled to seek temporary, and preliminary injunctive relief pursuant to the California Arbitration Act, without the necessity of proving actual damages or posting any bond or other security.

 

14. Arbitration . In the event of any dispute or claim relating to or arising out of the employment relationship between Executive and Company or the termination of that relationship (including, but not limited to, any claims of breach of contract, wrongful termination or age, sex, race, disability or other discrimination), Executive and Company agree that all such disputes shall be resolved by binding arbitration conducted before a single neutral arbitrator in Ventura County, California, pursuant to the rules for arbitration of employment disputes by the American Arbitration Association (available at www.adr.org) and the rules set forth in the California Arbitration Act, Code of Civil Procedure Section 1280, et seq. (available at www.leginfo.ca.gov/calaw.html). The arbitrator shall permit adequate discovery, including discovery pursuant to Section 1283.05 of the California Code of Civil Procedure. In addition, the arbitrator is empowered to award all remedies otherwise available in a court of competent jurisdiction; however Executive and Company each retain the right under Section 1281.8 of the California Code of Civil Procedure to seek provisional remedies. Any judgment rendered by the arbitrator may be entered by any court of competent jurisdiction. The arbitrator shall issue an award in writing and state the essential findings and conclusions on which the award is based. By executing this Agreement, Executive and Company are both waiving the right to a jury trial with respect to any such disputes. Company shall bear the costs of the arbitrator, forum and filing fees. Each party shall bear its own respective attorneys’ fees and all other costs, unless otherwise provided by law and awarded by the arbitrator. This arbitration agreement does not include claims that, by law, may not be subject to mandatory arbitration.

 

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15. General Provisions .

 

15.1 Successors and Assigns . The rights and obligations of Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Company. Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement (except by will or the laws of descent and distribution). For avoidance of doubt, any payments or obligations that Company owes to Executive shall be paid to Executive’s heirs or estate in the event of Executive’s death.

 

15.2 Waiver . Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

 

15.3 Attorneys’ Fees . Each side will bear its own attorneys’ fees in any dispute unless a statutory section at issue, if any, authorizes the award of attorneys’ fees to the prevailing party.

 

15.4 Severability . In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.

 

15.5 Interpretation; Construction . The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing Company, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that Executive has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

 

15.6 Governing Law . This Agreement will be governed by and construed in accordance with the laws of the United States and the State of California. Each party consents to the jurisdiction and venue of the state courts in Ventura County, California, or the federal courts in Los Angeles County, California, if applicable, in any action, suit, or proceeding arising out of or relating to this Agreement.

 

15.7 Notices . Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to the addresses set forth below, or such other address as either party may specify in writing:

 

If to Company:

 

Bone Biologics, Corp.

175 May Street, Suite 400,

Edison, NJ 08837

 

If to Executive:

 

William Jay Treat

7 Dellwood

Dove Canyon, CA 92679

 

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15.8 Survival . Sections 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of this Agreement shall survive Executive’s employment by Company.

 

16. Entire Agreement . This Agreement constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. This agreement may be amended or modified only with the written consent of Executive and the Board. No oral waiver, amendment or modification will be effective under any circumstances whatsoever. In the event of any conflict in terms between this Agreement and the Plan or any Company policy, the terms of this Agreement shall prevail and govern.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.

 

    William Jay Treat:
       
Dated: September 19, 2014 /s/ William Jay Treat
    (Signature)
       
    BONE BIOLOGICS, CORP.:
       
Dated: September 19 , 2014 By: /s/ Bruce Stroever
    Name: Bruce Stroever
    Title: Chairman of the Board

 

[Signature Page to President and Chief Technology Officer Employment Agreement]

 

 
 

 

Exhibit A

 

William Jay Treat is currently serving in the capacity of VP Manufacturing and CMC for Targazyme, a Carlsbad, California company involved in developing a product to enhance various stems cells in homing and engrafting. He is one of the original co-founders with an equity stake in the company. The company is preparing to enter a Phase IIb/III clinical trial. The anticipated activity required by Dr. Treat will not interfere with his duties at Bone Biologics. If the requirements of Targazyme were to expand and impact his duties at Bone Biologics, he would resign from Targazyme providing them with appropriate lead time.

 

 
 

 

 

 

MANAGEMENT CONSULTING AGREEMENT

 

This Management Consulting Agreement (this “ Agreement ”) is entered into as of July 1, 2014 with an effective date of July 1, 2014 (the “Effective Date” ), by and between Bone Biologics, Inc. , a California corporation (the “Company” ), and The Gilson Group LLC ( Consultant” ).

 

1. Scope of Services.

 

1.1 Services. Consultant agrees to provide the services of Catherine Doll (“ Doll ”) to serve as the Company’s Interim Chief Financial Officer (“ CFO ”) reporting directly to the President and Chief Technology Officer. To the extent determined by mutual agreement of the Company, Consultant, and Doll, Doll will provide services to the Company as listed on Exhibit A attached hereto (the “ Services ”). Such services, as outlined in Exhibit A, are subject to change as mutually agreed to between the Parties. The manner and means by which Doll chooses to provide the Services under this Agreement are in Doll’s sole discretion and control, subject to direction from Consultant. Doll agrees to exercise the highest degree of professionalism in providing the Services under this Agreement. Consultant agrees to use its best efforts to perform the Services such that the results are satisfactory to the Company. Consultant may not subcontract or otherwise delegate its obligations under this Agreement without the Company’s prior written consent.

 

2. Fees; Expenses. In consideration for the Services to be provided hereunder, the Company shall provide to Consultant the fees set forth under Exhibit B attached hereto. As a condition to receipt of reimbursement, Consultant shall be required to submit to the Company reasonable evidence that the amount involved was expended and related to the Services provided under this Agreement.

 

3. Directors & Officers Insurance Coverage. Company shall provide proof of Directors & Officers insurance coverage from a responsible company. Company shall name Consultant and Doll as additional insureds on said policy to the extent they provide Services to Company and provide Consultant with an insurance certificate indicating the same. Independent Contractor Relationship. Consultant, and any of Consultant’s employees, including Doll’s, relationship with the Company will be that of an independent contractor and nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship. As part of the Services, Doll may be engaged to act on behalf of the Company in negotiations with investors, vendors, and other interested parties. In the event that Doll participates in these negotiations, the representations made and the positions advanced will be those of the Company and, not Consultant. Consultant shall not be authorized to incur on behalf of the Company any potential liability in excess of $5,000 without the prior consent of the President and Chief Technology Officer, which consent shall be evidenced in writing. Because Consultant and any of Consultant’s employees, including Doll, are independent contractors, the Company will not withhold or make payments for social security; make unemployment insurance or disability insurance contributions; or obtain worker’s compensation insurance on Consultant’s behalf. Consultant agrees to accept exclusive liability for complying with all applicable state and federal laws, including obligations such as payment of taxes, social security, disability and other contributions based on fees paid to Consultant, its agents or employees under this Agreement. Consultant further agrees to make all necessary withholdings or payments for social security, make unemployment insurance and/or disability insurance contributions, and provide worker’s compensation insurance for Doll during the term of the Agreement.

 

4. Confidential Information.

 

4.1 Confidential Information. Consultant agrees during the term of this Agreement and thereafter that it will (and will cause all of its agents, principals and employees to) take all steps reasonably necessary to hold the Company’s Confidential Information (as defined below) in trust and confidence, and not use the Confidential Information in any manner or for any purpose not expressly set forth in this Agreement, and not disclose any such Confidential Information to any third party without first obtaining the Company’s express written consent on a case-by-case basis. “Confidential Information” means any information disclosed by the Company to Consultant, or created by or on behalf of Consultant during the course of providing the Services hereunder, and includes, without limitation, any: (a) trade secrets, inventions, antibodies and other biological materials, cell lines, samples of assay components, mask works, ideas, processes, procedures, formulations, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques; (b) information regarding plans for research, developmental or experimental work, new products, clinical data, test data, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (c) information regarding the skills and compensation of the employees and other services providers of the Company. Notwithstanding the other provisions of this Agreement, nothing received by Consultant will be considered to be Confidential Information if (1) it has been previously published or is otherwise readily available to the public other than by a breach of any obligation of confidentiality or (2) it has been rightfully received by Consultant from a third party without any obligation of confidentiality.

 

 
 

 

4.2 Third Party Information. Consultant understands that the Company has received and will in the future receive from third parties confidential or proprietary information ( “Third Party Information” ) subject to a duty on the Company’s part to maintain the confidentiality of such information and use it only for certain limited purposes. Consultant agrees to hold Third Party Information in confidence and not to disclose to anyone (other than Company personnel) or to use, except in connection with performing the Services, Third Party Information unless expressly authorized in writing by an officer of the Company.

 

4.3 No Conflict of Interest. Consultant agrees and represents that it is not aware of any conflicts of interests or additional relationships that would preclude Doll from performing the Services. Consultant and Doll will provide written notice to the Company if any conflicts of interest arise. The Company will determine in its sole discretion if a conflict of interest arises.

 

4.4 Confidential Information of Others. Consultant represents and warrants that, as of the Effective Date, Consultant’s act of entering into this Agreement, acquiring any equity or other interest in the Company (if any), and providing the Services to the Company do not violate any outstanding agreement or obligation, of Consultant’s. Consultant further agrees that it will not perform any Services for the Company which would conflict with any agreement or obligation of Consultant or which would cause or result in any other person or entity having any ownership interest in any intellectual property of the Company, and will promptly notify the Company in writing in the event that any proposed Services may conflict with any such agreement or obligation, or result in such person or entity having any ownership interest. If the Company determines, in its sole discretion, that any of the foregoing has occurred or is likely to occur, the Company may terminate this Agreement immediately upon written notice.

 

5. Work Product and Intellectual Property Rights.

 

5.1 Disclosure of Work Product. As used in this Agreement, the term “Work Product” means any trade secrets, ideas, inventions (whether patentable or unpatentable), antibodies and other biological materials, cell lines, samples of assay components, mask works, processes, procedures, formulations, formulas, software source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques, trademarks, manufacturing techniques, or other copyrightable or patentable works. Consultant agrees to disclose promptly in writing to the Company, or any person designated by the Company, all Work Product which is solely or jointly conceived, made, reduced to practice, or learned by Consultant in the course of any work performed for the Company ( “Company Work Product” ).

 

5.2 Assignment of Company Work Product. Consultant irrevocably assigns to the Company all right, title and interest worldwide in and to the Company Work Product and all applicable intellectual property rights related to the Company Work Product, including without limitation, copyrights, trademarks, trade secrets, patents, moral rights, contract and licensing rights (the “Proprietary Rights” ). If Consultant has any rights to the Company Work Product that cannot be assigned to the Company, Consultant unconditionally and irrevocably waives the enforcement of such rights, and all claims and causes of action of any kind against the Company with respect to such rights, and agrees, at the Company’s request and expense, to consent to and join in any action to enforce such rights. If Consultant has any right to the Company Work Product that cannot be assigned to the Company or waived by Consultant, Consultant unconditionally and irrevocably grants to the Company during the term of such rights, an exclusive, irrevocable, perpetual, worldwide, fully paid and royalty-free license, with rights to sublicense through multiple levels of sublicensees, to reproduce, create derivative works of, distribute, publicly perform and publicly display by all means now known or later developed, such rights.

 

5.3 Enforcement of Proprietary Rights. Consultant will assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights relating to Company Work Product in any and all countries. To that end Consultant will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, Consultant will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. Consultant’s obligation to assist the Company with respect to Proprietary Rights relating to such Company Work Product in any and all countries shall continue beyond the termination of this Agreement, but the Company shall compensate Consultant at a reasonable rate after such termination for the time actually spent by Consultant at the Company’s request on such assistance. In the event the Company is unable for any reason, after reasonable effort, to secure Consultant’s signature on any document needed in connection with the actions specified above, Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as its agent and attorney in fact, which appointment is coupled with an interest, to act for and in its behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by Consultant.

 

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6. Consultant Representations and Warranties. Consultant hereby represents and warrants that (a) no portion of the Services nor any element thereof will infringe the Proprietary Rights of any third party; (b) Consultant will, and will cause its employees and agents (including but not limited to Doll) to comply with all applicable laws and regulations in connection with the performance of the Services and its other obligations hereunder; and (c) Consultant has full right and power to enter into and perform this Agreement without the consent of any third party or breach of any third party obligation.

 

7. Term and Termination

 

7.1 Term. This Agreement shall be effective as of the Effective Date and shall continue in effect until 90 days after the Effective Date of agreement unless terminated earlier as provided herein. Thereafter, this Agreement shall automatically renew for successive one (1) month periods unless either party provides written notice to the other party at least 10 days in advance of the renewal term of its decision not to renew the term. This Agreement is intended to be temporary in nature, and will cease once the Company retains a permanent Chief Financial Officer.

 

(a) This Agreement is intended by the Parties to be assigned to Bone Biologics, Corp. when AFH Acquisition X, Inc. and its wholly-owned subsidiary, Bone Biologics Acquisition Corp., a Delaware corporation (“Merger Sub”), enter into an Agreement and Plan of Merger, by and among (i) AFX Acquisition X, Inc, (ii) the Company, and (iii) Merger Sub. This Agreement is intended to continue to be binding, in full, on all Parties after this assignment of rights and responsibilities by the Company to Bone Biologics, Corp.

 

7.2 Termination. Either Party may terminate this Agreement in the event of the other party’s material breach of this Agreement, if such breach is not cured within ten (10) days’ of written notice thereof from the non-breaching party. The Company may terminate this Agreement (a) immediately without notice in the event of Consultant’s breach of (or as provided in) Sections 4 through 6 hereof; or (b) for its convenience if the Company finds a replacement Chief Financial Officer, upon at least ten (10) days’ prior written notice to Consultant. Consultant may terminate this Agreement for its convenience upon at least thirty (30) days’ prior written notice to the Company.

 

7.3 Return of Company Property; Noninterference. Upon termination of the Agreement or earlier as requested by the Company, Consultant will deliver to the Company any and all drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Work Product, Third Party Information or Confidential Information of the Company. Consultant further agrees that any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Company personnel at any time with or without notice. During the term, and for a period of two (2) years immediately following the termination, of this Agreement, Consultant agrees not to solicit or induce any employee or other service provider of the Company to terminate or breach an employment, contractual or other relationship with the Company.

 

7.4 Survival. Sections 2 and 4 through 8 shall survive any termination or expiration of this Agreement.

 

8. General Provisions.

 

8.1 Severability. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

 

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8.2 Governing Law. This Agreement will be governed and construed in accordance with the laws of the State of California, without reference to its conflicts of laws principles. Each party hereby expressly consents to the personal jurisdiction of the state and federal courts located in Los Angeles County, California, with respect to any dispute arising out of or relating to this Agreement or the subject matter hereof.

 

8.3 No Assignment. This Agreement may not be assigned by Consultant without the Company’s consent, and any such attempted assignment shall be void and of no effect. The Company may assign this Agreement to any affiliate, successor or acquiror, whether by operation of law or otherwise.

 

8.4 Notices. All notices, requests and other communications under this Agreement must be in writing, and must be sent by registered or certified mail, postage prepaid and return receipt requested, overnight delivery, or facsimile.

 

8.5 Injunctive Relief. A breach of any of the promises or agreements contained in this Agreement may result in irreparable and continuing damage to the Company for which there may be no adequate remedy at law, and the Company is therefore entitled to seek injunctive relief as well as such other and further relief as may be appropriate.

 

8.6 Waiver. No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

 

8.7 Entire Agreement . This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions between the Company and Consultant. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged.

 

[ Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

4
 

 

In Witness Whereof, the parties have caused this Agreement to be executed by their duly authorized representative.

 

Company:  
   
Bone Biologics, Inc.  
   
By: /s/ William Jay Treat  
Name: William Jay Treat  
Title: President and Chief Technology Officer  
Address: 175 May Street, Suite 400  
  Edison, NJ  08837  
     
Consultant:  
   
The Gilson Group LLC  
     
By: /s/ Catherine Doll  
Name: Catherine Doll  
Title: Chief Executive Officer  
Address: The Gilson Group, LLC.  
  2967 Michelson Drive, Suite G102   
  Irvine, CA 92612   

 

[Signature Page to Consulting Agreement]

 
 

 

Exhibit A

 

DESCRIPTION OF SERVICES

 

The Services shall include the following (without limitation): those services customarily associated with a company’s most senior financial officer and those services otherwise assigned to Consultant by the President and Chief Technology Officer. Doll will continue to be an employee of Consultant, and will divide her efforts between Consultant and the Company consistent with industry best practices and her personal experience, consistent with direction from her employer, Consultant. In no event will Doll devote more than 50% of her time to the Company.

 

It is understood that Consultant and Doll are not being requested to perform an audit, review or compilation. Consultant and Doll are reasonably entitled to rely on the accuracy and validity of the data disclosed or supplied to them by representatives and employees of the Company, and with respect to Doll, such reliance shall be consistent with her duties and obligations as an executive officer of the Company.

 

 
 

 

Exhibit B

 

FEES

 

Assuming Consultant’s material compliance with the terms of this Agreement, compensation for Consultant’s services to the Company shall be as described in this section.

 

Cash Fees :

 

Consultant shall be paid a retainer of $10,000 for the first 66 hours of services provided by Doll. Any services provided in excess of 66 hours will be paid at a rate of $150/hour. Consultant agrees to provide itemized invoices consistent with industry best practices within 30 days of services being provided by Doll. Cash fees shall be paid within 30 days of receipt of invoice from Consultant.

 

Common Stock

 

Consultant shall receive 1 warrant for Company Common Stock for each dollar that is paid by Company for services provided by Doll. The first issuance of such warrants will be made at the completion of the initial 90 day term of the Agreement. Any additional warranties to be provided for dollars paid for services rendered after the initial 90 day term of the Agreement will be paid at the end of each 30 day period thereafter.

 

Reimbursement for Reasonable Expenses

 

Consultant shall be reimbursed for reasonable expenses incurred by Doll in connection with the performance of Consultant’s Services. Such reasonable expenses will be billed by Consultant, and include but are not limited to travel expenses for in-person meetings. Reasonable expenses shall be paid within 30 days of receipt of invoice from Consultant.

 

 
 

 

CONSULTING AGREEMENT

 

This Consulting Agreement (this “ Agreement ”) is entered into as of September 19 , 2014 with an effective date of September 19 , 2014 (the “Effective Date” ), by and between Bone Biologics, Corp. , a Delaware corporation (the “Company” ), and T.O. Medical Development Inc. a California Corporation ( Consultant” ).

 

1. Scope of Services.

 

1.1 Services. Consultant agrees to provide consulting services ( “Services” ) to the Company as reasonably requested by the Company’s Chief Executive Officer (“ CEO ”) or Board of Directors (the “Board” ), which Services shall include those listed on Exhibit A attached hereto. Consultant shall report to the CEO or (if requested) directly to the Board. As part of the Services, Bruce Hazuka (an Employee and Advisor to the Consultant) will serve as the provider of the “Services.” The manner and means by which Consultant chooses to provide Services under this Agreement are in Consultant’s sole discretion and control. Consultant agrees to exercise the highest degree of professionalism in providing Services under this Agreement. Consultant agrees to use its best efforts to perform the Services such that the results are satisfactory to the Company. Consultant shall devote at least 15 days per month to performance of the Services. Consultant may not subcontract or otherwise delegate its obligations under this Agreement without the Company’s prior written consent.

 

2. Compensation; Expenses. In consideration for the Services to be provided hereunder, the Company shall provide to Consultant the compensation set forth under Exhibit B attached hereto. Consultant shall not be authorized to incur on behalf of the Company any expenses above $1,000 without the prior consent of the Board or the CEO, which consent shall be evidenced in writing. As a condition to receipt of reimbursement, Consultant shall be required to submit to the Company reasonable evidence that the amount involved was expended and related to Services provided under this Agreement.

 

3. Independent Contractor Relationship. Consultant’s relationship with the Company will be that of an independent contractor and nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship. Consultant is not the agent of the Company and is not authorized to make any representation, contract, or commitment on behalf of the Company. Because Consultant is an independent contractor, the Company will not withhold or make payments for social security; make unemployment insurance or disability insurance contributions; or obtain worker’s compensation insurance on Consultant’s behalf. Consultant agrees to accept exclusive liability for complying with all applicable state and federal laws, including obligations such as payment of taxes, social security, disability and other contributions based on fees paid to Consultant, its agents or employees under this Agreement.

 

4. Confidential Information.

 

4.1 Confidential Information. Consultant agrees during the term of this Agreement and thereafter that it will (and will cause all of its agents, principals and employees to) take all steps reasonably necessary to hold the Company’s Confidential Information (as defined below) in trust and confidence, and not use the Confidential Information in any manner or for any purpose not expressly set forth in this Agreement, and not disclose any such Confidential Information to any third party without first obtaining the Company’s express written consent on a case-by-case basis. “Confidential Information” means any information disclosed by the Company to Consultant, or created by or on behalf of Consultant during the course of providing Services hereunder, and includes, without limitation, any: (a) trade secrets, inventions, antibodies and other biological materials, cell lines, samples of assay components, mask works, ideas, processes, procedures, formulations, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques; (b) information regarding plans for research, developmental or experimental work, new products, clinical data, test data, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (c) information regarding the skills and compensation of the employees and other services providers of the Company. Notwithstanding the other provisions of this Agreement, nothing received by Consultant will be considered to be Confidential Information if (1) it has been previously published or is otherwise readily available to the public other than by a breach of any obligation of confidentiality or (2) it has been rightfully received by Consultant from a third party without any obligation of confidentiality.

 

 
 

 

4.2 Third Party Information. Consultant understands that the Company has received and will in the future receive from third parties confidential or proprietary information ( “Third Party Information” ) subject to a duty on the Company’s part to maintain the confidentiality of such information and use it only for certain limited purposes. Consultant agrees to hold Third Party Information in confidence and not to disclose to anyone (other than Company personnel) or to use, except in connection with performing the Services, Third Party Information unless expressly authorized in writing by an officer of the Company.

 

4.3 No Conflicting Arrangements. Consultant represents and warrants that Consultant has not performed since January 1, 2005, and does not presently perform or intend to perform, any consulting or other services for, or engage in or intend to engage in an employment relationship with, any third party who business or proposed business in any way involve products or services which are, or are likely to be, directly or indirectly competitive with the Company’s products or services, or those products or services proposed or in development by the Company during the term of this Agreement (“ Competitive Services ”). If, however, Consultant in the future decides to provide Competitive Services, Consultant shall provide the Company at least thirty (30) days’ prior written notice, specifying the name and address of the third party, and sufficient information regarding the proposed Competitive Services to permit the Company to evaluate whether they would conflict with (a) the terms of this Agreement, (b) the interests of the Company, or (c) further services which the Company might request of Consultant. If the Company, in its sole discretion, determines that the proposed Competitive Services would or are likely to conflict with any of (a) through (c) above, it will so notify Consultant in writing. If Consultant thereafter enters into any agreement or arrangement relating to these Competitive Services, or provides Competitive Services to this third party, this Agreement will terminate immediately as of that date, and the Company shall have no further payment obligations of any kind to Consultant.

 

4.4 Confidential Information of Others. Consultant represents and warrants that, as of the Effective Date, Consultant’s act of entering into this Agreement, acquiring any equity or other interest in the Company (if any), and providing Services to the Company do not violate any outstanding agreement or obligation, of Consultant’s. Consultant further agrees that it will not perform any Services for the Company which would conflict with any agreement or obligation of Consultant or which would cause or result in any other person or entity having any ownership interest in any intellectual property of the Company’s, and will promptly notify the Company in writing in the event that any proposed Services may conflict with any such agreement or obligation, or result in such person or entity having any ownership interest. If the Company determines, in its sole discretion, that any of the foregoing has occurred or is likely to occur, the Company may terminate this Agreement immediately upon written notice.

 

5.   Work Product and Intellectual Property Rights.

 

5.1 Disclosure of Work Product. As used in this Agreement, the term “Work Product” means any trade secrets, ideas, inventions (whether patentable or unpatentable), antibodies and other biological materials, cell lines, samples of assay components, mask works, processes, procedures, formulations, formulas, software source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques, trademarks, manufacturing techniques, or other copyrightable or patentable works. Consultant agrees to disclose promptly in writing to the Company, or any person designated by the Company, all Work Product which is solely or jointly conceived, made, reduced to practice, or learned by Consultant in the course of any work performed for the Company ( “Company Work Product” ).

 

5.2 Assignment of Company Work Product. Consultant irrevocably assigns to the Company all right, title and interest worldwide in and to the Company Work Product and all applicable intellectual property rights related to the Company Work Product, including without limitation, copyrights, trademarks, trade secrets, patents, moral rights, contract and licensing rights (the “Proprietary Rights” ). If Consultant has any rights to the Company Work Product that cannot be assigned to the Company, Consultant unconditionally and irrevocably waives the enforcement of such rights, and all claims and causes of action of any kind against the Company with respect to such rights, and agrees, at the Company’s request and expense, to consent to and join in any action to enforce such rights. If Consultant has any right to the Company Work Product that cannot be assigned to the Company or waived by Consultant, Consultant unconditionally and irrevocably grants to the Company during the term of such rights, an exclusive, irrevocable, perpetual, worldwide, fully paid and royalty-free license, with rights to sublicense through multiple levels of sublicensees, to reproduce, create derivative works of, distribute, publicly perform and publicly display by all means now known or later developed, such rights.

 

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5.3 Enforcement of Proprietary Rights. Consultant will assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights relating to Company Work Product in any and all countries. To that end Consultant will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, Consultant will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. Consultant’s obligation to assist the Company with respect to Proprietary Rights relating to such Company Work Product in any and all countries shall continue beyond the termination of this Agreement, but the Company shall compensate Consultant at a reasonable rate after such termination for the time actually spent by Consultant at the Company’s request on such assistance. In the event the Company is unable for any reason, after reasonable effort, to secure Consultant’s signature on any document needed in connection with the actions specified above, Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as its agent and attorney in fact, which appointment is coupled with an interest, to act for and in its behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by Consultant.

 

6. Consultant Representations and Warranties. Consultant hereby represents and warrants that (a) no portion of the Services nor any element thereof will infringe the Proprietary Rights of any third party; (b) Consultant will, and will cause its employees and agents to, comply with all applicable laws and regulations in connection with the performance of the Services and its other obligations hereunder; and (c) Consultant has full right and power to enter into and perform this Agreement without the consent of any third party or breach of any third party obligation.

 

7. Term and Termination

 

7.1 Term. This Agreement shall be effective as of the Effective Date and shall continue in effect until August 1, 2016, unless terminated earlier as provided herein.

 

7.2 Termination for Cause by the Company. Although the Company anticipates a mutually rewarding relationship with Consultant, the Company may terminate Consultant’s engagement immediately at any time for Cause subject to the terms of this Agreement. For purposes of this Agreement, “ Cause ” is defined as: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Consultant with respect to Consultant’s obligations or otherwise relating to the business of the Company; (b) any acts or conduct by Consultant that are materially adverse to the Company’s interests; (c) Consultant’s material breach of this Agreement; (d) Consultant’s conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude or that otherwise materially negatively impacts Consultant’s ability to effectively perform Consultant’s duties hereunder; (e) Consultant’s willful neglect of duties as determined in the good faith discretion of the Board of Directors (provided that poor performance and/or subpar results by themselves do not constitute Cause); or (f) the winding down of the Company’s business and/or dissolution or liquidation of the Company (other than in connection with a change in control). In the event of termination of Consultant’s engagement based on clauses (a), (b) or (e) above, Consultant will have fifteen (15) days following receipt of notice from the Company to cure the issue, if curable. In the event Consultant’s engagement is terminated in accordance with this subsection 7.2 Consultant shall be entitled to receive only Consultant’s base cash compensation then in effect, prorated to the date of termination plus all benefits, if any, accrued through the date of termination (collectively, “ Standard Entitlements ”). In addition, Consultant shall be entitled to receive reimbursement of any business expenses, to the extent not previously reimbursed, in accordance with Section 2 above. Except for any terms and conditions of this Agreement that by their terms survive termination of Consultant’s engagement, all other Company obligations to Consultant pursuant to this Agreement will become automatically terminated and completely extinguished. For clarification, the foregoing is an exclusive list of the acts or omissions that shall be considered “Cause” for the termination of Consultant’s engagement by the Company.

 

Termination Without Cause. The Company may terminate Consultant’s engagement under this Agreement without Cause at any time by providing 90 days written notice to Consultant.

 

7.3 Resignation of Other Positions. Should Consultant’s engagement terminate for any reason, Consultant agrees to immediately resign all other positions Consultant may hold with or on behalf of the Company, if any.

 

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7.4 Application of Section 409A.

 

(i) Notwithstanding anything set forth in this Agreement to the contrary, no amount payable pursuant to this Agreement which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “ Section 409A Regulations ”) that is to be paid based upon Consultant’s termination of engagement shall be paid unless and until Consultant has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that Consultant is a “specified employee” within the meaning of the Section 409A Regulations as of the date of Consultant’s separation from service, no amount that constitutes a deferral of compensation which is payable on account of Consultant’s separation from service shall be paid to Consultant before the date (the “ Delayed Payment Date ”) which is the first day of the seventh month after the date of Consultant’s separation from service or, if earlier, the date of Consultant’s death following such separation from service. All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.

 

(ii) The Company intends that income provided to Consultant pursuant to this Agreement or otherwise will not be subject to taxation under Section 409A of the Code and the Company shall utilize commercially reasonable efforts in administering this Agreement and any payments or benefits to be provided to Consultant to ensure that Consultant is not subject to any such taxation. The provisions of this Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. However, the Company does not guarantee any particular tax effect for income provided to Consultant pursuant to this Agreement.

 

(iii) Notwithstanding anything herein to the contrary, the reimbursement of expenses or in-kind benefits provided pursuant to this Agreement shall be subject to the following conditions: (1) the expenses eligible for reimbursement or in-kind benefits in one taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits in any other taxable year; (2) the reimbursement of eligible expenses or in-kind benefits shall be made promptly, subject to the Company’s applicable policies, but in no event later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

 

7.5 Return of Company Property; Noninterference. Upon termination of the Agreement or earlier as requested by the Company, Consultant will deliver to the Company any and all drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Work Product, Third Party Information or Confidential Information of the Company. Consultant further agrees that any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by the Company personnel at any time with or without notice. During the term, and for a period of two (2) years immediately following the termination, of this Agreement, Consultant agrees not to solicit or induce any employee or other service provider of the Company to terminate or breach an employment, contractual or other relationship with the Company.

 

7.6 Survival. Sections 2 and 4 through 8 shall survive any termination or expiration of this Agreement.

 

8. General Provisions.

 

8.1 Severability. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

 

8.2 Governing Law. This Agreement will be governed and construed in accordance with the laws of the State of California, without reference to its conflicts of laws principles. Each party hereby expressly consents to the personal jurisdiction of the state and federal courts located in Los Angeles County, California, with respect to any dispute arising out of or relating to this Agreement or the subject matter hereof.

 

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8.3 No Assignment. This Agreement may not be assigned by Consultant without the Company’s consent, and any such attempted assignment shall be void and of no effect. The Company may assign this Agreement to any affiliate, successor or acquiror, whether by operation of law or otherwise.

 

8.4 Notices. All notices, requests and other communications under this Agreement must be in writing, and must be sent by registered or certified mail, postage prepaid and return receipt requested, overnight delivery, or facsimile.

 

8.5 Injunctive Relief. A breach of any of the promises or agreements contained in this Agreement may result in irreparable and continuing damage to the Company for which there may be no adequate remedy at law, and the Company is therefore entitled to seek injunctive relief as well as such other and further relief as may be appropriate.

 

8.6 Waiver. No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

 

8.7 Entire Agreement . This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions between the Company and Consultant. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged.

 

[ Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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In Witness Whereof, the parties have caused this Agreement to be executed by their duly authorized representative.

 

Company:

 

Bone Biologics, Corp.

 

By: /s/ Bruce Stroever  
Name: Bruce Stroever  
Title: Chairman  
Address: 175 May Street, Suite 400,  
  Edison, NJ 08837  
     
Consultant:  
   
T.O. Medical Development Inc.  
     
By: /s/ Carolyn Hazuka  
Name: Carolyn Hazuka  
Title: President/CEO  
Address: 100 Rancho Road, 7-240  
  Thousand Oaks, CA 91360  

 

 
 

 

Exhibit A

 

DESCRIPTION OF SERVICES

 

The Services shall include the following (without limitation):

 

1. Office administration;

 

2. Support and management of the outside audits of the Company’s financial statements;

 

3. Assistance with personnel recruiting;

 

4. Support for private placement of the Company’s equity securities, a PIPE, and IPO including preparation of a private placement memorandum (PPM); and all marketing material to support promotion of the Company in all fund raising.

 

5. Support for potential strategic transactions for the Company.

 

6. Support for the CEO and President for achieving all milestones of the Company

 

 
 

 

Exhibit B

 

COMPENSATION

 

Time Commitment :

 

At least 15 days/month.

 

Cash Compensation :

 

Consultant shall be paid a monthly payment of $15,000, of which $7,500 shall be payable on the 15 th of each month and the remaining $7,500 shall be payable on the last day of each month.

 

Stock Options

 

Subject to the approval of the Board of Directors, Consultant will be granted warrants (the “ Warrant ”) to purchase 3% of the Company’s fully diluted shares of $0.001 par value per share Common Stock outstanding as of the date of closing of that certain merger of Bone Biologics Acquisition Corp. with and into Bone Biologics, Inc. pursuant to which Bone Biologics, Inc. will survive and become a wholly-owned subsidiary of the Company at a strike price of $1.00 per share consistent with other warrants issued at closing of the merger. The Warrant will vest over a two-year period from the Effective Date subject to Consultant’s continued Service , with 33.33% of the shares subject to the Warrant becoming vested and exercisable on the date that this Agreement is executed, 33.33% of the shares subject to the Warrant becoming vested and exercisable on the date that is twelve (12) months after the Effective Date.and 33.34% of the shares subject to the Option vesting and becoming exercisable on the date that is twenty-four (24) months after the Effective Date;, however, that all unvested shares subject to the Warrant (and any additional equity awards hereafter issued by the Company to Consultant ) shall fully vest and be exercisable if Consultant’s Service ceases as a result of a Termination without Cause occurring on or within twelve (12) months after a Change in Control (as defined in the Option Plan)).

 

 
 

 

 

BONE BIOLOGICS, CORP.

 

2014 STOCK PLAN

 

 
 

 

Table of Contents

 

    Page
1. Establishment, Purpose and Term of Plan 1
     
  1.1 Establishment 1
  1.2 Purpose 1
  1.3 Term of Plan 1
       
2. Definitions and Construction 1
       
  2.1 Definitions 1
  2.2 Construction 8
       
3. Administration 8
     
  3.1 Administration by the Committee 8
  3.2 Authority of Officers 9
  3.3 Administration with Respect to Insiders 9
  3.4 Committee Complying with Section 162(m) 9
  3.5 Powers of the Committee 9
  3.6 Option or SAR Repricing 10
  3.7 Indemnification 10
       
4. Shares Subject to Plan 11
     
  4.1 Maximum Number of Shares Issuable 11
  4.2 Annual Increase in Maximum Number of Shares Issuable 11
  4.3 Share Counting 11
  4.4 Adjustments for Changes in Capital Structure 11
  4.5 Assumption or Substitution of Awards 12
       
5. Eligibility, Participation and Award Limitations 12
     
  5.1 Persons Eligible for Awards 12
  5.2 Participation in the Plan 12
  5.3 Award Limitations 12
       
6. Stock Options 13
     
  6.1 Exercise Price 13
  6.2 Exercisability and Term of Options 14
  6.3 Payment of Exercise Price 14
  6.4 Effect of Termination of Service 15
  6.5 Transferability of Options 16

 

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Table of Contents

(continued)

 

    Page
7. Stock Appreciation Rights 16
     
  7.1 Types of SARs Authorized 16
  7.2 Exercise Price 16
  7.3 Exercisability and Term of SARs 17
  7.4 Exercise of SARs 17
  7.5 Deemed Exercise of SARs 18
  7.6 Effect of Termination of Service 18
  7.7 Transferability of SARs 18
       
8. Restricted Stock Awards 18
     
  8.1 Types of Restricted Stock Awards Authorized 18
  8.2 Purchase Price 18
  8.3 Purchase Period 19
  8.4 Payment of Purchase Price 19
  8.5 Vesting and Restrictions on Transfer 19
  8.6 Voting Rights; Dividends and Distributions 19
  8.7 Effect of Termination of Service 20
  8.8 Nontransferability of Restricted Stock Award Rights 20
       
9. Restricted Stock Unit Awards 20
     
  9.1 Grant of Restricted Stock Unit Awards 20
  9.2 Purchase Price 20
  9.3 Vesting 21
  9.4 Voting Rights, Dividend Equivalent Rights and Distributions 21
  9.5 Effect of Termination of Service 22
  9.6 Settlement of Restricted Stock Unit Awards 22
  9.7 Nontransferability of Restricted Stock Unit Awards 22
       
10. Performance Awards 22
     
  10.1 Types of Performance Awards Authorized 22
  10.2 Initial Value of Performance Shares and Performance Units 22
  10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula 23
  10.4 Measurement of Performance Goals 23
  10.5 Settlement of Performance Awards 25
  10.6 Voting Rights; Dividend Equivalent Rights and Distributions 26
  10.7 Effect of Termination of Service 27
  10.8 Nontransferability of Performance Awards 27

 

- ii -
 

 

Table of Contents

(continued)

 

      Page
11. Cash-Based Awards and Other Stock-Based Awards 27
     
  11.1 Grant of Cash-Based Awards 27
  11.2 Grant of Other Stock-Based Awards 28
  11.3 Value of Cash-Based and Other Stock-Based Awards 28
  11.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards 28
  11.5 Voting Rights; Dividend Equivalent Rights and Distributions 28
  11.6 Effect of Termination of Service 29
  11.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards 29
       
12. Deferred Compensation Awards 29
     
  12.1 Establishment of Deferred Compensation Award Programs 29
  12.2 Terms and Conditions of Deferred Compensation Awards 29
       
13. Standard Forms of Award Agreement 30
     
  13.1 Award Agreements 30
  13.2 Authority to Vary Terms 30
       
14. Change in Control  30
     
  14.1 Effect of Change in Control on Awards 30
  14.2 Effect of Change in Control on Nonemployee Director Awards 31
  14.3 Federal Excise Tax Under Section 4999 of the Code 32
       
15. Compliance with Securities Law 32
       
16. Compliance with Section 409A 33
       
  16.1 Awards Subject to Section 409A 33
  16.2 Deferral and/or Distribution Elections 33
  16.3 Subsequent Elections 34
  16.4 Payment of Section 409A Deferred Compensation 34
       
17. Tax Withholding 36
     
  17.1 Tax Withholding in General  36
  17.2 Withholding in or Directed Sale of Shares 36
       
18. Amendment, Suspension or Termination of Plan 37
       
19. Miscellaneous Provisions 37
     
  19.1 Repurchase Rights 37
  19.2 Forfeiture Events 37
  19.3 Provision of Information 38
  19.4 Rights as Employee, Consultant or Director 38
  19.5 Rights as a Shareholder 38
  19.6 Delivery of Title to Shares 38
  19.7 Fractional Shares 38
  19.8 Retirement and Welfare Plans 38
  19.9 Beneficiary Designation 39
  19.10 Severability 39
  19.11 No Constraint on Corporate Action 39
  19.12 Unfunded Obligation 39
  19.13 Choice of Law 39

 

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BONE BIOLOGICS, CORP.

 

2014 Stock Plan

 

1. Establishment, Purpose and Term of Plan .

 

1.1 Establishment . The Bone Biologics, Corp. 2014 Stock Plan (the “ Plan ”) was approved by the Board on September 19, 2014, and shall be subject to approval by the shareholders of the Company at which time it shall become effective (the “ Effective Date ”).

 

1.2 Purpose . The purpose of the Plan is to advance the interests of the Participating Company Group and its shareholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan seeks to achieve this purpose by providing for Awards in the form of Options, Stock Appreciation Rights, Restricted Stock Purchase Rights, Restricted Stock Bonuses, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, Other Stock-Based Awards, and Deferred Compensation Awards.

 

1.3 Term of Plan. The Plan shall continue in effect until its termination by the Committee; provided, however, that all Awards shall be granted, if at all, on or before ten (10) years from the earlier of the Plan’s adoption by the Board and its approval by the shareholders of the Company.

 

2. Definitions and Construction .

 

2.1 Definitions. Whenever used herein, the following terms shall have their respective meanings set forth below:

 

(a) “ Affiliate ” means (i) a parent entity, other than a Parent Corporation, that directly, or indirectly through one or more intermediary entities, controls the Company or (ii) a subsidiary entity, other than a Subsidiary Corporation, that is controlled by the Company directly or indirectly through one or more intermediary entities. For this purpose, the terms “parent,” “subsidiary,” “control” and “controlled by” shall have the meanings assigned such terms for the purposes of registration of securities on Form S-8 under the Securities Act.

 

(b) “ Award ” means any Option, Stock Appreciation Right, Restricted Stock Purchase Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award, Other Stock-Based Award or Deferred Compensation Award granted under the Plan.

 

(c) “ Award Agreement ” means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions applicable to an Award.

 

(d) “ Board ” means the Board of Directors of the Company.

 

 
 

 

(e) “ Cash-Based Award ” means an Award denominated in cash and granted pursuant to Section 11.

 

(f) “ Cashless Exercise ” means a Cashless Exercise as defined in Section 6.3(b)(i).

 

(g) “ Cause ” means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between a Participant and a Participating Company applicable to an Award, any of the following: (i) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of the Participant with respect to the Participant’s obligations or otherwise relating to the business of the Participating Company Group; (ii) any acts or conduct by the Participant that are materially adverse to the Participating Company Group’s interests; (iii) the Participant’s material breach of Company’s Employee Proprietary Information and Inventions Agreement, if any; (iv) the Participant’s conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude or that otherwise materially negatively impacts the Participant’s ability to effectively perform the Participant’s duties; (v) the Participant’s willful neglect of duties as determined in the good faith discretion of the Board (provided that poor performance and/or subpar results by themselves do not constitute Cause); or (vi) the winding down of the Company’s business and/or dissolution or liquidation of Company (other than in connection with a Change in Control).

 

(h) “ Change in Control ” means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between the Participant and a Participating Company applicable to an Award, the occurrence of any one or a combination of the following:

 

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total Fair Market Value or total combined voting power of the Company’s then-outstanding securities entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall not be deemed to have occurred if such degree of beneficial ownership results from any of the following: (A) an acquisition by any person who on the Effective Date is the beneficial owner of more than fifty percent (50%) of such voting power, (B) any acquisition directly from the Company, including, without limitation, pursuant to or in connection with a public offering of securities, (C) any acquisition by the Company, (D) any acquisition by a trustee or other fiduciary under an employee benefit plan of a Participating Company or (E) any acquisition by an entity owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or

 

(ii) an Ownership Change Event or series of related Ownership Change Events (collectively, a “ Transaction ”) in which the shareholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities entitled to vote generally in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1(ff)(iii), the entity to which the assets of the Company were transferred (the “ Transferee ”), as the case may be; or

 

2
 

 

(iii) approval by the shareholders of a plan of complete liquidation or dissolution of the Company;

 

provided, however, that a Change in Control shall be deemed not to include a transaction described in subsections (i) or (ii) of this Section 2.1(h) in which a majority of the members of the board of directors of the continuing, surviving or successor entity, or parent thereof, immediately after such transaction is comprised of Incumbent Directors.

 

For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Committee shall determine whether multiple acquisitions of the voting securities of the Company and/or multiple Ownership Change Events are related and to be treated in the aggregate as a single Change in Control, and its determination shall be final, binding and conclusive.

 

(i) “ Code ” means the Internal Revenue Code of 1986, as amended, and any applicable regulations or administrative guidelines promulgated thereunder.

 

(j) “ Committee ” means the Compensation Committee and such other committee or subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. If, at any time, there is no committee of the Board then authorized or properly constituted to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.

 

(k) “ Company ” means Bone Biologics, Corp., a Nevada corporation, or any successor corporation thereto.

 

(l) “ Consultant ” means a person engaged to provide consulting or advisory services (other than as an Employee or a member of the Board) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on registration on Form S-8 under the Securities Act.

 

(m) “ Covered Employee ” means, at any time the Plan is subject to Section 162(m), any Employee who is or may reasonably be expected to become a “covered employee” as defined in Section 162(m), or any successor statute, and who is designated, either as an individual Employee or a member of a class of Employees, by the Committee no later than the earlier of (i) the date that is ninety (90) days after the beginning of the Performance Period, or (ii) the date on which twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered Employee” under this Plan for such applicable Performance Period.

 

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(n) “ Deferred Compensation Award ” means an Award granted to a Participant pursuant to Section 12.

 

(o) “ Director ” means a member of the Board.

 

(p) “ Disability ” means the permanent and total disability of the Participant, within the meaning of Section 22(e)(3) of the Code.

 

(q) “ Dividend Equivalent Right ” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash dividends paid on one share of Stock for each share of Stock represented by an Award held by such Participant.

 

(r) “ Employee ” means any person treated as an employee (including an Officer or a member of the Board who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a member of the Board nor payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan. The Company shall determine in good faith and in the exercise of its discretion, whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be. For purposes of an individual’s rights, if any, under the terms of the Plan as of the time of the Company’s determination of whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individual’s status as an Employee.

 

(s) “ ERISA ” means the Employee Retirement Income Security Act of 1974 and any applicable regulations or administrative guidelines promulgated thereunder.

 

(t) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

(u) “ Fair Market Value ” means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:

 

(i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock as quoted on the national or regional securities exchange or quotation system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or quotation system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded or quoted prior to the relevant date, or such other appropriate day as shall be determined by the Committee, in its discretion.

 

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(ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair Market Value of a share of Stock on the basis of the opening, closing, or average of the high and low sale prices of a share of Stock on such date or the preceding trading day, the actual sale price of a share of Stock received by a Participant, any other reasonable basis using actual transactions in the Stock as reported on a national or regional securities exchange or quotation system, or on any other basis consistent with the requirements of Section 409A. The Committee may vary its method of determination of the Fair Market Value as provided in this Section for different purposes under the Plan to the extent consistent with the requirements of Section 409A.

 

(iii) If, on such date, the Stock is not listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be as determined by the Committee in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse, and in a manner consistent with the requirements of Section 409A.

 

(v) “ Incentive Stock Option ” means an Option intended to be (as set forth in the Award Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.

 

(w) “ Incumbent Director ” means a director who either (i) is a member of the Board as of the Effective Date or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but excluding a director who was elected or nominated in connection with an actual or threatened proxy contest relating to the election of directors of the Company).

 

(x) “ Insider ” means an Officer, Director or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act.

 

(y) “ Net Exercise ” means a Net Exercise as defined in Section 6.3(b)(iii).

 

(z) “ Nonemployee Director ” means a Director who is not an Employee.

 

(aa) “ Nonemployee Director Award ” means any Award granted to a Nonemployee Director.

 

(bb) “ Nonstatutory Stock Option ” means an Option not intended to be (as set forth in the Award Agreement) or which does not qualify as an incentive stock option within the meaning of Section 422(b) of the Code.

 

(cc) “ Officer ” means any person designated by the Board as an officer of the Company.

 

(dd) “ Option ” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.

 

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(ee) “ Other Stock-Based Award ” means an Award denominated in shares of Stock and granted pursuant to Section 11.

 

(ff) “ Ownership Change Event ” means the occurrence of any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the shareholders of the Company of securities of the Company representing more than fifty percent (50%) of the total combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of Directors; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).

 

(gg) “ Parent Corporation ” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.

 

(hh) “ Participant ” means any eligible person who has been granted one or more Awards.

 

(ii) “ Participating Company ” means the Company or any Parent Corporation, Subsidiary Corporation or Affiliate.

 

(jj) “ Participating Company Group ” means, at any point in time, the Company and all other entities collectively which are then Participating Companies.

 

(kk) “ Performance Award ” means an Award of Performance Shares or Performance Units.

 

(ll) “ Performance Award Formula ” means, for any Performance Award, a formula or table established by the Committee pursuant to Section 10.3 which provides the basis for computing the value of a Performance Award at one or more levels of attainment of the applicable Performance Goal(s) measured as of the end of the applicable Performance Period.

 

(mm) “ Performance-Based Compensation ” means compensation under an Award that satisfies the requirements of Section 162(m) for certain performance-based compensation paid to Covered Employees.

 

(nn) “ Performance Goal ” means a performance goal established by the Committee pursuant to Section 10.3.

 

(oo) “ Performance Period ” means a period established by the Committee pursuant to Section 10.3 at the end of which one or more Performance Goals are to be measured.

 

(pp) “ Performance Share ” means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Share, as determined by the Committee, based upon attainment of applicable Performance Goal(s).

 

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(qq) “ Performance Unit ” means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Unit, as determined by the Committee, based upon attainment of applicable Performance Goal(s).

 

(rr) “ Restricted Stock Award ” means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase Right.

 

(ss) “ Restricted Stock Bonus ” means Stock granted to a Participant pursuant to Section 8.

 

(tt) “ Restricted Stock Purchase Right ” means a right to purchase Stock granted to a Participant pursuant to Section 8.

 

(uu) “ Restricted Stock Unit ” means a right granted to a Participant pursuant to Section 9 to receive on a future date or event a share of Stock or cash in lieu thereof, as determined by the Committee.

 

(vv) “ Rule 16b-3 ” means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.

 

(ww) “ SAR ” or “ Stock Appreciation Right ” means a right granted to a Participant pursuant to Section 7 to receive payment, for each share of Stock subject to such Award, of an amount equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the Award over the exercise price thereof.

 

(xx) “ Section 162(m) ” means Section 162(m) of the Code.

 

(yy) “ Section 409A ” means Section 409A of the Code.

 

(zz) “ Section 409A Deferred Compensation ” means compensation provided pursuant to an Award that constitutes nonqualified deferred compensation within the meaning of Section 409A.

 

(aaa) “ Securities Act ” means the Securities Act of 1933, as amended.

 

(bbb) “ Service ” means a Participant’s employment or service with the Participating Company Group, whether as an Employee, a Director or a Consultant. Unless otherwise provided by the Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders such Service or a change in the Participating Company for which the Participant renders such Service, provided that there is no interruption or termination of the Participant’s Service. Furthermore, a Participant’s Service shall not be deemed to have been interrupted or terminated if the Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company. However, unless otherwise provided by the Committee, if any such leave taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such leave the Participant’s Service shall be deemed to have terminated, unless the Participant’s right to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, an unpaid leave of absence shall not be treated as Service for purposes of determining vesting under the Participant’s Award Agreement. A Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the business entity for which the Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination.

 

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(ccc) “ Stock ” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.4.

 

(ddd) “ Stock Tender Exercise ” means a Stock Tender Exercise as defined in Section 6.3(b)(ii).

 

(eee) “ Subsidiary Corporation ” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.

 

(fff) “ Ten Percent Owner ” means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.

 

(ggg) “ Trading Compliance Policy ” means the written policy of the Company pertaining to the purchase, sale, transfer or other disposition of the Company’s equity securities by Directors, Officers, Employees or other service providers who may possess material, nonpublic information regarding the Company or its securities.

 

(hhh) “ Vesting Conditions ” mean those conditions established in accordance with the Plan prior to the satisfaction of which an Award or shares subject to an Award remain subject to forfeiture or a repurchase option in favor of the Company exercisable for the Participant’s monetary purchase price, if any, for such shares upon the Participant’s termination of Service.

 

2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

 

3. Administration .

 

3.1 Administration by the Committee. The Plan shall be administered by the Committee. All questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein. All expenses incurred in the administration of the Plan shall be paid by the Company.

 

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3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided that the Officer has apparent authority with respect to such matter, right, obligation, determination or election.

 

3.3 Administration with Respect to Insiders. With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3.

 

3.4 Committee Complying with Section 162(m). If the Company is a “publicly held corporation” within the meaning of Section 162(m), the Board may establish a Committee of “outside directors” within the meaning of Section 162(m) to approve the grant of any Award intended to result in the payment of Performance-Based Compensation.

 

3.5 Powers of the Committee . In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:

 

(a) to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Stock, units or monetary value to be subject to each Award;

 

(b) to determine the type of Award granted;

 

(c) to determine the Fair Market Value of shares of Stock or other property;

 

(d) to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the Performance Measures, Performance Period, Performance Award Formula and Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (vi) the time of the expiration of any Award, (vii) the effect of the Participant’s termination of Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;

 

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(e) to determine whether an Award will be settled in shares of Stock, cash, other property or in any combination thereof;

 

(f) to approve one or more forms of Award Agreement;

 

(g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any shares acquired pursuant thereto;

 

(h) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any shares acquired pursuant thereto, including with respect to the period following a Participant’s termination of Service;

 

(i) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose citizens may be granted Awards; and

 

(j) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law.

 

3.6 Option or SAR Repricing . Without the affirmative vote of holders of a majority of the shares of Stock cast in person or by proxy at a meeting of the shareholders of the Company at which a quorum representing a majority of all outstanding shares of Stock is present or represented by proxy, the Committee shall not approve a program providing for either (a) the cancellation of outstanding Options or SARs having exercise prices per share greater than the then Fair Market Value of a share of Stock (“ Underwater Awards ”) and the grant in substitution therefore of new Options or SARs having a lower exercise price, Full Value Awards, or payments in cash, or (b) the amendment of outstanding Underwater Awards to reduce the exercise price thereof. This Section shall not apply to adjustments pursuant to the assumption of or substitution for an Option or SAR in a manner that would comply with Section 424(a) or Section 409A of the Code or to an adjustment pursuant to Section 4.4.

 

3.7 Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, to the extent permitted by applicable law, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.

 

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4. Shares Subject to Plan .

 

4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Sections 4.2 and 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to Awards shall be equal to 2,642,898 and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.

 

4.2 Annual Increase in Maximum Number of Shares Issuable . Subject to adjustment as provided in Section 4.4, the maximum aggregate number of shares of Stock that may be issued under the Plan as set forth in Section 4.1 may be increased by the Board in January 2015, and on each subsequent January through and including January 2024, by up to the number of shares of Stock equal to 5% of the number of shares of Stock issued and outstanding on the immediately preceding December 31.

 

4.3 Share Counting. If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an amount not greater than the Participant’s purchase price, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be available for issuance under the Plan. Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash . Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations applicable to SARs and Options pursuant to Section 17.2 shall not again be available for issuance under the Plan. Upon payment in shares of Stock pursuant to the exercise of an SAR, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the SAR is exercised. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant, or by means of a Net-Exercise, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised.

 

4.4 Adjustments for Changes in Capital Structure . Subject to any required action by the shareholders of the Company and the requirements of Sections 409A and 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the shareholders of the Company in a form other than Stock (excepting regular, periodic cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards, the Award limits set forth in Section 5.3, and in the exercise or purchase price per share under any outstanding Award in order to prevent dilution or enlargement of Participants’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the “ New Shares ”), the Committee may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise or purchase price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number, and in no event may the exercise or purchase price under any Award be decreased to an amount less than the par value, if any, of the stock subject to such Award. The Committee in its discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate, including modification of Performance Goals, Performance Award Formulas and Performance Periods. The adjustments determined by the Committee pursuant to this Section shall be final, binding and conclusive.

 

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4.5 Assumption or Substitution of Awards. The Committee may, without affecting the number of shares of Stock reserved or available hereunder, authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A and any other applicable provisions of the Code.

 

5. Eligibility, Participation and Award Limitations .

 

5.1 Persons Eligible for Awards. Awards may be granted only to Employees, Consultants and Directors.

 

5.2 Participation in the Plan. Awards are granted solely at the discretion of the Committee. Eligible persons may be granted more than one Award. However, eligibility in accordance with this Section shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.

 

5.3 Award Limitations.

 

(a) Incentive Stock Option Limitations.

 

(i) Maximum Number of Shares Issuable Pursuant to Incentive Stock Options. Subject to adjustment as provided in Sections 4.2 and 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed 2,642,898.

 

(ii) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an “ ISO-Qualifying Corporation ”). Any person who is not an Employee of an ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option.

 

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(iii) Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options (granted under all stock option plans of the Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a limitation different from that set forth in this Section, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Upon exercise, shares issued pursuant to each such portion shall be separately identified.

 

(b) Section 162(m) Award Limits . Subject to adjustment as provided in Section 4.4, no Employee shall be granted within any fiscal year of the Company one or more Awards intended to qualify for treatment as Performance-Based Compensation which in the aggregate are for more than 500,000 shares or, if applicable, which could result in such Employee receiving more than $2,000,000 for each full fiscal year of the Company contained in the Performance Period for such Award. Notwithstanding the foregoing, with respect to a newly hired Participant, the share limit set forth above shall be 1,000,000. With respect to an Award of Performance Based Compensation payable in cash, the maximum amount shall be $3,000,000 for each fiscal year contained in the Performance Period.

 

6. Stock Options .

 

Options shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee shall from time to time establish. Award Agreements evidencing Options may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

6.1 Exercise Price. The exercise price for each Option shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner that would qualify under the provisions of Section 409A or 424(a) of the Code.

 

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6.2 Exercisability and Term of Options. Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option and (c) no Option granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable until at least six (6) months following the date of grant of such Option (except in the event of such Employee’s death, disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act). Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, each Option shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.

 

6.3 Payment of Exercise Price.

 

(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or in cash equivalent; (ii) if permitted by the Committee and subject to the limitations contained in Section 6.3(b), by means of (1) a Cashless Exercise, (2) a Stock Tender Exercise or (3) a Net Exercise; (iii) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (iv) by any combination thereof. The Committee may at any time or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.

 

(b) Limitations on Forms of Consideration.

 

(i) Cashless Exercise. A “ Cashless Exercise ” means the delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise, including with respect to one or more Participants specified by the Company notwithstanding that such program or procedures may be available to other Participants.

 

(ii) Stock Tender Exercise. A “ Stock Tender Exercise ” means the delivery of a properly executed exercise notice accompanies by a Participant’s tender to the Company, or attestation to the ownership, in a form acceptable to the Company of whole shares of Stock owned by the Participant having a Fair Market Value that does not exceed the aggregate exercise price for the shares with respect to which the Option is exercised. A Stock Tender Exercise shall not be permitted if it would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. If required by the Company, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.

 

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(iii) Net Exercise. A “ Net Exercise ” means the delivery of a properly executed exercise notice followed by a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to a Participant upon the exercise of an Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate exercise price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued.

 

6.4 Effect of Termination of Service.

 

(a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided by this Plan and unless otherwise provided by the Committee, an Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall terminate. Except as otherwise provided in the Award Agreement, or other agreement governing the Option, vested Options shall remain exercisable following a termination of Service as follows:

 

(i) Disability. If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the date of expiration of the Option’s term as set forth in the Award Agreement evidencing such Option (the “ Option Expiration Date ”).

 

(ii) Death. If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participant’s termination of Service.

 

(iii) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the Participant’s Service is terminated for Cause or if, following the Participant’s termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.

 

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(iv) Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of ninety (90) days after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.

 

(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than termination of Service for Cause, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 15 below, the Option shall remain exercisable until the later of (i) thirty (30) days after the date such exercise first would no longer be prevented by such provisions or (ii) the end of the applicable time period under Section 6.4(a), but in any event no later than the Option Expiration Date.

 

6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. An Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option, a Nonstatutory Stock Option may be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act. An Incentive Stock Option shall not be assignable or transferable in any manner.

 

7. Stock Appreciation Rights .

 

Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing SARs may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a related Option (a “ Tandem SAR ”) or may be granted independently of any Option (a “ Freestanding SAR ”). A Tandem SAR may only be granted concurrently with the grant of the related Option.

 

7.2 Exercise Price. The exercise price for each SAR shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR shall be the exercise price per share under the related Option and (b) the exercise price per share subject to a Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the SAR. Notwithstanding the foregoing, a SAR may be granted with an exercise price lower than the minimum exercise price set forth above if such SAR is granted pursuant to an assumption or substitution for another stock appreciation right in a manner that would qualify under the provisions of Section 409A of the Code.

 

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7.3 Exercisability and Term of SARs.

 

(a) Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent, and only to the extent, that the related Option is exercisable, subject to such provisions as the Committee may specify where the Tandem SAR is granted with respect to less than the full number of shares of Stock subject to the related Option. The Committee may, in its discretion, provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised without the advance approval of the Company and, if such approval is not given, then the Option shall nevertheless remain exercisable in accordance with its terms. A Tandem SAR shall terminate and cease to be exercisable no later than the date on which the related Option expires or is terminated or canceled. Upon the exercise of a Tandem SAR with respect to some or all of the shares subject to such SAR, the related Option shall be canceled automatically as to the number of shares with respect to which the Tandem SAR was exercised. Upon the exercise of an Option related to a Tandem SAR as to some or all of the shares subject to such Option, the related Tandem SAR shall be canceled automatically as to the number of shares with respect to which the related Option was exercised.

 

(b) Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR; provided, however, that (i) no Freestanding SAR shall be exercisable after the expiration of ten (10) years after the effective date of grant of such SAR, and (ii) no Freestanding SAR granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable until at least six (6) months following the date of grant of such SAR (except in the event of such Employee’s death, disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act). Subject to the foregoing, unless otherwise specified by the Committee in the grant of a Freestanding SAR, each Freestanding SAR shall terminate ten (10) years after the effective date of grant of the SAR, unless earlier terminated in accordance with its provisions.

 

7.4 Exercise of SARs. Upon the exercise (or deemed exercise pursuant to Section 7.5) of an SAR, the Participant (or the Participant’s legal representative or other person who acquired the right to exercise the SAR by reason of the Participant’s death) shall be entitled to receive payment of an amount for each share with respect to which the SAR is exercised equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price. Payment of such amount shall be made (a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum upon the date of exercise of the SAR and (b) in the case of a Freestanding SAR, in cash, shares of Stock, or any combination thereof as determined by the Committee, in a lump sum upon the date of exercise of the SAR. When payment is to be made in shares of Stock, the number of shares to be issued shall be determined on the basis of the Fair Market Value of a share of Stock on the date of exercise of the SAR. For purposes of Section 7, an SAR shall be deemed exercised on the date on which the Company receives notice of exercise from the Participant or as otherwise provided in Section 7.5.

 

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7.5 Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or expire, the SAR by its terms remains exercisable immediately prior to such termination or expiration and, if so exercised, would result in a payment to the holder of such SAR, then any portion of such SAR which has not previously been exercised shall automatically be deemed to be exercised as of such date with respect to such portion pursuant to a Net Exercise procedure and withholding of Shares as described in Section 17.2.

 

7.6 Effect of Termination of Service. Subject to earlier termination of the SAR as otherwise provided herein and unless otherwise provided by the Committee, an SAR shall be exercisable after a Participant’s termination of Service only to the extent and during the applicable time period determined in accordance with Section 6.4 (treating the SAR as if it were an Option) and thereafter shall terminate.

 

7.7 Transferability of SARs. During the lifetime of the Participant, an SAR shall be exercisable only by the Participant or the Participant’s guardian or legal representative. An SAR shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Award, a Tandem SAR related to a Nonstatutory Stock Option or a Freestanding SAR may be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act.

 

8. Restricted Stock Awards .

 

Restricted Stock Awards shall be evidenced by Award Agreements specifying whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

8.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted in the form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of or satisfaction of Vesting Conditions applicable to a Restricted Stock Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).

 

8.2 Purchase Price. The purchase price for shares of Stock issuable under each Restricted Stock Purchase Right shall be established by the Committee in its discretion. No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving shares of Stock pursuant to a Restricted Stock Bonus, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock subject to a Restricted Stock Award.

 

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8.3 Purchase Period. A Restricted Stock Purchase Right shall be exercisable within a period established by the Committee, which shall in no event exceed thirty (30) days from the effective date of the grant of the Restricted Stock Purchase Right.

 

8.4 Payment of Purchase Price. Except as otherwise provided below, payment of the purchase price for the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in cash, by check or in cash equivalent, (b) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (c) by any combination thereof.

 

8.5 Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Stock Award may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. During any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event or as provided in Section 8.8. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to such Restricted Stock Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then satisfaction of the Vesting Conditions automatically shall be determined on the next trading day on which the sale of such shares would not violate the Trading Compliance Policy. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

 

8.6 Voting Rights; Dividends and Distributions. Except as provided in this Section, Section 8.5 and any Award Agreement, during any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, the Participant shall have all of the rights of a shareholder of the Company holding shares of Stock, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares; provided, however, unless otherwise determined by the Committee and provided by the Award Agreement, such dividends and distributions shall be subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid, and otherwise shall be paid no later than the end of the calendar year in which such dividends or distributions are paid to shareholders (or, if later, the 15th day of the third month following the date such dividends or distributions are paid to shareholders). In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant is entitled by reason of the Participant’s Restricted Stock Award shall be immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made.

 

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8.7 Effect of Termination of Service. Unless otherwise provided by the Committee in the Award Agreement evidencing a Restricted Stock Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then (a) the Company shall have the option to repurchase for the purchase price paid by the Participant any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service and (b) the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to a Restricted Stock Bonus which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.

 

8.8 Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock pursuant to a Restricted Stock Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

 

9. Restricted Stock Unit Awards . Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of Restricted Stock Units subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Units may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

9.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of a Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).

 

9.2 Purchase Price. No monetary payment (other than applicable tax withholding, if any) shall be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Restricted Stock Unit Award.

 

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9.3 Vesting. Restricted Stock Unit Awards may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Unit Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to the Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then the satisfaction of the Vesting Conditions automatically shall be determined on the first to occur of (a) the next trading day on which the sale of such shares would not violate the Trading Compliance Policy or (b) the later of (i) last day of the calendar year in which the original vesting date occurred or (ii) the last day of the Company’s taxable year in which the original vesting date occurred.

 

9.4 Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid by crediting the Participant with a cash amount with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Stock as determined by the Committee. The number of additional Restricted Stock Units (rounded to the nearest whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on such date with respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Such additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time as the Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, appropriate adjustments shall be made in the Participant’s Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions as are applicable to the Award.

 

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9.5 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Restricted Stock Unit Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then the Participant shall forfeit to the Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service.

 

9.6 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award vest or on such other date determined by the Committee, in its discretion, and set forth in the Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 9.4) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes, if any. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section, and such deferred issuance date(s) and amount(s) elected by the Participant shall be set forth in the Award Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may provide for settlement of any Restricted Stock Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section.

 

9.7 Nontransferability of Restricted Stock Unit Awards. The right to receive shares pursuant to a Restricted Stock Unit Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Restricted Stock Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

 

10. Performance Awards . Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements evidencing Performance Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

10.1 Types of Performance Awards Authorized. Performance Awards may be granted in the form of either Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall specify the number of Performance Shares or Performance Units subject thereto, the Performance Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the other terms, conditions and restrictions of the Award.

 

10.2 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by the Committee in granting a Performance Award, each Performance Share shall have an initial monetary value equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in Section 4.4, on the effective date of grant of the Performance Share, and each Performance Unit shall have an initial monetary value established by the Committee at the time of grant. The final value payable to the Participant in settlement of a Performance Award determined on the basis of the applicable Performance Award Formula will depend on the extent to which Performance Goals established by the Committee are attained within the applicable Performance Period established by the Committee.

 

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10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In granting each Performance Award, the Committee shall establish in writing the applicable Performance Period, Performance Award Formula and one or more Performance Goals which, when measured at the end of the Performance Period, shall determine on the basis of the Performance Award Formula the final value of the Performance Award to be paid to the Participant. Unless otherwise permitted in compliance with the requirements under Section 162(m) with respect to each Performance Award intended to result in the payment of Performance-Based Compensation, the Committee shall establish the Performance Goal(s) and Performance Award Formula applicable to each Performance Award no later than the earlier of (a) the date ninety (90) days after the commencement of the applicable Performance Period or (b) the date on which 25% of the Performance Period has elapsed, and, in any event, at a time when the outcome of the Performance Goals remains substantially uncertain. Once established, the Performance Goals and Performance Award Formula applicable to a Covered Employee shall not be changed during the Performance Period. The Company shall notify each Participant granted a Performance Award of the terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award Formula.

 

10.4 Measurement of Performance Goals. Performance Goals shall be established by the Committee on the basis of targets to be attained (“ Performance Targets ”) with respect to one or more measures of business or financial performance (each, a “ Performance Measure ”), subject to the following:

 

(a) Performance Measures. Performance Measures shall be calculated in accordance with the Company’s financial statements, or, if such terms are not used in the Company’s financial statements, they shall be calculated in accordance with generally accepted accounting principles, a method used generally in the Company’s industry, or in accordance with a methodology established by the Committee prior to the grant of the Performance Award. Performance Measures shall be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial reporting purposes or such division or other business unit as may be selected by the Committee. Unless otherwise determined by the Committee prior to the grant of the Performance Award, the Performance Measures applicable to the Performance Award shall be calculated prior to the accrual of expense for any Performance Award for the same Performance Period and excluding the effect (whether positive or negative) on the Performance Measures of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the Performance Goals applicable to the Performance Award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Participant’s rights with respect to a Performance Award. Performance Measures may be one or more of the following, as determined by the Committee:

 

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(i) revenue;

 

(ii) sales;

 

(iii) expenses;

 

(iv) operating income;

 

(v) gross margin;

 

(vi) operating margin;

 

(vii) earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization;

 

(viii) pre-tax profit;

 

(ix) net operating income;

 

(x) net income;

 

(xi) economic value added;

 

(xii) free cash flow;

 

(xiii) operating cash flow;

 

(xiv) balance of cash, cash equivalents and marketable securities;

 

(xv) stock price;

 

(xvi) earnings per share;

 

(xvii) return on shareholder equity;

 

(xviii) return on capital;

 

(xix) return on assets;

 

(xx) return on investment;

 

(xxi) total shareholder return;

 

(xxii) employee satisfaction;

 

(xxiii) employee retention;

 

(xxiv) market share;

 

(xxv) customer satisfaction;

 

(xxvi) product development;

 

(xxvii) research and development expenses;

 

(xxviii) completion of an identified special project; and

 

(xxix) completion of a joint venture or other corporate transaction.

 

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(b) Performance Targets. Performance Targets may include a minimum, maximum, target level and intermediate levels of performance, with the final value of a Performance Award determined under the applicable Performance Award Formula by the level attained during the applicable Performance Period. A Performance Target may be stated as an absolute value, an increase or decrease in a value, or as a value determined relative to an index, budget or other standard selected by the Committee.

 

10.5 Settlement of Performance Awards.

 

(a) Determination of Final Value. As soon as practicable following the completion of the Performance Period applicable to a Performance Award, the Committee shall certify in writing the extent to which the applicable Performance Goals have been attained and the resulting final value of the Award earned by the Participant and to be paid upon its settlement in accordance with the applicable Performance Award Formula.

 

(b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award granted to any Participant who is not a Covered Employee to reflect such Participant’s individual performance in his or her position with the Company or such other factors as the Committee may determine. If permitted under a Covered Employee’s Award Agreement, the Committee shall have the discretion, on the basis of such criteria as may be established by the Committee, to reduce some or all of the value of the Performance Award that would otherwise be paid to the Covered Employee upon its settlement notwithstanding the attainment of any Performance Goal and the resulting value of the Performance Award determined in accordance with the Performance Award Formula. No such reduction may result in an increase in the amount payable upon settlement of another Participant’s Performance Award that is intended to result in Performance-Based Compensation.

 

(c) Effect of Leaves of Absence. Unless otherwise required by law or a Participant’s Award Agreement, payment of the final value, if any, of a Performance Award held by a Participant who has taken in excess of thirty (30) days in unpaid leaves of absence during a Performance Period shall be prorated on the basis of the number of days of the Participant’s Service during the Performance Period during which the Participant was not on an unpaid leave of absence.

 

(d) Notice to Participants. As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), the Company shall notify each Participant of the determination of the Committee.

 

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(e) Payment in Settlement of Performance Awards. As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), but in any event within the Short-Term Deferral Period described in Section 16.1 (except as otherwise provided below or consistent with the requirements of Section 409A), payment shall be made to each eligible Participant (or such Participant’s legal representative or other person who acquired the right to receive such payment by reason of the Participant’s death) of the final value of the Participant’s Performance Award. Payment of such amount shall be made in cash, shares of Stock, or a combination thereof as determined by the Committee. Unless otherwise provided in the Award Agreement evidencing a Performance Award, payment shall be made in a lump sum. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the payment to be made to the Participant pursuant to this Section, and such deferred payment date(s) elected by the Participant shall be set forth in the Award Agreement. If any payment is to be made on a deferred basis, the Committee may, but shall not be obligated to, provide for the payment during the deferral period of Dividend Equivalent Rights or interest.

 

(f) Provisions Applicable to Payment in Shares. If payment is to be made in shares of Stock, the number of such shares shall be determined by dividing the final value of the Performance Award by the Fair Market Value of a share of Stock determined by the method specified in the Award Agreement. Shares of Stock issued in payment of any Performance Award may be fully vested and freely transferable shares or may be shares of Stock subject to Vesting Conditions as provided in Section 8.5. Any shares subject to Vesting Conditions shall be evidenced by an appropriate Award Agreement and shall be subject to the provisions of Sections 8.5 through 8.8 above.

 

10.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Performance Share Awards until the date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Performance Share Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date the Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date on which the Performance Shares are settled or the date on which they are forfeited. Such Dividend Equivalent Rights, if any, shall be credited to the Participant either in cash or in the form of additional whole Performance Shares as of the date of payment of such cash dividends on Stock. The number of additional Performance Shares (rounded down to the nearest whole number); if any, as determined by the Committee to be so credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Performance Shares previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Dividend Equivalent Rights shall be accumulated and paid to the extent that Performance Shares become nonforfeitable, as determined by the Committee. Settlement of Dividend Equivalent Rights may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and may be paid on the same basis as settlement of the related Performance Share as provided in Section 10.5. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, appropriate adjustments shall be made in the Participant’s Performance Share Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Performance Share Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Performance Goals as are applicable to the Award.

 

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10.7 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Performance Award or in the Participant’s employment agreement, if any, referencing such Awards, the effect of a Participant’s termination of Service on the Performance Award shall be as follows:

 

(a) Death or Disability. If the Participant’s Service terminates because of the death or Disability of the Participant before the completion of the Performance Period applicable to the Performance Award, the final value of the Participant’s Performance Award shall be determined by the extent to which the applicable Performance Goals have been attained with respect to the entire Performance Period and shall be prorated based on the number of months of the Participant’s Service during the Performance Period. Payment shall be made following the end of the Performance Period in any manner permitted by Section 10.5.

 

(b) Other Termination of Service. If the Participant’s Service terminates for any reason except death or Disability before the completion of the Performance Period applicable to the Performance Award, such Award shall be forfeited in its entirety.

 

10.8 Nontransferability of Performance Awards. Prior to settlement in accordance with the provisions of the Plan, no Performance Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Performance Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

 

11. Cash-Based Awards and Other Stock-Based Awards . Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements evidencing Cash-Based Awards and Other Stock-Based Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

 

11.1 Grant of Cash-Based Awards . Subject to the provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms and conditions, including the achievement of performance criteria, as the Committee may determine.

 

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11.2 Grant of Other Stock-Based Awards . The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted securities, stock-equivalent units, stock appreciation units, securities or debentures convertible into common stock or other forms determined by the Committee) in such amounts and subject to such terms and conditions as the Committee shall determine. Other Stock-Based Awards may be made available as a form of payment in the settlement of other Awards or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may involve the transfer of actual shares of Stock to Participants, or payment in cash or otherwise of amounts based on the value of Stock and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

 

11.3 Value of Cash-Based and Other Stock-Based Awards . Each Cash-Based Award shall specify a monetary payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of shares of Stock or units based on such shares of Stock, as determined by the Committee. The Committee may require the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. If the Committee exercises its discretion to establish performance criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that will be paid to the Participant will depend on the extent to which the performance criteria are met. The establishment of performance criteria with respect to the grant or vesting of any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall follow procedures substantially equivalent to those applicable to Performance Awards set forth in Section 10.

 

11.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards . Payment or settlement, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash, shares of Stock or other securities or any combination thereof as the Committee determines. The determination and certification of the final value with respect to any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall comply with the requirements applicable to Performance Awards set forth in Section 10. To the extent applicable, payment or settlement with respect to each Cash-Based Award and Other Stock-Based Award shall be made in compliance with the requirements of Section 409A.

 

11.5 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Other Stock-Based Awards until the date of the issuance of such shares of Stock (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), if any, in settlement of such Award. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Other Stock-Based Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid in accordance with the provisions set forth in Section 9.4. Dividend Equivalent Rights shall not be granted with respect to Cash-Based Awards. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, appropriate adjustments shall be made in the Participant’s Other Stock-Based Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of such Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions and performance criteria, if any, as are applicable to the Award.

 

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11.6 Effect of Termination of Service . Each Award Agreement evidencing a Cash-Based Award or Other Stock-Based Award shall set forth the extent to which the Participant shall have the right to retain such Award following termination of the Participant’s Service. Such provisions shall be determined in the discretion of the Committee, need not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination, subject to the requirements of Section 409A, if applicable.

 

11.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards. Prior to the payment or settlement of a Cash-Based Award or Other Stock-Based Award, the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. The Committee may impose such additional restrictions on any shares of Stock issued in settlement of Cash-Based Awards and Other Stock-Based Awards as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such shares of Stock are then listed and/or traded, or under any state securities laws or foreign law applicable to such shares of Stock.

 

12. Deferred Compensation Awards .

 

12.1 Establishment of Deferred Compensation Award Programs . This Section 12 shall not be effective unless and until the Committee determines to establish a program pursuant to this Section. If the Committee determines that any such program may constitute an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA, the Committee shall adopt and implement such program through a separate subplan to this Plan. Eligibility to participate in such subplan shall be limited to Directors and a select group of management or highly compensated employees, and the Committee shall take all additional actions required to qualify such subplan as a “top-hat” unfunded deferred compensation plan, including filing with the U.S. Department of Labor within 120 days following the adoption of such subplan a notice pursuant to Department of Labor Regulations Section 2520.104-23.

 

12.2 Terms and Conditions of Deferred Compensation Awards . Deferred Compensation Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements evidencing Deferred Compensation Awards may incorporate all or any of the terms of the Plan by reference and, except as provided below, shall comply with and be subject to the terms and conditions applicable to the appropriate form of Award as set forth in the applicable section of this Plan.

 

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(a) Limitation on Elections. Notwithstanding any Participant’s prior election to reduce cash compensation pursuant to a program established in accordance with this Section 12, no Deferred Compensation Award may be granted to the Participant after termination of the Plan or termination of the Participant’s Service, and any such cash compensation shall be paid at the normal time and in accordance with the terms of the applicable cash compensation arrangement.

 

(b) Election Irrevocable. A Participant’s election to reduce cash compensation pursuant to a program established in accordance with this Section 12 shall become irrevocable on the last day of the calendar year prior to the year in which the services are to be rendered with respect to which such cash compensation would otherwise become payable, or at the time otherwise required by Section 409A.

 

(c) Vesting. Deferred Compensation Awards may be fully vested at grant or may be subject to such Vesting Conditions as the Committee determines.

 

13. Standard Forms of Award Agreement .

 

13.1 Award Agreements . Each Award shall comply with and be subject to the terms and conditions set forth in the appropriate form of Award Agreement approved by the Committee and as amended from time to time. No Award or purported Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement, which execution may be evidenced by electronic means.

 

13.2 Authority to Vary Terms . The Committee shall have the authority from time to time to vary the terms of any standard form of Award Agreement either in connection with the grant or amendment of an individual Award or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Award Agreement are not inconsistent with the terms of the Plan.

 

14. Change in Control .

 

14.1 Effect of Change in Control on Awards. Subject to the requirements and limitations of Section 409A, if applicable, the Committee may provide for any one or more of the following:

 

(a) Accelerated Vesting. In its discretion, the Committee may provide in the grant of any Award or at any other time may take such action as it deems appropriate to provide for acceleration of the exercisability, vesting and/or settlement in connection with a Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Participant’s Service prior to, upon, or following such Change in Control, and to such extent as the Committee shall determine.

 

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(b) Assumption, Continuation or Substitution. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “ Acquiror ”), may, without the consent of any Participant, assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable. For purposes of this Section, if so determined by the Committee in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. Any Award or portion thereof which is neither assumed, substituted for, or otherwise continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.

 

(c) Cash-Out of Outstanding Stock-Based Awards. The Committee may, in its discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award denominated in shares of Stock or portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced (but not below zero) by the exercise or purchase price per share, if any, under such Award. In the event such determination is made by the Committee, an Award having an exercise or purchase price per share equal to or greater than the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control may be canceled without payment of consideration to the holder thereof. Payment pursuant to this Section (reduced by applicable withholding taxes, if any) shall be made to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.

 

14.2 Effect of Change in Control on Nonemployee Director Awards. Subject to the requirements and limitations of Section 409A, if applicable, including as provided by Section 16.4(f), in the event of a Change in Control, each outstanding Nonemployee Director Award shall become immediately exercisable and vested in full and, except to the extent assumed, continued or substituted for pursuant to Section 14.1(b), shall be settled effective immediately prior to the time of consummation of the Change in Control.

 

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14.3 Federal Excise Tax Under Section 4999 of the Code.

 

(a) Excess Parachute Payment. In the event that any acceleration of vesting pursuant to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of such acceleration of vesting, payment or benefit as an “excess parachute payment” under Section 280G of the Code, the Participant may elect to reduce the amount of any acceleration of vesting called for under the Award in order to avoid such characterization.

 

(b) Determination by Independent Accountants. To aid the Participant in making any election called for under Section 14.3(a), no later than the date of the occurrence of any event that might reasonably be anticipated to result in an “excess parachute payment” to the Participant as described in Section 14.3(a), the Company shall request a determination in writing by independent public accountants selected by the Company (the “ Accountants ”). As soon as practicable thereafter, the Accountants shall determine and report to the Company and the Participant the amount of such acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit to the Participant. For the purposes of such determination, the Accountants may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make their required determination. The Company shall bear all fees and expenses the Accountants charge in connection with their services contemplated by this Section.

 

15. Compliance with Securities Law .

 

The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities and the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award unless (a) a registration statement under the Securities Act shall at the time of such exercise or issuance be in effect with respect to the shares issuable pursuant to the Award, or (b) in the opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to issuance of any Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

 

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16. Compliance with Section 409A .

 

16.1 Awards Subject to Section 409A. The Company intends that Awards granted pursuant to the Plan shall either be exempt from or comply with Section 409A, and the Plan shall be so construed. The provisions of this Section 16 shall apply to any Award or portion thereof that constitutes or provides for payment of Section 409A Deferred Compensation. Such Awards may include, without limitation:

 

(a) A Nonstatutory Stock Option or SAR that includes any feature for the deferral of compensation other than the deferral of recognition of income until the later of (i) the exercise or disposition of the Award or (ii) the time the stock acquired pursuant to the exercise of the Award first becomes substantially vested.

 

(b) Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other Stock-Based Award that either (i) provides by its terms for settlement of all or any portion of the Award at a time or upon an event that will or may occur later than the end of the Short-Term Deferral Period (as defined below) or (ii) permits the Participant granted the Award to elect one or more dates or events upon which the Award will be settled after the end of the Short-Term Deferral Period.

 

Subject to the provisions of Section 409A, the term “ Short-Term Deferral Period ” means the 2½ month period ending on the later of (i) the 15th day of the third month following the end of the Participant’s taxable year in which the right to payment under the applicable portion of the Award is no longer subject to a substantial risk of forfeiture or (ii) the 15th day of the third month following the end of the Company’s taxable year in which the right to payment under the applicable portion of the Award is no longer subject to a substantial risk of forfeiture. For this purpose, the term “substantial risk of forfeiture” shall have the meaning provided by Section 409A.

 

16.2 Deferral and/or Distribution Elections. Except as otherwise permitted or required by Section 409A, the following rules shall apply to any compensation deferral and/or payment elections (each, an “ Election ”) that may be permitted or required by the Committee pursuant to an Award providing Section 409A Deferred Compensation:

 

(a) Elections must be in writing and specify the amount of the payment in settlement of an Award being deferred, as well as the time and form of payment as permitted by this Plan.

 

(b) Elections shall be made by the end of the Participant’s taxable year prior to the year in which services commence for which an Award may be granted to such Participant.

 

(c) Elections shall continue in effect until a written revocation or change in Election is received by the Company, except that a written revocation or change in Election must be received by the Company prior to the last day for making the Election determined in accordance with paragraph (b) above or as permitted by Section 16.3.

 

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16.3 Subsequent Elections . Except as otherwise permitted or required by Section 409A, any Award providing Section 409A Deferred Compensation which permits a subsequent Election to delay the payment or change the form of payment in settlement of such Award shall comply with the following requirements:

 

(a) No subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made.

 

(b) Each subsequent Election related to a payment in settlement of an Award not described in Section 16.4(a)(ii), 16.4(a)(iii) or 16.4(a)(vi) must result in a delay of the payment for a period of not less than five (5) years from the date on which such payment would otherwise have been made.

 

(c) No subsequent Election related to a payment pursuant to Section 16.4(a)(iv) shall be made less than twelve (12) months before the date on which such payment would otherwise have been made.

 

(d) Subsequent Elections shall continue in effect until a written revocation or change in the subsequent Election is received by the Company, except that a written revocation or change in a subsequent Election must be received by the Company prior to the last day for making the subsequent Election determined in accordance the preceding paragraphs of this Section 16.3.

 

16.4 Payment of Section 409A Deferred Compensation .

 

(a) Permissible Payments. Except as otherwise permitted or required by Section 409A, an Award providing Section 409A Deferred Compensation must provide for payment in settlement of the Award only upon one or more of the following:

 

(i) The Participant’s “separation from service” (as defined by Section 409A);

 

(ii) The Participant’s becoming “disabled” (as defined by Section 409A);

 

(iii) The Participant’s death;

 

(iv) A time or fixed schedule that is either (i) specified by the Committee upon the grant of an Award and set forth in the Award Agreement evidencing such Award or (ii) specified by the Participant in an Election complying with the requirements of Section 16.2 or 16.3, as applicable;

 

(v) A change in the ownership or effective control or the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 409A; or

 

(vi) The occurrence of an “unforeseeable emergency” (as defined by Section 409A).

 

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(b) Installment Payments . It is the intent of this Plan that any right of a Participant to receive installment payments (within the meaning of Section 409A) shall, for all purposes of Section 409A, be treated as a right to a series of separate payments.

 

(c) Required Delay in Payment to Specified Employee Pursuant to Separation from Service. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, except as otherwise permitted by Section 409A, no payment pursuant to Section 16.4(a)(i) in settlement of an Award providing for Section 409A Deferred Compensation may be made to a Participant who is a “specified employee” (as defined by Section 409A) as of the date of the Participant’s separation from service before the date (the “ Delayed Payment Date ”) that is six (6) months after the date of such Participant’s separation from service, or, if earlier, the date of the Participant’s death. All such amounts that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.

 

(d) Payment Upon Disability. All distributions of Section 409A Deferred Compensation payable by reason of a Participant becoming disabled shall be paid in a lump sum or in periodic installments as established by the Participant’s Election. If the Participant has made no Election with respect to distributions of Section 409A Deferred Compensation upon becoming disabled, all such distributions shall be paid in a lump sum upon the determination that the Participant has become disabled.

 

(e) Payment Upon Death . If a Participant dies before complete distribution of amounts payable upon settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed to his or her beneficiary under the distribution method for death established by the Participant’s Election upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death. If the Participant has made no Election with respect to distributions of Section 409A Deferred Compensation upon death, all such distributions shall be paid in a lump sum upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death.

 

(f) Payment Upon Change in Control. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, to the extent that any amount constituting Section 409A Deferred Compensation would become payable under this Plan by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A. Any Award which constitutes Section 409A Deferred Compensation and which would vest and otherwise become payable upon a Change in Control as a result of the failure of the Acquiror to assume, continue or substitute for such Award in accordance with Section 14.1(b) shall vest to the extent provided by such Award but shall be converted automatically at the effective time of such Change in Control into a right to receive, in cash on the date or dates such award would have been settled in accordance with its then existing settlement schedule (or as required by Section 16.4(c)), an amount or amounts equal in the aggregate to the intrinsic value of the Award at the time of the Change in Control.

 

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(g) Payment Upon Unforeseeable Emergency. The Committee shall have the authority to provide in the Award Agreement evidencing any Award providing for Section 409A Deferred Compensation for payment in settlement of all or a portion of such Award in the event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an unforeseeable emergency. In such event, the amount(s) distributed with respect to such unforeseeable emergency cannot exceed the amounts reasonably necessary to satisfy the emergency need plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution(s), after taking into account the extent to which such emergency need is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of deferrals under the Award. All distributions with respect to an unforeseeable emergency shall be made in a lump sum upon the Committee’s determination that an unforeseeable emergency has occurred. The Committee’s decision with respect to whether an unforeseeable emergency has occurred and the manner in which, if at all, the payment in settlement of an Award shall be altered or modified, shall be final, conclusive, and not subject to approval or appeal.

 

(h) Prohibition of Acceleration of Payments. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, this Plan does not permit the acceleration of the time or schedule of any payment under an Award providing Section 409A Deferred Compensation, except as permitted by Section 409A.

 

(i) No Representation Regarding Section 409A Compliance . Notwithstanding any other provision of the Plan, the Company makes no representation that Awards shall be exempt from or comply with Section 409A. No Participating Company shall be liable for any tax, penalty or interest imposed on a Participant by Section 409A.

 

17. Tax Withholding .

 

17.1 Tax Withholding in General. The Company shall have the right to deduct from any and all payments made under the Plan, or to require the Participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes (including social insurance), if any, required by law to be withheld by any Participating Company with respect to an Award or the shares acquired pursuant thereto. The Company shall have no obligation to deliver shares of Stock, to release shares of Stock from an escrow established pursuant to an Award Agreement, or to make any payment in cash under the Plan until the Participating Company Group’s tax withholding obligations have been satisfied by the Participant.

 

17.2 Withholding in or Directed Sale of Shares. The Committee shall have the right, but not the obligation to cause the Company, to deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding obligations of any Participating Company. The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates. The Company may require a Participant to direct a broker, upon the vesting, exercise or settlement of an Award, to sell a portion of the shares subject to the Award determined by the Company in its discretion to be sufficient to cover the tax withholding obligations of any Participating Company and to remit an amount equal to such tax withholding obligations to such Participating Company in cash.

 

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18. Amendment, Suspension or Termination of Plan . The Committee may amend, suspend or terminate the Plan at any time. However, without the approval of the Company’s shareholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.4), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s shareholders under any applicable law, regulation or rule, including the rules of any stock exchange or quotation system upon which the Stock may then be listed or quoted. No amendment, suspension or termination of the Plan shall affect any then outstanding Award unless expressly provided by the Committee. Except as provided by the next sentence, no amendment, suspension or termination of the Plan may adversely affect any then outstanding Award without the consent of the Participant. Notwithstanding any other provision of the Plan to the contrary, the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A.

 

19. Miscellaneous Provisions .

 

19.1 Repurchase Rights . Shares issued under the Plan may be subject to one or more repurchase options, or other conditions and restrictions as determined by the Committee in its discretion at the time the Award is granted. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

 

19.2 Forfeiture Events.

 

(a) The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service.

 

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(b) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, any Participant who knowingly or through gross negligence engaged in the misconduct, or who knowingly or through gross negligence failed to prevent the misconduct, and any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company for (i) the amount of any payment in settlement of an Award received by such Participant during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement, and (ii) any profits realized by such Participant from the sale of securities of the Company during such twelve- (12-) month period.

 

19.3 Provision of Information. Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s common shareholders.

 

19.4 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee, Consultant or Director or interfere with or limit in any way any right of a Participating Company to terminate the Participant’s Service at any time. To the extent that an Employee of a Participating Company other than the Company receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employee’s employer or that the Employee has an employment relationship with the Company.

 

19.5 Rights as a Shareholder. A Participant shall have no rights as a shareholder with respect to any shares covered by an Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.4 or another provision of the Plan.

 

19.6 Delivery of Title to Shares. Subject to any governing rules or regulations, the Company shall issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall deliver such shares to or for the benefit of the Participant by means of one or more of the following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form.

 

19.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any Award.

 

19.8 Retirement and Welfare Plans . Neither Awards made under this Plan nor shares of Stock or cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under any Participating Company’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit.

 

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19.9 Beneficiary Designation. Subject to local laws and procedures, each Participant may file with the Company a written designation of a beneficiary who is to receive any benefit under the Plan to which the Participant is entitled in the event of such Participant’s death before he or she receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. If a married Participant designates a beneficiary other than the Participant’s spouse, the effectiveness of such designation may be subject to the consent of the Participant’s spouse. If a Participant dies without an effective designation of a beneficiary who is living at the time of the Participant’s death, the Company will pay any remaining unpaid benefits to the Participant’s legal representative.

 

19.10 Severability . If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired thereby.

 

19.11 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or another Participating Company’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or another Participating Company to take any action which such entity deems to be necessary or appropriate.

 

19.12 Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan shall be considered unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974. No Participating Company shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Participating Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Participating Company. The Participants shall have no claim against any Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.

 

19.13 Choice of Law. Except to the extent governed by applicable federal law, the validity, interpretation, construction and performance of the Plan and each Award Agreement shall be governed by the laws of the State of Delaware, without regard to its conflict of law rules.

 

IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets forth the Bone Biologics, Corp. 2014 Stock Plan as duly adopted by the Board on September 19 , 2014.

 

  /s/ William Jay Treat , President & Chief Technology Officer
  Name, Title                

 

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PLAN HISTORY AND NOTES TO COMPANY

 

__________, 2014   Board adopts Plan with a reserve of __________ shares (subject to increases and other adjustments as provided by the Plan), subject to approval by the shareholders of the Company.
     
__________, 2014   Plan submitted for approval by the shareholders of the Company.
     
    Plan approved by the shareholders of the Company.
     
    Form S-8 registration statement covering Plan filed.
     
IMPORTANT NOTE: IRC 162(m) 5 year reapproval of performance goals   Because the Committee may change the targets under performance goals, Section 162(m) requires shareholder reapproval of the material terms of performance goals no later than the annual meeting in the 5th year following the year in which the public company shareholders initially approved such material terms. See Treas. Reg. 1.162-27(e)(4)(vi).
     
IMPORTANT NOTE: Implementation of Section 12—Deferred Compensation Awards   Upon establishment of a Deferred Compensation Award program pursuant to Section 12, determine whether such program may constitute an employee pension benefit plan within the meaning of ERISA Sec. 3(2), and, if so, implement such program through a subplan adopted by the committee, with eligibility limited to Directors and a select group of management or highly compensated employees in order to qualify such subplan as a “top-hat” unfunded deferred compensation plan. File notice with Dept. of Labor under ERISA Reg. 2520.104-23 within 120 days of adoption of such subplan in order to exempt the subplan from reporting and disclosure requirements of ERISA.

 

 
 

 

 

BONE BIOLOGICS, CORP.

NOTICE OF GRANT OF STOCK OPTION

 

Bone Biologics, Corp. (the “ Company ”) has granted to the Participant an option (the “ Option ”) to purchase certain shares of Stock (the “ Option Shares ”) pursuant to the Bone Biologics, Corp. 2014 Stock Plan (the “ Plan ”), as follows:

 

Participant:   ___________ Award No.:    
           
Date of Grant:   ___________      
           
Number of Option Shares:   ___________ , subject to adjustment as provided by the Option Agreement.
     
Exercise Price per Share:   $ __________      
           
Vesting Start Date:   ___________      
           
Option Expiration Date:   The tenth anniversary of the Date of Grant
     
Tax Status of Option:   ___________  Stock Option. (Enter “Incentive” or “Nonstatutory.” If blank, this Option will be a Nonstatutory Stock Option.)
     
Vested Shares:   Except as provided in the Option Agreement and provided the Participant’s Service has not terminated prior to the applicable date, the number of Vested Shares (disregarding any resulting fractional share) as of any date is determined by multiplying the Number of Option Shares by the “ Vested Ratio ” determined as of such date, as follows:
     
        Vested Ratio
    Prior to first anniversary of Vesting Start Date   0
         
    On first anniversary of Vesting Start Date (the “ Initial Vesting Date ”)    1/3
         
    Plus    
         
    For each additional one year of the Participant’s Service from the Initial Vesting Date until the Vested Ratio equals 1/1, an additional    1/3
         
Accelerated Vesting:   Notwithstanding any other provision contained in this Notice of Grant or the Option Agreement, the Total Number of Option Shares shall become Vested Shares upon the termination of Participant’s Service without Cause (as defined in the Superseding Agreement or, in the absence of one, the Plan) by the Participating Company Group (or its successor) or by the Participant for Good Reason (as defined in the Superseding Agreement or, in the absence of one, the Option Agreement) within ten days prior to, or during the one-year period from and after, the date a Change in Control is consummated.    

 

 
 

 

Suspension of Vesting:   During any authorized leave of absence, the vesting of the Option as provided by this Notice of Grant shall be suspended after the leave of absence exceeds a period of ninety (90) days. Vesting of the Option shall resume upon the Participant’s termination of the leave of absence and return to Service. The period of Service required for each subsequent Vested Share installment determined in accordance with the vesting schedule above shall be extended by the length of the suspension. Any extension of the vesting schedule shall not defer the Option Expiration Date.
     
Superseding Agreement:   [Employment Agreement, dated , between the Company and the Participant.]

 

By their signatures below or by electronic acceptance or authentication in a form authorized by the Company, the Company and the Participant agree that the Option is governed by this Notice of Grant and by the provisions of the Option Agreement and the Plan, both of which are made a part of this document, and by the Superseding Agreement, if any. The Participant acknowledges that copies of the Plan, the Option Agreement and the prospectus for the Plan are available on the Company’s internal web site and may be viewed and printed by the Participant for attachment to the Participant’s copy of this Notice of Grant. The Participant represents that the Participant has read and is familiar with the provisions of the Option Agreement and the Plan, and hereby accepts the Option subject to all of their terms and conditions.

 

BONE BIOLOGICS, CORP.   PARTICIPANT
       
By:      
Name:     Signature
Title:      
      Date
Address: 175 May Street, Suite 400    
  Edison, NJ 08837   Address
       

 

ATTACHMENTS: 2014 Stock Plan, as amended to the Date of Grant; Stock Option Agreement; Exercise Notice; and Plan Prospectus

 

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BONE BIOLOGICS, CORP.

STOCK OPTION AGREEMENT

 

Bone Biologics, Corp. (the “ Company ”) has granted to the Participant named in the Notice of Grant of Stock Option (the “ Notice of Grant ”) to which this Stock Option Agreement (the “ Option Agreement ”) is attached an option (the “ Option ”) to purchase certain shares of Stock upon the terms and conditions set forth in the Notice of Grant and this Option Agreement. The Option has been granted pursuant to and shall in all respects be subject to the terms and conditions of the Bone Biologics, Corp. 2014 Stock Plan (the “ Plan ”), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Notice of Grant, the Participant: (a) acknowledges receipt of, and represents that the Participant has read and is familiar with, the Notice of Grant, this Option Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of shares issuable pursuant to the Option (the “ Plan Prospectus ”) , (b) accepts the Option subject to all of the terms and conditions of the Notice of Grant, this Option Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Notice of Grant, this Option Agreement or the Plan.

 

1. Definitions and Construction .

 

1.1 Definitions . Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Notice of Grant or the Plan.

 

(a) “ Good Reason ” shall mean that any one or more of the following events have occurred without the Participant’s express prior written consent:

 

(i) A material adverse change in the Participant’s authority, duties and/or responsibilities such that the Participant’s authority, duties and/or responsibilities are no longer commensurate with the Participant’s position on the Date of Grant;

 

(ii) The relocation of the Participant’s primary workplace on the Date of Grant to a location that increases the Participant’s daily commute by more than thirty (30) miles; or

 

(iii) Any material reduction by the Company (or its successor) of (A) the Participant’s base salary on the Date of Grant or (B) the Participant’s target bonus on the Date of Grant, unless any such reduction is made as part of, and is generally consistent with, a general reduction of base salaries or target bonuses, respectively, of similarly situated employees, in which case such a reduction shall not constitute Good Reason.

 

In order to resign the Participant’s employment for Good Reason, the Participant must within sixty (60) days of the Participant’s awareness of the applicable Good Reason event(s) provide the Company with written notice informing the Company about the Participant’s intention to resign the Participant’s employment for Good Reason unless such event(s) is cured or remedied by the Company (“ Good Reason Notice ”). The Company will have thirty (30) days after its receipt of such Good Reason Notice to cure or remedy the Good Reason event(s). If Company does not timely cure or remedy the Good Reason event(s), then the Participant can resign the Participant’s employment for Good Reason at any time within thirty (30) days following the expiration of the thirty (30) day cure/remedy period. This “Good Reason” definition and process is intended to constitute an involuntary separation from service as provided under Treasury Regulations Section 1.409A-1(n) and shall be interpreted accordingly.

 

 
 

 

1.2 Construction . Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Option Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

 

2. Tax Consequences .

 

2.1 Tax Status of Option . This Option is intended to have the tax status designated in the Notice of Grant.

 

(a) Incentive Stock Option . If the Notice of Grant so designates, this Option is intended to be an Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not represent or warrant that this Option qualifies as such. The Participant should consult with the Participant’s own tax advisor regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. (NOTE TO PARTICIPANT: If the Option is exercised more than three (3) months after the date on which you cease to be an Employee (other than by reason of your death or permanent and total disability as defined in Section 22(e)(3) of the Code), the Option will be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required by Section 422 of the Code.)

 

(b) Nonstatutory Stock Option. If the Notice of Grant so designates, this Option is intended to be a Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning of Section 422(b) of the Code.

 

2.2 ISO Fair Market Value Limitation. If the Notice of Grant designates this Option as an Incentive Stock Option , then to the extent that the Option (together with all Incentive Stock Options granted to the Participant under all stock option plans of the Participating Company Group, including the Plan) becomes exercisable for the first time during any calendar year for shares having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this Section 2.2, options designated as Incentive Stock Options are taken into account in the order in which they were granted, and the Fair Market Value of Stock is determined as of the time the option with respect to such Stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 2.2, such different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment to the Code. If the Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 2.2, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. (NOTE TO PARTICIPANT: If the aggregate Exercise Price of the Option (that is, the Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan or any other stock option plan of the Participating Company Group) is greater than $100,000, you should contact the Chief Financial Officer of the Company to ascertain whether the entire Option qualifies as an Incentive Stock Option.)

 

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3. Administration .

 

All questions of interpretation concerning the Notice of Grant, this Option Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Option shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Option, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Option or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Option. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.

 

4. Exercise of the Option .

 

4.1 Right to Exercise . Except as otherwise provided herein, the Option shall be exercisable on and after the Initial Vesting Date and prior to the termination of the Option (as provided in Section 6) in an amount not to exceed the number of Vested Shares less the number of shares previously acquired upon exercise of the Option. In no event shall the Option be exercisable for more shares than the Number of Option Shares, as adjusted pursuant to Section 9.

 

4.2 Method of Exercise . Exercise of the Option shall be by means of electronic or written notice (the “ Exercise Notice ”) in a form authorized by the Company. An electronic Exercise Notice must be digitally signed or authenticated by the Participant in such manner as required by the notice and transmitted to the Company or an authorized representative of the Company (including a third-party administrator designated by the Company). In the event that the Participant is not authorized or is unable to provide an electronic Exercise Notice, the Option shall be exercised by a written Exercise Notice addressed to the Company, which shall be signed by the Participant and delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Company, or an authorized representative of the Company (including a third-party administrator designated by the Company). Each Exercise Notice, whether electronic or written, must state the Participant’s election to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Participant’s investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement. Further, each Exercise Notice must be received by the Company prior to the termination of the Option as set forth in Section 6 and must be accompanied by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased. The Option shall be deemed to be exercised upon receipt by the Company of such electronic or written Exercise Notice and the aggregate Exercise Price.

 

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4.3 Payment of Exercise Price.

 

(a) Forms of Consideration Authorized . Except as otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check or in cash equivalent; (ii) if permitted by the Company and subject to the limitations contained in Section 4.3(b), by means of (1) a Cashless Exercise, (2) a Net-Exercise, or (3) a Stock Tender Exercise; or (iii) by any combination of the foregoing.

 

(b) Limitations on Forms of Consideration. The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedure providing for payment of the Exercise Price through any of the means described below, including with respect to the Participant notwithstanding that such program or procedures may be available to others.

 

(i) Cashless Exercise. A “ Cashless Exercise ” means the delivery of a properly executed Exercise Notice together with irrevocable instructions to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with respect to shares of Stock acquired upon the exercise of the Option in an amount not less than the aggregate Exercise Price for such shares (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System).

 

(ii) Net-Exercise. A “ Net-Exercise ” means the delivery of a properly executed Exercise Notice electing a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to the Participant upon the exercise of the Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate Exercise Price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate Exercise Price not satisfied by such reduction in the number of whole shares to be issued. Following a Net-Exercise, the number of shares remaining subject to the Option, if any, shall be reduced by the sum of (1) the net number of shares issued to the Participant upon such exercise, and (2) the number of shares deducted by the Company for payment of the aggregate Exercise Price.

 

(iii) Stock Tender Exercise. A “ Stock Tender Exercise ” means the delivery of a properly executed Exercise Notice accompanied by (1) the Participant’s tender to the Company, or attestation to the ownership, in a form acceptable to the Company of whole shares of Stock having a Fair Market Value that does not exceed the aggregate Exercise Price for the shares with respect to which the Option is exercised, and (2) the Participant’s payment to the Company in cash of the remaining balance of such aggregate Exercise Price not satisfied by such shares’ Fair Market Value. A Stock Tender Exercise shall not be permitted if it would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s Stock. If required by the Company, the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.

 

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4.4 Tax Withholding .

 

(a) In General. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by a Participating Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company Group, if any, which arise in connection with the Option. The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company Group have been satisfied by the Participant.

 

(b) Withholding in Shares . The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Company’s tax withholding obligations upon exercise of the Option by deducting from the shares of Stock otherwise issuable to the Participant upon such exercise a number of whole shares having a fair market value, as determined by the Company as of the date of exercise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates.

 

4.5 Beneficial Ownership of Shares; Certificate Registration . The Participant hereby authorizes the Company, in its sole discretion, to deposit for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice any or all shares acquired by the Participant pursuant to the exercise of the Option. Except as provided by the preceding sentence, a certificate for the shares as to which the Option is exercised shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.

 

4.6 Restrictions on Grant of the Option and Issuance of Shares . The grant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

 

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4.7 Fractional Shares . The Company shall not be required to issue fractional shares upon the exercise of the Option.

 

5. Nontransferability of the Option .

 

During the lifetime of the Participant, the Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. The Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Following the death of the Participant, the Option, to the extent provided in Section 7, may be exercised by the Participant’s legal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.

 

6. Termination of the Option .

 

The Option shall terminate and may no longer be exercised after the first to occur of (a) the close of business on the Option Expiration Date, (b) the close of business on the last date for exercising the Option following termination of the Participant’s Service as described in Section 7, or (c) a Change in Control to the extent provided in Section 8.

 

7. Effect of Termination of Service .

 

7.1 Option Exercisability. The Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period as determined below and thereafter shall terminate.

 

(a) Retirement. If the Participant’s Service terminates other than for Cause after the Participant has both (i) attained age fifty-five (55) and (ii) completed ten (10) years of continuous Service (such combination of age and continuous Service, “ Retirement Eligibility ”), the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the Option Expiration Date.

 

6
 

 

(b) Disability . If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. Notwithstanding the foregoing, if the Participant’s Service terminates because of the Disability of the Participant after the Participant achieves Retirement Eligibility, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the Option Expiration Date.

 

(c) Death . If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. Notwithstanding the foregoing, (i) if the Participant dies during the three-month period provided by Section 7.1(e) or during the twelve-month period provided by Section 7.1(b), the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after the date of the Participant’s death, but in any event no later than the Option Expiration Date; or (ii) if the Participant’s Service terminates because of the death of the Participant after the Participant achieves Retirement Eligibility, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the Option Expiration Date.

 

(d) Termination for Cause. Notwithstanding any other provision of this Option Agreement to the contrary, if the Participant’s Service is terminated for Cause or if, following the Participant’s termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.

 

(e) Other Termination of Service . If the Participant’s Service terminates for any reason, except Disability, death or Cause or after achieving Retirement Eligibility, the Option, to the extent unexercised and exercisable for Vested Shares by the Participant on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.

 

7
 

 

7.2 Extension if Exercise Prevented by Law . Notwithstanding the foregoing, other than termination of the Participant’s Service for Cause, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until the later of (a) thirty (30) days after the date such exercise first would no longer be prevented by such provisions, or (b) the end of the applicable time period under Section 7.1, but in any event no later than the Option Expiration Date.

 

8. Effect of Change in Control .

 

In the event of a Change in Control, except to the extent that the Committee determines to cash out the Option in accordance with Section 13.1(c) of the Plan, the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be (the “ Acquiror ”), may, without the consent of the Participant, assume or continue in full force and effect the Company’s rights and obligations under all or any portion of the Option or substitute for all or any portion of the Option a substantially equivalent option for the Acquiror’s stock. For purposes of this Section, the Option or any portion thereof shall be deemed assumed if, following the Change in Control, the Option confers the right to receive, subject to the terms and conditions of the Plan and this Option Agreement, for each share of Stock subject to such portion of the Option immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise of the Option, for each share of Stock subject to the Option, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. The Option shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control to the extent that the Option is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised as of the time of the Change in Control.

 

9. Adjustments for Changes in Capital Structure .

 

Subject to any required action by the stockholders of the Company and the requirements of Sections 409A and 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number, Exercise Price and kind of shares subject to the Option, in order to prevent dilution or enlargement of the Participant’s rights under the Option. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number and the Exercise Price shall be rounded up to the nearest whole cent. In no event may the Exercise Price be decreased to an amount less than the par value, if any, of the Stock subject to the Option. The Committee in its sole discretion, may also make such adjustments in the terms of the Option to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate. All adjustments pursuant to this Section shall be determined by the Committee, and its determination shall be final, binding and conclusive.

 

8
 

 

10. Rights as a Stockholder, Director, Employee or Consultant .

 

The Participant shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 9. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no specified term. Nothing in this Option Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participant’s Service as a Director, an Employee or Consultant, as the case may be, at any time.

 

11. Notice of Sales Upon Disqualifying Disposition .

 

The Participant shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, if the Notice of Grant designates this Option as an Incentive Stock Option , the Participant shall (a) promptly notify the Chief Financial Officer of the Company if the Participant disposes of any of the shares acquired pursuant to the Option within one (1) year after the date the Participant exercises all or part of the Option or within two (2) years after the Date of Grant and (b) provide the Company with a description of the circumstances of such disposition. Until such time as the Participant disposes of such shares in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Participant shall hold all shares acquired pursuant to the Option in the Participant’s name (and not in the name of any nominee) for the one-year period immediately after the exercise of the Option and the two-year period immediately after Date of Grant. At any time during the one-year or two-year periods set forth above, the Company may place a legend on any certificate representing shares acquired pursuant to the Option requesting the transfer agent for the Company’s Stock to notify the Company of any such transfers. The obligation of the Participant to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence.

 

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12. Legends .

 

The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of Stock subject to the provisions of this Option Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:

 

THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [ INSERT DISQUALIFYING DISPOSITION DATE HERE ]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.

 

13. Miscellaneous Provisions .

 

13.1 Termination or Amendment. The Committee may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may have a materially adverse effect on the Option or any unexercised portion hereof without the consent of the Participant unless such termination or amendment is necessary to comply with any applicable law or government regulation. No amendment or addition to this Option Agreement shall be effective unless in writing.

 

13.2 Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Option Agreement.

 

13.3 Binding Effect. This Option Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participant’s heirs, executors, administrators, successors and assigns.

 

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13.4 Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Notice of Grant or at such other address as such party may designate in writing from time to time to the other party.

 

(a) Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, the Notice of Grant, this Option Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Notice of Grant and Exercise Notice called for by Section 4.2 to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.

 

(b) Consent to Electronic Delivery. The Participant acknowledges that the Participant has read Section 13.4(a) of this Option Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Notice of Grant and Exercise Notice, as described in Section 13.4(a). The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 13.4(a) or may change the electronic mail address to which such documents are to be delivered (if the Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 13.4(a).

 

13.5 Integrated Agreement. The Notice of Grant, this Option Agreement and the Plan, together with the Superseding Agreement, if any, shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein, the provisions of the Notice of Grant, the Option Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and effect.

 

13.6 Applicable Law. This Option Agreement shall be governed by the laws of the State of Delaware as such laws are applied to agreements between Delaware residents entered into and to be performed entirely within the State of Delaware.

 

13.7 Counterparts. The Notice of Grant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

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EXCLUSIVE

LICENSE AGREEMENT

 

Between

 

THE REGENTS OF THE

UNIVERSITY OF CALIFORNIA

 

And

 

BONE BIOLOGICS, INC.

 

“NELL-1 Enhanced Bone Mineralization” and NELL1

Expression Systems and Neuroprotective Activity of NELL2”

and “Recombinant NELL-1 & 2 Protein Production”

 

UC Case Nos. 1999-560-1; 2002-477-1, 2, 3;

2004-331-1, 2 and 2006-369-1

 

 
 

 

Table of Contents

 

      Page
RECITALS 1
  1. DEFINITIONS 1
  2. GRANT 4
  3. SUBLICENSES 4
  4. FEES 5
  5. ROYALTIES 6
  6. DILIGENCE 7
  7. PATENT FILING, PROSECUTION AND MAINTENANCE 8
  8. PATENT INFRINGEMENT 9
  9. PROGRESS AND ROYALTY REPORTS 11
  10. BOOKS AND RECORDS 11
  11. LIFE OF THE AGREEMENT 12
  12. TERMINATION BY THE REGENTS 12
  13. TERMINATION BY LICENSEE 13
  14. DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION 13
  15. PATENT MARKING 13
  16. USE OF NAMES AND TRADEMARKS 13
  17. LIMITED WARRANTY 13
  18. INDEMNIFICATION 14
  19. NOTICES 15
  20. ASSIGNABILITY 16
  21. LATE PAYMENTS 16
  22. WAIVER 16
  23. FAILURE TO PERFORM 16
  24. GOVERNING LAW 16
  25. GOVERNMENT APPROVAL OR REGISTRATION 16
  26. EXPORT CONTROL LAWS 17
  27. PREFERENCE FOR UNITED STATES INDUSTRY 17
  28. FORCE MAJEURE 17
  29. CONFIDENTIALITY 17
  30. MISCELLANEOUS 18
APPENDIX A A- 1

 

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EXCLUSIVE LICENSE AGREEMENT

 

This Agreement is made and is effective this 15th day of March 2006 (the “ Effective Date ”) between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA (“ The Regents ”), a California corporation having its corporate offices located at 1111 Franklin Street, Oakland, California 94607-5200, acting through its offices located at 10920 Wilshire Blvd, Suite 1200, Los Angeles, California 90024-1406, and Bone Biologics, Inc. (“ Licensee ”), a corporation having a principal place of business at 115 North Doheny Drive, Beverly Hills, California 90211.

 

RECITALS

 

WHEREAS, a certain invention (the “ Invention ”), generally characterized as “NELL-1 Enhanced Bone Mineralization” (UCLA Case No. 1999-560-1); “NELL-1 Enhanced Bone Mineralization” (UCLA Case No. 2002-477-1, 2, 3); “NELL1 Expresion Systems and Neuroprotective Activity of NELL2” (UCLA Case No. 2004-331-1, 2); and “Recombinant NELL-1 & 2 Protein Production” (UCLA Case No. 2006-369-1) made in the course of research at the University of California, Los Angeles by Drs. Kang Ting, Shunichi Kuroda, Chia Soo and Ben Wu, and claimed in Regents’ Patent Rights as defined below;

 

WHEREAS, Drs. Ting, Wu and Soo are employees of The Regents and as such are obligated to assign their right, title and interest in and to the Invention to The Regents;

 

WHEREAS, Dr. Shunichi Kuroda is an employee of Osaka University and Osaka University has not asserted their rights; therefore Dr. Kuroda as an individual assigned his rights to The Regents.

 

WHEREAS, the Invention was developed with United States Government funds, and The Regents has elected title thereto and granted a royalty-free nonexclusive license to the United States Government on March 15, 2004, as required under 35 U.S.C. §200-212;

 

WHEREAS, Licensee is a “small business concern” as defined in 15 U.S.C. §632; and

 

WHEREAS, The Regents wishes that Regents’ Patent Rights be developed and utilized to the fullest extent so that the benefits can be enjoyed by the general public.

 

The parties agree as follows:

 

1. DEFINITIONS

 

1.1 “ Regents’ Patent Rights ” means The Regents interest in any of the patent applications listed in Appendix A attached to this Agreement and assigned to The Regents (UCLA Case No. 1999-560, 2002-477, 2004-331 and 2006-369); any continuing applications thereof including divisions; but excluding continuations-in-part except to the extent of claims entirely supported in the specification and entitled to the priority date of the parent application; any patents issuing on these applications including reissues and reexaminations; and any corresponding foreign patents or patent applications; all of which will be automatically incorporated in and added to Appendix A and made a part of this Agreement.

 

 
 

 

1.2 “ Licensed Product ” means any article, composition, apparatus, substance, chemical, or any other material whose manufacture, use or sale would constitute an infringement of any Valid Claim within Regents’ Patent Rights, or any service, article, composition, apparatus, chemical, substance, or any other material made, used, or sold by or utilizing or practicing a Licensed Method. This definition of Licensed Product also includes a service either used by Licensee, an Affiliate, or sublicensee or provided by Licensee, an Affiliate or sublicensee to its customers when such service requires the use of Licensed Product or performance of Licensed Method.

 

1.3 “ Licensed Method ” means any process or method whose use or practice would constitute an infringement of any claim within Regents’ Patent Rights.

 

1.4 The Field of Use ” means modulation of skeletal formation and skeletal replacement or repair. As new fields of use are identified, Licensee may request to have additional Fields of Use amended into this Paragraph 1.4, The Regents may add the proposed field if additional diligence for the development of the new Field of Use is incorporated into Paragraph 6.3. The new diligence terms will stipulate dates for completion of specific phases of clinical development as well as a date for First Commercial Sale for a Licensed Product in the new Field of Use.

 

1.5 “ Affiliate ” means any corporation or other business entity in which Licensee owns or controls, directly or indirectly, at least fifty percent (50%) of the outstanding stock or other voting rights entitled to elect directors. In any country where the local law does not permit foreign equity participation of at least fifty percent (50%), then “Affiliate” means any company in which Licensee owns or controls, directly or indirectly, the maximum percentage of outstanding stock or voting rights that is permitted by local law.

 

1.6 “ First Commercial Sale ” means the first sale of any Licensed Product by Licensee or any Affiliate or Sublicensee, following marketing approval by the appropriate governmental agency for the country in which the sale is to be made. When governmental marketing approval is not required, “First Commercial Sale” means the first sale in that country.

 

1.7 “ Final Sale ” means any sale, transfer, lease, exchange or other disposition or provision of a Licensed Product and/or a Licensed Method to a Customer. A Final Sale shall be deemed to have occurred upon the earliest to occur of the following (as applicable): (a) the transfer of title to such Licensed Product and/or Licensed Method to a Customer, (b) the shipment of such Licensed Product to a Customer, (c) the provision of a Licensed Method to a Customer, (d) the provision of an invoice for such Licensed Product or Licensed Method to a Customer, or (e) payment by the Customer for Licensed Products or Licensed Methods.

 

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1.8 “ Net Sales ” means the total of the gross amount invoiced or otherwise charged (whether consisting of cash or any other forms of consideration) for the Final Sale of Licensed Products or Licensed Methods by Licensee, or by any Affiliate, joint venture or Sublicensee to Customers, less the following deductions (to the extent included in and not already deducted from the gross amount invoiced or otherwise charged) to the extent reasonable and customary: cash, trade or quantity discounts, retroactive price reductions or rebates actually granted to Customers and charge-back payments and rebates granted to managed health care organizations or to any governmental entity (and its agencies, purchasers or reimburses); sales, use, tariff, import/export duties or other excise taxes imposed on particular sales (excepting value added taxes or income taxes); transportation and delivery charges, including insurance to the extent actually paid by the Customer; and allowances or credits to Customers because of rejections or returns and amounts written off as uncollectible by Licensee. Where Licensee or any Affiliate, joint venture or Sublicensee is the Customer, then Net Sales shall be based on the average Net Sales received from other Customers in an arms length transaction for such Licensed Products or Licensed Methods during the same calendar quarter, less the deductions described above. If a Licensed Product is sold in combination with another product, component or service not covered by a Valid Claim in the country in which the combination product is sold, the Net Sales for such combination product shall be calculated by multiplying the net selling price of the combination by the fraction A/(A + B), where A is the average gross selling price of the Licensed Product sold separately in that country, and B is the average gross selling price of the other product, component or service sold separately in that country. If all such items are not sold separately, any item not sold separately shall have a price attributed to it for purposes of this definition consistent with pricing of similar products or their functional equivalents sold separately. If a price for either or both items cannot be determined pursuant to the foregoing, the Net Sales for purposes of determining royalties on the combination product shall be reasonably determined by Licensee based on the relative value contributed by each item to the combination product.

 

1.9 “ Series A Financing ” means an investment of at least two million dollars ($2,000,000.00) from a venture capital firm through the sale of equity securities of Licensee or documentation that sufficient funds have been raised from any source to meet all the development milestones set forth up to Paragraph 6.3(e).

 

1.10 “ Sublicensee ” means any third party sublicensed by Licensee under the Regents’ Patent Rights to make, have made, use, sell, offer for sale or import any Licensed Product or to practice any Licensed Method.

 

1.11 “ Sublicensing Income ” means income received by Licensee from a sublicense of the Regents’ Patent Rights, including income received by way of license issue fees, milestone payments, and the like but specifically excludes payment or prepayment of royalties for the sale or distribution of Licensed Products or the practice of Licensed Methods. Not included in the definition of Sublicensing Income is income received by Licensee as payment or reimbursement for (i) equity or debt financing, (ii) past or future research and development costs conducted by or for Licensee, including costs associated with materials, equipment or clinical testing; (iii) amounts paid for third party technology (provided that Licensee shall make a good faith allocation of Sublicensing Income between the Regents’ Patent Rights and such third party technology, in accordance with generally accepted accounting principles); and patent and patent related expenses

 

1.12 “ Customer ” means any individual or entity that receives Licensed Products or Licensed Methods, provided however, that Licensee or any Affiliate, joint venture or Sublicensee shall be deemed a Customer only if it receives Licensed Products or Licensed Services for its own end- use and not resale.

 

3
 

 

1.13 “ Valid Claim ” means a patent claim contained in (a) a pending application included within the Regents’ Patent Rights, unless such application has been pending for more than five (5) years from its U.S. filing date for domestic patents and seven (7) years from the date of the PCT filing for foreign; or (b) an issued and unexpired patent included within the Regents’ Patent Rights which claim has not been held unenforceable, unpatentable or invalid by a final decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through abandonment, reissue, disclaimer or otherwise.

 

2. GRANT

 

2.1 Subject to the limitations set forth in this Agreement, The Regents hereby grants to Licensee an exclusive license (the “ License ”) under Regents’ Patent Rights, in jurisdictions where Regents’ Patent Rights exist, to make, have made, use, sell, offer for sale and import Licensed Products and to practice Licensed Methods in the Field of Use to the extent permitted by law.

 

2.2 The License is subject to all the applicable provisions of any license to the United States Government executed by The Regents and is subject to any overriding obligations to the United States Federal Government under 35 U.S.C. §200-212 and applicable governmental implementing regulations.

 

2.3 The Regents expressly reserves the right to use Regents’ Patent Rights and associated technology for educational and research purposes including publication of research results and sharing research results with other non-profit institutions, and allowing other non-profit research institutions to use Regents’ Patent Rights and associated technology for the same purpose.

 

3. SUBLICENSES

 

3.1 The Regents also grants to Licensee the right to issue exclusive or nonexclusive sublicenses (“ Sublicenses ”) to third parties to make, have made, use sell, offer for sale or import Licensed Products and to practice Licensed Methods in any jurisdiction in which Licensee has exclusive rights under this Agreement. To the extent applicable, sublicenses must include all of the rights of and obligations due to The Regents (and, if applicable, the U.S. Government under 35 U.S.C. §200-212) contained in this Agreement.

 

3.2 Licensee must pay to The Regents a percentage of all Sublicensing Income as follows:

 

3.2a Fifteen percent (15%) of any Sublicensing Income received during the first eighteen (18) months after the Effective Date.

 

3.2b Ten percent (10%) of any Sublicensing Income received more than eighteen (18) months after the Effective Date; provided, however, if the sublicensee also licenses material licensee patent rights not dominated by The Regents Patent Rights under the sublicense, this percentage will be reduced to eight percent (8%) of Sublicensing Income received from that sublicensee more than five (5) years after the Effective Date.

 

4
 

 

3.3 On Net Sales of Licensed Products sold or disposed of by a Sublicensee, Licensee must pay to The Regents an earned royalty in accordance with Article 5 (Royalties) as if these were Licensee’s Net Sales. Any royalties received by Licensee in excess of royalties due to The Regents under this Paragraph 3.3 belong to Licensee.

 

3.4 Licensee must provide to The Regents a copy of each Sublicense within thirty (30) days of execution, and a copy of all information submitted to Licensee by Sublicensees relevant to the computation of the payments due to The Regents under this Article 3 (Sublicenses).

 

3.5 If this Agreement is terminated for any reason, all outstanding Sublicenses, not in default, will be assigned by licensee to The Regents, at the option of The Regents. The Sublicenses will remain in full force and effect with The Regents as the licensor or sublicensor instead of Licensee, but the duties of The Regents under the assigned Sublicenses will not be greater than the duties of The Regents under this Agreement, and the rights of The Regents under the assigned Sublicenses will not be less than the rights of The Regents under this Agreement, including all financial consideration and other rights of The Regents.

 

4. FEES

 

4.1 In partial consideration for the License, Licensee will pay to The Regents a license issue fee of twenty thousand one hundred dollars and fifty cents ($20,100.50), of which ten thousand one hundred dollars and fifty cents ($10,100.50) will be paid within thirty (30) days of the Effective Date and the remainder within six (6) months after the Effective Date. This fee is nonrefundable and is not an advance against royalties.

 

4.2 For the first (and only the first) Licensed Product reaching the milestones indicated below, Licensee must make the following payments to The Regents within thirty (30) days of reaching the milestones:

 

4.2a First Commercial Sale: Twenty-five thousand dollars ($25,000)

 

4.2b FDA marketing approval: Fifty-thousand dollars ($50,000)

 

4.3 Licensee must pay to The Regents a license maintenance fee of ten-thousand dollars ($10,000) beginning on the one (1) year anniversary date of the Effective Date of this Agreement and continuing annually on each anniversary date of the Effective Date. The maintenance fee will not be due and payable on any anniversary date of the Effective Date if prior to that date Licensee has made the First Commercial Sale of a Licensed Product. The license maintenance fees are non-refundable and are not an advance against royalties.

 

4.4 Within thirty (30) days after the Effective Date, and subject to The Regents’ execution of Licensee’s standard common stock purchase agreement in the form attached as Appendix B. Licensee will issue to the Regents shares of Licensee’s Common Stock equal to two percent (2%) of the total outstanding and issued Common Stock as of the Effective Date.

 

5
 

 

5. ROYALTIES

 

5.1 Licensee must pay to The Regents for sales by Licensee or its Affiliates an earned royalty of three percent (3%) of Net Sales of Licensed Products or Licensed Methods.

 

5.2 Licensee must pay to The Regents a minimum annual royalty of twenty-five thousand dollars ($25,000) for the life of Regents’ Patent Rights, beginning in the year of the First Commercial Sale of Licensed Product. Licensee must pay the minimum annual royalty to The Regents by February 28 of each year. The minimum annual royalty will be credited against the earned royalty due and owing for the calendar year in which the minimum payment was made.

 

5.3 Paragraphs 1.1, 1.2, 1.3 and 1.4 define Regents’ Patent Rights, Licensed Product, Licensed Method and the Field of Use so that royalties are payable on products covered by pending patent applications and issued patents. Royalties accrue for the duration of this Agreement.

 

5.4 Licensee must pay royalties owed to The Regents on a quarterly basis. Licensee must pay the royalties within two (2) months of the end of the calendar quarter in which the royalties accrued.

 

5.5 All monies due The Regents must be paid in United States funds. When Licensed Products are sold for monies other than United States dollars, the royalties will first be determined in the foreign currency of the country in which those Licensed Products were sold and, second, converted into equivalent United States funds. Licensee must use the exchange rate established by the Bank of America in San Francisco, California on the last day of the calendar quarter.

 

5.6 Any tax for the account of The Regents required to be withheld by Licensee under the laws of any foreign country must be promptly paid by Licensee for and on behalf of The Regents to the appropriate governmental authority. Licensee will use its best efforts to furnish The Regents with proof of payment of any tax. Licensee is responsible for all bank transfer charges. All payments made by Licensee in fulfillment of The Regents’ tax liability in any particular country will be credited against fees or royalties due The Regents for that country.

 

5.7 If at any time legal restrictions prevent the acquisition or prompt remittance of United States Dollars by Licensee with respect to any country where a Licensed Product is sold, the Licensee shall pay royalties due to The Regents from Licensee’s other sources of United States Dollars.

 

5.8 If any patent or any claim included in Regents’ Patent Rights is held invalid or unenforceable in a final decision by a court of competent jurisdiction from which no appeal has or can be taken, all obligation to pay royalties based on that patent or claim or any claim patentably indistinct from it will cease as of the date of that final decision. Licensee will not, however, be relieved from paying any royalties that accrued before that decision or that is based on another patent or claim not involved in that decision.

 

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5.9 No royalties will be collected or paid on Licensed Products sold to the United States Federal Government, or any agency of the United States Government. The Licensee and its Sublicensees will reduce the amount charged for Licensed Products distributed to the United States Government by the amount of the royalty.

 

5.10 No multiple royalties will be due even if a Licensed Product or Licensed Method is covered by more than one of the Regents’ Patent Rights.

 

5.11 If Licensee pays a third party royalties in consideration for patent rights which are necessary in order to practice Regents’ Patent Rights then Licensee or Sublicensee, as the case may be may deduct one third of one percent (0.333%) from the royalty rate due to The Regents under this Agreement for every percentage point paid to third party in royalties, provided that in no event shall royalties or other amounts due to The Regents in any reporting period be reduced to less than fifty percent (50%) of what would otherwise be due to The Regents.

 

6. DILIGENCE

 

6.1 Upon the execution of this Agreement, Licensee must diligently proceed with the development, manufacture and sale (“ Commercialization ”) of Licensed Products and must earnestly and diligently endeavor to market them within a reasonable time after execution of this Agreement and in quantities sufficient to meet the market demands for them.

 

6.2 Licensee must endeavor to obtain all necessary governmental approvals for the Commercialization of Licensed Products.

 

6.3 The Regents has the right and option to either terminate this Agreement or reduce Licensee’s exclusive license to a nonexclusive license if Licensee fails to perform any of the terms in this Paragraph 6.3. This right, if exercised by The Regents, supersedes the rights granted in Article 2 (Grant).

 

6.3a Within three (3) months of the Effective Date provide The Regents with an updated business plan for commercialization of a Licensed Product.

 

6.3b Within twelve (12) months of the Effective Date commence an animal study to test proof of concept of a Licensed Product using a commercially available carrier.

 

6.3c Within eighteen (18) months of the Effective Date commence a large animal study to test proof of concept of a Licensed Product.

 

6.3d Within twenty-four (24) months of the Effective Date provide the Regents with documentation satisfying the requirements of a Series A Financing to support development of a Licensed Product through that date.

 

6.3e Within thirty-six (36) months of the Effective Date commence preclinical studies of a Licensed Product

 

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6.3f Within forty-eight (48) months of the Effective Date commence Phase I clinical trials (or equivalent) for a Licensed Product

 

6.3g Within nine (9) years of the Effective Date have First Commercial Sale of a Licensed Product.

 

Licensee may extend any three of these milestones in six (6) month increments, but not more than once per milestone, by making a ten-thousand dollars ($10,000) payment to UCLA. In the event of any extension, any later occurring milestones will be similarly extended. If Licensee, directly or through its Affiliates or sublicensees, fulfills all of its obligations in this Paragraph 6.3, Licensee will be deemed to have satisfied its diligence obligations under this Article 6 (Diligence).

 

6.4 Licensee has the sole discretion for making all decisions as to how to commercialize any Licensed Product.

 

7. PATENT FILING, PROSECUTION AND MAINTENANCE

 

7.1 As long as Licensee is paying prosecution costs, The Regents will diligently file, prosecute and maintain the patents and applications comprising Regents’ Patent Rights. These patents will be held in the name of The Regents and will be obtained with counsel representing The Regents, which counsel will be selected by the Licensee subject to The Regents’ reasonable approval (and The Regents acknowledge approval of Paul Li, currently with the law firm of Squire, Sanders & Dempsey). The Regents must provide Licensee with copies of each patent application, office action, response to office action, request for terminal disclaimer, and request for reissue or reexamination of any patent or patent application under Regents’ Patent Rights. The Regents will communicate and work together with Licensee to provide direction to patent counsel but final decisions regarding prosecution are The Regents; provided that The Regents will consult with Licensee regarding patent prosecution decisions, and The Regents will use best efforts to consider the business interests expressed by Licensee in prosecution of the Regents’ Patent Rights, to the extent no conflict exists with the legitimate requirements of The Regents. The Regents is entitled to take action to preserve rights and minimize costs whether or not Licensee has commented.

 

7.2 Licensee will bear all costs incurred prior to and during the term of this Agreement in the preparation, filing, prosecution and maintenance of patent applications and patents in Regents’ Patent Rights as follows: (a) Licensee will reimburse The Regents for all patent costs incurred by and invoiced to The Regents prior to March 1, 2005 (up to a maximum of fifty thousand dollars ($50,000)) within thirty (30) days after the closing of the Series A Financing or satisfying the diligence requirement in Paragraph 6.3(d) above: (b) Licensee will pay all patent costs incurred by and invoiced to The Regents after March 1, 2005 and prior to July 1, 2005, as such costs occur, but may defer payment of fifty percent (50%) of those costs until March 31, 2006 and (c) Licensee will pay all patent costs incurred by and invoiced to The Regents after July 1, 2005, as such costs occur. Prosecution includes interferences, oppositions and any other inter partes matters originating in a patent office. Licensee must send payment to The Regents within thirty (30) days of Licensee’s receipt of an invoice.

 

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7.3 Licensee has the right to request patent protection on the Invention in foreign countries if the rights are available. Licensee must notify The Regents of its decision within eight (8) months of the filing of the corresponding United States patent application. This notice must be in writing and must identify the countries desired. The absence of this notice from Licensee to The Regents will be considered an election not to secure foreign rights.

 

7.4 Eight (8) months after the filing of the corresponding United States application, but not sooner, The Regents will have the right to file patent applications at its own expense in any country which Licensee has not identified in written notice provided by Paragraph 7.3. These applications and resulting patents will not be subject to this Agreement.

 

7.5 Licensee’s obligation to underwrite and to pay all United States and foreign patent costs will continue for as long as this Agreement remains in effect. Licensee may terminate its obligations with respect to any given patent application or patent upon three (3) months written notice to The Regents. The Regents will use its best efforts to curtail patent costs chargeable to Licensee under this Agreement after this notice is received from Licensee. The Regents may continue prosecution or maintenance of these application(s) or patent(s) at its sole discretion and expense, and Licensee will have no further rights or licenses to them.

 

7.6 The Regents will use its best efforts to not allow any Regents’ Patent Rights for which Licensee is licensed and is underwriting the costs of to lapse or become abandoned without Licensee’s authorization or reasonable notice, except for the filing of continuations, divisionals, or the like which substitute for the lapsed application.

 

8. PATENT INFRINGEMENT

 

8.1 In the event that The Regents (to the extent of the actual knowledge of the licensing professional responsible for the administration of this Agreement) or the Licensee learns of infringement of potential commercial significance of any patent licensed under this Agreement, the knowledgeable party will provide the other (i) with written notice of such infringement and (ii) with any evidence of such infringement available to it (the “ Infringement Notice ”). During the period in which, and in the jurisdiction where, the Licensee has exclusive rights under this Agreement, neither The Regents nor the Licensee will notify a third party (including the infringer) of infringement or put such third party on notice of the existence of any Patent Rights without first obtaining consent of the other. If the Licensee puts such infringer on notice of the existence of any Patent Rights with respect to such infringement without first obtaining the written consent of The Regents and if a declaratory judgment action is filed by such infringer against The Regents, then Licensee’s right to initiate a suit against such infringer for infringement under Paragraph 8.2 below will terminate immediately without the obligation of The Regents to provide notice to the Licensee. Both The Regents and the Licensee will use their diligent efforts to cooperate with each other to terminate such infringement without litigation; provided, however, that Licensee shall not be required to sublicense the infringer.

 

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8.2 If infringing activity of potential commercial significance by the infringer has not been abated within ninety (90) days following the date the Infringement Notice takes effect, then the Licensee will have the initial right, but not the obligation, at its expense, to institute suit for patent infringement against the infringer. The Regents may voluntarily join such suit at its own expense, but may not thereafter commence sun against the infringer for the acts of infringement that are the subject of the Licensee’s suit or any judgment rendered in the sun. If, in a suit initiated by the Licensee, The Regents is involuntarily joined other than by the Licensee, then the Licensee will pay any costs incurred by The Regents arising out of such suit, including but not limited to, any legal fees of counsel that The Regents selects and retains to represent it in the suit. In the event that (1) Licensee is unable to proceed with an infringement actions because The Regents is deemed to be a necessary party and The Regents declines to be joined in the Licensee’s infringement action; (2) The Regents does not pursue an infringement action in its own name; and (3) Licensee is unable to reach a mutually acceptable business solution with the alleged infringer (e.g. sublicense from Licensee), The Regents agrees to reduce by fifty percent (50%) the royalty rates payable by Licensee under the Agreement to account for the impact of the alleged infringement on Licensee.

 

8.3 If, within a hundred and eighty (180) days following the date the Infringement Notice takes effect, infringing activity of potential commercial significance by the infringer has not been abated and if the Licensee has not brought suit against the infringer, then The Regents may institute such suit for patent infringement against the infringer. If The Regents institutes such suit, then the Licensee may not join such suit without The Regents consent and may not thereafter commence suit against the infringer for acts of infringement that are subject to The Regents suit or any judgment rendered in that suit.

 

8.4 Any recovery or settlement received in connection with any suit will first be shared by The Regents and the Licensee equally to cover any litigation costs each incurred and next shall be paid to The Regents or the Licensee to cover any litigation costs it incurred in excess of the litigation costs of the other. In any suit initiated by the Licensee, any recovery in excess of litigation costs will be shared between Licensee and The Regents as follows: (a) for any recovery other than amounts paid for willful infringement: (i) The Regents will receive fifteen percent (15%) of the recovery if The Regents was not a party in the litigation or was involuntarily joined but did not actively participate in the litigation, (ii) The Regents will receive forty percent (40%) if The Regents was party in the litigation, and actively participated in the litigation (and incurred litigation costs); and (b) for any recovery for willful infringement, The Regents will receive fifty percent (50%) of the recovery. The Regents and the Licensee agree to be bound by all determinations of patent infringement, validity and enforceability (but no other issue) resolved by any adjudicated judgment in a suit brought in compliance with this Article 8 (Patent Infringement).

 

8.5 Any agreement made by the Licensee for purposes of settling litigation or other dispute shall comply with the requirements of Article 3 (Sublicenses) of this Agreement.

 

8.6 Each party will cooperate with the other in litigation proceedings instituted hereunder but at the expense of the party who initiated the suit (unless such suit is being jointly prosecuted by the parties).

 

8.7 Any litigation proceedings will be controlled by the party bringing the suit, except that The Regents may be represented by counsel of its choice in any suit brought by the Licensee.

 

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9. PROGRESS AND ROYALTY REPORTS

 

9.1 Beginning January 31, 2006, Licensee must submit to The Regents semiannual progress reports covering Licensee’s activities related to the development and testing of all Licensed Products and the obtaining of the governmental approvals necessary for marketing. These progress reports must be made for each Licensed Product until its First Commercial Sale.

 

9.2 The progress reports submitted under Paragraph 9.1 must include the following topics:

 

9.2a Summary of work completed.

 

9.2b Key scientific discoveries.

 

9.2c Summary of work in progress.

 

9.2d Current schedule of anticipated events or milestones.

 

9.2e Market plans for introduction of Licensed Products.

 

9.2f A summary of resources (dollar value) spent in the reporting period.

 

9.3 Licensee must notify The Regents if Licensee or any of its Sublicensees or Affiliates ceases to be a small entity (as defined by the United States Patent and Trademark Office) under the provisions of 35 U.S.C. §41 (b).

 

9.4 Licensee must report the date of the First Commercial Sale in the royalty report immediately following that Sale.

 

9.5 After the First Commercial Sale of each Licensed Product, Licensee must make quarterly royalty reports to The Regents by February 28, May 31, August 31 and November 30 of each year (i.e., within two (2) months from the end of each calendar quarter). Each royalty report must cover Licensee’s most recently completed calendar quarter and must show:

 

9.5a Gross sales and Net Sales of any Licensed Product.

 

9.5b Number of each type of Licensed Product sold.

 

9.5c Royalties payable to The Regents.

 

9.6 Licensee must state in its royalty report if it had no sales of any Licensed Product.

 

10. BOOKS AND RECORDS

 

10.1 Licensee must keep accurate books and records of all Licensed Products manufactured, used or sold. Licensee must preserve these books and records for at least five (5) years from the date of the royalty payment to which they pertain.

 

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10.2 The Regents’ are entitled to have an independent auditor with a national accounting firm reasonably acceptable to Licensee inspect these books and records solely to confirm the royalty and other payments made hereunder and compliance with other provisions in this agreement at reasonable times and upon reasonable prior notice to Licensee, an not more than once during any twelve (12) month period. The Regents will pay the fees and expenses of these inspections. If an error favoring Licensee of more than five percent (5%) of the total annual royalties is discovered, for the period being audited, then Licensee will pay the fees and expenses of these inspections. Any auditor shall enter into a confidentiality agreement with Licensee, reasonably acceptable to Licensee, prior to conducting any inspection and shall not disclose any Licensee Confidential Information except to the extent necessary to verify the accuracy of the payments made by Licensee hereunder and compliance with other provisions in this agreement.

 

11. LIFE OF THE AGREEMENT

 

11.1 Unless otherwise terminated by operation of law or by acts of the parties in accordance with the terms of this Agreement, this Agreement is in force from the Effective Date recited on page one and remains in effect for the life of the last to expire patent in Regents’ Patent Rights, or until the last patent application licensed under this Agreement is abandoned and no patent in Regents’ Patent Rights ever issues- (the later of these dates, the “ Expiration Date ”).

 

11.2 Upon termination of this Agreement, prior to Expiration Date, Licensee will have no further right to make, have made, use or sell any Licensed Product except as provided in Article 14 (Disposition of Licensed Products on Hand Upon Termination).

 

11.3 Any expiration or termination of this Agreement will not affect the rights and obligations set forth in the following Articles;

 

Article 10 Books and Records

 

Article 14 Disposition of Licensed Products on Hand upon Termination

 

Article 16 Use of Names and Trademarks

 

Article 17 Limited Warranty

 

Article 18 Indemnification

 

Article 23 Failure to Perform

 

Article 24 Governing Law

 

12. TERMINATION BY THE REGENTS

 

12.1 If Licensee violates or fails to perform any material term or covenant of this Agreement, then The Regents may give written notice of the default (“ Notice of Default ”) to Licensee. If Licensee does not repair the default within sixty (60) days after the effective date of the Notice of Default, then The Regents has the right to terminate this Agreement and the License by a second written notice (“ Notice of Termination ”) to Licensee. If The Regents sends a Notice of Termination to Licensee, then this Agreement automatically terminates on the effective date of this notice. Termination does not relieve Licensee of its obligation to pay any royalty or fees owing at the time of termination and does not impair any accrued right of The Regents.

 

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13. TERMINATION BY LICENSEE

 

13.1 Licensee has the right at any time to terminate this Agreement in whole or with respect to any portion of Regents’ Patent Rights by giving written notice to The Regents. This notice of termination will be subject to Article 19 (Notices) and will be effective ninety (90) days after the effective date of the notice.

 

13.2 Any termination in accordance with Paragraph 13.1 does not relieve Licensee of any obligation or liability accrued prior to termination. Nor does termination rescind anything done by Licensee or any payments made to The Regents prior to the effective date of termination. Termination does not affect in any manner any rights of The Regents arising under this Agreement prior to termination.

 

14. DISPOSITION OF LICENSED PRODUCTS

 ON HAND UPON TERMINATION

 

14.1 Upon termination of this Agreement, Licensee will have the right to dispose of all previously made or partially made Licensed Products, but no more, within a period of six (6) months. But Licensee must submit royalty reports on the sale of these Licensed Products and must pay royalties at the rate and at the time provided in this Agreement.

 

15. PATENT MARKING

 

15.1 Licensee must mark all Licensed Products made, used or sold under the terms of this Agreement, or their containers, in accordance with the applicable patent marking laws.

 

16. USE OF NAMES AND TRADEMARKS

 

16.1 Neither party is permitted to use any name, trade name, trademark or other designation of the other party or its employees (including contraction, abbreviation or simulation of any of the foregoing) in advertising, publicity or other promotional activity. Unless required by law, Licensee is expressly prohibited from using the name “The Regents of the University of California” or the name of any campus of the University of California.

 

17. LIMITED WARRANTY

 

17.1 The Regents warrants that it has the lawful right to grant this license to Licensee.

 

17.2 This License and the associated Invention are provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. THE REGENTS MAKE NO REPRESENTATION OR WARRANTY THAT ANY LICENSED PRODUCT WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.

 

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17.3 SUBJECT TO ARTICLE 18 (Indemnification), IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR THE USE OF THE INVENTION OR LICENSED PRODUCTS OR THE USE OR THE PRACTICE OF LICENSED METHODS.

 

17.4 Nothing in this Agreement will be construed as:

 

17.4a A warranty or representation by The Regents as to the validity or scope of any Regents’ Patent Rights.

 

17.4b A warranty or representation that anything made, used, sold or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of patents of third parties.

 

17.4c Obligate The Regents to bring or prosecute actions or suits against third parties for patent infringement except as provided in Article 8 (Patent Infringement).

 

17.4d Conferring by implication, estoppel or otherwise any license or rights under any patents of The Regents other than Regents’ Patent Rights as defined herein, regardless of whether such patents are dominant or subordinate to Regents’ Patent Rights.

 

17.4e Obligate The Regents to furnish any know-how not provided in Regents’ Patent Rights.

 

18. INDEMNIFICATION

 

18.1 Licensee will, and will require its Sublicensees to, indemnify, hold harmless and defend The Regents, its officers, employees, and agents, the sponsors of the research that led to the invention, the inventors of the patents and patent applications in Regents’ Patent Rights and their respective employers from and against any and all liability, claims, suits, losses, damages, costs, fees and expenses resulting from or arising out of exercise of this license or any sublicense. Indemnification includes but is not limited to products liability. If The Regents, in its sole discretion, believes that there will be a conflict of interest or it will not otherwise be adequately represented by counsel chosen by Licensee to defend The Regents in accordance with this Paragraph 18.1, then The Regents may retain counsel of its choice to represent it, and Licensee will pay all expenses for such representation.

 

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18.2 Licensee, at its sole cost and expense, must insure its activities in connection with the work under this Agreement and obtain, keep in force and maintain Comprehensive or Commercial Form General Liability Insurance (contractual liability included) with limits as follows:

 

18.2a Each occurrence $5,000,000

 

18.2b Products/completed operations aggregate $10,000,000

 

18.2c Personal and advertising injury $5,000,000

 

18.2d General aggregate (commercial form only) $10,000,000

 

18.3 Licensee expressly understands, however, that the coverages and limits in Paragraph 18.2 do not in any way limit the Licensee’s liability. Licensee must furnish The Regents with certificates of insurance evidencing compliance with all requirements. Licensee’s insurance must:

 

18.3a Provide for thirty (30) day advance written notice to The Regents of any modification.

 

18.3b Indicate that The Regents of the University of California is endorsed as an Insured under the coverages listed in Paragraph 18.2. 

 

18.3c Include a provision that the coverages will be primary and will not participate with nor will be excess over any valid and collective insurance or program of self-insurance carried or maintained by The Regents.

 

18.4 The Regents shall notify Licensee in writing of any claim or suit brought against The Regents in respect of which The Regents intends to invoke the provisions of this Article 18 (Indemnification). Licensee shall keep The Regents informed on a current basis of its defense of any claims under this Article 18 (Indemnification).

 

19. NOTICES

 

19.1 Any notice or payment required to be given to either party must be sent to the respective address given below and is effective: (a) on the date of delivery if delivered in person, (b) five (5) days after mailing if mailed by first-class certified mail, postage paid, or (c) on the next business day if sent by overnight delivery. Either party may change its designated address by written notice.

 

  For Licensee: BONE BIOLOGICS
     
    115 North Doheny Drive
     
    Beverly Hills, California 90211
     
    Attention: Chia Soo
     
  For The Regents: The Regents of the University of California
     
    University of California, Los Angeles
     
    Office of Intellectual Property Administration
     
    10920 Wilshire Blvd., Suite 1200
     
    Los Angeles, California 90024-1406
     
    Attention: Director

 

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20. ASSIGNABILITY

 

20.1 This Agreement is binding upon and inures to the benefit of The Regents, its successors and assigns. But it is personal to Licensee and assignable by Licensee only with the written consent of The Regents. The consent of The Regents will not be required if the assignment is in conjunction with the transfer of all or substantially all of the business of Licensee to which this license relates.

 

21. LATE PAYMENTS

 

21.1 For each royalty payment or fee not received by The Regents when due, Licensee must pay to The Regents a simple interest charge of ten percent (10%) per annum to be calculated from the date payment was due until it was actually received by The Regents.

 

22. WAIVER

 

22.1 The waiver of any breach of any term of this Agreement does not waive any other breach of that or any other term.

 

23. FAILURE TO PERFORM

 

23.1 If either party takes legal action against the other because of a failure of performance due under this Agreement, then the prevailing party is entitled to reasonable attorney’s fees in addition to costs and necessary disbursements.

 

24. GOVERNING LAW

 

24.1 THIS AGREEMENT IS TO BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity of any patent or patent application will be governed by the applicable laws of the country of the patent or patent application.

 

25. GOVERNMENT APPROVAL OR REGISTRATION

 

25.1 If this Agreement or any associated transaction is required by the law of any nation to be either approved or registered with any governmental agency, Licensee will assume all legal obligations to do so. Licensee will notify The Regents if it becomes aware that this Agreement is subject to a United States or foreign government reporting or approval requirement. Licensee will make all necessary filings and pay all costs including fees, penalties, and all other out-of-pocket costs associated with such reporting or approval process.

 

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26. EXPORT CONTROL LAWS

 

26.1 Licensee must observe all applicable United States and foreign laws with respect to the transfer of Licensed Products and related technical data to foreign countries, including the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations.

 

27. PREFERENCE FOR UNITED STATES INDUSTRY

 

27.1 Because this Agreement grants an exclusive right to a particular use of the Invention, Licensee must manufacture in the United States any products embodying this Invention or produced through the Invention’s use to the extent required by 35 U.S.C. §200-212. The Regents agree that, if requested by Licensee, The Regents will use reasonable and good faith efforts to cooperate with Licensee to seek a waiver or exception form the foregoing requirement on reasonable showing thereof by Licensee of a basis for such a waiver.

 

28. FORCE MAJEURE

 

28.1 The parties will be excused from any performance required under this Agreement if performance is impossible or unfeasible due to any catastrophe or other major event beyond their reasonable control, including war, riot, or insurrection; lockouts or other serious labor disputes; and floods, fires, explosions, or other natural disasters. When such events abate, and in any event within one (1) year, the parties’ respective obligations will resume.

 

29. CONFIDENTIALITY

 

29.1 If either party discloses confidential information to the other party, the disclosing party will designate this information as confidential by appropriate legend or instruction, and the receiving party will:

 

29.1a Use the same degree of care to maintain the secrecy of the confidential information as it uses to maintain the secrecy of its own information of like kind.

 

29.1b Use the confidential information only to accomplish the purposes of this Agreement.

 

29.2 Neither party will disclose confidential information received from the other party except to its employees, customers, distributors and other agents who are bound to it by similar obligations of confidence and only as required to accomplish the purposes of this Agreement.

 

29.3 Neither party will have any confidentiality obligation with respect to the confidential information belonging to or disclosed by the other party that:

 

29.3a The receiving party can demonstrate by written records was previously known to it.

 

29.3b The receiving party lawfully obtained from sources under no obligation of confidentiality.

 

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29.3c Is or becomes publicly available other than through an act or omission of the receiving party or any of its employees.

 

29.3d Is required to be disclosed under the California Public Records Act, governmental audit requirement or other requirement of law.

 

29.4 The provisions of this Article 29 (Confidentiality) will continue in effect for five (5) years after expiration or termination of this Agreement.

 

29.5 The Regents is free to release to the inventors and senior administrators employed by The Regents the terms and conditions of this Agreement. If such release is made, then The Regents shall give notice of the confidential nature and shall request that the recipient not disclose such terms and conditions to others. If a third party inquires whether a license to Regents’ Patent Rights is available, then The Regents may disclose the existence of this Agreement and the extent of the grant in Article 2 (Grant) to such third party, but will not disclose the name of Licensee or any other terms or conditions of this Agreement, except where The Regents is required to release information under the California Public Records Act, a governmental audit requirement, or other applicable law.

 

30. MISCELLANEOUS

 

30.1 The headings of the several sections are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement.

 

30.2 This Agreement is not binding upon the parties until it has been signed below on behalf of each party, in which event it becomes effective as of the date recited on page one.

 

30.3 No amendment or modification of this Agreement will be valid or binding upon the parties unless made in writing and signed by each party.

 

30.4 This Agreement embodies the entire understanding of the parties and supersedes all previous communications, representations or understandings, either oral or written, between the parties relating to the subject matter hereof.

 

30.5 If any part of this Agreement is for any reason found to be unenforceable, all other parts nevertheless remain enforceable as long as a party’s rights under this Agreement are not materially affected. In lieu of the unenforceable provision, the parties will substitute or add as part of this Agreement a provision that will be as similar as possible in economic and business objectives as was intended by the unenforceable provision.

 

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Both The Regents and Licensee have executed this Agreement in duplicate originals by their authorized officers on the dates written below:

 

BONE BIOLOGICS, INC.   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
         
By: /s/ Mary A. Gray     By: /s/ Emily Loughran  
  Signature     Signature
         
Name: Mary A. “Toni” Gray     Name: Emily Loughran
Title: CEO     Title: Director of Licensing
Date: March 20, 2006   Date: March 20, 2006 

 

 
 

 

APPENDIX A

 

REGENTS’ PATENT RIGHTS

 

U.S. Patent Application No. 09/412,297 entitled “NELL-1 Enhanced Bone Mineralization,” filed October 5, 1999 (UCLA Case No. 1999-560) by Dr. Kang Ting and assigned to The Resents of the University of California.

 

U.S. Provisional Patent Application No. 60/410,846 (ABANDONED) entitled “NELL-1 Enhanced Bone Mineralization,” filed September 13, 2002 (UCLA Case No. 2002-477-1, 2) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

PCT Patent Application No. PCT/US03/029281 entitled “NELL-1 Enhanced Bone Mineralization,” filed September 15, 2003 (UCLA Case No. 2002-477-3) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

U.S. Provisional Patent Application No. 60/445,672 (ABANDONED) entitled “NELL1 Expression Systems and Neuroprotective Activity of NELL2,” filed February 7, 2003 (UCLA Case No. 2004-331-1) by Drs. Kang Ting, Shunichi Kuroda and Ben Wu and assigned to The Regents of the University of California.

 

PCT Patent Application No. PCT/US04/003808 entitled “NELL Peptide-Expression Systems and Bone Formation Activity of NELL Peptide,” filed February 9, 2004 (UCLA Case No. 2004-331-2) by Drs. Kang Ting, Shunichi Kuroda and Ben Wu and assigned to The Regents of the University of California.

 

U.S. Provisional Patent Application No. 60/653,722 entitled “Pharmaceutical Compositions for Treating or Preventing Bone Conditions,” filed February 16, 2005 (UCLA Case No. 2006-369-1) by Drs. Kang Ting, Shunichi Kuroda and Chia Soo and assigned to The Regents of the University of California.

 

A-1
 

 

First Amendment

To

Exclusive License Agreement No. 2006-03-0536

 

This Amendment is made and is effective this 1st day of September 2007 (the “ Effective Date ”) by and between The Regents of the University of California (“ The Regents ”), a California corporation having its statewide administrative offices at 1111 Franklin Street, 12th Floor, Oakland, California 94607-5200, acting through the offices of The University of California, Los Angeles located at 11000 Kinross Avenue, Suite #200 Los Angeles, CA 90095-7231 and Bone Biologics, Inc. (“ Licensee ”), a corporation having a principal place of business at 115 North Doheny Drive, Beverly Hills, California, 90211 and amends UC License Agreement Control No. 2006-03-0536 (the Agreement) between The Regents and Licensee in accordance with the terms and conditions of this Amendment.

 

The parties agree as follows:

 

1. Delete Paragraph 1.4 and replace with the following:

 

The “ Field of Use ” means modulation of neuroectodermal, mesenchymal cell or mesoderm derivatives, including musculoskeletal and cardiovascular system growth, formation, replacement, remodeling, regeneration, or repair (“ Musculoskeletal ” and “ Cardiovascular ”). In addition, Field of Use includes all cGMP manufacture and gene expression protocols of NELL-1 & 2 protein and all compositions of matter, formulations, and delivery methods thereof (“ Manufacture ”) and application of the Invention to the field of mesodermal derivatives such as musculoskeletal and cardiovascular systems. Licensee may request to have additional Fields of Use amended into this Paragraph 1.4. The Regents may add the proposed field if additional diligence for the development of the new Field of Use is incorporated into Paragraph 6.3. The new diligence terms will stipulate dates for completion of specific phases of clinical development as well as a date for First Commercial Sale for a Licensed Product in the new Field of Use.

 

2. In Paragraphs 3.2a and 3.2b, the term “ Effective Date ” is the Effective Date of this First Amendment when applied to Sublicensing Income received for the Manufacture or Cardiovascular fields.

 

3. Delete Paragraph 4.2 and replace with the following:

 

For the first (and only the first) Licensed Product in the Musculoskeletal, for the first (and only the first) Licensed Product in the Cardiovascular field, and for the first (and only the first) Licensed Product in the Manufacture field reaching the milestones indicated below, Licensee must make the following payments to The Regents within thirty (30) days of reaching the milestones:

 

4.2a First Commercial Sale: Twenty-five thousand dollars ($25,000)

 

4.2b FDA marketing approval: Fifty-thousand dollars ($50,000)

 

For the avoidance of doubt, only the first milestone (4.2a) is applicable for the Manufacture field if the First Commercial Sale is for a Licensed Product in the Manufacture field that is neither in the Musculoskeletal or Cardiovascular field.

 

A-2
 

 

4. Expand the diligence Paragraph 6.3 for the Manufacture and Cardiovascular Fields of Use as set forth below:

 

A. Paragraph 6.3a-g as currently written applies only to Licensed Product in the Musculoskeletal field and should be renumbered to read 6.3(i)a-g.

 

B. Add the following diligence terms to Paragraph 6.3 to address diligence for the Cardiovascular field as follows:

 

6.3(ii)a Within 18 months of the Effective Date of the First Amendment, apply for maturation funding to identify therapeutic and/or diagnostic applications of interest in Cardiovascular field through Bone Biologics or Sublicensee of Bone Biologics.
     
   

Within 36 months of the Effective Date of the First Amendment, receive at least $100,000 of maturation funding to identify therapeutic and/or diagnostic applications of interest in Cardiovascular field through Bone Biologics or Sublicensee of Bone Biologics.

     
   

Within four and a half (4.5) years of the Effective Date of the First Amendment, provide The Regents with an updated business plan for commercialization of a Licensed Product in Cardiovascular field.

   

6.3(ii)b Within six (6) years of the Effective Date of the First Amendment finish an animal study to test proof of concept of a Licensed Product in Cardiovascular field.

 

6.3(ii)c Within seven (7) years of the Effective Date of the First Amendment finish a large animal study to test proof of concept of a Licensed Product in the Cardiovascular field.

 

6.3(ii)d Within nine (9) years of the Effective Date of the First Amendment finish preclinical studies for a Licensed Product in the Cardiovascular field.

 

6.3(ii)e Within twelve (12) years of the Effective Date of the First Amendment finish Phase I clinical trials (or equivalent) for a licensed product the Cardiovascular field.

 

6.3(ii)f Within fourteen (14) years of the Effective Date of the First Amendment have First Commercial Sale of a Licensed Product in the Cardiovascular field.

 

A-3
 

 

C. Add the following diligence terms to Paragraph 6.3 to address diligence for the Manufacture field as follows:

 

6.3(iii)a Within six (6) months of the Effective Date of the First Amendment provide to The Regents a signed agreement from a third party for cGMP manufacture.

 

6.3(iii)b Within eighteen (18) months of the Effective Date of the First Amendment commence composition of matter and delivery studies on preclinical protein in small animals. 

 

6.3(iii)c Within thirty (30) months of the Effective Date of the First Amendment commence composition of matter and delivery studies on preclinical protein in large animals.

 

6.3(iii)d Within forty-two (42) months of the Effective Date of the First Amendment commence composition of matter and delivery studies on cGMP protein for an IDE application.

 

6.3(iii)e Within five an a half (5.5) years of the Effective Date of the First Amendment commence composition of matter and delivery studies on cGMP protein for a Phase I clinical trial.

 

6.3(iii)f Within nine and a half (9.5) years of the Effective Date of the First Amendment have First Commercial Sale of a Licensed Product with cGMP protein and specific composition of matter and delivery methods.

 

D. Number the last paragraph of 6.3 as 6.3(iv) as follows:

 

6.3(iv) Licensee may extend any three of these milestones in each of the Musculoskeletal, Cardiovascular, and Manufacture diligence fields in six (6) month increments, but not more than once per milestone, by making a ten-thousand dollar ($10,000) payment to The Regents. In the event of any extension, any later occurring milestones in the Field of Use will be similarly extended. If Licensee, directly or through its Affiliates or sublicensees, fulfills all of its obligations in this Paragraph 6.3, Licensee will be deemed to have satisfied its diligence obligations under this Article 6 (Diligence).

 

A-4
 

 

All other terms and conditions of the Agreement remain the same.

 

BONE BIOLOGICS, INC .   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
         
By: /s/ Bruce A. Hazuka     By: /s/ Emily Loughran  
  Signature     Signature
         
Name: Bruce A. Hazuka    Name: Emily Loughran
Title: CEO     Title: Director of Licensing
Date: 9/25/07   Date: 9 - 27 - 07 

 

A-5
 

 

First Amendment
to
Exclusive License Agreement No. 2006-03-0536

 

This Amendment is made and is effective this 1st day of September 2007 (the “ Effective Date ”) by and between The Regents of the University of California (“ The Regents ”), a California corporation having its statewide administrative offices at 1111 Franklin Street, 12th Floor, Oakland, California 94607-5200, acting through the offices of The University of California, Los Angeles located at 11000 Kinross Avenue, Suite #200 Los Angeles, CA 90095-7231 and Bone Biologics, Inc. (“ Licensee ”), a corporation having a principal place of business at 115 North Doheny Drive, Beverly Hills, California, 90211 and amends UC License Agreement Control No. 2006-03-0536 (the “ Agreement ”) between The Regents and Licensee in accordance with the terms and conditions of this Amendment.

 

The parties agree as follows:

 

1. Delete Paragraph 1.4 and replace with the following:

 

The “ Field of Use ” means modulation of neuroectodermal, mesenchymal cell or mesoderm derivatives, including musculoskeletal and cardiovascular system growth, formation, replacement, remodeling, regeneration, or repair (“ Musculoskeletal ” and “ Cardiovascular ”). In addition, Field of Use includes all cGMP manufacture and gene expression protocols of NELL-1 & 2 protein and all compositions of matter, formulations, and delivery methods thereof (“ Manufacture ”) and application of the Invention to the field of mesodermal derivatives such as musculoskeletal and cardiovascular systems. Licensee may request to have additional Fields of Use amended into this Paragraph 1.4. The Regents may add the proposed field if additional diligence for the development of the new Field of Use is incorporated into Paragraph 6.3. The new diligence terms will stipulate dates for completion of specific phases of clinical development as well as a date for First Commercial Sale for a Licensed Product in the new Field of Use.

 

2. In Paragraphs 3.2a and 3.2b, the term “ Effective Date ” is the Effective Date of this First Amendment when applied to Sublicensing Income received for the Manufacture or Cardiovascular fields.

 

3. Delete Paragraph 4.2 and replace with the following:

 

For the first (and only the first) Licensed Product in the Musculoskeletal, for the first (and only the first) Licensed Product in the Cardiovascular field, and for the first (and only the first) Licensed Product in the Manufacture field reaching the milestones indicated below, Licensee must make the following payments to The Regents within thirty (30) days of reaching the milestones:

 

4.2a First Commercial Sale: Twenty-five thousand dollars ($25,000)

 

4.2b FDA marketing approval: Fifty-thousand dollars ($50,000)

 

 
 

 

For the avoidance of doubt, only the first milestone (4.2a) is applicable for the Manufacture field if the First Commercial Sale is for a Licensed Product in the Manufacture field that is neither in the Musculoskeletal or Cardiovascular field.

 

4. Expand the diligence Paragraph 6.3 for the Manufacture and Cardiovascular Fields of Use as set forth below:

 

A. Paragraph 6.3a-g as currently written applies only to Licensed Product in the Musculoskeletal field and should be renumbered to read 6.3(i)a-g.

 

B. Add the following diligence terms to Paragraph 6.3 to address diligence for the Cardiovascular field as follows:

 

6.3(ii)a Within 18 months of the Effective Date of the First Amendment, apply for maturation funding to identify therapeutic and/or diagnostic applications of interest in Cardiovascular field through Bone Biologics or Sublicensee of Bone Biologics.

 

Within 36 months of the Effective Date of the First Amendment, receive at least $100,000 of maturation funding to identify therapeutic and/or diagnostic applications of interest in Cardiovascular field through Bone Biologics or Sublicensee of Bone Biologics.

 

Within four and a half (4.5) years of the Effective Date of the First Amendment, provide The Regents with an updated business plan for commercialization of a Licensed Product in Cardiovascular field.

 

6.3(ii)b Within six (6) years of the Effective Date of the First Amendment finish an animal study to test proof of concept of a Licensed Product in Cardiovascular field.

 

6.3(ii)c Within seven (7) years of the Effective Date of the First Amendment finish a large animal study to test proof of concept of a Licensed Product in the Cardiovascular field.

 

6.3(ii)d Within nine (9) years of the Effective Date of the First Amendment finish preclinical studies for a Licensed Product in the Cardiovascular field.

 

6.3(ii)e Within twelve (12) years of the Effective Date of the First Amendment finish Phase I clinical trials (or equivalent) for a licensed product the Cardiovascular field.

 

6.3(ii)f Within fourteen (14) years of the Effective Date of the First Amendment have First Commercial Sale of a Licensed Product in the Cardiovascular field.

 

2
 

  

C. Add the following diligence terms to Paragraph 6.3 to address diligence for the Manufacture field as follows:

 

6.3(iii)a Within six (6) months of the Effective Date of the First Amendment provide to The Regents a signed agreement from a third party for cGMP manufacture.

 

6.3(iii)b Within eighteen (18) months of the Effective Date of the First Amendment commence composition of matter and delivery studies on preclinical protein in small animals.

 

6.3(iii)c Within thirty (30) months of the Effective Date of the First Amendment commence composition of matter and delivery studies on preclinical protein in large animals.

 

6.3(iii)d Within forty-two (42) months of the Effective Date of the First Amendment commence composition of matter and delivery studies on cGMP protein for an IDE application.

 

6.3(iii)e Within five and a half (5.5) years of the Effective Date of the First Amendment commence composition of matter and delivery studies on cGMP protein for a Phase I clinical trial.

 

6.3(iii)f Within nine and a half (9.5) years of the Effective Date of the First Amendment have First Commercial Sale of a Licensed Product with cGMP protein and specific composition of matter and delivery methods.

 

D. Number the last paragraph of 6.3 as 6.3(iv) as follows:

 

6.3(iv) Licensee may extend any three of these milestones in each of the Musculoskeletal, Cardiovascular, and Manufacture diligence fields in six (6) month increments, but not more than once per milestone, by making a ten-thousand dollar ($10,000) payment to The Regents. In the event of any extension, any later occurring milestones in the Field of Use will be similarly extended. If Licensee, directly or through its Affiliates or sublicensees, fulfills all of its obligations in this Paragraph 6.3, Licensee will be deemed to have satisfied its diligence obligations under this Article 6 (Diligence).

 

All other terms and conditions of the Agreement remain the same.

 

BONE BIOLOGICS, INC   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
     
By: /s/ Bruce A. Hazuka   By: /s/ Emily Loughran
Name: Bruce A. Hazuka   Name: Emily Loughran
Title CEO   Title Director of Licensing
Date: 9/25/07   Date: 9 - 27 - 07

 

3
 

 

Second Amendment To Exclusive License Agreement
UC Control No. 2006-03-0536

 

THIS SECOND AMENDMENT (the “ Amendment ”) is effective this 29th day of May 2008 (the “ Effective Date ”) by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA (“ The Regents ”), a California corporation having its statewide administrative offices at 1111 Franklin Street, 12th Floor, Oakland, California 94607-5200, acting through the offices of The University of California, Los Angeles located at 11000 Kinross Avenue, Suite #200, Los Angeles, CA 90095-7231 and BONE BIOLOGICS, INC. (“ Licensee ”), a corporation having a principal place of business at 115 North Doheny Drive, Beverly Hills, California, 90211 and amends the exclusive license agreement, Control No. 2006-03-0536 , effective as of the 15th day of March 2006 between The Regents and Licensee (the “ Agreement ”) in accordance with the terms and conditions of this Amendment.

 

The parties agree as follows:

 

1. Amend Article 1, Paragraph 1.1/ Regent’s Patent Rights of the Agreement to include the following UC Case Number:

 

“UC Case Number: 2008-238 ‘Vascular Effects of Nell-1’ ”

 

2. Amend Article 4/ FEES of the Agreement to add Paragraph 4.5 to the Article:

 

“4.5 Licensee must pay The Regents a milestone fee of Ten Thousand Dollars ($10,000) upon issuance of the first U.S. Patent claiming priority to provisional filing 60/983,903 .”

 

All other terms and conditions of the Agreement remain the same.

 

This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Facsimile, Portable Document Format (PDF) or photocopied signatures of the Parties will have the same legal validity as original signatures.

 

Both The Regents and Licensee have executed this Second Amendment in duplicate originals by their authorized officers on the dates written below:

 

BONE BIOLOGICS, INC   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
     
By: /s/ Bruce A. Hazuka     By: /s/ Emily Loughran
Name: Bruce A. Hazuka    Name: Emily Loughran 
Title: CEO    Title: Director of Licensing
Date: 6/25/08     Date: 6 - 30 - 08 

 

1
 

 

Third Amendment to Exclusive License Agreement
UC Control No. 2006-03-0536

 

THIS THIRD AMENDMENT (the “ Amendment ”) is effective this 4th day of December 2008 (the “ Effective Date ”) by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA (“ The Regents ”), a California corporation having its statewide administrative offices at 1111 Franklin Street, 12th Floor, Oakland, California 94607-5200, acting through the offices of The University of California, Los Angeles located at 11000 Kinross Avenue, Suite #200, Los Angeles, CA 90095-7231 and BONE BIOLOGICS, INC. (“ Licensee ”), a corporation having a principal place of business at 115 North Doheny Drive, Beverly Hills, California, 90211 and amends the Exclusive License Agreement, Control No. 2006-03-0536 , effective as of the March 15, 2006, the First Amendment dated September 1, 2007, and the Second Amendment dated May 29, 2008 between The Regents and Licensee (collectively, the “ Agreement ”) in accordance with the terms and conditions of this Amendment.

 

Recitals

 

WHEREAS Licensee desires to add the following invention to the Agreement and Appendix A:

 

UCLA Case 2009-271 : “ Recombinant NELL Protein Production ;”

 

NOW THEREFORE , in consideration of the foregoing premises and the mutual promises, covenants, and agreements hereinafter set forth, ail parties to this First Amendment mutually agree to amend the Agreement as follows:

 

1. Amend the RECITALS of the Agreement as follows:

 

Add: UCLA Case Number: 2009-271 : “ Recombinant NELL Protein Production .”

 

2. Amend Article 1, Paragraph 1.1/ Regent’s Patent Rights of the Agreement to include UC Case Number 2009-271.

 

3. Delete APPENDIX A ( REGENTS’ PATENT RIGHTS ) of the Agreement in its entirety and replace it with the revised APPENDIX A (REGENTS’ PATENT RIGHTS) attached.

 

All other terms and conditions of the Agreement remain the same.

 

This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument Facsimile, Portable Document Format (PDF) or photocopied signatures of the Parties will have the same legal validity as original signatures.

 

Both The Regents and Licensee have executed this Third Amendment in duplicate originals by their authorized officer’s on the dates written below:

 

[SIGNATURE PAGE FOLLOWS:]

 

1
 

 

BONE BIOLOGICS, INC   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
     
By:

/s/ Bruce A. Hazuka

  By: /s/ Emily Loughran
Name:

Bruce A. Hazuka

  Name: Emily Loughran
Title: President + CEO   Title: Director of Licensing
Date: Dec. 4, 2008   Date: 2 - 23 - 09

 

2
 

 

Appendix A

REGENTS’ PATENT RIGHTS

 

1) UCLA CASE NO. 1999-560 (“Enhanced Mineralization in Osteoblasts”)

 

United States Patent No. 7,052,856 entitled, “Enhanced Mineralization in Osteoblasts”, issued May 30, 2006 (UCLA Case No. 1999-560-1) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

U.S. Patent Application No. 09/412,297 entitled “Enhanced Mineralization in Osteoblasts,” filed October 5, 1999 (UCLA Case No. 1999-560-1) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

PCT Application No. PCT/US00/27477 (ABANDONED) entitled, “Enhanced Mineralization in Osteoblasts,” filed October 4, 2000 (UCLA Case No. 1999-560-1) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

U.S. Patent Application No. 11/392,294 entitled “Enhanced Mineralization in Osteoblasts,” filed March 28, 2006 (UCLA Case No. 1999-560-2) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

U.S. Patent Application No. 11/594,510 entitled “Enhanced Mineralization in Osteoblasts,” filed November 7, 2006 (UCLA Case No. 1999-560-3) by Drs. Kang Ting, Benjamin M. Wu, and Chia B. Soo and assigned to The Regents of the University of California.

 

PCT Application No. PCT/US07/083655 entitled, “Enhanced Mineralization in Osteoblasts”, filed November 05, 2007 (UCLA Case No. 1999-560-3) by Drs. Kang Ting, Benjamin M. Wu, and Chia B. Soo and assigned to The Regents of the University of California.

 

U.S. Patent Application No. 11/713,366 entitled “Enhanced Mineralization in Osteoblasts,” filed March 1, 2007 (UCLA Case No. 1999-560-4) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

PCT Application No. PCT/US08/054779 entitled, “Enhanced Mineralization in Osteoblasts”, filed February 22, 2008 (UCLA Case No. 1999-560-4) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

U.S. Patent Application No. 11/977,031 entitled “Enhanced Mineralization in Osteoblasts,” filed October 22, 2007 (UCLA Case No. 1999-560-5) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

2) UCLA CASE NO. 2002-477 (“NELL-1 Enhanced Bone Mineralization”)

 

U.S. Provisional Patent Application No. 60/410,846 (ABANDONED) entitled “NELL-1 Enhanced Bone Mineralization,” filed September 13, 2002 (UCLA Case No. 2002-477-1, 2) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

3
 

 

U.S. Patent Application No. 10/527,786 (ABANDONED) entitled “NELL-1 Enhanced Bone Mineralization,” filed September 15, 2003 (UCLA Case No. 2002-477-3) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

PCT Patent Application No. PCT/US03/029281 (ABANDONED) entitled “NELL-1 Enhanced Bone Mineralization,” filed September 15, 2003 (UCLA Case No. 2002-477-3) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

Canadian Patent Application No. 2498751 entitled “NELL-1 Enhanced Bone Mineralization,” filed September 15, 2003 (UCLA Case No. 2002-477-3) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

Chinese Patent Application No. 03824975.8 entitled “NELL-1 Enhanced Bone Mineralization,” filed September 15, 2003 (UCLA Case No. 2002-477-3) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

European Patent Application No. 03752446.9 entitled “NELL-1 Enhanced Bone Mineralization,” filed September 15, 2003 (UCLA Case No. 2002-477-3) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

Japanese Patent Application No. 2004-536597 entitled “NELL-1 Enhanced Bone Mineralization,” filed September 15, 2003 (UCLA Case No. 2002-477-3) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

South Korean Patent Application No. 2005-7004382 entitled “NELL-1 Enhanced Bone Mineralization,” filed September 15, 2003 (UCLA Case No. 2002-477-3) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

U.S. Patent Application No. 11/973,831 entitled “NELL-1 Enhanced Bone Mineralization,” filed October 9, 2007 (UCLA Case No. 2002-477-4) by Dr. Kang Ting and assigned to The Regents of the University of California.

 

3) UCLA CASE NO. 2004-331 (“NELL-1 Expression Systems and Neuroprotective Activity of NELL-2”)

 

U.S. Provisional Patent Application No. 60/445,672 (ABANDONED) entitled “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,” filed February 7, 2003 (UCLA Case No. 2004-331-1) by Drs. Kang Ting, Shunichi Kuroda and Benjamin M. Wu and assigned to The Regents of the University of California.

 

U.S. Patent Application No. 10/544,553 entitled “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,” filed February 9, 2004 (UCLA Case No. 2004-331-2) by Drs. Kang Ting, Shunichi Kuroda and Benjamin M. Wu and assigned to The Regents of the University of California.

 

4
 

 

PCT Patent Application No. PCT/US04/003808 (ABANDONED) entitled “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,” filed February 9, 2004 (UCLA Case No. 2004-331-2) by Drs. Kang Ting, Shunichi Kuroda and Benjamin M. Wu and assigned to The Regents of the University of California.

 

Canadian Patent Application No. 2515208 entitled “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,” filed February 9, 2004 (UCLA Case No. 2004-331-2) by Drs. Kang Ting, Shunichi Kuroda and Benjamin M. Wu and assigned to The Regents of the University of California.

 

Chinese Patent Application No. 200480009450.1 entitled “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,” filed February 9, 2004 (UCLA Case No. 2004-331-2) by Drs. Kang Ting, Shunichi Kuroda and Benjamin M. Wu and assigned to The Regents of the University of California.

 

European Patent Application No. 04709500.5 entitled “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,” filed February 9, 2004 (UCLA Case No. 2004-331-2) by Drs. Kang Ting, Shunichi Kuroda and Benjamin M. Wu and assigned to The Regents of the University of California.

 

Japanese Patent Application No. 2006-503442 entitled “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,” filed February 9, 2004 (UCLA Case No. 2004-331-2) by Drs. Kang Ting, Shunichi Kuroda and Benjamin M. Wu and assigned to The Regents of the University of California.

 

South Korean Patent Application No. 10-2005-7014588 entitled “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,” filed February 9, 2004 (UCLA Case No. 2004-331-2) by Drs. Kang Ting, Shunichi Kuroda and Benjamin M. Wu and assigned to The Regents of the University of California.

 

U.S. Patent Application No. 11/601,529 entitled “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,” filed November 17, 2006 (UCLA Case No. 2004-331-3) by Drs. Kang Ting. Shunichi Kuroda and Benjamin M. Wu and assigned to The Regents of the University of California.

 

PCT Patent Application No. PCT/US07/084074 entitled “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,” filed November 8, 2007 (UCLA Case No. 2004-331-3) by Drs. Kang Ting. Shunichi Kuroda and Benjamin M. Wu and assigned to The Regents of the University of California.

 

U.S. Provisional Patent Application No. for UCLA Case No. 2004-331-4 entitled “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,” by Drs. Kang Ting, Shunichi Kuroda and Benjamin M. Wu and assigned to The Regents of the University of California was COMBINED INTO 2009-271.

 

5
 

 

4) UCLA CASE NO. 2006-369 (“Pharmaceutical Compositions for Treating or Preventing Bone Conditions”)

 

U.S. Provisional Patent Application No. 60/653,722 (ABANDONED) entitled “Pharmaceutical Compositions for Treating or Preventing Bone Conditions,” filed February 16, 2005 (UCLA Case No. 2006-369-1) by Drs. Kang Ting, Shunichi Kuroda, Chia B. Soo, and Benjamin M. Wu and assigned to The Regents of the University of California.

 

U.S. Patent Application No. 11/884,525 entitled “Pharmaceutical Compositions for Treating or Preventing Bone Conditions,” filed February 16, 2006 (UCLA Case No. 2006-369-2) by Drs. Kang Ting, Shunichi Kuroda, Chia B. Soo, and Benjamin M. Wu and assigned to The Regents of the University of California.

 

PCT Patent Application No. PCT/US06/005473 (ABANDONED) entitled “Pharmaceutical Compositions for Treating or Preventing Bone Conditions,” filed February 16, 2006 (UCLA Case No. 2006-369-2) by Drs. Kang Ting, Shunichi Kuroda and Ben Wu and assigned to The Regents of the University of California.

 

Canadian Patent Application No. 2,597,605 entitled “Pharmaceutical Compositions for Treating or Preventing Bone Conditions,” filed February 16, 2006 (UCLA Case No. 2006-369-2) by Drs. Kang Ting, Shunichi Kuroda, Chia B. Soo, and Benjamin M. Wu and assigned to The Regents of the University of California.

 

Chinese Patent Application No. 200680012707.8 entitled “Pharmaceutical Compositions for Treating or Preventing Bone Conditions,” filed February 16, 2006 (UCLA Case No. 2006-369-2) by Drs. Kang Ting, Shunichi Kuroda, Chia B. Soo, and Benjamin M. Wu and assigned to The Regents of the University of California.

 

European Patent Application No. 06735230.2 entitled “Pharmaceutical Compositions for Treating or Preventing Bone Conditions,” filed February 16, 2006 (UCLA Case No. 2006-369-2) by Drs. Kang Ting, Shunichi Kuroda, Chia B. Soo, and Benjamin M. Wu and assigned to The Regents of the University of California.

 

Japanese Patent Application No. 2007-556289 entitled “Pharmaceutical Compositions for Treating or Preventing Bone Conditions,” filed February 16, 2006 (UCLA Case No. 2006-369-2) by Drs. Kang Ting, Shunichi Kuroda, Chia B. Soo, and Benjamin M. Wu and assigned to The Regents of the University of California.

 

South Korean Patent Application No. PCT/US06/005473 entitled “Pharmaceutical Compositions for Treating or Preventing Bone Conditions,” filed February 16, 2006 (UCLA Case No. 2006-369-2) by Drs. Kang Ting, Shunichi Kuroda, Chia B. Soo, and Benjamin M. Wu and assigned to The Regents of the University of California.

 

6
 

 

5) UCLA CASE NO. 2008-238 (“NELL-1 Compositions”)

 

U.S. Provisional Patent Application No. 60/983,903 (ABANDONED) entitled “NELL-1 Compositions,” filed October 30, 2007 (UCLA Case No. 2008-238-1) by Drs. Kang Ting, Chia B. Soo and Xinli Zhang and assigned to The Regents of the University of California.

 

U.S. Patent Application No. 11/929,708 entitled “NELL-1 Compositions,” filed October 30, 2007 (UCLA Case No. 2008-238-2) by Drs. Kang Ting, Chia B. Soo and Xinli Zhang and assigned to The Regents of the University of California. -

 

PCT Patent Application No. PCT/US08/081168 entitled “NELL-1 Compositions,” filed October 30, 2007 (UCLA Case No. 2008-238-2) by Drs. Kang Ting, Chia B. Soo and Xinli Zhang and assigned to The Regents of the University of California.

 

6) UCLA CASE NO. 2009-271 (“Recombinant NELL Protein Production”)

 

U.S. Provisional Patent Application No. 61/103,534 (Combined with UC Case 2004-331-4 : “NELL-1 Expression Systems and Neuroprotective Activity of NELL-2,”) entitled “Recombinant NELL Protein Production,” filed October 07, 2008 (UCLA Case No. 2009-271-1) by Drs. Kang Ting and Chia B. Soo and assigned to The Regents of the University of California.

 

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Fourth Amendment to Exclusive License Agreement
UC Control No. 2006-03-0536

 

THIS FOURTH AMENDMENT (the “ Amendment ”) is effective this 19th day of August 2009 (the “ Effective Date ”) by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA (“The Regents”) , a California corporation having its statewide administrative offices at 1111 Franklin Street, 12th Floor, Oakland, California 94607-5200, acting through the offices of The University of California, Los Angeles located at 11000 Kinross Avenue, Suite #200, Los Angeles, CA 90095-7231 and a BONE BIOLOGICS, INC. (“ Licensee ”), a corporation having a principal place of business at 115 North Doheny Drive, Beverly Hills, California, 90211 and amends the Exclusive License Agreement, Control No. 2006-03-0536, effective as of the March 15, 2006, the First Amendment dated September 1, 2007, and the Second Amendment dated May 29, 2008, Third Amendment dated December 4, 2008 between The Regents and Licensee (collectively, the “ Agreement ”) in accordance with the terms and conditions of this Amendment.

 

Recitals

 

WHEREAS , the Licensee desires to add UC Case No. 2009-569 to the Agreement;

 

WHEREAS , The Regents desires to update language concerning patent filing, prosecution and maintenance;

 

NOW THEREFORE , in consideration of the foregoing premises and the mutual promises, covenants, and agreements hereinafter set forth, all parties to this Fourth Amendment mutually agree to amend the Agreement as follows:

 

1. Amend the RECITALS of the Agreement as follows:

 

Add: UCLA Case No. 2009-569: “ NELL-1 Isoform

 

2. Amend Article 1, Paragraph 1.1/ Regent’s Patent Rights of the Agreement to include UC Case No. 2009-569.

 

3. Delete Article 7 (PATENT FILING, PROSECUTION AND MAINTENANCE) of the Agreement in its entirety and replace it with the following:

 

“7. PATENT FILING, PROSECUTION AND MAINTENANCE

 

7.1 Patent Prosecution

 

7.1a As long as Licensee has complied with its obligations to reimburse or pre-pay The Regents for patent prosecution costs as set forth in this Article 7 (PATENT FILING, PROSECUTION AND MAINTENANCE), The Regents will file, prosecute and maintain the patents and applications comprising Regents’ Patent Rights. These patents will be held in the name of The Regents and will be obtained with counsel of The Regents’ choice. The Regents must provide Licensee with copies of each patent application, office action, response to office action, request for terminal disclaimer, and request for reissue or reexamination of any patent or patent application under Regents’ Patent Rights. The Regents will consider any comments or suggestions by Licensee and will use reasonable efforts to amend patent applications to include claims reasonably requested by Licensee to protect the products and services contemplated under this Agreement. The Regents is entitled to take action to preserve rights and minimize costs whether or not Licensee has commented, and will use reasonable efforts to not allow any Regents’ Patent Rights for which Licensee is licensed and is underwriting the costs of to lapse or become abandoned without Licensee’s written authorization under Paragraph 7.4, except for the filing of continuations, divisionals, or the like that substitute for the lapsed application.

 

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7.1b Licensee has the right to request patent filings on the Invention in the United States and any foreign territories where Regents’ Patent Rights are available (“ National Phase Filing ”) by providing a written request to The Regents identifying which territories Licensee has selected for patent prosecution no later than ninety (90) days prior to the deadline for filing any such National Phase Filing (“ Patent Prosecution Request ”). All other requests and instructions for patent prosecution (for example Chapter Two Demands, responses to office actions, utility filings, provisional patent filings, etc.) shall be provided in writing by Licensee to The Regents no later than ninety (90) days prior to the deadline set by the patent office in the territory such patent action is to take place in (also a “ Patent Prosecution Request ” for purposes of this Agreement). The absence of this Patent Prosecution Request by the deadline specified in this Paragraph 7.1 will be considered an election not to secure the patent rights associated with the specific phase of patent prosecution in such territory, and such patent application(s) and patent(s) will not be part of Regents’ Patent Rights and therefore not subject to this Agreement, and Licensee will have no further rights or license to them.

 

7.1c Ninety (90) days before the deadline for filing a Chapter Two Demand and ninety (90) days before the deadline for filing a National Phase Filing, but not sooner, The Regents will have the right to file patent applications at its own expense in any territory which Licensee has not identified in written notice pursuant to this Paragraph 7.1 and such patent application(s) and patent(s) will not be part of Regents’ Patent Rights and therefore not subject to this Agreement, and Licensee will have no further rights or license to them.

 

7.2 Past Patent Costs

 

Licensee will bear all costs incurred prior to the term of this Agreement in the preparation, filing, prosecution and maintenance of patent applications and patents in Regents’ Patent Rights (“Past Patent Costs”). Prosecution includes, but is not limited to, interferences, oppositions and any other inter partes matters originating in a patent office. Licensee must send payment for such Past Patent Costs to The Regents within thirty (30) days of Licensee’s receipt of an invoice for these costs.

 

7.3 Ongoing Patent Costs

 

7.3a Licensee will bear all costs incurred during the term of this Agreement in the preparation, filing, prosecution and maintenance of patent applications and patents in Regents’ Patent Rights (“ Ongoing Patent Costs ”). Prosecution includes, but is not limited to, interferences, oppositions and any inter partes matters originating in a patent office. Licensee’s obligation to underwrite and to pay all United States and foreign patent costs will continue for as long as this Agreement remains in effect. Licensee may request a cost estimate for patent filings, chapter two demands and office actions (“ Cost Estimate ”). Fees and expenses that are due to incidentals (for example photocopy charges or long distance phone charges) are not included within such Cost Estimate unless expressly so stated, nor is Licensee’s direct interaction with Regents’ counsel such as by phone calls, e-mails, in person meetings and the like.

 

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7.3b With each Patent Prosecution Request, Licensee must pay in advance to The Regents The Regents’ patent counsel’s estimated costs for undertaking any utility patent filing, National Phase Filing or office action filing before The Regents authorizes its patent counsel to proceed with such patent action (“ Advanced Payment ”). The absence of this Advanced Payment will be considered an election not to secure the patent rights associated with the specific phase of patent prosecution in such territory, and such patent application(s) and patent(s) will not be part of Regents’ Patent Rights and therefore not subject to this Agreement, and Licensee will have no further rights or license to them.

 

7.4 Termination of Patent Prosecution by Licensee

 

Licensee may terminate its obligations with respect to any given patent application or patent within Regents’ Patent Rights by providing written notice to The Regents (“ Patent Termination Notice ”), and termination of Licensee’s obligations with respect to such patent application or patent will be effective three (3) months after receipt of such Patent Termination Notice by The Regents. The Regents will use its best efforts to curtail patent costs chargeable to Licensee under this Agreement after this Patent Termination Notice is received by The Regents from Licensee. The Regents may continue prosecution or maintenance of these application(s) or patent(s) at its sole discretion and expense, and such application(s) and patent(s) will not be part of Regents’ Patent Rights and therefore not subject to this Agreement, and Licensee will have no further rights or license to them.”

 

4. Amend the APPENDIX A (REGENTS’ PATENT RIGHTS) of the Agreement by adding the following:

 

“7) UCLA CASE NO. 2009-569 (“ NELL-1 Isoform ”)

 

Provisional Patent Application No. 61/163,297 entitled, “ NELL-1 Isoform ”, filed March 25, 2009 (UCLA Case No. 2009-569-1) by Dr(s). Kang Ting and Chia B. Soo, and assigned to The Regents.”

 

All other terms and conditions of the Agreement remain the same.

   

[SIGNATURE PAGE FOLLOW:]

 

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This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Facsimile, Portable Document Format (PDF) or photocopied signatures of the Parties will have the same legal validity as original signatures.

 

Both The Regents and Licensee have executed this Fourth Amendment by their authorized officers on the dates written below:

 

BONE BIOLOGICS, INC   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
     
By: /s/ Bruce A. Hazuka   By: /s/ Emily Loughran
Name: Bruce A. Hazuka   Name: Emily Loughran
Title : President - CEO   Title: Director of Licensing
Date: 8/19/09   Date: January 6, 2010

  

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Fifth Amendment
to
Exclusive License Agreement
UC Control No. 2006-03-0536

 

THIS FIFTH AMENDMENT (the “ Amendment ”) is effective this 11th day of January 2011 (the “ Effective Date ”) by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA (“ The Regents ”), a California corporation having its statewide administrative offices at 1111 Franklin Street, 12th Floor, Oakland, California 94607-5200, acting through the offices of The University of California, Los Angeles located at 11000 Kinross Avenue, Suite #200, Los Angeles, CA 90095-7231 and BONE BIOLOGICS, INC. (“ Licensee ”), a corporation having a principal place of business at 115 North Doheny Drive, Beverly Hills, California, 90211 and amends the Exclusive License Agreement, Control No. 2006-03-0536, effective as of the March 15, 2006, the First Amendment dated September 1, 2007, the Second Amendment dated May 29, 2008, Third Amendment dated December 4, 2008, and the Fourth Amendment dated August 19, 2009 between The Regents and Licensee (collectively, the “ Agreement ”) in accordance with the terms and conditions of this Amendment.

 

Recitals

 

WHEREAS , the Licensee desires to add UCLA Case No. 2011-416 to the Agreement;

 

NOW THEREFORE , in consideration of the foregoing premises and the mutual promises, covenants, and agreements hereinafter set forth, all parties to this Fifth Amendment mutually agree to amend the Agreement as follows:

 

1. Amend the RECITALS of the Agreement as follows:

 

Add: UCLA Case No. 2011-416: “ Using NELL-1 to Inhibit Osteoclasts and to Prevent, Treat Osteoporosis

 

2.   Amend Article 1, Paragraph 1.1/ Regent’s Patent Rights of the Agreement to include UCLA Case No. 2011-416.

 

3. Amend the APPENDIX A (REGENTS’ PATENT RIGHTS) of the Agreement by adding the following:

 

“7) UCLA CASE NO. 2011-416 (“ Using NELL-1 to Inhibit Osteoclasts and to Prevent, Treat Osteoporosis ”)

 

Provisional Patent Application No. 61/432,544 entitled, “ Using NELL-1 to Inhibit Osteoclasts and to Prevent, Treat Osteoporosis ,” filed January 13, 2011 (UCLA Case No. 2011-416-1) by Dr(s). Chia B. Soo and Kang Ting, and assigned to The Regents.”

 

All other terms and conditions of the Agreement remain the same.

 

[SIGNATURE PAGE FOLLOW:]

 

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This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Facsimile, Portable Document Format (PDF) or photocopied signatures of the Parties will have the same legal validity as original signatures.

 

Both The Regents and Licensee have executed this Fifth Amendment by their authorized officers on the dates written below:

 

BONE BIOLOGICS, INC   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
         
By: /s/ Bruce A. Hazuka   By: /s/ Emily Loughran
Name: Bruce A. Hazuka   Name: Emily Loughran
Title: President   Title: Director of Licensing
Date: January 11, 2011   Date: 3 - 30 - 2011

 

2
 

 

Sixth Amendment
to
the License Agreement
UC Control No. 2006-03-0536

 

THIS SIXTH AMENDMENT (the “ Sixth Amendment ”) is effective this August 18, 2011 (the “ Effective Date ”) by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA (“ The Regents ”), a California corporation having its statewide administrative offices at 1111 Franklin Street, 12th Floor, Oakland, California 94607-5200, acting through the offices of The University of California, Los Angeles located at 11000 Kinross Avenue, Suite #200, Los Angeles, CA 90095-7231 and BONE BIOLOGICS, INC. (“ Licensee ”), a corporation having a principal place of business at 115 North Doheny Drive, Beverly Hills, California, 90211 and amends the Exclusive License Agreement, Control No. 2006-03-0536, effective as of the March 15, 2006, the First Amendment dated September 1, 2007, the Second Amendment dated May 29, 2008, Third Amendment dated December 4, 2008, the Fourth Amendment dated August 19, 2009, and the Fifth Amendment dated January 11, 2011 between The Regents and Licensee (collectively, the “ License Agreement ”) in accordance with the terms and conditions of this Amendment.

 

Recitals

 

WHEREAS , Licensee desires to amend the sublicensing income;

 

NOW THEREFORE , in consideration of the foregoing premises and the mutual promises, covenants, and agreements hereinafter set forth, all parties to this Sixth Amendment mutually agree to amend the License Agreement as follows:

 

1.   AMEND Article 3 (SUBLICENSES) of the License Agreement by:

 

a)   Deleting Paragraph 3.2b in its entirety; and

 

b)   Adding “and ten percent (10%) after eighteen (18) months of the Effective Date of the Agreement.” to the end of Paragraph 3.2a.

 

All other terms and conditions of the License Agreement remain the same.

 

This Sixth Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Facsimile, Portable Document Format (PDF) or photocopied signatures of the Parties will have the same legal validity as original signatures.

 

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IN WITNESS WHEREOF, the parties have executed this Sixth Amendment by their duly authorized representatives for good and valuable consideration.

 

BONE BIOLOGICS, INC   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
         
By:     By:  
Name: Bruce A. Hazuka   Name: Emily Loughran
Title: President   Title: Director of Licensing
Date:     Date:  

 

2
 

 

Seventh Amendment
to
the License Agreement
UC Control No. 2006-03-0536

 

THIS SEVENTH AMENDMENT (the “ Seventh Amendment ”) is effective this August 7, 2012 (the “ Effective Date ”) by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA (“ The Regents ”), a California corporation having its statewide administrative offices at 1111 Franklin Street, 12th Floor, Oakland, California 94607-5200, acting through the offices of The University of California, Los Angeles located at 11000 Kinross Avenue, Suite #200, Los Angeles, CA 90095-7231 and BONE BIOLOGICS, INC. (“ Licensee ”), a corporation having a principal place of business at 100 Rancho Road, Suite 7-231, Thousand Oaks, California, 91361 and amends the Exclusive License Agreement, Control No. 2006-03-0536, effective as of the March 15, 2006, the First Amendment dated September 1, 2007, the Second Amendment dated May 29, 2008, Third Amendment dated December 4, 2008, the Fourth Amendment dated August 19, 2009, the Fifth Amendment dated January 11, 2011, and Sixth Amendment dated August 18, 2011 between The Regents and Licensee (collectively, the “ License Agreement ”) in accordance with the terms and conditions of this Seventh Amendment.

 

Recitals

 

WHEREAS , Licensee desires to remove and exclude the cardiovascular application of the “Field of Use” and remove the diligence requirements associated with the cardiovascular application from the License Agreement;

 

NOW THEREFORE , in consideration of the foregoing premises and the mutual promises, covenants, and agreements hereinafter set forth, all parties to this Seventh Amendment mutually agree to amend the License Agreement as follows:

 

1.   AMEND Article 1 (DEFINITIONS) of the License Agreement by deleting Paragraph 1.4 in its entirety and replacing it with the following:

 

“1.4 The “Field of Use” means modulation of neuroectodermal, mesenchymal cell or mesoderm derivatives, including musculoskeletal system growth, formation, replacement, remodeling, regeneration, or repair (“Musculoskeletal”), excluding cardiovascular system growth, formation, replacement, remodeling, regeneration, or repair (“Cardiovascular Application”). In addition, Field of Use includes all cGMP manufacture and gene expression protocols of NELL-1 & 2 protein and all compositions of matter, formulations, and delivery methods thereof (“Manufacture”) and application of the Invention to the field of mesodermal derivatives, such as musculoskeletal systems. Licensee may request to have additional Fields of Use amended into this Paragraph 1.4, excluding Cardiovascular Application. The Regents may add the proposed field if additional diligence for the development of the new Field of Use is incorporated into Paragraph 6.3. The new diligence terms will stipulate dates for completion of specific phases of clinical development as well as a date for First Commercial Sale for a Licensed Product in the new Field of Use.

 

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2.   AMEND Article 4 (FEES) of the License Agreement by deleting Paragraph 4.2 in its entirety and replacing it with the following:

 

“4.2 For the first (and only the first) Licensed Product reaching the milestones indicated below, Licensee must make the following payments to The Regents within thirty (30) days of reaching the milestones:

 

4.2a First Commercial Sale: Twenty-Five Thousand Dollars ($25,000)

 

4.2b FDA marketing approval: Fifty Thousand Dollars ($50,000)

 

For the avoidance of doubt, only the first milestone (4.2a) is applicable for the Manufacture field if the First Commercial Sale is for a Licensed Product in the Manufacture field that is not in the Musculoskeletal field.”

 

3.   AMEND Article 6 (DILIGENCE) of the License Agreement by deleting Paragraph 6.3(ii) and 6.3(vi) in their entirety and replacing them with the following, respectively:

 

a)    “6.3(ii) INTENTIONALLY DELETED .”

 

b)    “6.3(iv) Licensee may extend any of these milestones in each of the Musculoskeletal, and Manufacture diligence fields in six (6) month increments, but not more than once per milestone, by making a Ten Thousand Dollar ($10,000) payment to The Regents. In the event of any extension, any later occurring milestones in the Field of Use will be similarly extended. If Licensee, directly or through its Affiliates or sublicensees, fulfills all of its obligations in this Paragraph 6.3, Licensee will be deemed to have satisfied its diligence obligations under this Article 6 (DILIGENCE).”

 

All other terms and conditions of the License Agreement remain the same.

 

This Seventh Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Facsimile, Portable Document Format (PDF) or photocopied signatures of the Parties will have the same legal validity as original signatures.

 

IN WITNESS WHEREOF, the parties have executed this Seventh Amendment by their duly authorized representatives for good and valuable consideration.

 

BONE BIOLOGICS, INC   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
     
By: /s/ Bruce A. Hazuka   By: /s/ Emily Loughran
Name: Bruce A. Hazuka   Name: Emily Loughran
Title: President   Title: Director of Licensing
Date: 8/7/12   Date: August 20, 2012

 

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INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement, dated September ___, 2014, is made between Bone Biologics, Corp., a Delaware corporation (the “ Company ”), and __________________________ (the “ Indemnitee ”).

 

RECITALS

 

A. The Company desires to attract and retain the services of talented and experienced individuals, such as Indemnitee, to serve as directors and officers of the Company and its subsidiaries and wishes to indemnify its directors and officers to the maximum extent permitted by law;

 

B. The Company and Indemnitee recognize that corporate litigation in general has subjected directors and officers to expensive litigation risks;

 

C. Section 145 of the General Corporation Law of Delaware, under which the Company is organized (“ Section 145 ”), empowers the Company to indemnify its directors and officers by agreement and to indemnify persons who serve, at the request of the Company, as the directors and officers of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive;

 

D. The Company’s Certificate of Incorporation expressly provide that the indemnification provisions set forth therein, which include mandatory advancement, are not exclusive and may be supplemented by contracts such as this Indemnification Agreement;

 

E. The Company’s Bylaws expressly provide that the indemnification provisions set forth therein, which include mandatory advancement, are not exclusive and may be supplemented by contracts such as this Indemnification Agreement;

 

F. Section 145(g) allows for the purchase of management liability (“D&O”) insurance by the Company, which in theory can cover asserted liabilities without regard to whether they are indemnifiable or not;

 

G. Individuals considering service with or presently serving Company expect to be extended market terms of indemnification commensurate with their position, and that entities such as Company will endeavor to maintain appropriate D&O insurance; and

 

H. In order to induce Indemnitee to serve or continue to serve as a director or officer of the Company and/or one or more subsidiaries of the Company, the Company and Indemnitee enter into this Agreement, which is a material consideration for Indemnitee’s service.

 

 
 

 

AGREEMENT

 

NOW, THEREFORE, Indemnitee and the Company hereby agree as follows:

 

1. Definitions . As used in this Agreement:

 

(a) “ Agent ” means any person who is or was a director, officer, employee or other agent of the Company or a subsidiary of the Company; or is or was serving at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company as a director, officer, employee or agent of another foreign or domestic corporation, limited liability company, employee benefit plan, nonprofit entity, partnership, joint venture, trust or other enterprise; or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the Company or a subsidiary of the Company, or was a director, officer, employee or agent of another enterprise at the request of, for the convenience of, or to represent the interests of such predecessor corporation.

 

(b) “ Board ” means the Board of Directors of the Company.

 

(c) A “ Change in Control ” shall be deemed to have occurred if (i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a trustee or other fiduciary holding securities under an employee benefit plan 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 stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing a majority of the total voting power represented by the Company’s then outstanding voting securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination was previously so approved, cease for any reason to constitute a majority of the Board, (iii) the stockholders of the Company approve a merger or consolidation or a sale of all or substantially all of the Company’s assets with or to another entity, other than a merger, consolidation or asset sale that would result in the holders of the Company’s outstanding voting securities immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least a majority of the total voting power represented by the voting securities of the Company or such surviving or successor entity outstanding immediately thereafter, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company.

 

(d) “ Expenses ” shall include all reasonable out-of-pocket costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements), actually and reasonably incurred by Indemnitee in connection with either the investigation, defense or appeal of a Proceeding or establishing or enforcing a right to indemnification under this Agreement, or Section 145 or otherwise; provided, however, that “Expenses” shall not include any judgments, fines, ERISA excise taxes or penalties, or amounts paid in settlement of a Proceeding.

 

(e) “ Independent Counsel ” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in relevant matters of corporation law and neither currently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party or (ii) any other party to or witness in the proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. Where required by this Agreement, Independent Counsel shall be retained at the Company’s sole expense.

 

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(f) “ Proceeding ” means any threatened, pending, or completed action, claim, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether formal or informal, civil, criminal, administrative, or investigative, including any such investigation or proceeding instituted by or on behalf of the Corporation or its Board of Directors, in which Indemnitee is or reasonably may be involved as a party or target, that is by reason of Indemnitee’s being an Agent of the Corporation.

 

(g) “ Subsidiary ” means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, by the Company and one or more other subsidiaries, or by one or more other subsidiaries.

 

2. Agreement to Serve . Indemnitee agrees to serve and/or continue to serve as an Agent of the Company, at its will (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves as an Agent of the Company, so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws or charter of the Company or any subsidiary of the Company or until such time as Indemnitee tenders his or her resignation in writing; provided, however, that nothing contained in this Agreement is intended to create any right to continued employment or other service by Indemnitee.

 

3. Liability Insurance .

 

(a) Maintenance of D&O Insurance . The Company hereby covenants and agrees that, so long as Indemnitee shall continue to serve as an Agent of the Company and thereafter so long as Indemnitee shall be subject to any possible Proceeding by reason of the fact that Indemnitee was an Agent of the Company, the Company, subject to Section 3(c), shall promptly obtain and maintain in full force and effect directors’ and officers’ liability insurance (“ D&O Insurance ”) in reasonable amounts from established and reputable insurers of a minimum A.M. Best rating of A- VII, and as more fully described below. In the event of a Change in Control, the Company shall, as set forth in Section (c) below, either: i) maintain such D&O Insurance for six years; or ii) purchase a six year tail for such D&O Insurance. Should a tail policy be purchased, reasonable efforts shall be made to try to negotiate that such policy is purchased by the Company’s D&O insurance broker at that time, and under the same or better terms and limits for individuals that is in place at that time.

 

(b) Rights and Benefits . In all policies of D&O Insurance, Indemnitee shall qualify as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s independent directors (as defined by the insurer) if Indemnitee is such an independent director; of the Company’s non-independent directors if Indemnitee is not an independent director; of the Company’s officers if Indemnitee is an officer of the Company; or of the Company’s key employees, if Indemnitee is not a director or officer but is a key employee.

 

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(c) Limitation on Required Maintenance of D&O Insurance . Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance at all, or of any type, terms, or amount, if the Company determines in good faith and after using commercially reasonable efforts that: such insurance is not reasonably available; the premium costs for such insurance are disproportionate to the amount of coverage provided; the coverage provided by such insurance is limited so as to provide an insufficient or unreasonable benefit; Indemnitee is covered by similar insurance maintained by a subsidiary of the Company; or the Company is to be acquired and a policy (tail or otherwise) of reasonable terms and duration can be purchased for pre-closing acts or omissions by Indemnitee.

 

4. Mandatory Indemnification . Subject to the terms of this Agreement:

 

(a) Third Party Actions . If Indemnitee was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was an Agent of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, the Company shall indemnify Indemnitee against all Expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such Proceeding, provided Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or Proceeding, had no reasonable cause to believe his or her conduct was unlawful.

 

(b) Derivative Actions . If Indemnitee was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company by reason of the fact that Indemnitee is or was an Agent of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such Proceeding, provided Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification under this Section 4(b) shall be made in respect to any claim, issue or matter as to which Indemnitee shall have been finally adjudged to be liable to the Company by a court of competent jurisdiction unless and only to the extent that the Delaware Court of Chancery or the court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such amounts which the Delaware Court of Chancery or such other court shall deem proper.

 

(c) Actions where Indemnitee is Deceased . If Indemnitee is a person who was or is a party or is threatened to be made a party to any Proceeding by reason of the fact that Indemnitee is or was an Agent of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, and if, prior to, during the pendency of or after completion of such Proceeding Indemnitee is deceased, the Company shall indemnify Indemnitee’s heirs, executors and administrators against all Expenses and liabilities of any type whatsoever to the extent Indemnitee would have been entitled to indemnification pursuant to this Agreement were Indemnitee still alive.

 

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(d) Certain Terminations . The termination of any Proceeding or of any claim, issue, or matter therein by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

 

(e) Limitations . Notwithstanding the foregoing provisions of Sections 4(a) through (d) hereof, but subject to the exception set forth in Section 14 which shall control, the Company shall not be obligated to indemnify the Indemnitee for Expenses or liabilities of any type whatsoever for which payment (and the Company’s indemnification obligations under this Agreement shall be reduced by such payment) is actually made to or on behalf of Indemnitee, by the Company or otherwise, under a corporate insurance policy, or under a valid and enforceable indemnity clause, right, by-law, or agreement; and, in the event the Company has previously made a payment to Indemnitee for an Expense or liability of any type whatsoever for which payment is actually made to or on behalf of the Indemnitee under an insurance policy, or under a valid and enforceable indemnity clause, by-law or agreement, Indemnitee shall return to the Company the amounts subsequently received by the Indemnitee from such other source of indemnification.

 

(f) Witness . In the event that Indemnitee is not a party or threatened to be made a party to a Proceeding, but is subpoenaed (or given a written request to be interviewed by or provide documents or information to a government authority) in such a Proceeding by reason of the fact that the Indemnitee is or was an Agent of the Company, or by reason of anything witnessed or allegedly witnessed by the Indemnitee in that capacity, the Company shall indemnify the Indemnitee against all actually and reasonable out of pocket costs (including without limitation legal fees) reasonably incurred by the Indemnitee in responding to such subpoena or written request for an interview. As a condition to this right, Indemnitee must provide notice of such subpoena or request to the Company within 14 days, subject to the terms of Section 7(a).

 

5. Indemnification for Expenses in a Proceeding in Which Indemnitee is Wholly or Partly Successful .

 

(a) Successful Defense . Notwithstanding any other provisions of this Agreement, to the extent Indemnitee has been successful, on the merits or otherwise, in defense of any Proceeding (including, without limitation, an action by or in the right of the Company) in which Indemnitee was a party by reason of the fact that Indemnitee is or was an Agent of the Company at any time, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with the investigation, defense or appeal of such Proceeding.

 

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(b) Partially Successful Defense . Notwithstanding any other provisions of this Agreement, to the extent that Indemnitee is a party to any Proceeding (including, without limitation, an action by or in the right of the Company) in which Indemnitee was a party by reason of the fact that Indemnitee is or was an Agent of the Company at any time and is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with each successfully resolved claim, issue or matter.

 

(c) Dismissal . For purposes of this section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

(d) Contribution . If the indemnification provided in this Agreement is unavailable and may not be paid to Indemnitee, then to the extent allowed by law, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the amount of Expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and Indemnitee on the other hand from the transaction from which such action, suit or proceeding arose, and (ii) the relative fault of Company on the one hand and of Indemnitee on the other in connection with the events which resulted in such Expenses, judgments, fines or settlement amounts, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of Indemnitee on the other shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information, active or passive conduct, and opportunity to correct or prevent the circumstances resulting in such Expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this section were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.

 

6. Mandatory Advancement of Expenses .

 

(a) Subject to the terms of this Agreement and following notice pursuant to Section 7(a) below, the Company shall advance, interest free, all Expenses reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any Proceeding to which Indemnitee is a party or is threatened to be made a party by reason of the fact that Indemnitee is or was an Agent of the Company (unless there has been a final determination that Indemnitee is not entitled to indemnification for such Expenses) upon receipt satisfactory documentation supporting such Expenses. Such advances are intended to be an obligation of the Company to Indemnitee hereunder and shall in no event be deemed to be a personal loan. Such advancement of Expenses shall otherwise be unsecured and without regard to Indemnitee’s ability to repay. The advances to be made hereunder shall be paid by the Company to Indemnitee within 30 days following delivery of a written request therefore by Indemnitee to the Company, along with such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to advancement (which shall include without limitation reasonably detailed invoices for legal services, but with disclosure of confidential work product not required). The Company shall discharge its advancement duty by, at its option, (a) paying such Expenses on behalf of Indemnitee, (b) advancing to Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimbursing Indemnitee for Expenses already paid by Indemnitee. In the event that the Company fails to pay Expenses as incurred by Indemnitee as required by this paragraph, Indemnitee may seek mandatory injunctive relief (including without limitation specific performance) from any court having jurisdiction to require the Company to pay Expenses as set forth in this paragraph. If Indemnitee seeks mandatory injunctive relief pursuant to this paragraph, it shall not be a defense to enforcement of the Company’s obligations set forth in this paragraph that Indemnitee has an adequate remedy at law for damages.

 

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(b) Undertakings. By execution of this Agreement, Indemnitee agrees to repay the amount advanced only in the event and to the extent that it shall be finally determined that Indemnitee is not entitled to indemnification by the Company to the extent set forth in this agreement and under Delaware law. Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement. No additional undertaking, or security, shall be required of Indemnitee.

 

7. Notice and Other Indemnification Procedures .

 

(a) Notice by Indemnitee . Promptly after receipt by Indemnitee of notice of the commencement of or the threat of commencement of any Proceeding, Indemnitee shall, if Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company in writing of the commencement or threat of commencement thereof provided , however , that a delay in giving such notice will not deprive Indemnitee of any right to be indemnified under this Agreement unless, and then only to the extent that, the Company did not otherwise learn of the Proceeding and such delay is materially prejudicial to the Company; and, provided , further , that notice will be deemed to have been given without any action on the part of Indemnitee in the event the Company is a party to the same Proceeding and has notice thereof. The omission to notify the Company will not relieve the Company from any liability for indemnification which it may have to Indemnitee otherwise than under this Agreement.

 

(b) Insurance . If the Company receives notice pursuant to Section 7(a) hereof of the commencement of a Proceeding that may be covered under D&O Insurance then in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.

 

(c) Defense . In the event the Company shall be obligated to pay the Expenses of any Proceeding against Indemnitee, the Company shall be entitled to assume the defense of such Proceeding, with counsel selected by the Company and approved by Indemnitee (which approval shall not be unreasonably withheld), upon the delivery to Indemnitee of written notice of the Company’s election so to do. After delivery of such notice, and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding, provided that (i) Indemnitee shall have the right to employ his or her own counsel in any such Proceeding at Indemnitee’s expense; and (ii) Indemnitee shall have the right to employ his or her own counsel in any such Proceeding at the Company’s expense if (A) the Company has authorized the employment of counsel by Indemnitee at the expense of the Company; (B) Indemnitee shall have reasonably concluded based on the written advice of Indemnitee’s legal counsel that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense; or (C) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding. In addition to all the requirements above, if the Company has D&O Insurance, or other insurance, with a panel counsel requirement that may cover the matter for which indemnity is claimed by Indemnitee, then Indemnitee shall use such panel counsel or other counsel approved by the insurers, unless there is an actual conflict of interest posed by representation by all such counsel, or unless and to the extent Company waives such requirement in writing. Indemnitee and his counsel shall provide reasonable cooperation with such insurer on request of the Company.

 

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8. Right to Indemnification .

 

(a) Right to Indemnification . In the event that Section 5(a) is inapplicable, the Company shall indemnify Indemnitee pursuant to this Agreement unless, and except to the extent that, it shall have been determined by one of the methods listed in Section 8(b) that Indemnitee has not met the applicable standard of conduct required to entitle Indemnitee to such indemnification.

 

(b) Determination of Right to Indemnification . A determination of Indemnitee’s right to indemnification under this Section 8 shall be made at the election of the Board by (i) a majority vote of directors who are not parties to the Proceeding for which indemnification is being sought, even though less than a quorum, or by a committee consisting of directors who are not parties to the Proceeding for which indemnification is being sought, who, even though less than a quorum, have been designated by a majority vote of the disinterested directors, or (ii) if there are no such disinterested directors or if the disinterested directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee. However, in the event there has been a Change in Control, then the determination shall, at Indemnitee’s sole option, be made by Independent Counsel as in (b)(ii), above, with Indemnitee choosing the Independent Counsel subject to Company’s consent, such consent not to be unreasonably withheld.

 

(c) Submission for Decision . As soon as practicable, and in no event later than 30 days after Indemnitee’s written request for indemnification, the Board shall select the method for determining Indemnitee’s right to indemnification. Indemnitee shall cooperate with the person or persons or entity making such determination with respect to Indemnitee’s right to indemnification, including providing to such person, persons or entity, upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel or member of the Board shall act reasonably and in good faith in making a determination regarding Indemnitee’s entitlement to indemnification under this Agreement.

 

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(d) Application to Court . If (i) a claim for indemnification or advancement of Expenses is denied, in whole or in part, (ii) no disposition of such claim is made by the Company within 60 days after the request therefore, (iii) the advancement of Expenses is not timely made pursuant to Section 6 of this Agreement or (iv) payment of indemnification is not made pursuant to Section 5 of this Agreement, Indemnitee shall have the right at his option to apply to the Delaware Court of Chancery, a California state or federal court, the court in which the Proceeding is or was pending, or any other court of competent jurisdiction, for the purpose of enforcing Indemnitee’s right to indemnification (including the advancement of Expenses) pursuant to this Agreement. Upon written request by Indemnitee, the Company shall consent to service of process.

 

(e) Expenses Related to the Enforcement or Interpretation of this Agreement . The Company shall indemnify Indemnitee against Expenses incurred by Indemnitee in connection with any hearing or proceeding under this Section 8 involving Indemnitee, and against Expenses incurred by Indemnitee in connection with any other proceeding between the Company and Indemnitee to the extent involving the interpretation or enforcement of the rights of Indemnitee under this Agreement, if and to the extent Indemnitee is successful.

 

(f) In no event shall Indemnitee’s right to indemnification (apart from advancement of Expenses) be determined prior to a final adjudication in the Proceeding at issue if the Proceeding is both ongoing, and of the nature to have a final adjudication.

 

(g) In any proceeding to determine Indemnitee’s right to indemnification or advancement, Indemnitee shall be presumed to be entitled to indemnification or advancement, with the burden of proof on the Company to prove, by a preponderance of the evidence (or higher standard if required by relevant law) that Indemnitee is not so entitled.

 

(h) Indemnitee shall be fully indemnified for those matters where, in the performance of his duties for the Company, he relied in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any of the Company’s officers or employees, or committees of the board of directors, or by any other person as to matters Indemnitee reasonably believed were within such other person’s professional or expert competence and who was selected with reasonable care by or on behalf of the Company.

 

9. Exceptions . Any other provision herein to the contrary notwithstanding, the Company shall not be obligated:

 

(a) Claims Initiated by Indemnitee . To indemnify or advance Expenses to Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by Indemnitee (including cross actions), with a reasonable allocation where appropriate, unless (i) such indemnification is expressly required to be made by law, (ii) the Proceeding was authorized by the Board, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the General Corporation Law of Delaware or (iv) the Proceeding is brought pursuant to Section 8 specifically to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145 in advance of a final determination, in which case 8(e)’s fees-on-fees provision shall control;

 

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(b) Fees on Fees . To indemnify Indemnitee for any Expenses incurred by Indemnitee with respect to any Proceeding instituted by Indemnitee to enforce or interpret this Agreement, to the extent Indemnitee is not successful in such a Proceeding;

 

(c) Unauthorized Settlements . To indemnify Indemnitee under this Agreement for any amounts paid in settlement of a Proceeding unless the Company consents to such settlement, which consent shall not be unreasonably withheld;

 

(d) Claims Under Section 16(b) . To indemnify Indemnitee for Expenses associated with any Proceeding related to, or the payment of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law (provided, however, that the Company must advance Expenses for such matters as otherwise permissible under this Agreement); or

 

(e) Payments Contrary to Law . To indemnify or advance Expenses to Indemnitee for which payment is prohibited by applicable law.

 

10. Non-Exclusivity . The provisions for indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while occupying Indemnitee’s position as an Agent of the Company. Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as an Agent of the Company and shall inure to the benefit of the heirs, executors and administrators of Indemnitee.

 

11. Permitted Defenses . It shall be a defense to any action for which a claim for indemnification is made under this Agreement (other than an action brought to enforce a claim for Expenses pursuant to Section 6 hereof, provided that the required documents have been tendered to the Company) that Indemnitee is not entitled to indemnification because of the limitations set forth in Sections 4 and 9 hereof. Neither the failure of the Company (including its Board of Directors) or an Independent Counsel to have made a determination prior to the commencement of such enforcement action that indemnification of Indemnitee is proper in the circumstances, nor an actual determination by the Company (including its Board of Directors) or an Independent Counsel that such indemnification is improper, shall be a defense to the action or create a presumption that Indemnitee is not entitled to indemnification under this Agreement or otherwise. In making any determination concerning Indemnitee’s right to indemnification, there shall be a presumption that Indemnitee has satisfied the applicable standard of conduct. Any determination by the Company concerning Indemnitee’s right to indemnification that is adverse to Indemnitee may be challenged by the Indemnitee in the Court of Chancery of the State of Delaware.

 

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12. Subrogation . In the event the Company is obligated to make a payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery under any corporate insurance policy or any other indemnity agreement covering Indemnitee, who shall execute all documents reasonably required and take all action that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights (provided that the Company pays Indemnitee’s costs and expenses of doing so), including without limitation by assigning all such rights to the Company or its designee to the extent of such indemnification or advancement of Expenses. The Company’s obligation to indemnify or advance expenses under this Agreement shall be reduced by any amount Indemnitee has collected from such other source, and in the event that Company has fully paid such indemnity or expenses, Indemnitee shall return to the Company any amounts subsequently received from such other source of indemnification. With regard to third party indemnitors, however, Section 13 shall control over this section.

 

13. [Primacy of Indemnification . The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of expenses or liability insurance provided by one or more third-parties (the “Third Party Indemnitors”). The Company hereby agrees that (i) it is the indemnitor of first resort, i.e. , its obligations to Indemnitee under this Agreement and any indemnity provisions set forth in its Certificate of Incorporation, Bylaws or elsewhere (collectively, “Indemnity Arrangements”) are primary, and any obligation of the Third Party Indemnitors to advance expenses or to provide indemnification for the same Expenses or liabilities incurred by Indemnitee is secondary and excess, (ii) it shall advance the full amount of Expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of Indemnitee, to the extent legally permitted and as required by any Indemnity Arrangement, without regard to any rights Indemnitee may have against the Third Party Indemnitors, and (iii) it irrevocably waives, relinquishes and releases the Third Party Indemnitors from any claims against the Third Party Indemnitors for contribution, subrogation or any other recovery of any kind arising out of or relating to any Indemnity Arrangement. The Company further agrees that no advancement or indemnification payment by any Third Party Indemnitor on behalf of Indemnitee shall affect the foregoing, and the Third Party Indemnitors shall be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Third Party Indemnitors are express third party beneficiaries of the terms of this Section 13. The Company, on its own behalf and on behalf of its insurers to the extent allowed by the policies, waives subrogation rights against Indemnitee.]

 

14. Broadest Interpretation. The Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Certificate of Incorporation or Bylaws as now or hereafter in effect, or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its Board of Directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its Board of Directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

 

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15. No Imputation . The knowledge or actions, or failure to act, of any director, officer, employee, or agent of the Company, or the Company itelf shall not be imputed to Indemnitee for the purpose of determining Indemnitee’s rights hereunder.

 

16. Survival of Rights .

 

(a) All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an Agent of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed Proceeding by reason of the fact that Indemnitee was serving in the capacity referred to herein.

 

(b) The Company shall require any successor to the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

17. Interpretation of Agreement . It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent permitted by law, including those circumstances in which indemnification would otherwise be discretionary.

 

18. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to this Section.

 

19. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the matters addressed herein, and any other prior or contemporaneous oral or written understandings or agreements with respect to the matters addressed herein (including without limitation any prior indemnification agreement for Indemnitee) are expressly superseded by this Agreement.

 

20. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless it is in a writing signed by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

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21. Notice . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) upon delivery if delivered by hand to the party to whom such notice or other communication shall have been directed, (b) if mailed by certified or registered mail with postage prepaid, return receipt requested, on the third business day after the date on which it is so mailed, (c) one business day after the business day of deposit with a nationally recognized overnight delivery service, specifying next day delivery, with written verification of receipt, or (d) on the same day as delivered by confirmed facsimile transmission if delivered during business hours or on the next successive business day if delivered by confirmed facsimile transmission after business hours. Addresses for notice to either party shall be as shown on the signature page of this Agreement, or to such other address as may have been furnished by either party in the manner set forth above.

 

22. Governing Law . This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware. This Agreement is intended to be an agreement of the type contemplated by Section 145(f) of the General Corporation Law of Delaware.

 

23. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforcement is sought needs to be produced to evidence the existence of this Agreement.

 

The parties hereto have entered into this Indemnification Agreement, including the undertaking contained herein, effective as of the date first above written.

 

Indemnitee:   The Company:
       
      Bone Biologics, Corp .
       
      By:  
Address:        
      Name: William Jay Treat
      Title: President

 

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FORMER OFFICER & DIRECTOR INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement, dated September 19, 2014, is made between Bone Biologics, Corp., a Delaware corporation (the “ Company ”), and ___________________________ (the “ Indemnitee ”).

 

RECITALS

 

A. In connection with that certain Agreement and Plan of Merger, dated September 19, 2014 (the “ Merger Agreement ”) by and between the Company and its wholly-owned subsidiary, Bone Biologics Acquisition Corp., a Delaware corporation (“ Merger Sub ”) and Bone Biologics, Inc. (“ Bone ” or “ Bone Biologics ”), our Board of Directors has agreed to provide certain limited indemnification for certain of the Company’s former officers and directors;

 

B. The Company’s Amended and Restated Certificate of Incorporation expressly provide that the Company shall indemnify, to the fullest extent permitted by Section 145 of the DGCL and the Company’s Bylaws, each as amended from time to time, each person that such section grants the Company the power to indemnify;

 

C. The Company’s Amended and Restated Bylaws expressly provide that the indemnification provisions set forth therein are not exclusive and may be supplemented by contracts such as this Indemnification Agreement;

 

AGREEMENT

 

NOW, THEREFORE, Indemnitee and the Company hereby agree as follows:

 

1. Definitions . As used in this Agreement:

 

(a) “ Board ” means the Board of Directors of the Company.

 

(b) A “ Change in Control ” shall be deemed to have occurred if (i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a trustee or other fiduciary holding securities under an employee benefit plan 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 stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d 3 under the Exchange Act), directly or indirectly, of securities of the Company representing a majority of the total voting power represented by the Company’s then outstanding voting securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination was previously so approved, cease for any reason to constitute a majority of the Board, (iii) the stockholders of the Company approve a merger or consolidation or a sale of all or substantially all of the Company’s assets with or to another entity, other than a merger, consolidation or asset sale that would result in the holders of the Company’s outstanding voting securities immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least a majority of the total voting power represented by the voting securities of the Company or such surviving or successor entity outstanding immediately thereafter, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company

 

 
 

 

(c) “ Effective Date of the Merger ” means September 19, 2014.

 

(d) “ Expenses ” shall include all reasonable out-of-pocket costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements), actually and reasonably incurred by Indemnitee in connection with either the investigation, defense or appeal of a Qualifying Proceeding; provided, however, that “Expenses” shall not include any judgments, fines, bonds, security, penalties, taxes, or amounts paid in settlement of a Qualifying Proceeding.

 

(e) “ Former D&O Indemnified Persons ” means Don R. Hankey and Amir F. Heshmatpour.

 

(f) “ Hankey Affidavit ”) means that certain affidavit executed by Don R. Hankey and attached hereto as Exhibit A.

 

(g) “ Heshmatpour Affidavit ”) means that certain affidavit executed by Amir F. Heshmatpour and attached hereto as Exhibit B.

 

(h) “Independent Counsel” means an attorney with at least 5 years of experience in management indemnification matters who has neither represented Indemnitee or Company in the past 5 years. Independent Counsel shall be chosen by the Company, and shall be paid by the Company.

 

(i) “ Merger ” means all transactions contemplated by the Merger Agreement.

 

(j) “ Qualifying Proceeding ” means any lawsuit or formal administrative proceeding to which Indemnitee is a party or identified in a formal order of investigation, that (i) is by reason of Indemnitee’s being an officer or director of the Company prior to the Merger, including through all transactions relating to the Merger, that certain Amended and Restated Letter of Intent entered into between Musculoskeletal Transplant Foundation, Inc., Bone Biologics, Inc. and AFH Holding & Advisory, LLC on May 7, 2014, as amended, and the preparation and filing of the Company’s current report on Form 8-K filed in connection with the Merger (the “Super 8-K”) or (ii) is related to acts in connection with the Merger taken by the Former D&O Indemnified Persons.

 

(k) “ Subsidiary ” means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, by the Company and one or more other subsidiaries, or by one or more other subsidiaries.

 

2
 

 

2. Former D&O Indemnification Agreement . For a period of four (4) years from and after September 19, 2014, we will indemnify (including advancement of Expenses) and hold harmless the Former D&O Indemnified Persons, for any Qualifying Proceeding. Such indemnification and advancement shall be subject to all restrictions required by Delaware law.

 

3. Mandatory Indemnification . Subject to the terms of this Agreement:

 

(a) Third Party Actions . If Indemnitee was or is a party or is threatened to be made a party to any Qualifying Proceeding (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was an officer or director of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, the Company shall indemnify Indemnitee against all Expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such Qualifying Proceeding, provided Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or Proceeding, had no reasonable cause to believe his or her conduct was unlawful.

 

(b) Derivative Actions . If Indemnitee was or is a party or is threatened to be made a party to any Qualifying Proceeding by or in the right of the Company by reason of the fact that Indemnitee is or was an officer or director of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such Qualifying Proceeding, provided Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification under this Section 3(b) shall be made in respect to any claim, issue or matter as to which Indemnitee shall have been finally adjudged to be liable to the Company by a court of competent jurisdiction unless and only to the extent that the Delaware Court of Chancery or the court in which such Qualifying Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such amounts which the Delaware Court of Chancery or such other court shall deem proper.

 

(c) Actions where Indemnitee is Deceased . If Indemnitee is a person who was or is a party or is threatened to be made a party to any Qualifying Proceeding by reason of the fact that Indemnitee is or was an officer or director of the Company, or by reason of anything done or not done by Indemnitee in any such capacity, and if, prior to, during the pendency of or after completion of such Qualifying Proceeding Indemnitee is deceased, the Company shall indemnify Indemnitee’s heirs, executors and administrators against all Expenses and liabilities of any type whatsoever to the extent Indemnitee would have been entitled to indemnification pursuant to this Agreement were Indemnitee still alive.

 

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(d) Certain Terminations . The termination of any Qualifying Proceeding or of any claim, issue, or matter therein by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or Qualifying Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

 

(e) Notwithstanding the foregoing provisions, the Company shall not be obligated to indemnify the Indemnitee for Expenses or liabilities of any type whatsoever for which payment (and the Company’s indemnification obligations under this Agreement shall be reduced by such payment) is actually made to or on behalf of Indemnitee, by the Company or otherwise, under any insurance policy or other indemnification right. In the event the Company has previously made a payment to Indemnitee for an Expense or liability of any type whatsoever for which payment is actually made to or on behalf of the Indemnitee under an insurance policy or other indemnity right, Indemnitee shall return to the Company the amounts subsequently received by the Indemnitee from such other source of indemnification.

 

(f) Witness . In the event that Indemnitee is not a party or threatened to be made a party to a Qualifying Proceeding, but is subpoenaed (or given a written request to be interviewed by or provide documents or information to a government authority) in such a Qualifying Proceeding by reason of the fact that the Indemnitee is or was an officer or director of the Company, or by reason of anything witnessed or allegedly witnessed by the Indemnitee in that capacity, the Company shall indemnify the Indemnitee against all actually and reasonable out of pocket costs (including without limitation legal fees) reasonably incurred by the Indemnitee in responding to such subpoena or written request for an interview. As a condition to this right, Indemnitee must provide notice of such subpoena or request to the Company within 14 days, subject to the terms of Section 5(a).

 

4. Indemnification for Expenses in a Qualifying Proceeding in Which Indemnitee is Wholly or Partly Successful .

 

(a) Successful Defense . Subject to the condition precedent in Section 6, to the extent Indemnitee has been successful, on the merits or otherwise, in defense of any Qualifying Proceeding (including, without limitation, an action by or in the right of the Company) in which Indemnitee was a party by reason of the fact that Indemnitee was an officer or director of the Company prior to the Effective Date of the Merger, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with the investigation, defense or appeal of such Qualifying Proceeding.

 

(b) Partially Successful Defense . Subject to the condition precedent in Section 6, to the extent that Indemnitee is a party to any Qualifying Proceeding (including, without limitation, an action by or in the right of the Company) in which Indemnitee was a party by reason of the fact that Indemnitee was an officer or director of the Company prior to the Effective Date of the Merger and is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Qualifying Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with each successfully resolved claim, issue or matter.

 

4
 

 

(c) Dismissal . Subject to the condition precedent in Section 6, for purposes of this section and without limitation, the termination of any claim, issue or matter in such a Qualifying Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

(d) Contribution . If, for a Qualifying Proceeding, the indemnification provided in this Agreement is unavailable and may not be paid to Indemnitee for reasons other than for failure to meet the condition precedent in Section 6, then to the extent allowed by law, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the amount of Expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and Indemnitee on the other hand from the transaction from which such action, suit or proceeding arose, and (ii) the relative fault of Company on the one hand and of Indemnitee on the other in connection with the events which resulted in such Expenses, judgments, fines or settlement amounts, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of Indemnitee on the other shall be determined by reference to, among other things, the parties' relative intent, knowledge, access to information, active or passive conduct, and opportunity to correct or prevent the circumstances resulting in such Expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this section were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.

 

5. Mandatory Advancement of Expenses .

 

(a) Subject to the condition precedent in Section 6 of this Agreement and following notice as required below, the Company shall advance, interest free, all Expenses reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any Qualifying Proceeding (unless there has been a final determination that Indemnitee is not entitled to indemnification for such Expenses) upon receipt of satisfactory documentation supporting such Expenses. The advances to be made hereunder shall be paid by the Company to Indemnitee within 45 days following delivery of a written request therefore by Indemnitee to the Company, along with such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to advancement (which shall include without limitation reasonably detailed invoices for legal services, but with disclosure of confidential work product not required). The Company shall discharge its advancement duty by, at its option, (a) paying such Expenses on behalf of Indemnitee, (b) advancing to Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimbursing Indemnitee for Expenses already paid by Indemnitee. In the event that the Company fails to pay Expenses as incurred by Indemnitee as required by this paragraph, Indemnitee may seek mandatory injunctive relief (including without limitation specific performance) from any court having jurisdiction to require the Company to pay Expenses as set forth in this paragraph. If Indemnitee seeks mandatory injunctive relief pursuant to this paragraph, it shall not be a defense to enforcement of the Company’s obligations set forth in this paragraph that Indemnitee has an adequate remedy at law for damages.

 

5
 

 

(b) Undertakings . By execution of this Agreement, Indemnitee agrees to repay the amount advanced in the event and to the extent that it shall be finally determined that Indemnitee is not entitled to indemnification or advancement by the Company to the extent set forth in this Agreement. Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement.

 

6. Condition Precedent to Indemnification and Advancement Rights. Each right of Indemnitee in this Agreement is subject to the condition precedent of the complete accuracy of both the Hankey Affidavit and the Heshmatpour Affidavit. Any inaccuracy in either affidavit eliminates all rights of all Former D&O Indemnified Persons to any advancement or indemnification. A determination that any such inaccuracy exists shall be made by the Company in its sole, but reasonable, judgment, but may be challenged by Indemnitee as set forth in Section 8(c) below. Should such inaccuracy be discovered by the Company after indemnification or advancement has been made to Indemnitee, all such sums shall be repaid by the Indemnitee.

 

7. Notice and Other Indemnification Procedures .

 

(a) Notice by Indemnitee . Promptly after receipt by Indemnitee of notice of the commencement of or the threat of commencement of any Qualifying Proceeding, Indemnitee shall, if Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company in writing of the commencement.

 

(b) Insurance . If the Company receives notice of the commencement of a Qualifying Proceeding that may be covered under D&O Insurance then in effect, the Company shall give prompt notice of the commencement of such Qualifying Proceeding to the insurers in accordance with the procedures set forth in the respective policies.

 

(c) Defense . In the event the Company shall be obligated to pay the Expenses of any Qualifying Proceeding against Indemnitee, the Company shall be entitled to assume the defense of such Qualifying Proceeding, with counsel selected by the Company and approved by Indemnitee (which approval shall not be unreasonably withheld), upon the delivery to Indemnitee of written notice of the Company’s election so to do. After delivery of such notice, and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Qualifying Proceeding. Indemnitee shall have the right to employ his or her own counsel in any such Qualifying Proceeding at Indemnitee’s expense, unless either (i) Indemnitee shall have reasonably concluded based on the written advice of Indemnitee’s legal counsel that there is an actual conflict of interest between the Company and Indemnitee in the conduct of any such defense; or (ii) the Company shall not, in fact, have employed counsel to assume the defense of such Qualifying Proceeding. In addition to all the requirements above, if the Company has D&O Insurance, or other insurance, with a panel counsel requirement that may cover the matter for which indemnity is claimed by Indemnitee, then Indemnitee shall use such panel counsel or other counsel approved by the insurers, unless there is an actual conflict of interest posed by representation by all such counsel, or unless and to the extent Company waives such requirement in writing. Indemnitee and his counsel shall provide reasonable cooperation with such insurer on request of the Company.

 

6
 

 

8. Determination of Right to Indemnification or Advancement .

 

(a) Determination of Right to Indemnification or Advancement . The determination of Indemnitee’s right to indemnification or advancement (including whether the condition precedent in Section 6 applies) shall be made at the election of the Board by: (i) a majority vote of directors who are not parties to the Qualifying Proceeding for which indemnification is being sought, even though less than a quorum, or by a committee consisting of directors who are not parties to the Qualifying Proceeding for which indemnification is being sought, who, even though less than a quorum, have been designated by a majority vote of the disinterested directors, provided , however , that any determination not to indemnify Indemnitee must include a legal opinion by the Company’s legal counsel regarding the reason not to indemnify, or (ii) if there are no such disinterested directors or if the disinterested directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee. However, in the event there has been a Change in Control, then the determination shall, at Indemnitee’s sole option, be made by Independent Counsel as in (a)(ii), above, with Indemnitee choosing the Independent Counsel subject to Company’s consent, such consent not to be unreasonably withheld. The Company may, at its sole expense, go through the process under this Section again at any time (such right to be exercised reasonably and in good faith) should material developments warrant it, to make a new determination.

 

(b) Submission for Decision . As soon as practicable, and in no event later than 60 days after Indemnitee’s written request for indemnification or advancement, the Board shall select the method for determining Indemnitee’s right to indemnification or advancement. Indemnitee shall cooperate with the person or persons or entity making such determination, including providing to such person, persons or entity, upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel or member of the Board shall act reasonably and in good faith in making a determination regarding Indemnitee’s entitlement to indemnification under this Agreement.

 

(c) Application to Court . If (i) a claim for indemnification or advancement of Expenses is denied, in whole or in part, (ii) no disposition of such claim is made by the Company within 60 days after the request therefore, (iii) the advancement of Expenses is not timely made or (iv) payment of indemnification is not made, Indemnitee shall have the right at his option to apply to the Delaware Court of Chancery, a California state or federal court, the court in which the Qualifying Proceeding is or was pending, or any other court of competent jurisdiction, for the purpose of enforcing Indemnitee’s right to indemnification or advancement pursuant to this Agreement. Upon written request by Indemnitee, the Company shall consent to service of process.

 

(d) Expenses Related to the Enforcement or Interpretation of this Agreement . In any action to enforce or interpret this agreement (including a declaratory action), the prevailing party shall be entitled to recover its Expenses from the other in bringing or opposing that action, but only to the extent it has been successful in bringing or opposing that action. Should Indemnitee prevail and the Company have been determined to have acted in bad faith towards Indemnitee, then in any case Company shall pay Indemnitee all his Expenses in bringing the action.

 

7
 

 

(e) Subject to the condition precedent in Section 6, in no event shall Indemnitee’s right to indemnification (apart from advancement of Expenses) be determined prior to a final adjudication in the Qualifying Proceeding at issue if the Qualifying Proceeding is both ongoing, and of the nature to have a final adjudication.

 

(f) In any proceeding to determine Indemnitee’s right to indemnification or advancement, Indemnitee shall be rebuttably presumed to be entitled to indemnification or advancement (including that his Affidavit shall be rebuttably presumed to be accurate), with the burden of proof on the Company to prove, by a preponderance of the evidence (or higher standard if required by relevant law) that Indemnitee is not so entitled.

 

(g) Indemnitee shall be fully indemnified for those matters where, in the performance of his duties for the Company, he relied in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any of the Company’s officers or employees, or committees of the board of directors, or by any other person as to matters Indemnitee reasonably believed were within such other person's professional or expert competence and who was selected with reasonable care by or on behalf of the Company; however, this provision shall not apply to the condition precedent in Section 6 and any dispute regarding same.

 

9. Exceptions . Any other provision herein to the contrary notwithstanding, the Company shall not be obligated:

 

(a) Claims Initiated by Indemnitee . To indemnify or advance Expenses to Indemnitee with respect to Qualifying Proceedings initiated or brought voluntarily by Indemnitee (including cross actions), with a reasonable allocation where appropriate, unless (i) such indemnification is expressly required to be made by law, (ii) the Qualifying Proceeding was authorized by the Board, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the General Corporation Law of Delaware or (iv) Indemnitee qualifies for such Expenses under section 8(d).;

 

(b) Fees on Fees . To indemnify Indemnitee for any Expenses incurred by Indemnitee with respect to any Qualifying Proceeding instituted by Indemnitee to enforce or interpret this Agreement, to the extent Indemnitee is not successful in such a Proceeding;

 

(c) Unauthorized Settlements . To indemnify Indemnitee under this Agreement for any amounts paid in settlement of a Qualifying Proceeding unless the Company consents to such settlement, which consent shall not be unreasonably withheld;

 

(d) Claims Under Section 16(b) . To indemnify Indemnitee for Expenses associated with any Qualifying Proceeding related to, or the payment of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law (provided, however, that the Company must advance Expenses for such matters as otherwise permissible under this Agreement); or

 

(e) Payments Contrary to Law . To indemnify or advance Expenses to Indemnitee for which payment is prohibited by applicable law.

 

8
 

 

10. Exclusivity . The provisions for indemnification and advancement of Expenses set forth in this Agreement shall be the exclusive rights by which Indemnitee may seek indemnification from Company or any subsidiary. In consideration both for the Merger and the rights granted to him herein, Indemnitee waives his rights to any other indemnification or advancement right he may have from the Company or any subsidiary, including without limitation all rights he may otherwise have under the Amended and Restated Bylaws or any prior bylaws, the current Certificate of Incorporation or any prior certificate of incorporation, as an employee of the Corporation or any subsidiary, the Delaware General Corporation Law section 145, or as may be found in any other agreement or law. Indemnitee’s rights hereunder shall continue for any Qualifying Proceeding commenced during the two years following the Effective Date of the Merger and shall inure to the benefit of his heirs, executors and administrators of Indemnitee during such two year period.

 

11. Permitted Defenses . It shall be a defense to any action for which a claim for indemnification (including advancement) is made under this Agreement that Indemnitee is not entitled to indemnification because of the limitations set forth in Sections 6 and 9 hereof. Neither the failure of the Company (including its Board) or an Independent Counsel to have made a determination prior to the commencement of such enforcement action that indemnification of Indemnitee is proper in the circumstances, nor an actual determination by the Company (including its Board) or an Independent Counsel that such indemnification is improper, shall be a defense to the action or create a presumption that Indemnitee is not entitled to indemnification under this Agreement or otherwise. In making any determination concerning Indemnitee’s right to indemnification, there shall be a presumption that Indemnitee has satisfied the applicable standard of conduct. Any determination by the Company concerning Indemnitee’s right to indemnification or advancement that is adverse to Indemnitee may be challenged by the Indemnitee in the Court of Chancery of the State of Delaware, a California state or federal court, the court in which the Qualifying Proceeding is or was pending, or any other court of competent jurisdiction..

 

12. Subrogation . In the event the Company is obligated to make a payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery under any corporate insurance policy or any other indemnity agreement covering Indemnitee, who shall execute all documents reasonably required and take all action that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights (provided that the Company pays Indemnitee’s costs and expenses of doing so), including without limitation by assigning all such rights to the Company or its designee to the extent of such indemnification or advancement of Expenses. The Company’s obligation to indemnify or advance expenses under this Agreement shall be reduced by any amount Indemnitee has collected from such other source, and in the event that Company has fully paid such indemnity or expenses, Indemnitee shall return to the Company any amounts subsequently received from such other source of indemnification.

 

9
 

 

13. Survival of Rights .

 

(a) All agreements and obligations of the Company contained herein shall continue only for the two year period following the Effective Date of the Merger and shall continue thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed Qualifying Proceeding that is asserted during such two year period.

 

(b) The Company shall require any successor to the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

14. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to this Section.

 

15. Entire Agreement . This Agreement constitutes the entire agreement between the parties with respect to the matters addressed herein, and any other prior or contemporaneous oral or written understandings or agreements with respect to the matters addressed herein (including without limitation any prior indemnification agreement for Indemnitee) are expressly superseded by this Agreement.

 

16. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless it is in a writing signed by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

17. Notice . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) upon delivery if delivered by hand to the party to whom such notice or other communication shall have been directed, (b) if mailed by certified or registered mail with postage prepaid, return receipt requested, on the third business day after the date on which it is so mailed, (c) one business day after the business day of deposit with a nationally recognized overnight delivery service, specifying next day delivery, with written verification of receipt, or (d) on the same day as delivered by confirmed facsimile transmission if delivered during business hours or on the next successive business day if delivered by confirmed facsimile transmission after business hours. Addresses for notice to either party shall be as shown on the signature page of this Agreement, or to such other address as may have been furnished by either party in the manner set forth above.

 

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18. Governing Law . This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.

 

19. Counterparts . This Agreement may be executed manually, by electronic transmission or by facsimile by the parties hereto, in one or more counterparts, all of which shall for all purposes be deemed to be an original, and all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforcement is sought needs to be produced to evidence the existence of this Agreement.

 

The parties hereto have entered into this Indemnification Agreement, including the undertaking contained herein, effective as of the date first above written.

 

Indemnitee:   The Company:
       
      Bone Biologics, Corp.
         
    By:  
Address:         
      Name: William Jay Treat
      Title: President

 

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EXHIBIT A

(Hankey Affidavit)

 

 
 

 

STATE OF CALIFORNIA )  
  ) ss
COUNTY OF LOS ANGELES )  

 

AFFIDAVIT OF DON R. HANKEY

 

I, Don R. Hankey, state the following:

 

1. From August 6, 2014 through the Effective Date of the Merger (as such term is defined in that Former Officer & Director Indemnification Agreement), I was the sole director, chief financial officer, president and secretary (the “ Sole D&O ”) of Bone Biologics, Corp. f/k/a AFH Acquisition X, Inc., (the “ Company ”).

 

During my tenure as the Sole D&O of the Company, the Company:

 

(i) has had no operations;

 

(ii) has not purchased, traded or sold any securities, as such term is defined by the Securities Act of 1933;

 

(iii) is not currently a party to any litigation nor been informed by any party that it may be a party to any litigation or dispute;

 

(iv) has no outstanding obligations other than (i) those set forth in Form 10-Q filed by the Company on September 15, 2014, with the Securities and Exchange Commission and (ii) certain additional obligation not exceeding $15,000 in the aggregate which were not set forth on the aforementioned Form 10-Q;

 

(v) after reasonable inquiry, I am unaware of any fact or circumstance that could lead to a claim against me or for which I may be called as a witness, by reason of my service for or a position held at Company or any of its subsidiaries or affiliates, or that is related to acts in connection with the Merger.

 

I swear under penalty of perjury that the foregoing is true and correct to the best of my knowledge and belief.

 

Dated:        
        Don R. Hankey

 

Sworn to and subscribed before me, a notary public for the State of California, County of______________________, this ____ day of September, 2014.

 

  Notary Name:    
  Notary Signature:    
  Notary Seal:    

 

 
 

 

EXHIBIT B

(Heshmatpour Affidavit)

 

 
 

 

STATE OF CALIFORNIA )  
  ) ss
COUNTY OF LOS ANGELES )  

 

AFFIDAVIT OF AMIR F. HESHMATPOUR

 

I, Amir F. Heshmatpour, state the following:

 

2. From October 18, 2007 through August 6, 2014, I was the sole director, chief financial officer, president and secretary (the “ Sole D&O ”) of Bone Biologics, Corp. f/k/a AFH Acquisition X, Inc., (the “ Company ”).

 

During my tenure as the Sole D&O of the Company, the Company:

 

(i) had no operations;

 

(ii) had not purchased, traded or sold any securities, as such term is defined by the Securities Act of 1933;

 

(iii) was not a party to any litigation that is currently pending nor informed by any party that it may be a party to any litigation or dispute;

 

(iv) had no outstanding obligations other than (i) those set forth in Form 10-Q filed by the Company on September 15, 2014, with the Securities and Exchange Commission and (ii) certain additional obligation not exceeding $15,000 in the aggregate which were not set forth on the aforementioned Form 10-Q;

 

(v) after reasonable inquiry, I am unaware of any fact or circumstance that could lead to a claim against me or for which I may be called as a witness, by reason of my service for or a position held at Company or any of its subsidiaries or affiliates, or that is related to acts in connection with the Merger.

 

I swear under penalty of perjury that the foregoing is true and correct to the best of my knowledge and belief.

 

Dated:        
        Amir F. Heshmatpour

 

Sworn to and subscribed before me, a notary public for the State of California, County of______________________, this ____ day of September, 2014.

 

  Notary Name:    
  Notary Signature:    
  Notary Seal:    

 

 
 

 

 

List of Subsidiaries

 

The following is a list of all of the subsidiaries of Bone Biologics Corp., a Delaware corporation:

 

●      Bone Biologics, Inc.