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): May 22, 2020

 

Qualigen Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   001-37428   26-3474527

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

2042 Corte Del Nogal, Carlsbad, California 92011

(Address of principal executive offices) (Zip Code)

 

(760) 918-9165

(Registrant’s telephone number, including area code)

 

Ritter Pharmaceuticals, Inc.; 1880 Century Park East, Suite 1000, Los Angeles, California 90067

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

 

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

 

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class  

Trading Symbol

  Name of each exchange on which registered
Common Stock, par value $.001 per share   QLGN   The Nasdaq Capital Market of The Nasdaq Stock Market LLC

 

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

 

Emerging growth company [X]

 

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

 

 

 

     

 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

On May 22, 2020, Qualigen Therapeutics, Inc., formerly known as Ritter Pharmaceuticals, Inc. (the “Company”), completed its previously announced “reverse merger” transaction with Qualigen, Inc. (“Qualigen” – not to be confused with the Company) in accordance with the terms of the Agreement and Plan of Merger, dated as of January 15, 2020, by and among the Company, RPG28 Merger Sub, Inc. (“Merger Sub”), and Qualigen (as amended on February 1, 2020 and March 26, 2020, the “Merger Agreement”), pursuant to which Merger Sub merged with and into Qualigen with Qualigen surviving as a wholly owned subsidiary of the Company (the “Merger”). The former stockholders of Qualigen acquired, via the merger, a substantial majority of the shares of the Company.

 

Contingent Value Rights Agreement

 

On May 22, 2020, in connection with the Merger, the Company, John Beck in the capacity of CVR Holders’ Representative and Andrew Ritter in his capacity as a consultant to the Company (the “CVR Consultant”) entered into a Contingent Value Rights Agreement (the “CVR Agreement”).

 

Holders of record of Company common stock as of immediately before the time the Reverse Stock Split (described below) and Merger were consummated are entitled to receive a pro rata distribution of nontransferable contingent value rights (“CVRs”) from the Company. The CVRs will provide their holders with potential cash payment rights to a pro rata portion of the net proceeds, if any, from any “Legacy Monetization,” which means the sale, license, transfer, spin-off or other monetizing event, before May 22, 2023, of all or any part of the Company’s intellectual property associated with the Company’s legacy business of developing therapeutic products that modulate the gut microbiome to treat gastrointestinal diseases (the “Legacy Technology”).

 

As previously disclosed, the post-Merger Company does not intend to carry on this legacy business.

 

The CVRs will terminate on May 22, 2030. No payments with respect to the CVRs will be payable in respect of any Legacy Monetization proceeds actually received after May 22, 2030 by the Company. From and after May 22, 2030, any further proceeds received by the Company arising from any Legacy Monetization will be retained by the Company and will not be distributed to the CVR Holders.

 

The CVRs are not be transferable by the CVR Holders, except in certain limited circumstances; do not have any voting or dividend rights; will not be certificated or evidenced by any instrument; will not accrue interest; and will not be registered with the SEC or listed for trading on any exchange. It is intended that the CVRs will not constitute securities, or a class of securities, for the purposes of any securities laws. The CVRs do not and will not represent any equity or ownership interest in the Company or in all or any part of the Company’s intellectual property or technology, or any other asset.

 

Under the CVR Agreement, the Company will make available up to $350,000, to be allocated in accordance with the good-faith discretion of the CVR Consultant or the CVR Holders’ Representative, but with the intention that it be expended at a rate sufficient that it last for 36 months after the merger (subject to earlier use as needed for the execution of particular Legacy Monetizations), for “Ongoing Support Funding.” The CVR Consultant (during the consulting term) or the CVR Holders’ Representative (after the CVR Consultant’s consulting term) will have discretion and decision making authority (i) over any continued operation of, development of or investment in the Legacy Technology and (ii) over when (if ever) and whether to pursue, or enter into, an agreement to dispose of and/or to commercialize or monetize in any particular manner the Legacy Technology, and upon what terms and conditions.

 

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The Company will endeavor to retain the CVR Consultant and any such other pre-merger Company personnel and other third-party consultants identified by the CVR Consultant or the CVR Holders’ Representative, in each case as the CVR Consultant/CVR Holders’ Representative and the Company may agree in good faith (all together, the “Legacy Executives”) as employees or consultants of the Company, on reasonable and mutually acceptable terms given the circumstances, for no less than, with respect to the CVR Consultant, 90 days after the merger (which period may be extended up to May 22, 2023 or reduced by the CVR Consultant) and, with respect to other Legacy Executives, up to May 22, 2023 for the purposes of maintaining and preserving such Legacy Technology, and seeking, negotiating and executing Legacy Monetizations, unless the Ongoing Support Funding has been exhausted.

 

The Company paid, out of the Ongoing Support Funding, $10,000 to the CVR Holders’ Representative as compensation for services rendered through May 22, 2021. Thereafter, the CVR Holders’ Representative and the Company will negotiate in good faith an annual fee for the CVR Holders’ Representative’s services based on the success of the Legacy Monetization efforts, among other factors. In addition, the Company will reimburse, out of the Ongoing Support Funding, the CVR Holders’ Representative for the CVR Holders’ Representative’s necessary and reasonable out-of-pocket expenses incurred in performing his obligations under the CVR Agreement, unless the Ongoing Support Funding has been exhausted (and subject to a separate limitation applicable to “Representative Losses” set forth in the CVR Agreement).

 

In furtherance of the foregoing:

 

● The Company will not before May 22, 2030 dispose of and/or commercialize or monetize in any manner the Legacy Technology except pursuant to a Legacy Monetization agreed to by the CVR Consultant or the CVR Holders’ Representative;

 

● The Company will not unreasonably decline to acquiesce in a Legacy Monetization which has been fully approved by the CVR Holders’ Representative; and

 

● The Company will not before May 22, 2023 terminate or intentionally negatively impact such Legacy Technology without the prior written approval of the CVR Holders’ Representative, unless the Ongoing Support Funding has been exhausted.

 

The “net proceeds” of a Legacy Monetization, which are the amounts payable to CVR Holders, are to be determined after reduction for any and all post-merger expenses incurred by the Company pursuing and closing Legacy Monetizations, including (i) compensation and expenses of the Legacy Executives (including a “Success Bonus” payable in cash to the Legacy Executives, if any, who assisted a particular Legacy Monetization on behalf of the Company, in an amount equal in the aggregate to 30% of the (pre-Success Bonus) net proceeds of such Legacy Monetization), (ii) fees and reasonable out-of-pocket expenses of the CVR Holders’ Representative, (iii) any other consultant fees and expenses, success fees (but specifically excluding the Success Bonus), legal fees and similar items, (iv) each “reserve fund” established with regard to a particular Legacy Monetization, which is an amount (not to exceed $50,000 or 20% of the gross proceeds of the applicable Legacy Monetization, whichever is higher) determined by the CVR Holders’ Representative that will be withheld from any gross proceeds received after termination or depletion of the Ongoing Support Funding to be used and held for use to fund Monetization Expenses in connection with the applicable Legacy Monetization, (v) each increase in the insurance premium for the Company’s directors and officers liability insurance policy due to the inclusion of the CVR Holders’ Representative and the CVR Consultant as persons covered by such policy, if any, (vi) indemnification payments by the Company in respect of any losses incurred by the CVR Holders’ Representative or the CVR Consultant arising out of third-party claims related to the CVR Holders’ Representative’s or the CVR Consultant’s performance under the CVR Agreement (the “Representative Losses”) and (vii) any and all post-merger preservation and maintenance of such Legacy Technology, and specifically including all actual Ongoing Support Funding.

 

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The Company will provide the initial calculation of any payment owed to the CVR Holders in connection with any Legacy Monetization. The CVR Holders’ Representative may request reasonable documentation to support such calculation and ask questions of the Company’s accounting personnel regarding such calculation. If the CVR Holders’ Representative objects to the Company’s calculation of any payment owed to the CVR Holders under the CVR Agreement, then an independent third-party valuation expert will resolve such dispute, and such resolution will be binding on the parties to the CVR Agreement and the CVR Holders. The fees of any such valuation expert will be borne 50% by the Company and 50% by the CVR Holders as a deduction from the amount otherwise payable to them in connection with the relevant Legacy Monetization.

 

Except as expressly provided in the CVR Agreement, the Company has no obligation to incur expenses pursuing and closing Legacy Monetizations or otherwise to seek or support Legacy Monetizations. The Company’s (as opposed to the CVR Holders’ Representative’s and the Legacy Executives’) sole responsibility as to Legacy Monetization activities is as set forth in the CVR Agreement. Except as expressly provided in the CVR Agreement the Company and its post-Merger management will have no further obligation to promote, support, invest in, allocate internal resources toward, advance or monetize the Legacy Technology pending the Legacy Monetization(s).

 

The Company will indemnify and hold harmless the CVR Holders’ Representative and the CVR Consultant from and against all Representative Losses except in the event that any such Representative Losses are finally adjudicated to have been primarily caused by the fraud, gross negligence or willful misconduct of the CVR Holders’ Representative or the CVR Consultant. The Company’s obligation to indemnify the CVR Holders’ Representative and the CVR Consultant is subject to a maximum of $500,000, exclusive of any reserve funds, which must be applied first to pay Representative Losses before the Company has any obligation to pay Representative Losses.

 

The Company will use its reasonable efforts to have the CVR Holders’ Representative and the CVR Consultant included on the Company’s directors and officers liability insurance policy, if any.

 

If the Company is merged or acquired as a whole after the Merger, no part of the merger or acquisition proceeds will give rise to any payment on the CVRs. The Company will not consolidate or merge into any person, or transfer its properties and assets substantially as an entirety to any person or transfer substantially all of its business to any person, unless the resulting person from such consolidation or merger or the person that acquires the Company’s business expressly assumes payment of any amounts owed to the CVR Holders and the Company’s obligations under the CVR Agreement.

 

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Each CVR Holder authorizes the CVR Holders’ Representative to act as the exclusive representative, agent and attorney-in-fact of each CVR Holder. Each CVR Holder will not challenge or contest any action, inaction, determination or decision of the CVR Holders’ Representative or the CVR Consultant or the authority or power of the CVR Holders’ Representative or the CVR Consultant and will not threaten, bring, commence, institute, maintain, prosecute or voluntarily aid any action, which challenges the validity of or seeks to enjoin the operation of any provision of the CVR Agreement, including without limitation, the provisions relating to the authority of the CVR Holders’ Representative to act on behalf of each CVR Holder as set forth in the CVR Agreement. To the extent permitted by applicable law, it is expressly agreed that in no event will any CVR Holders (as opposed to the CVR Holders’ Representative) or any former or ongoing stockholders of the Company (as opposed to the CVR Holders’ Representative) have, after the Merger, any power or right to commence or join in any legal proceeding against the Company or any affiliate of the Company based on or arising out of the CVRs or the CVR Agreement. Such legal proceeding may be brought by, and only by, the CVR Holders’ Representative in the name of and for the benefit of the CVR Holders. The outcome or settlement of any such legal proceeding will be binding upon all CVR Holders. The CVR Holders’ Representative may assign any of its rights or obligations under the CVR Agreement to a third-party reasonably acceptable to the Company to serve as a successor CVR Holders’ Representative.

 

The CVR Holders’ Representative and the Company may amend or waive the CVR Agreement, without the need for consent of any CVR Holder or any percentage-in-interest of CVR Holders, and such amendment or waiver will be binding on all CVR Holders.

 

The foregoing description of the CVR Agreement does not purport to be complete and is qualified in its entirety by reference to the CVR Agreement, which is attached hereto as Exhibit 2.4, and is incorporated herein by reference.

 

Lock-Up Agreements

 

It was a condition to the closing of the Merger that Qualigen stockholders holding at least 50% of Qualigen capital stock (solely in their capacity as Qualigen stockholders), and specifically including Sekisui Diagnostics, LLC and each executive officer and director of Qualigen to be elected or appointed, as applicable, as an executive officer and director of the Company as of immediately following the Merger (each a “Lock-Up Party”), had executed and delivered to the Company their respective Lock-Up Agreements in substantially the form attached as an exhibit to the Merger Agreement.

 

In fact, by virtue of holders of the corresponding shares of Qualigen stock (including all of the specifically-required holders) having signed Lock-Up Agreements, an aggregate of approximately 6.5 million outstanding shares of (post-Reverse-Stock-Split and post-Merger) Common Stock are now subject to Lock-Up Agreements. This figure represents approximately 60.8% of all shares of outstanding Common Stock issued to former holders of outstanding Qualigen stock in the Merger, and also represents approximately 51.9% of all currently outstanding Common Stock altogether.

 

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Pursuant to the terms of the Lock-Up Agreements, each Lock-Up Party agreed that, without the prior written consent of the Company, during the period commencing at the Effective Time and continuing until 180 days after the Merger – i.e., until November 18, 2020 (the “Lock-Up Period”), the Lock-Up Party will not, subject to certain limited exceptions: (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of or lend, directly or indirectly, any shares of common stock of the Company (“Common Stock”) or any securities convertible into, exercisable or exchangeable for or that represent the right to receive Common Stock (including without limitation, Common Stock or such other securities which may be deemed to be beneficially owned by the Lock-Up Party in accordance with the rules and regulations of the SEC and securities of Company which may be issued upon exercise of a stock option or warrant) whether now owned or hereafter acquired (collectively, the “Lock-Up Securities”); (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to, the registration of any Common Stock or any security convertible into or exercisable or exchangeable for Common Stock; (4) grant any proxies or powers of attorney with respect to any Lock-Up Securities, deposit any Lock-Up Securities into a voting trust or enter into a voting agreement or similar arrangement or commitment with respect to any Lock-Up Securities; or (5) publicly disclose the intention to do any of the foregoing (each of the foregoing restrictions, the “Lock-Up Restrictions”).

 

Notwithstanding the above, the Lock-Up Restrictions will automatically terminate on the date that is 180 days after the Merger – i.e., on November 18, 2020.

 

Each Lock-Up Party agreed that during the Lock-Up Period, such Lock-Up Party will not engage in any hedging or other transaction with respect to any Lock-Up Securities which reasonably could be expected to result in a sale or disposition of such Lock-Up Securities even if such Lock-Up Securities would be disposed of by someone other than such Lock-Up Party. Such prohibited hedging or other transactions would include any short sale or any purchase, sale or grant of any right (including any put or call option) with respect to such Lock-Up Securities or to any security that includes, relates to, or derives any significant part of its value from such Lock-Up Securities.

 

In the event that any other holder of Company securities who is subject to a substantially similar lock-up agreement is permitted by the Company to sell, transfer or dispose of shares of Common Stock for value other than as permitted by such other holder’s substantially similar lock-up agreement, the same percentage of shares of Common Stock held by the Lock-Up Parties will be immediately and fully released on the same terms from the Lock-Up Restrictions (the “Pro-Rata Release”); provided, however, that such Pro-Rata Release will not be applied unless and until permission has been granted by the Company to equity holder(s) to sell, transfer or dispose, in the aggregate, more than 1% of the number of shares of Common Stock originally subject to such other holder’s substantially similar lock-up agreement.

 

The foregoing description of the Lock-Up Agreements does not purport to be complete and is qualified in its entirety by reference to the form of Lock-Up Agreement, which is attached hereto as Exhibit 10.22, and is incorporated herein by reference.

 

Item 2.01. Completion of Acquisition or Disposition of Assets.

 

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.01.

 

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On May 22, 2020, in connection with, and before the completion of, the Merger, the Company effected a 1-for-25 reverse stock split of its common stock (the “Reverse Stock Split”), and immediately after the Merger the Company changed its name from “Ritter Pharmaceuticals, Inc.” to “Qualigen Therapeutics, Inc.”

 

Under the terms of the Merger Agreement, the Company issued shares of Common Stock to Qualigen’s stockholders, at an exchange ratio of 0.29522 shares of Common Stock (after taking into account the Reverse Stock Split) for each share of Qualigen common stock outstanding immediately before the Merger. In the Merger the Company also issued, on a 1:1 basis, shares of its Series Alpha Preferred Stock for each share of Qualigen Series Alpha Preferred Stock outstanding immediately before the Merger. Also, in the Merger the Company assumed all of the outstanding and unexercised warrants of Qualigen, with such warrants now representing the right to purchase a number of shares of Common Stock equal to 0.29522 multiplied by the number of shares of Qualigen common stock previously underlying such Qualigen warrants (and with a corresponding change in the exercise price per share).

 

Immediately before the Merger, there were approximately 1.84 million (post-Reverse Stock Split) shares of Common Stock outstanding. Immediately after the Merger, the Company had approximately 12.53 million (post-Reverse Stock Split) shares of Common Stock issued and outstanding – excluding stock options, warrants and Series Alpha Preferred Stock. Accordingly, immediately after the Merger the shares of outstanding Common Stock held by persons who were holders of Common Stock immediately before the Merger constituted approximately 14.7% of the new total of outstanding Common Stock.

 

Immediately after the consummation of the Merger, the former stockholders and warrantholders of Qualigen owned, or held rights to acquire, approximately 91.2% of the fully-diluted common stock of the Company, with the Company’s stockholders, warrantholders and optionholders as of immediately before the Merger owning approximately 8.8% of the fully-diluted common stock of the Company immediately after the Merger. (This computation excludes all available stock incentive plan pool shares that have not yet been subjected to stock options or other awards.)

 

The shares of Common Stock, shares of Series Alpha Preferred Stock and warrants issued to the former stockholders and warrantholders of Qualigen were registered with the SEC on a Registration Statement on Form S-4 (Registration No. 333-236235) (the “Registration Statement”).

 

The shares of Common Stock listed on The Nasdaq Capital Market, previously trading (on a pre- Reverse Stock Split basis) through the close of business on Friday May 22, 2020 under the ticker symbol “RTTR,” commenced trading on The Nasdaq Capital Market, on a post-Reverse Stock Split adjusted basis, under the ticker symbol “QLGN,” on Tuesday, May 26, 2020. The Common Stock’s CUSIP number changed as a result of the May 26, 2020 reverse stock split of the Common Stock, but the (new) CUSIP number did not change by virtue of the Merger or the name change.

 

The foregoing description of the Merger does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, including the amendments thereto, which are attached hereto as Exhibits 2.1, 2.2 and 2.3, and are incorporated herein by reference.

 

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Item 3.02. Unregistered Sales of Equity Securities.

 

Qualigen entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) on May 20, 2020 with an institutional investor which had previously invested in Qualigen (the “Investor”). Pursuant to the Securities Purchase Agreement, Qualigen agreed to sell and issue shares of Qualigen’s newly designated Series Alpha Preferred Stock, par value $0.01 per share (the “Qualigen Series Alpha Preferred Stock”), in a private placement transaction (the “Private Placement”). The closing of the Private Placement was on May 22, 2020, immediately before the closing of the Merger. Qualigen sold and issued to the Investor 4,010 shares of Qualigen Series Alpha Preferred Stock at a purchase price of $1,000 per share, for an aggregate purchase price of $4.01 million. In addition, pursuant to the Securities Purchase Agreement Qualigen issued 1,000 shares of Qualigen Series Alpha Preferred Stock to the investor as a commitment fee and issued five-year warrants to the Investor for the purchase of 916,189 shares of Qualigen common stock. The Company (as a signatory to the Securities Purchase Agreement for such purpose) also agreed, subject to and effective upon the consummation of the Merger, to certain restrictive covenants in favor of the Investor, including participation rights in subsequent financings for 18 months, a most-favored-nation provision for up to 12 months, a 181-day standoff provision, and a covenant against variable-rate transactions.

 

Each share of Qualigen Series Alpha Preferred Stock was, at any time at the option of the holder, convertible into a number of shares of Qualigen common stock equal to $1,000 shares divided by a conversion price initially equal to $0.218, subject to adjustment for any stock splits, stock dividends and similar events and also subject to “ratchet” antidilution adjustment (subject to certain customary exceptions), provided that any conversion of Qualigen Series Alpha Preferred Stock by a holder into shares of Qualigen common stock would be prohibited if, as a result of such conversion, the holder, together with its affiliates and any other person or entity whose beneficial ownership of the common stock would be aggregated with such holder’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, would beneficially own more than 9.99% of the total number of shares Qualigen common stock issued and outstanding after giving effect to such conversion. Upon written notice to Qualigen, the holder could from time to time increase or decrease such limitation to any other percentage not in excess of 9.99% specified in such notice. Each share of Qualigen Series Alpha Preferred Stock was entitled to a preference of $1,000 per share upon liquidation of Qualigen. Without consent of the holders of at least 67% of the Qualigen Series Alpha Preferred Stock, Qualigen could not amend its charter documents to materially and adversely affect the rights of the Qualigen Series Alpha Preferred Stock, repurchase certain junior securities of Qualigen, pay cash dividends on junior securities of Qualigen or (unless it is at arm’s-length and is approved by a majority of Qualigen’s disinterested directors) enter into a material transaction with an affiliate of Qualigen.

 

The warrants issued by Qualigen to the Investor had an initial exercise price of $0.327 per share of Qualigen common stock, subject to adjustment for any stock splits, stock dividends and similar events and also subject to “ratchet” antidilution adjustment (subject to certain customary exceptions), provided that any exercise of such warrants by a holder for shares of Qualigen common stock would be prohibited if, as a result of such exercise, the holder, together with its affiliates and any other person or entity whose beneficial ownership of the common stock would be aggregated with such holder’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, would beneficially own more than 9.99% of the total number of shares Qualigen common stock issued and outstanding after giving effect to such exercise. Upon written notice to Qualigen, the holder could from time to time increase or decrease such limitation to any other percentage not in excess of 9.99% specified in such notice.

 

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The preceding summary does not purport to be complete and is qualified in its entirety by reference to the Securities Purchase Agreement for the Private Placement, a copy of which is attached hereto as Exhibit 10.11, and which is incorporated herein by reference, and by the Certificate of Designation for the Qualigen Series Alpha Preferred Stock and the Qualigen warrant issued to the Investor, copies of which are attached hereto as Exhibits 3.6 and 10.12 and which are incorporated herein by reference.

 

The Private Placement Securities Purchase Agreement has been included as an Exhibit to this Current Report on Form 8-K to provide investors and stockholders with information regarding its terms. It is not intended to provide any other factual information about the Company or the parties thereto. The Private Placement Securities Purchase Agreement contains representations and warranties that the parties thereto made to, and solely for the benefit of, each other. The assertions embodied in such representations and warranties are qualified by information contained in the confidential disclosure schedules that each may have delivered to the other party in connection with signing the Private Placement Securities Purchase Agreement. Accordingly, investors and stockholders should not rely on such representations and warranties as characterizations of the actual state of facts or circumstances, since they were only made as of the date of the Private Placement Securities Purchase Agreement and are modified in important part by the underlying disclosure schedules. Moreover, information concerning the subject matter of such representations and warranties may change after the date of the Private Placement Securities Purchase Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.

 

The securities described above were not registered under the Securities Act, or any state securities laws. Qualigen relied on an exemption from the registration requirements of the Securities Act under Section 4(a)(2) thereof. The Investor represented that it was acquiring the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof.

 

In addition, as compensation for services rendered and to be rendered in the future by GreenBlock Capital LLC as a strategic advisor and capital markets consultant pursuant to a Consulting Agreement dated August 22, 2018 (as amended on March 6, 2020 and May 3, 2020), before the Merger on May 22, 2020 Qualigen issued to GreenBlock Capital LLC and GreenBlock’s designees an aggregate of 4,122,850 shares of Qualigen common stock and five-year warrants to purchase (at a pre-Merger/pre-reverse-split exercise price of $0.327 per share) an aggregate of 2,748,567 shares of Qualigen common stock. (Such warrants were not exercisable until November 21, 2020.) GreenBlock Capital LLC represented to Qualigen that none of the designees who received securities have voting control or beneficial ownership rights over any securities issued to GreenBlock Capital LLC or any other designee, and vice versa; and that such holders do not constitute a control block or group.

 

The preceding summary does not purport to be complete and is qualified in its entirety by reference to the Consulting Agreement and the amendments thereto, copies of which are attached hereto as Exhibits 10.6, 10.7 and 10.8, and which are incorporated herein by reference.

 

The securities described above were not registered under the Securities Act, or any state securities laws. Qualigen relied on an exemption from the registration requirements of the Securities Act under Section 4(a)(2) thereof. GreenBlock Capital LLC and GreenBlock’s designees represented that they were acquiring the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof.

 

All figures provided in this Item are for the securities issued by Qualigen. These securities were all exchanged in the Merger for Company securities (of different quantities and different conversion/exercise prices).

 

Item 3.03. Material Modification to Rights of Security Holders.

 

On May 20, 2020, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series Alpha Preferred Stock (the “Certificate of Designation”) with the Delaware Secretary of State. The Certificate of Designation establishes and designates the Series Alpha Preferred Stock of the Company, and the rights, preferences and privileges thereof.

 

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Each share of Series Alpha Preferred Stock of the Company is, at any time at the option of the holder, convertible into a number of shares of Common Stock equal to $1,000 shares divided by a conversion price initially equal to $0.73947344, subject to adjustment for any stock splits, stock dividends and similar events and also subject to “ratchet” antidilution adjustment (subject to certain customary exceptions), provided that any conversion of Series Alpha Preferred Stock by a holder into shares of Common Stock would be prohibited if, as a result of such conversion, the holder, together with its affiliates and any other person or entity whose beneficial ownership of the common stock would be aggregated with such holder’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, would beneficially own more than 9.99% of the total number of shares Common Stock issued and outstanding after giving effect to such conversion. Upon written notice to the Company, the holder may from time to time increase or decrease such limitation to any other percentage not in excess of 9.99% specified in such notice. Each share of Series Alpha Preferred Stock is entitled to a preference of $1,000 per share upon liquidation of the Company. Without consent of the holders of at least 67% of the Series Alpha Preferred Stock of the Company, the Company shall not amend its charter documents to materially and adversely affect the rights of the Series Alpha Preferred Stock, repurchase certain junior securities of the Company, pay cash dividends on junior securities of the Company or (unless it is at arm’s-length and is approved by a majority of the Company’s disinterested directors) enter into a material transaction with an affiliate of the Company.

 

Pursuant to and in the Merger, on May 22, 2020, the Company issued 5,360 shares of Series Alpha Preferred Stock to the Investor, which had held 5,360 shares of equivalent Qualigen Series Alpha Preferred Stock. In the Securities Purchase Agreement Qualigen had entered into with the Investor on May 20, 2020, looking to such issuance of Company Series Alpha Preferred Stock in the Merger in exchange for Qualigen Series Alpha Preferred Stock, the Company (as a signatory to the Securities Purchase Agreement for such purpose) agreed, subject to and effective upon the consummation of the Merger, to certain restrictive covenants in favor of the Investor, including participation rights in subsequent financings for 18 months, a most-favored-nation provision for up to 12 months, a 181-day standoff provision, and a covenant against variable-rate transactions.

 

As previously disclosed, at the special meeting of the Company’s stockholders convened on May 14, 2020 and adjourned to May 18, 2020 (the “Special Meeting”), the Company’s stockholders approved, among other proposals, (1) an amendment to the certificate of incorporation of the Company (the “Stock Split Amendment”) to effect the Reverse Stock Split; (2) an amendment to the certificate of incorporation of the Company to change the Company’s name from “Ritter Pharmaceuticals, Inc.” to “Qualigen Therapeutics, Inc.” (the “Name Change Amendment”).

 

On May 22, 2020, immediately before the closing of the Merger, the Company filed the Stock Split Amendment with the Delaware Secretary of State to effect the Reverse Stock Split and immediately after the closing of the Merger, the Company filed the Name Change Amendment. As a result of the Reverse Stock Split, the number of issued and outstanding shares of Common Stock immediately before the Reverse Stock Split was reduced to a smaller number of shares, such that every 25 shares of Common Stock held by a stockholder immediately before the Reverse Stock Split were combined and reclassified into one share of the Company’s common stock. Immediately following the Reverse Stock Split (but before the Merger), there were approximately 1.84 million shares of Common Stock outstanding.

 

Immediately following the Reverse Stock Split and the Merger, there were approximately 12.53 million shares of Common Stock outstanding (including the approximately 1.84 million shares of Common Stock outstanding immediately after the Reverse Stock Split and immediately before the Merger).

 

The foregoing descriptions of the Certificate of Designation, the Stock Split Amendment and the Name Change Amendment are not complete and are subject to and qualified in their entirety by reference to the Certificate of Designation, the Stock Split Amendment and the Name Change Amendment, copies of which are attached hereto as Exhibit 3.1, Exhibit 3.2 and Exhibit 3.4, respectively, and are incorporated herein by reference.

  

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Item 5.01. Changes in Control of Registrant.

 

The information set forth in Item 1.01 and Item 2.01 of this Current Report on Form 8-K regarding the Merger and the information set forth in Item 5.02 of this Current Report on Form 8-K regarding the Company’s board of directors and executive officers following the Merger are incorporated by reference into this Item 5.01.

 

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

 

Resignations

 

In accordance with the Merger Agreement, and effective upon the closing of the Merger, Andrew Ritter, Noah Doyle, Matthew Foehr, Paul Maier and William Merino resigned from the Company’s board of directors. In addition, in accordance with the Merger Agreement, and effective upon the closing of the Merger, all of the Company’s officers (Andrew Ritter, Ira Ritter and John Beck) resigned from their officer and employee positions. These director and officer resignations were not the result of any disagreements with the Company relating to the Company’s operations, policies or practices.

 

Directors

 

The Merger Agreement provided that upon the closing of the Merger, the board of directors of the Company would consist of seven directors with six directors to be designated by Qualigen, and the seventh director to be designated by the pre-Merger Company board of directors, subject to the reasonable approval and consent of the members of the post-Merger Company board of directors who were designated by Qualigen. Ira E. Ritter was designated by the pre-merger Company board of directors, and was approved and consented to by the members of the post-merger Company board of directors who were designated by Qualigen. Qualigen designated for the Ritter Board three incumbent directors of Qualigen and Matthew E. Korenberg, and intends to designate two additional directors (besides Ira E. Ritter), at least one of whom will be, as contemplated by California law applicable to California public companies, a qualified female director.

 

Thus, in accordance with the Merger Agreement, the Company’s board of directors was reconstituted to include the following directors as of May 22, 2020:

 

Michael S. Poirier   64   Chairman
Kurt H. Kruger   64   Director
Richard A. David, MD FACS   60   Director
Matthew E. Korenberg   45   Director
Ira E. Ritter   71   Director

 

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The following information is provided with respect to these persons:

 

Michael S. Poirier | Chairman, President & CEO. Michael Poirier founded Qualigen in 1996 and is its Chairman, President and Chief Executive Officer. Before founding Qualigen, Mr. Poirier had relevant operating, marketing and sales positions with Ashirus Technologies, Inc., EnSys, Inc., Sanofi Pasteur and Abbott Laboratories, Inc. Before working at Abbott, Mr. Poirier served as an officer in the United States Navy, assigned to the US Atlantic Fleet. Mr. Poirier holds a B.A. from Providence College and attended the University of Zürich, Switzerland, School of Law.

 

Kurt H. Kruger. Mr. Kruger has enjoyed a 30-year career in medical technology. His deep involvement in the field has ranged from product design and development as a biomedical engineer to raising capital for, and following, publicly traded medical product companies as an equities research analyst. As a marketing manager at Guidant, now a part of Boston Scientific, he developed the launch plans for the first-ever implantable defibrillator. As a securities analyst he showed perspicuity leading Hambrecht & Quist in providing venture funds for, and then taking public, Ventritex, which was later acquired by St. Jude Medical. After Hambrecht & Quist, Mr. Kruger worked as an analyst for Montgomery Securities and Bank of America. Across 20 years of research work, Mr. Kruger has overseen the IPOs of over 30 medical products companies, including leadership of the Life Sciences banking effort for WR Hambrecht & Co. Mr. Kruger received a Sc.B. degree in Biomedical Engineering from Brown University; a Master’s degree in Bioengineering from the University of Michigan; and a business degree (S.M.) from the Sloan School at the Massachusetts Institute of Technology (MIT). He also completed the premedical post-baccalaureate program at Columbia University.

 

Richard A. David, MD FACS. Dr. Richard David serves as Chief Medical Officer for Skyline Urology, the largest Urology group in Los Angeles. He also serves as medical director for Skyline’s Advanced Prostate Cancer Center of Excellence. In addition, Dr. David serves as Associate Clinical Professor of Urology for the David Geffen School of Medicine at UCLA. Dr. David obtained his undergraduate education at Stanford University and his medical degree at Thomas Jefferson University in Philadelphia. He also holds a Master’s Degree in Medical Management (MMM) from the Marshall School of Business at the University of Southern California. He trained in general surgery and completed his urology residency at UCLA Medical Center in Los Angeles. Dr. David is a fellow of the American College of Surgeons.

 

Matthew E. Korenberg. Mr. Korenberg has served as Executive Vice President, Finance and Chief Financial Officer of Ligand Pharmaceuticals Incorporated, a biopharmaceutical company focused on developing or acquiring technologies that help pharmaceutical companies discover and develop medicines, since January 2018 and before that as Vice President, Finance and Chief Financial Officer of Ligand Pharmaceuticals Incorporated since August 2015. Before joining Ligand, commencing in September 2013, Mr. Korenberg was the founder, Chief Executive Officer and a director of NeuroCircuit Therapeutics, a company focused on developing drugs to treat genetic disorders of the brain with an initial focus on Down syndrome. Before founding NeuroCircuit Therapeutics, Mr. Korenberg was a Managing Director and member of the healthcare investment banking team at Goldman Sachs from July 1999 through August 2013. During his 14 year tenure at Goldman Sachs, Mr. Korenberg was focused on advising and financing companies in the biotechnology and pharmaceutical sectors and was based in New York, London and San Francisco. Before Goldman Sachs, Mr. Korenberg was a healthcare investment banker at Dillon, Read & Co. Inc. where he spent two years working with healthcare companies in the biotechnology and pharmaceutical sectors and industrial companies. Mr. Korenberg holds a B.B.A. in Finance and Accounting from The University of Michigan.

 

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Ira E. Ritter. Mr. Ritter served as Co-Founder, Chief Strategic Officer and Executive Chairman of Ritter’s predecessor from its inception in 2004 through the formation of the Company in 2008 and he has served in those positions with the Company from 2008 until the Merger. Mr. Ritter has extensive experience creating and building diverse business enterprises and has provided corporate management, strategic planning and financial consulting for a wide range of market segments including; health product related national distribution and private label production, television and publishing. He assisted taking the Company public on Nasdaq and Martin Lawrence Art Galleries public on the New York Stock Exchange. Since 2010, Mr. Ritter has also acted as a managing partner of Stonehenge Partners, LLC. Mr. Ritter has a long history of public service that includes appointments by three Governors to several State of California Commissions including eight years as Commissioner on the California Prison Industry Authority. He has guest lectured at University of Southern California Marshall School of Business and Pepperdine University Graziadio School of Business, where he also serves as an advisory board member to Pepperdine’s Graduate School of Education and Psychology, Social Entrepreneurship and Change Program. He previously served on the boards of directors for Vitavis Laboratories and SCWorx.

 

Independence of the Board of Directors

 

Under the Nasdaq listing standards, a majority of the members of the Company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. The board of directors has affirmatively determined that each of the five persons serving on the Company’s board of directors as of immediately after the Merger, except for Mr. Poirier and Mr. Ritter, is independent within the meaning of the applicable Nasdaq listing standards.

 

Each of the Company’s directors is a party to an indemnification agreement with the Company or with Qualigen.

 

Committees of the Company’s Board of Directors

 

The Company’s board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Members will serve on these committees until their resignations or until otherwise determined by the board of directors. The audit committee, compensation committee and nominating and corporate governance committee each operate under a written charter adopted by the board of directors, all of which are available on the Company’s website.

 

Audit Committee

 

The Company’s audit committee is comprised of three members. Mr. Kruger is the chairperson of the audit committee, and Mr. David and Mr. Korenberg are the other members of the committee. Each member of the audit committee meets the requirements for independence under current Nasdaq listing standards and applicable SEC rules and regulations and is financially literate as required by Nasdaq listing standards. In addition, the board of directors has determined that Mr. Kruger is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. This designation does not impose any duties, obligations or liabilities that are greater than those generally imposed on members of the audit committee and the board of directors. Other members of the audit committee may also possess the qualifications of an audit committee financial expert.

 

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Among other functions, the Company’s audit committee will evaluate the performance of and assesses the qualifications of the independent registered public accounting firm; engage the independent registered public accounting firm; determine whether to retain or terminate the existing independent registered public accounting firm or to appoint and engage a new independent registered public accounting firm; confer with senior management and the independent registered public accounting firm regarding the adequacy and effectiveness of internal control over financial reporting; establish procedures, as required under applicable law, for the receipt, retention and treatment of complaints received regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; review and approve the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; monitor the rotation of partners of the independent registered public accounting firm on the audit engagement team as required by law; review annually the audit committee’s written charter and the committee’s performance; review the financial statements to be included in the Annual Report on Form 10-K; and discuss with management and the independent registered public accounting firm the results of the annual audit and the results in the quarterly financial statements. The audit committee will have the authority to retain special legal, accounting or other advisors or consultants as it deems necessary or appropriate to carry out its duties.

 

Compensation Committee

 

The Company’s compensation committee is comprised of three members. Mr. David is the chairperson of the compensation committee, and Mr. Kruger and Mr. Korenberg are the other members of the committee. The composition of the compensation committee meets the requirements for independence under current Nasdaq listing standards and applicable SEC rules and regulations.

 

The Company’s compensation committee will oversee the overall compensation strategy and related policies, plans and programs. Among other functions, the compensation committee will determine and approve the compensation and other terms of employment of the Chief Executive Officer; determine and approve the compensation and other terms of employment of the other executive officers, as appropriate; review and recommend to the board of directors the type and amount of compensation to be paid to board members; administer the Ritter 2020 Plan; and review and establish appropriate insurance coverage for the directors and executive officers. The compensation committee will have the authority to retain special legal, accounting or other advisors or consultants as it deems necessary or appropriate to carry out its duties.

 

Nominating and Corporate Governance Committee

 

The Company’s nominating and corporate governance committee is comprised of two members. Mr. David is the chairperson of the nominating and corporate governance committee, and Mr. Kruger is the other member of the committee. The composition of the nominating and corporate governance committee meets the requirements for independence under current Nasdaq listing standards.

 

Executive Officers

 

The Company’s board of directors elected the following persons to comprise the executive officers of the Company as of immediately after the closing of the Merger:

 

Name   Age   Position
Michael S. Poirier   64   Chief Executive Officer and President
Christopher L. Lotz   55   Vice President of Finance, Chief Financial Officer
Shishir K. Sinha   53   Vice President of Operations
Wajdi Abdul-Ahad, PhD   67   Vice President, Research & Development, Chief Scientific Officer

 

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The following information is provided with respect to these persons:

 

Michael S. Poirier | Chief Executive Officer and President – see above.

 

Christopher L. Lotz | Vice President of Finance, Chief Financial Officer. Mr. Lotz joined Qualigen as Director of Finance in 2002 and was appointed Vice President and Chief Financial Officer in 2003. Before joining Qualigen, Mr. Lotz held financial positions with Bexcom, California Furniture Collections, Inc. and Group Publishing, Inc. Mr. Lotz holds a B.S. in Business Administration from Colorado State University.

 

Shishir K. Sinha | Vice President of Operations. Mr. Sinha joined Qualigen as Vice President, Operations & QA/QC in 2006. Before joining Qualigen, Mr. Sinha held manufacturing and related positions with Nanogen, Celera Diagnostics, Sequenom, Sandoz Pharmaceutics (Novartis) and Microgenics Corp. Mr. Sinha holds an MBEE in Biotechnology Enterprise from Johns Hopkins University and a B.A. in Genetics from the University of California, Berkeley.

 

Wajdi Abdul-Ahad, PhD | Vice President, Research & Development, Chief Scientific Officer. Dr. Abdul-Ahad is Qualigen’s Vice President of Research and Development and Chief Scientific Officer. Since joining Qualigen in 2006, he has successfully developed and commercialized numerous complex immunoassays on both the FastPack and FastPack IP Systems. In addition, Dr. Abdul-Ahad is responsible for all surface coating, nanotechnology and reagent manufacturing, as well as integration of new drug manufacturing systems and processes. Before joining Qualigen, Dr. Abdul-Ahad led multifunctional design teams at Beckman Coulter that developed and commercialized over 15 assays on their industry leading Access and Synchron automated systems. From 1988 to 1990, Dr. Abdul-Ahad held various management positions with the (Ireland) National Diagnostics Center and Noctech, Inc., both located in Galway, Ireland. Dr. Abdul-Ahad holds a PhD in Biochemistry from National University of Ireland, Galway; an MS in Clinical Chemistry from the University of Surrey, England; an MBA from the University of La Verne, California and a BS in Pharmacy from the University of Baghdad, Iraq. He also holds certifications and licenses from the American Board of Clinical Chemistry, State of California (Registered Pharmacist), National Registry of Clinical Chemistry and the National Academy for Clinical Biochemistry. Dr. Abdul-Ahad is also the author or co-author of numerous scientific publications.

 

By virtue of their prior ownership of Qualigen securities, the Company’s new executive officers received the following Company securities in the Merger (on the same basis as all other Company securityholders received Company securities in the Merger):

 

  - Mr. Poirier received 169,200 shares of Common Stock in exchange for his shares of Qualigen stock and his warrants to purchase shares of Qualigen Series C Preferred Stock became warrants to purchase 88,568 shares of Common Stock;
     
  - Mr. Lotz received 9,841 shares of Common Stock in exchange for his shares of Qualigen common stock and his warrants to purchase shares of Qualigen Series C Preferred Stock became warrants to purchase 77,674 shares of Common Stock;

 

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  - Mr. Sinha’s warrants to purchase shares of Qualigen Series C Preferred Stock became warrants to purchase 35,427 shares of Common Stock; and
     
  - Mr. Abdul-Ahad’s warrants to purchase shares of Qualigen Series C Preferred Stock became warrants to purchase 16,828 shares of Common Stock.

 

Each of Mr. Poirier, Mr. Lotz and Mr. Sinha is party to a respective Executive Employment Agreement with Qualigen dated February 1, 2017, as amended January 9, 2018 (the “Employment Agreements”). Each of the Employment Agreements had an initial three-year term and is now automatically renewed for successive one-year periods unless either party gives notice of nonrenewal at least 90 days before the end of such a one-year period.

 

Under the terms of Mr. Poirier’s Employment Agreement, Mr. Poirier is entitled to an annual base salary of at least $315,000, is eligible for Qualigen’s bonus plans, benefit programs and medical benefits, is eligible for certain event-based bonuses (including for “Liquidity Event” acquisition transactions), and is entitled to four weeks of vacation per year. If Mr. Poirier’s employment is terminated without Cause or he resigns for Good Reason, and he provides a general release to Qualigen, he is entitled to one year of salary continuation plus the cost of COBRA coverage continuation for such one year period.

 

Under the terms of Mr. Lotz’s Employment Agreement, Mr. Lotz is entitled to an annual base salary of at least $225,000, is eligible for Qualigen’s bonus plans, benefit programs and medical benefits, is eligible for certain event-based bonuses (including for “Liquidity Event” acquisition transactions), and is entitled to four weeks of vacation per year. If Mr. Lotz’s employment is terminated without Cause or he resigns for Good Reason, and he provides a general release to Qualigen, he is entitled to 180 days of salary continuation plus the cost of COBRA coverage continuation for such 180 day period.

 

Under the terms of Mr. Sinha’s Employment Agreement, Mr. Sinha is entitled to an annual base salary of at least $220,000, is eligible for Qualigen’s bonus plans, benefit programs and medical benefits, is eligible for certain event-based bonuses (including for “Liquidity Event” acquisition transactions), and is entitled to four weeks of vacation per year. If Mr. Sinha’s employment is terminated without Cause or he resigns for Good Reason, and he provides a general release to Qualigen, he is entitled to 180 days of salary continuation plus the cost of COBRA coverage continuation for such 180 day period.

 

Each of Mr. Poirier, Mr. Lotz and Mr. Sinha has agreed that Merger and the Merger-related transactions do not constitute a “Liquidity Event” as defined in his respective Employment Agreement and that accordingly they do not entitle him to a contractual Liquidity Event bonus.

 

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The following definitions are used in each of the Employment Agreements:

 

“Cause” means any of the following: (i) a material breach by the employee of any of the trade secret/proprietary information, confidential information of intellectual property ownership sections of the Employment Agreement; (ii) a material breach by the employee of any other provision of the Employment Agreement, if such material breach (if susceptible to cure) has continued uncured for a period of at least 15 days following delivery by Qualigen to the employee of written notice of such material breach; (iii) fraud, dishonesty or other breach of trust whereby the employee obtains personal gain or benefit at the expense of or to the detriment of Qualigen or any of Qualigen’s subsidiaries or affiliates; (iv) a conviction of or plea of nolo contendere or similar plea by the employee of any felony; (v) a conviction of or plea of nolo contendere or similar plea by of any other crime involving theft, misappropriation of property, dishonesty or moral turpitude; (vi) a willful and material violation of applicable law by the employee in connection with the performance of his duties under the Employment Agreement; (vii) chronic or repeated substance abuse by the employee, or any other use by the employee of alcohol, drugs or illegal substances in such a manner as to interfere with the performance of his material duties hereunder; or (viii) failure to comply with the lawful directions of Qualigen’s board of directors which are otherwise consistent with the terms of this Agreement, which failure has continued for a period of at least 10 days after delivery by Qualigen to the employee of written demand by Qualigen’s board of directors.

 

“Good Reason” means the occurrence of any of the following circumstances, without the employee’s express consent: the employee resigns due to (i) a material reduction of the employee’s title or authority, (ii) a material reduction in the employee’s salary or benefits (other than a reduction that generally applies to the officers at the employee’s level in Qualigen or, as applicable, after a transaction in which Qualigen or substantially all its assets is acquired, in the successor entity at that time), (iii) any material breach of this Agreement by Qualigen which is not cured within 30 days after written notice by the employee; or (iv) a change of the principal non-temporary location in which the employee is required to perform the employee’s services to any location exceeding 35 miles from Carlsbad, California. In no event shall a resignation be considered to be with Good Reason unless the resignation occurs after but within 30 days after the initiation of the item of Good Reason.

 

The foregoing description of the Employment Agreements does not purport to be complete and is qualified in its entirety by reference to the Employment Agreements, which are attached hereto as Exhibits 10.1, 10.2 and 10.3 and are incorporated herein by reference.

 

Compensation Arrangements for Pre-Merger Directors and Officers

 

Pursuant to previously-disclosed plans and arrangements, on May 18, 2020 the Company granted options under the Company’s 2015 Equity Incentive Plan to purchase a total of 1,166,136 shares of pre-Reverse Stock Split common stock of the Company (equating to 46,646 shares of post-Reverse Stock Split common stock of the Company) to Andrew Ritter, the Company’s Chief Executive Officer, President and director before the Merger (583,068 pre-Reverse Stock Split options, equating to 23,323 post-Reverse Stock Split options); Ira Ritter, the Company’s Chairman and Chief Strategic Officer before the Merger (361,502 pre-Reverse Stock Split options, equating to 14,460 post-Reverse Stock Split options); and John Beck, the Company’s Chief Financial Officer before the Merger (221,566 pre-Reverse Stock Split options, equating to 8,863 post-Reverse Stock Split options). All these stock options had an exercise price of $0.64 per pre-Reverse Stock Split share/ $16.00 per post-Reverse Stock Split share, with a scheduled expiration date of May 22, 2024. If the optionholder ceases to be a service provider to the Company, the options will remain exercisable only until the earlier of the scheduled expiration date or the second anniversary of the date the optionholder ceases to be a service provider to the Company.

 

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The Company also amended all of its other outstanding stock options in favor of the persons who, as of immediately before the Merger, were directors or officers of the Company such that the options would (if they had had a scheduled expiration date of later than May 22, 2024) have a revised scheduled expiration date of May 22, 2024 and such that the options will remain exercisable only until the earlier of the scheduled expiration date (as revised, if applicable) or the second anniversary of the date the optionholder ceases to be a service provider to the Company. These amendments were applicable to 1,171,294 pre-Reverse Stock Split options (equating to 46,852 post-Reverse Stock Split options) held by such persons.

 

On the closing date of the Merger, the Company made cash payments for severance, deferred salary, bonus, vacation pay and healthcare benefits to Andrew Ritter ($810,280 – including $468,000 severance and $234,000 bonus), Ira Ritter ($602,668– including $358,800 severance and $143,520 bonus) and John Beck ($354,188 – including $165,000 severance and $132,000 bonus).

 

Effective immediately after the Merger, the Company entered into Consulting Agreements with Andrew Ritter, Stonehenge Partners, LLC (an affiliate of Andrew Ritter) and CFB Financial, Inc. (an affiliate of John Beck).

 

The Consulting Agreement with Andrew Ritter is for consulting services as the “CVR Consultant” contemplated by the CVR Agreement, as outlined in Section 2.6 of the CVR Agreement related to “Legacy Monetization” activities. Such Section 2.6 provides that during the Consultant Term, the CVR Consultant shall (subject to the limitations provided in the CVR Agreement) have discretion and decision making authority (a) over any continued operation of, development of or investment in the Company’s pre-Merger gut microbiome modulation intellectual property and (b) over when (if ever) and whether to pursue, or enter into, a Legacy Monetization in any particular manner, and upon what terms and conditions. “Legacy Monetization” means the sale, license, transfer, spin-off or other monetizing event, before May 22, 2023, of all or any part of the Company’s pre-Merger gut microbiome modulation intellectual property. Mr. Ritter will bill the Company at a rate of $275 an hour for any hours providing these services to the Company in good faith; Mr. Ritter will provide documentation for his billings. The Consulting Agreement is for the length of the Consultant Term, which is defined in the CVR Agreement to mean until August 20, 2020; provided, however, that the CVR Consultant (Mr. Ritter) may, in his sole discretion, extend or reduce the Consultant Term to support Legacy Monetization efforts (although there can be no such extension to a date beyond May 22, 2023 or, if sooner, the date the Company’s obligatory ongoing CVR Agreement funding support toward Legacy Monetizations is exhausted).

 

The Consulting Agreement with Stonehenge Partners, LLC is for consulting services to the Company’s Chief Executive Officer as reasonably requested; consulting services may include, but are not limited to, helping support public market activities such as investor relations, strategy, messaging and contacts, assisting in financing strategy, and introductions to bankers, analysts and others. Stonehenge Partners, LLC committed to at least 10 hours of work per week and will be paid a flat fee of $11,000 a month for this 10 hours of work per week. Stonehenge Partners, LLC will bill the Company at a rate of $275 per hour for any hours providing services to the Company above and beyond this 10 hours per week, but only to the extent such additional hours have been expressly requested in writing by the Company. The Consulting Agreement is for a six-month term, subject to extension by mutual agreement of the parties; provided, that Stonehenge Partners, LLC has the right to terminate the Consulting Agreement at any time.

  

The Consulting Agreement with CFB Financial, Inc. is for consulting services to the Company’s Chief Executive Officer and Chief Financial Officer as reasonably requested; financial consulting services may include, but are not limited to, financial and reporting matters, Nasdaq, SEC, and audits, and the establishment of structures and best practices in managing the internal workings of the Company in order for it to follow good governance and other public market expectations. CFB Financial, Inc. committed to at least 10 hours of work per week and will be paid a flat fee of $8,000 a month for this 10 hours of work per week. CFB Financial, Inc. will bill the Company at a rate of $200 per hour for any hours providing services to the Company above and beyond this 10 hours per week, but only to the extent such additional hours have been expressly requested in writing by the Company. The Consulting Agreement is for a six-month term, subject to extension by mutual agreement of the parties; provided, that CFB Financial, Inc. has the right to terminate the Consulting Agreement at any time.

 

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

 

To the extent required by Item 5.03 of Form 8-K, the information contained in Item 2.01 and Item 3.03 of this Current Report on Form 8-K is incorporated by reference herein.

 

In connection with the merger, the Company amended its bylaws to identify them as the bylaws of “Qualigen Therapeutics, Inc.” rather than of “Ritter Pharmaceuticals, Inc.”, and to make other immaterial changes.

   

Item 8.01. Other Events.

 

In addition to the maters submitted to the Company’s stockholders at the Special Meeting, the results of which voting have been previously reported by the Company in a Current Report on Form 8-K, the stockholders of Qualigen considered two proposals related to the Merger which were presented to them by a solicitation of written consents.

 

The two proposals were as follows:

 

Proposal No. 1: To approve and adopt the Merger Agreement, the Merger and the other transactions and actions contemplated by the Merger Agreement.

 

Proposal No. 2: To approve and adopt an amendment of Qualigen’s certificate of incorporation to (i) increase the authorized number of shares of Qualigen common stock from 40,000,000 shares to 75,000,000 shares, (ii) increase the authorized number of shares of Qualigen preferred stock from 20,000,000 shares to 20,007,000 shares, (iii) provide that all weighted-average or ratchet anti-dilution provisions of each series of Qualigen preferred stock that would have been triggered by any agreement, issuance or deemed issuance in 2018, 2019 or 2020 or that may be triggered in connection with the Merger are, to such extent, deemed, conclusively and ab initio, to have been fully and duly waived, (iv) provide that immediately before the Effective Time, as contemplated by the Merger Agreement, all outstanding shares of each series of Qualigen preferred stock (other than outstanding shares of Qualigen Series Alpha preferred stock) will be automatically and mandatorily converted into Qualigen common stock at the then-effective conversion rate for the applicable series, and (v) provide that all necessary consents and waivers with regard to all protective provisions of each series of Qualigen preferred stock that would otherwise be inconsistent with such amendment of Qualigen’s certificate of incorporation or with the Merger or with any act done or omitted to be done in 2018, 2019 or 2020 (or to be done or omitted to be done afterward in 2020) with an eye to the Merger (or with an eye to such a merger) are, to such extent, deemed, conclusively and ab initio, to have been duly given.

 

Both proposals were adopted and approved by Qualigen’s stockholders (including by each applicable required majority or supermajority of each respective class and series of Qualigen stock). The first written consent was delivered to Qualigen on April 9, 2020 and the written consent action was declared final on May 15, 2020.

 

Written consents in favor of each of the two proposals were received from holders of the following numbers of shares of each respective class and series of Qualigen stock: 3,802,402 shares of Common Stock; 1,901,048 shares of Series A Preferred Stock; 5,484,838 shares of Series B Preferred Stock; 2,447,870 shares of Series C Convertible Preferred Stock; 1,508,305 shares of Series D Convertible Preferred Stock; and 643,511 shares of Series D-1 Convertible Preferred Non-Voting Stock.

 

As of April 9, 2020, the record date for the written consent action, 21,175,366 shares of Qualigen stock were outstanding and eligible to deliver written consents, as follows (broken out by class and series): 5,602,212 shares of Common Stock; 2,412,887 shares of Series A Preferred Stock; 7,707,736 shares of Series B Preferred Stock; 3,300,715 shares of Series C Convertible Preferred Stock; 1,508,305 shares of Series D Convertible Preferred Stock; and 643,511 shares of Series D-1 Convertible Preferred Non-Voting Stock.

 

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Accordingly, each of the two proposals received the written consent of the following percentages of each respective class and series of Qualigen stock: 67.87% of the Common Stock; 78.79% of the Series A Preferred Stock; 71.16% of the Series B Preferred Stock; 74.16% of the Series C Convertible Preferred Stock; 100% of the Series D Convertible Preferred Stock; and 100% of the Series D-1 Convertible Preferred Non-Voting Stock.

 

Because of the written-consents format, any stockholder who did not deliver an affirmative written consent is treated as an “against” vote (i.e., there is no means to distinguish between “against” votes and abstentions and simple non-responses). There was no broker voting and there were no broker non-votes.

 

 

On May 26, 2020, the Company issued a press release announcing the completion of the Merger, the Reverse Stock Split, the Private Placement and the Name Change. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.

 

Item 9.01. Financial Statements and Exhibits.

 

(a) The Company intends to file the financial statements of Qualigen required by Item 9.01(a) as part of an amendment to this Current Report on Form 8-K not later than 71 calendar days after the date this Current Report on Form 8-K is required to be filed.

 

(b) The Company intends to file the pro forma financial information required by Item 9.01(b) as part of an amendment to this Current Report on Form 8-K not later than 71 calendar days after the date this Current Report on Form 8-K is required to be filed.

 

(d) Exhibits

 

Exhibit No.   Description
     
2.1**   Agreement and Plan of Merger, dated January 15, 2020, by and among the Company, Qualigen, Inc. and RPG28 Merger Sub, Inc. (incorporated by reference to Annex A to the joint proxy and consent solicitation statement/prospectus forming a part of the Registration Statement on Form S-4 (Amendment No. 3) filed by the Company with the SEC on April 6, 2020)
     
2.2   Amendment No. 1 to Agreement and Plan of Merger, dated February 1, 2020, by and among the Company, Qualigen, Inc. and RPG28 Merger Sub, Inc. (incorporated by reference to Annex B to the joint proxy and consent solicitation statement/prospectus forming a part of the Registration Statement on Form S-4 (Amendment No. 3) filed by the Company with the SEC on April 6, 2020)
     
2.3   Amendment No. 2 to Agreement and Plan of Merger, dated March 26, 2020, by and among the Company, Qualigen, Inc. and RPG28 Merger Sub, Inc. (incorporated by reference to Annex C to the joint proxy and consent solicitation statement/prospectus forming a part of the Registration Statement on Form S-4 (Amendment No. 3) filed by the Company with the SEC on April 6, 2020)

 

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2.4   Contingent Value Rights Agreement, dated May 22, 2020, by and among the Company, John Beck in the capacity of CVR Holders’ Representative and Andrew J. Ritter in his capacity as a consultant to the Company
     
3.1   Certificate of Designation of Preferences, Rights and Limitations of Series Alpha Preferred Stock of the Company, filed with the Delaware Secretary of State on May 20, 2020
     
3.2   Certificate of Amendment to the Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on May 22, 2020 [reverse stock split]
     
3.3   Certificate of Merger, filed with the Delaware Secretary of State on May 22, 2020
     
3.4   Certificate of Amendment to the Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on May 22, 2020 [name change]
     
3.5   Amended and Restated Bylaws of the Company, as of May 22, 2020
     
3.6   Certificate of Designation of Preferences, Rights and Limitations of Series Alpha Preferred Stock of Qualigen, filed with the Delaware Secretary of State on May 20, 2020
     
10.1+   Executive Employment Agreement, by and between Qualigen, Inc. and Michael Poirier, dated as of February 1, 2017 and as amended on January 9, 2018
     
10.2+   Executive Employment Agreement, by and between Qualigen, Inc. and Christopher Lotz, dated as of February 1, 2017 and as amended on January 9, 2018
     
10.3+   Executive Employment Agreement, by and between Qualigen, Inc. and Shishir Sinha, dated as of February 1, 2017 and as amended on January 9, 2018
     
10.4   Exclusive Agreement, by and between Qualigen, Inc. and University of Louisville Research Foundation, Inc. dated as of June 8, 2018 (incorporated by reference to Exhibit 10.58 of the Registration Statement on Form S-4 (Amendment No. 1) filed by the Company with the SEC on March 13, 2020)
     
10.5   License Agreement, by and between Qualigen, Inc. and Advanced Cancer Therapeutics, LLC, dated as of December 17, 2018 (incorporated by reference to Exhibit 10.59 of the Registration Statement on Form S-4 (Amendment No. 1) filed by the Company with the SEC on March 13, 2020)
     
10.6+   Consulting Agreement, by and between Qualigen, Inc. and GreenBlock Capital LLC, dated as of August 22, 2018
     
10.7+   Amendment to Consulting Agreement, by and between Qualigen, Inc. and GreenBlock Capital LLC, dated as of March 6, 2020
     
10.8+   Amendment No. 2 to Consulting Agreement, by and between Qualigen, Inc. and GreenBlock Capital LLC, dated as of May 3, 2020

 

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10.9   Form of Warrant, issued by Qualigen, Inc. in favor of GreenBlock Capital LLC and its designees, dated May 22, 2020 [pre-Merger]
     
10.10   Form of Warrant, issued by the Company in favor of GreenBlock Capital LLC and its designees, dated May 22, 2020 [post-Merger]
     
10.11**   Securities Purchase Agreement, by and between Qualigen, Inc. and Alpha Capital Anstalt, dated May 20, 2020
     
10.12   Warrant, issued by Qualigen, Inc. in favor Alpha Capital Anstalt, dated May 22, 2020 [pre-Merger]
     
10.13   Warrant, issued by the Company in favor of Alpha Capital Anstalt, dated May 22, 2020 [post-Merger]
     
10.14+   Notice of Grant of Stock Option / Stock Option Agreement, by and between the Company and Andrew J. Ritter, dated as of May 18, 2020
     
10.15+   Notice of Grant of Stock Option / Stock Option Agreement, by and between the Company and Ira E. Ritter, dated as of May 18, 2020
     
10.16+   Notice of Grant of Stock Option / Stock Option Agreement, by and between the Company and John Beck, dated as of May 18, 2020
     
10.17+   Consulting Agreement, by and between the Company and Andrew J. Ritter, dated as of May 22, 2020
     
10.18+   Consulting Agreement, by and between the Company and Stonehenge Partners, LLC, dated as of May 22, 2020
     
10.19+   Consulting Agreement, by and between the Company and CFB Financial, Inc., dated as of May 22, 2020
     
10.20   2020 Stock Equity Incentive Plan
     
10.21   Form of Indemnification Agreement - Qualigen, Inc.
     
10.22   Form of Lock-Up Agreement
     
10.23   Distribution and Development Agreement, dated May 1, 2016, by and between Sekisui Diagnostics, LLC and its Affiliates, and Qualigen, Inc. and its Affiliates (incorporated by reference to Exhibit 10.54 of the Registration Statement on Form S-4 (Amendment No. 1) filed by the Company with the SEC on March 13, 2020)
     
10.24   Letter of Intent, dated March 16, 2018, by and between Sekisui Diagnostics, LLC and Qualigen, Inc. (incorporated by reference to Exhibit 10.55 of the Registration Statement on Form S-4 (Amendment No. 1) filed by the Company with the SEC on March 13, 2020)

 

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10.25   Amendment to Distribution and Development Agreement, dated April 2, 2018, by and between Sekisui Diagnostics, LLC and Qualigen, Inc. (incorporated by reference to Exhibit 10.56 of the Registration Statement on Form S-4 (Amendment No. 1) filed by the Company with the SEC on March 13, 2020)
     
10.26   Amendment to Letter of Intent, dated December 6, 2019, by and between Sekisui Diagnostics, LLC and Qualigen, Inc. (incorporated by reference to Exhibit 10.57 of the Registration Statement on Form S-4 (Amendment No. 1) filed by the Company with the SEC on March 13, 2020)
     
10.27   Amended and Restated Letter of Intent, dated August 22, 2018, by and between Sekisui Diagnostics, LLC and Qualigen, Inc. (incorporated by reference to Exhibit 10.60 of the Registration Statement on Form S-4 (Amendment No. 1) filed by the Company with the SEC on March 13, 2020)
     
14.1   Code of Business Conduct and Ethics
     
99.1   Press Release dated May 26, 2020, issued by the Company

 

** Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished to the SEC upon request.
+ Management contract or compensatory plans or arrangements.

 

Cautionary Note Regarding Forward Looking Statements

 

This Current Report on Form 8-K contains forward-looking statements by the Company that involve risks and uncertainties and reflect the Company’s judgment as of the date of this Report. These statements generally relate to future events or the Company’s future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” or “continue” or the negative of these words or other similar terms or expressions that concern the Company’s expectations, strategy, plans or intentions. Such forward-looking statements may relate to, among other things, potential future development, testing and launch of products and product candidates, the benefits of having a public-company platform, the timing of the Annual Meeting, and the Company’s filing of the financial statements referenced in Item 9.01. Actual events or results may differ from our expectations. For example, there can be no assurance that we will successfully develop any drugs or therapeutic devices; that preclinical or clinical development will be successful; that future clinical trial data will be favorable or that such trials will confirm any improvements over other products or lack negative impacts; that any drugs or therapeutic devices will receive required regulatory approvals or that they will be commercially successful; that we will be able to procure or earn sufficient working capital to complete the development, testing and launch of our prospective therapeutic products; or that we will be able to maintain or expand market demand and/or market share for our diagnostic products. Our stock price could be harmed if any of the events or trends contemplated by the forward-looking statements fails to occur or is delayed or if any actual future event otherwise differs from expectations. Additional information concerning these and other risk factors affecting the Company’s business (including events beyond the Company’s control, such as epidemics and resulting changes) can be found in the Company’s prior filings with the Securities and Exchange Commission, available at www.sec.gov. The Company disclaims any intent or obligation to update these forward-looking statements beyond the date of this Report, except as required by law. This caution is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

 

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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.

 

  QUALIGEN THERAPEUTICS, INC.
     
Date: May 29, 2020 By: /s/ Michael S. Poirier
    Michael S. Poirier, President and Chief Executive Officer

 

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Exhibit 2.4

 

Execution Version

 

CONTINGENT VALUE RIGHTS AGREEMENT

 

THIS CONTINGENT VALUE RIGHTS AGREEMENT, dated as of May 22, 2020 (this “Agreement”), is entered into by and among Ritter Pharmaceuticals, Inc., a Delaware corporation (“Parent”), John Beck in his capacity as the initial CVR Holders’ Representative (the “CVR Holders’ Representative”) and Andrew Ritter in his capacity as a consultant to Parent (“Consultant”).

 

Preamble

 

Parent, RPG28 Merger Sub, Inc., a Delaware corporation and direct wholly-owned subsidiary of Parent (“Merger Sub”), and Qualigen, Inc. entered into an Agreement and Plan of Merger dated as of January 15, 2020 (as amended to date, the “Merger Agreement”), pursuant to which Merger Sub will merge with and into Qualigen, Inc. (the “Merger”), with Qualigen, Inc. surviving the Merger as a subsidiary of Parent.

 

Pursuant to the Merger Agreement, Parent agreed to (subject to certain prerequisites as stated in the Merger Agreement) create, issue and distribute to the Persons who, as of immediately prior to the Effective Time or such other date as may be mutually agreed by Parent and Qualigen, Inc. (which date and time the parties have agreed shall be immediately prior to the reverse stock split to be effected on the Closing Date), are stockholders of record of Parent, contingent value rights (“CVRs”) as hereinafter described; and on May 18, 2020 the Board of Directors of Parent declared a dividend of one CVR per one share of Parent Common Stock outstanding as of immediately prior to the reverse stock split to be effected on the Closing Date (after giving effect to the conversion of any Parent Options, Parent Preferred Stock or Parent Warrants, but not to be adjusted for the reverse split to be effected in connection with the Merger) consistent with the Merger Agreement.

 

The parties have done all things necessary to make the contingent value rights, when, as and if issued as contemplated by the Merger Agreement and such declaration, the valid obligations of Parent and to make this Agreement a valid and binding agreement of Parent, in accordance with its terms.

 

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the benefit of the Holders (as hereinafter defined), as follows:

 

     

 

 

ARTICLE I

DEFINITIONS

 

Section 1.1. Definitions.

 

For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

 

(a) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;

 

(b) all accounting terms used herein and not expressly defined herein shall have the meanings assigned to such terms in accordance with United States generally accepted accounting principles, as in effect on the date hereof;

 

(c) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

 

(d) unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, limited liability companies, partnerships and other Persons and vice versa; and

 

(e) all references to “including” shall be deemed to mean including without limitation.

 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

 

Accountant” has the meaning set forth in Section 2.7.

 

Affiliate” means, with respect to any Person, any Person that controls, is controlled by, or is under common control with such Person.

 

Board of Directors” means the board of directors of Parent.

 

Business Day” means any day other than a Saturday, Sunday or a day on which the banks in Los Angeles, California are authorized or obligated by law or executive order to close.

 

Consultant Term” means the term commencing on the Effective Time and ending 90 days thereafter; provided, however, that the Consultant may, in his sole discretion, extend or reduce the Consultant Term to support Legacy Monetization efforts (although there can be no such extension to a date beyond the third anniversary of the Effective Time or, if sooner, the date the Ongoing Funding Support is exhausted).

 

CVR Payment Amount” means 100% of Net Proceeds in respect of each respective item of Gross Proceeds actually received by Parent.

 

CVR Payment Date” means the 75th day after the end of the calendar quarter in which a respective item of Gross Proceeds is actually received by Parent.

 

CVR Register” has the meaning set forth in Section 2.3(b).

 

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CVR Registrar” has the meaning set forth in Section 2.3(b).

 

CVRs” means the Contingent Value Rights issued by Parent as contemplated by this Agreement. Unless otherwise specified herein, for purposes of this Agreement all the CVRs shall be considered as part of and shall act as one class only.

 

D&O Premium Increment” has the meaning set forth in Section 6.3.

 

Effective Time” has the meaning set forth in the Merger Agreement.

 

Entitlement Certificate” has the meaning set forth in Section 2.4(a).

 

Gross Proceeds” means all cash (and the fair market value, as of the time of actual receipt of such non-cash consideration, of all non-cash consideration such as stock) actually received by Parent from a Legacy Monetization. Rights to receive royalty streams, milestone payments or other contingent payments shall not be treated (as such) as “non-cash consideration”; instead, any cash ultimately and actually received in respect of such rights shall be counted as Gross Proceeds.

 

Holder” means a Person in whose name a CVR is registered in the CVR Register.

 

Legacy Executives” has the meaning set forth in Section 2.6.

 

“Legacy Monetization” means the sale, license, transfer, spin-off or other monetizing event of all or any part of the Parent Legacy Technology, which sale, license, transfer, spin-off or other monetizing event is entered into during the period beginning on the date of execution of the Merger Agreement and ending on the date that is 36 months following the Closing Date.

 

“Legal Proceeding” means any claim, demand, action, cause of action, arbitration or lawsuit.

 

“Monetization Expenses” means any and all post-Merger expenses incurred by Parent pursuing and closing Legacy Monetizations, including compensation and expenses of the Legacy Executives, the fees and reasonable out-of-pocket expenses of the CVR Holders’ Representative, any other consultant fees and expenses, success fees (but specifically excluding the Success Bonus), legal fees and similar items, each Reserve Fund, each D&O Premium Increment, all Representative Losses and any and all post-Merger preservation and maintenance of the Parent Legacy Technology, including Patent and other Intellectual Property Rights application, registration and maintenance fees, and specifically including all actual Ongoing Support Funding. In no event shall the Monetization Expenses include any administrative or similar fee payable to Parent.

 

Net Proceeds” means, with respect to each respective Legacy Monetization, the excess, if any, of (a) all Gross Proceeds over (b) all Monetization Expenses and the entire associated Success Bonus.

 

“Notice of Objection” has the meaning set forth in Section 2.4(b).

 

Ongoing Support Funding” has the meaning set forth in Section 2.6.

 

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Parent Legacy Technology” means any Parent Intellectual Property Rights, technology, and related documentation, including without limitation all Parent IP, in existence as of immediately before the Effective Time. Without limitation, this shall include all Intellectual Property Rights relating to therapeutic products (including RP-G28, an orally administered, high purity galacto-oligosaccharide) that seek to modulate the gut microbiome to treat digestive disorders and gastrointestinal diseases (including lactose intolerance), research data and reports, test results, processes, procedures, protocols, product formulation data, analytical data, manufacturing data, license agreements, Patents, and other similar valuable but intangible items and rights.

 

Permitted Transfer” means: (i) a transfer of any or all of the CVRs (upon the death of the Holder) by will or intestacy; (ii) a transfer by instrument to an inter vivos or testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; (vi) a transfer from a participant’s account in a tax-qualified employee benefit plan to the participant or to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant; or (vii) a transfer from a participant in a tax-qualified employee benefit plan, who received the CVRs from such participant’s account in such tax-qualified employee benefit plan, to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant.

 

“Person” means any individual, firm, corporation, limited liability company, partnership, trust or other entity, and shall include any successor (by merger or otherwise) thereof or thereto.

 

Representative Losses” has the meaning set forth in Section 6.3.

 

Reserve Fund” means, with regard to a particular Legacy Monetization, a reasonable amount (which in any case shall not exceed $50,000 or 20% of the Gross Proceeds of the applicable Legacy Monetization, whichever is higher) to be determined by the CVR Holders’ Representative to be (i) withheld from any Gross Proceeds received after the termination or depletion of the Ongoing Support Funding and (ii) used and held for use to fund Monetization Expenses in connection with the Legacy Monetization giving rise to the Gross Proceeds.

 

Success Bonus” means a cash payment to the Legacy Executives, if any, who assisted a particular Legacy Monetization on behalf of Parent, in an amount equal in the aggregate to 30% of the (pre-Success Bonus) Net Proceeds of such Legacy Monetization, which shall be allocated among the Legacy Executives in accordance with, during the Consultant Term, the sole, good-faith discretion of the Consultant or, after expiration or termination of the Consultant Term, the sole, good-faith discretion of the CVR Holders’ Representative.

 

Surviving Person” has the meaning set forth in Section 5.1.

 

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ARTICLE II

CONTINGENT VALUE RIGHTS

 

Section 2.1. Issuance of CVRs.

 

The CVRs shall be issued and distributed by Parent, after the Merger, to the Persons who as of immediately prior to the reverse stock split to be effected on the Closing Date are stockholders of record of Parent, as contemplated by the Merger Agreement.

 

Section 2.2. Nontransferable.

 

The CVRs are not capable of being and shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through a Permitted Transfer.

 

Section 2.3. No Certificate; Registration; Registration of Transfer; Change of Address.

 

(a) The CVRs shall be issued in book-entry form only and shall not be evidenced by a certificate or other instrument.

 

(b) Parent shall, at its sole cost and expense, cause Parent’s transfer agent to keep a register (the “CVR Register”) for the registration of CVRs. It is expected that Corporate Stock Transfer, Inc. will be the initial CVR registrar and transfer agent (“CVR Registrar”) for the purpose of registering CVRs and transfers of CVRs as herein provided.

 

(c) Subject to the restriction on transferability set forth in Section 2.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other reasonably requested documentation in a form reasonably satisfactory to Parent and the CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof. Upon receipt of such written Permitted Transfer request and materials, the CVR Registrar shall register the transfer of the CVRs in the CVR Register, any such registration not to be unreasonably withheld or delayed. All duly transferred CVRs registered in the CVR Register shall be the valid obligations of Parent, evidencing the same right and shall entitle the transferee to the same benefits and rights under this Agreement, as those previously held by the transferor. No transfer of a CVR shall be valid until registered in the CVR Register. Any transfer or assignment of the CVRs shall be without charge to the Holder, other than the cost of any transfer or similar tax, which shall be the responsibility of the transferring Holder.

 

(d) A Holder may make a written request to the CVR Registrar to change such Holder’s address of record in the CVR Register. The written request must be duly executed by the Holder and conform to such other reasonable requirements as the CVR Registrar may from time to time establish. Upon receipt of such proper written request, the CVR Registrar shall promptly record the change of address in the CVR Register.

 

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Section 2.4. Payment Procedures.

 

On each CVR Payment Date, Parent shall deliver to the respective Holders, pro rata as to their CVRs holdings, the amount of the indicated CVR Payment Amount. It is understood that all Monetization Expenses shall be applied as early as possible and in full (but without duplication) against respective Gross Proceeds. Upon the earlier to occur of (i) the Termination Date or (ii) the final payment of any portion of Gross Proceeds with respect to a Legacy Monetization for which a Reserve Fund was established, any amount remaining in the Reserve Fund shall be included in the final CVR Payment Amount with respect to such Legacy Monetization (or, in the event that any such Reserve Fund remains outstanding on the Termination Date, a final CVR Payment Amount equal to such Reserve Fund shall be paid on the Termination Date). As an example: Suppose $100,000 of Monetization Expenses are accrued through the CVR Payment Date for Legacy Monetization #1 (with Gross Proceeds of $80,000) and an additional $130,000 of Monetization Expenses are accrued through the (next) CVR Payment Date for Legacy Monetization #2 (with Gross Proceeds of $400,000) and an additional $175,000 of Monetization Expenses are accrued through the (still next) CVR Payment Date for Legacy Monetization #3 (with Gross Proceeds of $1,000,000). For Legacy Monetization #1 the CVR Payment Amount would be $0, for Legacy Monetization #2 the CVR Payment Amount would be $250,000 and for Legacy Monetization #3 the CVR Payment Amount would be $825,000. And if then, four years later, an earnout payment of $100,000 is received from a Legacy Monetization #1, Legacy Monetization #2 or Legacy Monetization #3 counterparty, a CVR Payment Amount of $100,000 would then become payable.

 

(a) At least 60 days before the applicable CVR Payment Date, Parent shall deliver to the CVR Holders’ Representative a certificate (the “Entitlement Certificate”), certifying that the Holders are entitled to payment of a CVR Payment Amount (and setting forth the calculation of such CVR Payment Amount). If a Legacy Monetization has occurred but no CVR Payment Amount is payable, Parent shall also deliver an Entitlement Certificate so stating.

 

(b) Within 20 days after delivery by Parent of an Entitlement Certificate, the CVR Holders’ Representative may deliver a written notice to Parent requesting that Parent provide to the CVR Holders’ Representative or its authorized representative reasonable documentation to support Parent’s calculation of the CVR Payment Amount and shall make its accounting personnel available to the CVR Holders’ Representative or its authorized representative to discuss and answer questions with respect to the calculation of the CVR Payment Amount. Within 20 days after the CVR Holders’ Representative’s receipt of all of the documentation requested pursuant to the foregoing sentence, the CVR Holders’ Representative may deliver a written notice to Parent specifying that the CVR Holders’ Representative objects to the indicated CVR Payment Amount (a “Notice of Objection”), and stating the reason upon which the CVR Holders’ Representative has determined that (i) a CVR Payment Amount is due and payable, or (ii) the calculation of the CVR Payment Amount is in error. Any dispute arising from a Notice of Objection shall be resolved in accordance with Section 6.4 or by an independent third party valuation expert selected by Parent and the CVR Holders’ Representative, whose decision shall be binding on the parties hereto and every Holder. The fees charged by the valuation expert referenced in the foregoing sentence shall be paid 50% by Parent and 50% by the Holders (by deduction from the CVR Payment Amount).

 

(c) Parent shall be entitled to deduct and withhold, or cause to be deducted or withheld, from each CVR Payment Amount otherwise payable pursuant to this Agreement, such amounts as Parent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld or paid over to or deposited with the relevant governmental entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Holder in respect of which such deduction and withholding was made.

 

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Section 2.5. No Voting, Dividends or Interest; No Equity or Ownership Interest in Parent.

 

(a) The CVRs shall not have any voting or dividend rights, and interest shall not accrue on any amounts payable on the CVRs.

 

(b) The CVRs shall not represent any equity or ownership interest in Parent (or in any constituent company to the Merger) or in any Parent Legacy Technology or other asset. The rights and/or remedies of the holders of CVRs are limited to those expressly set forth in this Agreement, and such Holders’ sole right to receive property is the right to receive cash from Parent in accordance with the terms hereof.

 

(c) Each Holder acknowledges and agrees to the appointment and authority of the CVR Holders’ Representative to act as the exclusive representative, agent and attorney-in-fact of such Holder and all Holders as set forth in this Agreement. Each Holder agrees that such Holder will not challenge or contest any action, inaction, determination or decision of the CVR Holders’ Representative or Consultant or the authority or power of the CVR Holders’ Representative or Consultant and will not threaten, bring, commence, institute, maintain, prosecute or voluntarily aid any action, which challenges the validity of or seeks to enjoin the operation of any provision of this Agreement, including without limitation, the provisions relating to the authority of the CVR Holders’ Representative to act on behalf of such Holder and all Holders as set forth in this Agreement.

 

Section 2.6. Discretion and Decision Making Authority; No Fiduciary Duty.

 

Subject to this Section, during the Consultant Term, Consultant shall have discretion and decision making authority (a) over any continued operation of, development of or investment in the Parent Legacy Technology and (b) over when (if ever) and whether to pursue, or enter into, a Legacy Monetization in any particular manner, and upon what terms and conditions.

 

After the expiration or termination of the Consultant Term, the CVR Holders’ Representative shall have the sole discretion and decision making authority (a) over any continued operation of, development of or investment in the Parent Legacy Technology and (b) over when (if ever) and whether to pursue, or enter into, a Legacy Monetization in any particular manner, and upon what terms and conditions.

 

In furtherance of the foregoing:

 

(a) Parent shall not before the Termination Date dispose of and/or commercialize or monetize in any manner the Parent Legacy Technology except pursuant to a Legacy Monetization agreed to by the CVR Holders’ Representative or Consultant;

 

(b) Parent shall not unreasonably decline to acquiesce in a Legacy Monetization which has been fully approved by the CVR Holders’ Representative;

 

(c) Parent shall not before the third anniversary of the Effective Time terminate or intentionally negatively impact the Parent Legacy Technology, including by withholding or withdrawing the Ongoing Support Funding or failing to preserve and maintain the Parent Legacy Technology, without the prior written approval of the CVR Holders’ Representative, unless the Ongoing Support Funding has been exhausted;

 

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(d) Parent shall endeavor to retain Consultant and any such other pre-Merger Parent personnel and other third-party consultants identified by Consultant or the CVR Holders’ Representative, in each case, as the Consultant/CVR Holders’ Representative and Parent may agree in good faith (all together, the “Legacy Executives”) as employees or consultants of Parent, on reasonable and mutually acceptable terms given the circumstances, for, with respect to the Consultant, the Consultant Term and, with respect to other Legacy Executives, no less than 36 months after the Merger for the purposes of maintaining and preserving the Parent Legacy Technology and seeking, negotiating and executing Legacy Monetizations – all unless the Ongoing Support Funding has been exhausted;

 

(e) Parent shall make available up to $350,000 (subject to any reduction thereof pursuant to the terms of section 1.12 of the Merger Agreement), to be called for and allocated in accordance with the good-faith discretion of the Consultant or the CVR Holders’ Representative, but with the intention that it be expended at a rate no faster than a rate sufficient that it last for 36 months after the Effective Time (subject to earlier use as needed for the execution of particular Legacy Monetizations), for Monetization Expenses (the “Ongoing Support Funding”); provided, however, that any costs and expenses incurred by Parent in connection with Section 2.3(b) shall not be considered Ongoing Support Funding; and

 

(f) Parent shall pay $10,000 out of the Ongoing Support Funding to the CVR Holders’ Representative at the Effective Time as compensation for services rendered during the period from the Effective Time to the first anniversary of the Effective Time. Parent and the CVR Holders’ Representative shall negotiate in good faith the CVR Holders’ Representative’s fee for future annual 12-month periods based on the success of Legacy Monetization efforts, among other factors. Parent shall reimburse the CVR Holders’ Representative out of the Ongoing Support Funding for all necessary and reasonable out-of-pocket expenses incurred by the CVR Holders’ Representative in performing his, her or its obligations under this Agreement; provided that (except as specified in item “(iii)” of the third paragraph of Section 6.3) Parent shall have no such obligation to the extent the Ongoing Support Funding has been exhausted.

 

It is expressly understood that except (i) as expressly provided in this Section 2.6 and (ii) Parent’s indemnification obligations pursuant to Section 6.3, Parent has no obligation to incur Monetization Expenses or otherwise to seek or support Legacy Monetizations. Parent’s (as opposed to the CVR Holders’ Representative’s and the Legacy Executives’) sole responsibility as to Legacy Monetization activities is as set forth in this Section 2.6; except as expressly provided in this Section 2.6 Parent and its post-Merger management will have no further obligation to promote, support, invest in, allocate internal resources toward, advance or monetize the Parent Legacy Technology pending the Legacy Monetization(s).

 

Section 2.7. Audit Right.

 

Upon the prior written request by the CVR Holders’ Representative, Parent shall meet at reasonable times during normal business hours with the CVR Holders’ Representative to discuss the content of any Entitlement Certificate. Parent agrees to maintain, for at least one year after the last possible Legacy Monetization, all books and records relevant to the calculation of a CVR Payment Amount and the amount of Net Proceeds. Subject to reasonable advance written notice from the CVR Holders’ Representative and prior execution and delivery by it and an independent accounting firm of national reputation chosen by the CVR Holders’ Representative (the “Accountant”) of a reasonable and customary confidentiality/nonuse agreement, Parent shall permit the CVR Holders’ Representative and the Accountant, acting as agent of the CVR Holders’ Representative, at the CVR Holders’ Representative’s cost, to have access during normal business hours to the books and records of Parent as may be reasonably necessary to audit the calculation of such CVR Payment Amount or the calculation of the amount of Net Proceeds.

 

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Section 2.8. Termination.

 

The CVRs shall terminate on the 10th anniversary of the Effective Time (the “Termination Date”). No CVR Payment Amounts shall be payable in respect of any item of cash Gross Proceeds actually received after the Termination Date by Parent. From and after the Termination Date, any further proceeds received by Parent arising from any Legacy Monetization shall be retained by the Parent and shall not be distributed to the Holders.

 

ARTICLE III

COVENANTS

 

Section 3.1. Payment of CVR Payment Amount.

 

Parent shall duly and promptly pay each CVR Payment Amount, if any, in the manner provided for in Section 2.4 and in accordance with the terms of this Agreement.

 

Section 3.2. Assignments.

 

Parent shall not, in whole or in part, assign any of its obligations under this Agreement other than in accordance with the terms of Section 5.1 or Section 2.6 hereof. At any time, the CVR Holders’ Representative may assign any of its rights or obligations under this Agreement (or this Agreement in its entirety) to any third party (reasonably acceptable to Parent) to serve as a successor CVR Holders’ Representative.

 

ARTICLE IV

AMENDMENTS

 

Section 4.1. Amendments without Consent of Holders.

 

Without the consent of any Holders or of the CVR Holders’ Representative, Parent, at any time and from time to time after the Merger, may unilaterally execute and implement one or more amendments hereto to evidence the succession of another Person to Parent and the assumption by any such successor of the covenants of Parent herein in a transaction contemplated by Section 5.1 hereof. Promptly after the execution by Parent of any amendment pursuant to the provisions of this Section 4.1, Parent shall provide a copy of such amendment to the CVR Holders’ Representative.

 

Section 4.2. Amendments with Consent of Holders.

 

Subject to Section 4.1 (which amendments pursuant to Section 4.1 may be made without the consent of the Holders or of the CVR Holders’ Representative), with the consent of the CVR Holders’ Representative, Parent and the CVR Holders’ Representative may after the Merger enter into one or more amendments hereto for the purpose of adding, eliminating or changing any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders. This Agreement cannot be amended before the Effective Time.

 

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Section 4.3. Effect of Amendments.

 

Upon the execution of any amendment under this Article IV, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby.

 

ARTICLE V

CONSOLIDATION, MERGER, SALE OR CONVEYANCE

 

Section 5.1. Parent May Consolidate, Etc.

 

Parent shall not consolidate with or merge into any other Person, or transfer its properties and assets substantially as an entirety to any Person or transfer all or substantially all of its business to any Person, unless:

 

(a) the Person formed by such consolidation or into which Parent is merged, the Person that acquires the properties and assets of Parent substantially as an entirety or the Person that acquires by transfer all or substantially all of Parent’s business (the “Surviving Person”) shall expressly assume payment (if and to the extent required hereunder) of amounts on all the CVRs and the performance of every duty and covenant of this Agreement on the part of Parent to be performed or observed; and

 

(b) Parent has delivered to the CVR Holders’ Representative an Officer’s Certificate, stating that such consolidation, merger or transfer complies with this Article V and that all conditions precedent herein provided for relating to such transaction have been complied with.

 

Section 5.2. No Allocation to Parent Legacy Technology.

 

No transaction described in Section 5.1 shall give, and the Merger shall not give, the Holders the right to a CVR Payment Amount.

 

Section 5.3. Successor Substituted.

 

Upon any consolidation of or merger by Parent with or into any other Person, or any transfer of the properties and assets substantially as an entirety to any Person in accordance with Section 5.1, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, Parent under this Agreement with the same effect as if the Surviving Person had been named as Parent herein.

 

Section 5.4. Exclusion of Merger.

 

Sections 5.1 and 5.3 shall not apply to the Merger.

 

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ARTICLE VI

OTHER PROVISIONS OF GENERAL APPLICATION

 

Section 6.1. Notices.

 

Any notice, report, request, approval or consent required or permitted to be given under this Agreement shall be in writing and shall be addressed as follows:

 

(a) if to a Holder or any or all Holders or the CVR Holders’ Representative, addressed to the CVR Holders’ Representative and if to Consultant, addressed to Consultant, in each case, at: c/o Qualigen, Inc., 2042 Corte Del Nogal, Carlsbad, California 92011, email: CVRrepresentative@ritterpharma.com, with a copy to Reed Smith LLP, 599 Lexington Ave., 22nd Floor, New York, New York 10022, email: msanders@reedsmith.com, jcheng@reedsmith.com.

 

(b) if to Parent, addressed to it at: c/o Qualigen, Inc., 2042 Corte Del Nogal, Carlsbad, California 92011, email: mpoirier@qualigeninc.com

 

or, in each case, to the most recent address, specified by written notice, given to the sender pursuant to this Section.

 

Any such written notice, report, request, approval or consent shall be deemed to have been given on the earliest of (a) actual receipt, or (b) if personally delivered to the party to whom notice is to be given, the date of delivery, or (c) if sent by email, the date of transmission, if sent to such email address before 5:00 p.m. at the location of receipt on a Business Day, or the first Business Day after the date of transmission, if sent to such email address at or after 5:00 p.m. at the location of receipt on a Business Day or on a day that is not a Business Day, or (d) if sent by overnight courier and addressed as set forth above, the next Business Day after the date of deposit with such courier (by the courier’s stated time for enabling next-Business-Day delivery), or if deposited after such stated time shall be deemed to be the second Business Day after the date of deposit, or (e) if sent in the United States by United States certified mail, return receipt requested, postage prepaid and addressed as set forth above, on the fifth Business Day after such mailing.

 

Section 6.2. Successors and Assigns.

 

All covenants and agreements in this Agreement by Parent shall bind its successors and assigns, whether so expressed or not. All covenants and agreements in this Agreement by the CVR Holders’ Representative shall bind his successors, whether so expressed or not. In the event the CVR Holders’ Representative resigns (without assigning its rights or obligations to a successor CVR Holder’s Representative pursuant to Section 3.2), dies or is incapacitated, a successor CVR Holders’ Representative shall be elected by a majority in interest of the Holders.

 

Section 6.3. Benefits of Agreement.

 

Nothing in this Agreement, express or implied, shall give to any Person (other than the parties hereto, and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their permitted successors and assigns. The Holders shall have no rights or remedies hereunder except as are expressly set forth herein. To the extent permitted by applicable law, it is expressly agreed that in no event shall any Holders (as opposed to the CVR Holders’ Representative) or any former or ongoing stockholders of Parent (as opposed to the CVR Holders’ Representative) have, after the Effective Time, any power or right to commence or join in any Legal Proceeding against Parent or any Affiliate of Parent based on or arising out of the CVRs or this Agreement. Such Legal Proceeding may be brought by, and only by, the CVR Holders’ Representative in the name of and for the benefit of the Holders. The outcome or settlement of any such Legal Proceeding shall be binding upon all Holders.

 

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A decision, act, consent or instruction of the CVR Holders’ Representative shall constitute a decision for all Holders, and shall be final, binding and conclusive upon the Holders. The CVR Holders’ Representative and Consultant will incur no liability of any kind with respect to any action or omission by the CVR Holders’ Representative or Consultant in connection with the CVR Holders’ Representative’s and Consultant’s services pursuant to this Agreement, except in the event of liability directly resulting from the CVR Holders’ Representative’s or Consultant’s fraud, gross negligence or willful misconduct.

 

Parent shall indemnify and hold harmless the CVR Holders’ Representative and Consultant from and against any and all loss, liability, damage, claim, penalty, fine, forfeiture, action, fee, cost and expense (including the fees and expenses of counsel and experts and their staffs and all expense of document location, duplication and shipment) which arise out of or in connection with claims brought by a third party (including, for the avoidance of doubt, any CVR Holder) related to or arising from the CVR Holders’ Representative’s or Consultant’s execution and performance of this Agreement (collectively, “Representative Losses”), in each case, as such Representative Losses are suffered or incurred; provided, that in the event that any such Representative Losses are finally adjudicated to have been primarily caused by the fraud, gross negligence or willful misconduct of the CVR Holders’ Representative or Consultant, the CVR Holders’ Representative or Consultant, as the case may be, shall reimburse Parent the amount of such indemnified Representative Losses to the extent primarily attributable to such fraud, gross negligence or willful misconduct; further provided, that (i) all outstanding Reserve Funds shall be applied first to pay Representative Losses before any payment by Parent in respect of Representative Losses is required, (ii) Parent shall have no obligation of payment in respect of any Representative Losses until after all outstanding Reserve Funds, if any, have been exhausted, and (iii) Parent shall have no further obligation in respect of any Representative Losses after Parent has paid (exclusive of the use of Reserve Funds, if any) an aggregate of $500,000 in respect of Representative Losses.

 

Parent shall use reasonable efforts to have the CVR Holders’ Representative and Consultant included (by rider/endorsement) on Parent’s directors and officers liability insurance policy, if any, as additional insured persons (for acts and omissions in such capacity). If including the CVR Holders’ Representative and Consultant on such policy increases the insurance premium for any policy year (the amount of such increase, the “D&O Premium Increment”), Parent shall not be required to include the CVR Holders’ Representative and Consultant on or under the policy (by rider/endorsement or otherwise) if the D&O Premium Increment, together with all other Monetization Expenses theretofore incurred, would exceed the Ongoing Support Funding maximum.

 

Section 6.4. Governing Law.

 

This Agreement and the CVRs shall be governed by and construed in accordance with the laws of the State of Delaware without regards to its rules of conflicts of laws. In any action or proceeding between any of the Parties arising out of or relating to this Agreement or any of the CVRs, each of the parties: (a) irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware; (b) agrees that all claims in respect of such action or proceeding shall be heard and determined exclusively in accordance with this Section 6.4; (c) waives any objection to laying venue in any such action or proceeding in such courts; (d) waives any objection that such courts are an inconvenient forum or do not have jurisdiction over any party; (e) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with Section 6.1 of this Agreement; and (f) to the extent permitted by applicable Law, irrevocably and unconditionally waives the right to trial by jury.

 

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Section 6.5. Legal Holidays.

 

In the event that a CVR Payment Date shall not be a Business Day, then, notwithstanding any provision of this Agreement to the contrary, any payment required to be made in respect of the CVRs on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the CVR Payment Date.

 

Section 6.6. Severability Clause.

 

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 any other provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the arbitration forum or other tribunal making such determination is authorized and instructed to modify this Agreement so as to effect the original intent of the parties as closely as possible so that the transactions and agreements contemplated herein are consummated as originally contemplated to the fullest extent possible.

 

Section 6.7. Entire Agreement.

 

This Agreement represents the entire understanding of the parties hereto with reference to the CVRs and the subject matter of this Agreement and supersedes any and all other prior or contemporaneous oral or written agreements made with respect to the CVRs and/or this Agreement, except for the Merger Agreement. If and to the extent that any provision of this Agreement is inconsistent with or conflicts with the Merger Agreement, this Agreement shall govern and be controlling.

 

Section 6.8. Interpretation.

 

The language used in this Agreement is the language chosen by the parties to express their mutual intent, and no provision of this Agreement shall be interpreted for or against a party because that party or its attorney drafted the provision.

 

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IN WITNESS WHEREOF, the parties have executed and delivered this Contingent Value Rights Agreement as of the day and year first above written.

 

  RITTER PHARMACEUTICALS, INC.
                                       
  By: /s/ Andrew J. Ritter
  Name: Andrew J. Ritter
  Title: CEO

 

  /s/ John W. Beck
  JOHN BECK, AS CVR HOLDERS’ REPRESENTATIVE
   
  /s/ Andrew J. Ritter
  ANDREW J. RITTER, AS CONSULTANT

 

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Exhibit 3.1

 

Ritter Pharmaceuticals, inc.

 

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES ALPHA PREFERRED STOCK

 

PURSUANT TO SECTION 151 OF THE

Delaware GENERAL CORPORATION LAW

 

The undersigned, Andrew Ritter and John Beck, do hereby certify that:

 

1. They are the President and Secretary, respectively, of Ritter Pharmaceuticals, Inc., a Delaware corporation (the “Corporation”).

 

2. The Corporation is authorized to issue 15,000,000 shares of Preferred Stock, 17,060 of which have been issued.

 

3. The following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors”):

 

WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as Preferred Stock, consisting of 15,000,000 shares, $0.001 par value per share, issuable from time to time in one or more series;

 

WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of Preferred Stock and the number of shares constituting any series and the designation thereof, of any of them; and

 

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the Preferred Stock, which shall consist of 7,000 shares of the Preferred Stock which the Corporation has the authority to issue, as follows:

 

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of Preferred Stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of Preferred Stock as follows:

 

  1  
 

 

TERMS OF SERIES ALPHA PREFERRED STOCK

 

Section 1. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

 

Alternate Consideration” shall have the meaning set forth in Section 7(e).

 

Bankruptcy Event” means any of the following events: (a) the Corporation or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary thereof, (b) there is commenced against the Corporation or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Corporation or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Corporation or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, or (g) the Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

Base Conversion Price” shall have the meaning set forth in Section 7(b).

 

Beneficial Ownership Limitation” shall have the meaning set forth in Section 6(d).

 

Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

Buy-In” shall have the meaning set forth in Section 6(c)(iv).

 

  2  
 

 

Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 39% of the voting securities of the Corporation (other than by means of conversion or exercise of Series Alpha Preferred Stock and the Securities issued together with the Series Alpha Preferred Stock), other than the Merger, (b) the Corporation merges into or consolidates with any other Person, or any Person merges into or consolidates with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately prior to such transaction own less than 61% of the aggregate voting power of the Corporation or the successor entity of such transaction, other than the Merger, (c) the Corporation sells or transfers all or substantially all of its (and all of its Subsidiaries, taken as a whole) assets to another Person and the stockholders of the Corporation immediately prior to such transaction own less than 61% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a one year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the Original Issue Date), or (e) the execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

 

Commission” means the United States Securities and Exchange Commission.

 

Common Stock” means the Corporation’s common stock, par value $0.001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.

 

Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

Conversion Amount” means the sum of the Stated Value at issue.

 

Conversion Date” shall have the meaning set forth in Section 6(a).

 

Conversion Price” shall have the meaning set forth in Section 6(b).

 

Conversion Shares” means, collectively, the shares of Common Stock issued and issuable upon conversion of the shares of Series Alpha Preferred Stock in accordance with the terms hereof.

 

Dilutive Issuance” shall have the meaning set forth in Section 7(b).

 

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Dilutive Issuance Notice” shall have the meaning set forth in Section 7(b).

 

Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Corporation pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Corporation or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities issued pursuant to, or upon the exercise or exchange of or conversion of any securities issued or assumed pursuant to, the Merger (including the Warrants) and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of the Purchase Agreement, provided that such securities have not been amended since the date of the Purchase Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of any such securities or to extend the term of such securities (it being expressly understood that decreases in the exercise price of warrants (which were outstanding on the date of the Purchase Agreement) pursuant to the operation of ratchet or other antidilution provisions thereof which provisions have not been amended after the date of the Purchase Agreement do not constitute an “amendment since the date of the Purchase Agreement”), (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Corporation, and provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Corporation and shall provide to the Corporation additional benefits in addition to the investment of funds, but shall not include a transaction in which the Corporation is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

Fundamental Transaction” shall have the meaning set forth in Section 7(e).

 

GAAP” means United States generally accepted accounting principles.

 

Holder” shall have the meaning given such term in Section 2.

 

Junior Securities” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior or pari passu to the Series Alpha Preferred Stock in dividend rights or liquidation preference.

 

Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

Liquidation” shall have the meaning set forth in Section 5.

 

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Merger” means the proposed merger of a subsidiary of the Corporation with Qualigen, Inc. as contemplated by that certain Agreement and Plan of Merger dated January 15, 2020, as thereafter amended.

 

New York Courts” shall have the meaning set forth in Section 11(d).

 

Notice of Conversion” shall have the meaning set forth in Section 6(a).

 

Original Issue Date” means the date of the first issuance of any shares of the Series Alpha Preferred Stock regardless of the number of transfers of any particular shares of Series Alpha Preferred Stock and regardless of the number of certificates which may be issued to evidence such Series Alpha Preferred Stock.

 

Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

Purchase Agreement” means the Securities Purchase Agreement, dated on or shortly before the date of effectuation of the Merger, among Qualigen, Inc. and certain person(s) who would become the original Holders (as an effect of the Merger) and which (as to certain specified sections of such Securities Purchase Agreement) the Corporation acknowledged and agreed to - as amended, modified or supplemented from time to time in accordance with its terms.

 

Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

Securities” means the Series Alpha Preferred Stock and the Conversion Shares.

 

Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

Series Alpha Preferred Stock” shall have the meaning set forth in Section 2.

 

Share Delivery Date” shall have the meaning set forth in Section 6(c).

 

Stated Value” shall have the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.

 

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Subsidiary” means any entity which is currently or hereafter a direct or indirect subsidiary of the Corporation, for so long as such subsidiary relationship persists.

 

Successor Entity” shall have the meaning set forth in Section 7(e).

 

Trading Day” means a day on which the principal Trading Market is open for business.

 

Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange (or any successors to any of the foregoing).

 

Transaction Documents” means this Certificate of Designation, the Purchase Agreement (to the extent binding upon or benefiting the Corporation), all exhibits and schedules thereto (to the extent binding upon or benefiting the Corporation), the Warrants and any other documents or agreements (to the extent binding upon or benefiting the Corporation) executed in connection with the transactions integrated with the Merger.

 

Transfer Agent” means the current transfer agent of the Corporation, and any successor transfer agent of the Corporation.

 

Variable Rate Transaction” means a transaction in which the Corporation (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit, whereby the Company may issue securities at a future determined price.

 

VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Corporation, the fees and expenses of which shall be paid by the Corporation.

 

  6  
 

 

Warrants” means any common stock warrants of Qualigen, Inc. assumed by the Corporation in a transaction associated with the Merger, and as so assumed exercisable for shares of Common Stock.

 

Section 2. Designation, Amount and Par Value. This series of Preferred Stock of the Corporation shall be designated as its Series Alpha Preferred Stock (the “Series Alpha Preferred Stock”) and the number of shares so designated shall be 7,000 (which shall not be subject to increase without the written consent of the holders of a majority of the then outstanding shares of the Series Alpha Preferred Stock (each, a “Holder” and collectively, the “Holders”)). Each share of Series Alpha Preferred Stock shall have a par value of $0.001 per share and a stated value equal to $1,000, subject to increase set forth in Section 3 below (the “Stated Value”).

 

Section 3. Dividends.

 

a) As If Common Stock. If the Corporation, at any time while any shares of Series Alpha Preferred Stock are outstanding, pays a dividend or distribution (other than one payable in shares of Common Stock or in Common Stock Equivalents) on shares of Common Stock, Holders as of the record date for such dividend or distribution on Common Stock shall be entitled to receive at the same time as such payment on Common Stock, and the Corporation shall pay, a dividend or distribution on each share of Series Alpha Preferred Stock equal to the per-share amount of the dividend or distribution on Common Stock multiplied by the number of shares of Common Stock into which such share of Series Alpha Preferred Stock was (on such record date) convertible (without regard to any limitations on conversion, including without limitation the Beneficial Ownership Limitation). Such dividend or distribution on Series Alpha Preferred Stock shall be paid in the same form as the dividend or distribution on Common Stock. The Series Alpha Preferred Stock shall not otherwise have any rights to dividends. The fair market value of any dividend or distribution to which a share of Series Alpha Preferred Stock has become entitled pursuant to this Section but which has not yet been paid shall, until such dividend or distribution has been paid on such share of Series Alpha Preferred Stock, be added to the Stated Value of such share of Series Alpha Preferred Stock.

 

b) Other Securities. So long as any Series Alpha Preferred Stock shall remain outstanding, neither the Corporation nor any Subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities or shares pari passu with the Series Alpha Preferred Stock, in each case except as expressly permitted by Section 8(b).

 

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Section 4. Voting Rights. The Series Alpha Preferred Stock shall have the right to vote, together with the Common Stock as if all part of a single class and single series, as to all matters on which the Common Stock is entitled to vote, and each then-outstanding share of Series Alpha Preferred Stock shall as to each respective matter to be so voted upon be entitled to a number of votes equal to the number of shares of Common Stock into which such share of Series Alpha Preferred Stock would be, as of the record date for determination of stockholders entitled to vote as to such matter, convertible if the conversion price was equal to the “Minimum Price” (as of the Original Issue Date) as defined in Nasdaq Listing Rule 5635(d) (without giving effect to any post-Original Issue Date amendments of such Rule), taking into account for such purposes the Beneficial Ownership Limitation as then in effect. Provided, that such deemed “conversion price” shall be adjusted to reflect proportionally any changes in the actual Conversion Price pursuant to Section 7(a) below; but in the event of a Dilutive Issuance resulting in a “ratchet” change in the actual Conversion Price pursuant to Section 7(b) below, there shall be no voting rights adjustment of such “deemed” conversion price as a result of such Dilutive Issuance or as a result of such “ratchet” change in the actual Conversion Price pursuant to Section 7(b) below. Holders shall be entitled to notice of all meetings of Corporation stockholders on the same basis as holders of Common Stock.

 

Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value and any fees or liquidated damages then due and owing thereon under this Certificate of Designation, for each share of Series Alpha Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

Section 6. Conversion.

 

a) Conversions at Option of Holder. Each share of Series Alpha Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth in Section 6(d)) determined by dividing the Stated Value of such share of Series Alpha Preferred Stock by the Conversion Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”). Each Notice of Conversion shall specify the number of shares of Series Alpha Preferred Stock to be converted, the number of shares of Series Alpha Preferred Stock owned prior to the conversion at issue, the number of shares of Series Alpha Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by email such Notice of Conversion to the Corporation (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of shares of Series Alpha Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing the shares of Series Alpha Preferred Stock to the Corporation unless all of the shares of Series Alpha Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Series Alpha Preferred Stock promptly following the Conversion Date at issue. Shares of Series Alpha Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued.

 

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b) Conversion Price. The conversion price for the Series Alpha Preferred Stock shall equal $0.73947344, subject to adjustment herein (the “Conversion Price”).

 

c) Mechanics of Conversion.

 

i. Delivery of Conversion Shares Upon Conversion. Not later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) after each Conversion Date (the “Share Delivery Date”), the Corporation shall deliver, or cause to be delivered, to the converting Holder the number of Conversion Shares being acquired upon the conversion of the Series Alpha Preferred Stock, which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the effective date of the Merger, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement or under applicable law). On or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the effective date of the Merger, the Corporation shall deliver the Conversion Shares required to be delivered by the Corporation under this Section 6 electronically through the Depository Trust Company or another established clearing corporation performing similar functions. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Corporation’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Conversion.

 

ii. Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the Corporation shall promptly return to the Holder any original Series Alpha Preferred Stock certificate delivered to the Corporation and the Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Notice of Conversion.

 

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iii. Obligation Absolute; Partial Liquidated Damages. The Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Series Alpha Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. In the event a Holder shall elect to convert any or all of the Stated Value of its Series Alpha Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Series Alpha Preferred Stock of such Holder shall have been sought and obtained, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Series Alpha Preferred Stock which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall issue Conversion Shares and, if applicable, cash, upon a properly noticed conversion. If the Corporation fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) by the Share Delivery Date applicable to such conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of Stated Value of Series Alpha Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day on the third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after such damages begin to accrue) for each Trading Day after the Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare a Triggering Event pursuant to Section 10 hereof for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

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iv. Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the Share Delivery Date pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Corporation shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which (x) such Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Series Alpha Preferred Stock equal to the number of shares of Series Alpha Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded) or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Series Alpha Preferred Stock with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver the Conversion Shares upon conversion of the shares of Series Alpha Preferred Stock as required pursuant to the terms hereof.

 

v. Reservation of Shares Issuable Upon Conversion. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Series Alpha Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Series Alpha Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then outstanding shares of Series Alpha Preferred Stock hereunder. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

 

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vi. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series Alpha Preferred Stock. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share. Notwithstanding anything to the contrary contained herein, but consistent with the provisions of this subsection with respect to fractional Conversion Shares, nothing shall prevent any Holder from converting fractional shares of Series Alpha Preferred Stock.

 

vii. Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Series Alpha Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of such shares of Series Alpha Preferred Stock and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.

 

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d) Beneficial Ownership Limitation. The Corporation shall not effect any conversion of the Series Alpha Preferred Stock, and a Holder shall not have the right to convert any portion of the Series Alpha Preferred Stock, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting as a group together with such Holder or any of such Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of the Series Alpha Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Stated Value of Series Alpha Preferred Stock beneficially owned by such Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, the Series Alpha Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 6(d) applies, the determination of whether the Series Alpha Preferred Stock is convertible (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and of how many shares of Series Alpha Preferred Stock are convertible shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination of whether the shares of Series Alpha Preferred Stock may be converted (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and how many shares of the Series Alpha Preferred Stock are convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within one Trading Day confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Series Alpha Preferred Stock, by such Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Series Alpha Preferred Stock held by the applicable Holder. A Holder, upon notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d) applicable to its Series Alpha Preferred Stock provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Series Alpha Preferred Stock held by the Holder and the provisions of this Section 6(d) shall continue to apply. Any such increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Series Alpha Preferred Stock.

 

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Section 7. Certain Adjustments.

 

a) Stock Dividends and Stock Splits. If the Corporation, at any time while any shares of Series Alpha Preferred Stock are outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, this Series Alpha Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b) Subsequent Equity Sales. If, at any time while any shares of Series Alpha Preferred Stock are outstanding, the Corporation or any Subsidiary, as applicable sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance the Conversion Price shall be reduced to equal the higher of (i) the Base Conversion Price or (ii) $0.03 (the “Floor Price” – such Floor Price to be subject to adjustment in accordance with, but only in accordance with, Section 7(a)). Notwithstanding the foregoing, no adjustment will be made under this Section 7(b) in respect of an Exempt Issuance or in respect of any repricing (triggered or effected after the Original Issue Date) of any derivative securities which were outstanding as of the Original Issue Date. (Standard stock-split-type adjustments under Section 7(a) are not “repricings” for this purpose.) If the Corporation enters into a Variable Rate Transaction, despite the prohibition set forth in the Purchase Agreement, the Corporation shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised. The Corporation shall notify the Holders in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 7(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Corporation provides a Dilutive Issuance Notice pursuant to this Section 7(b), upon the occurrence of any Dilutive Issuance, the Holders are entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether a Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

 

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c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder’s Series Alpha Preferred Stock (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d) Pro Rata Distributions. During such time as any shares of Series Alpha Preferred Stock are outstanding, if the Corporation declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Series Alpha Preferred Stock, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Series Alpha Preferred Stock (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

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e) Fundamental Transaction. If, at any time while any shares of Series Alpha Preferred Stock are outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the Corporation (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Corporation, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Series Alpha Preferred Stock, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 6(d) on the conversion of this Series Alpha Preferred Stock), the number of shares of Common Stock of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Series Alpha Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 6(d) on the conversion of this Series Alpha Preferred Stock). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series Alpha Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new Series Alpha Preferred Stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such Series Alpha Preferred Stock into Alternate Consideration. The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents in accordance with the provisions of this Section 7(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Series Alpha Preferred Stock, deliver to the Holder in exchange for this Series Alpha Preferred Stock a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Series Alpha Preferred Stock which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Series Alpha Preferred Stock (without regard to any limitations on the conversion of this Series Alpha Preferred Stock) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Series Alpha Preferred Stock immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate of Designation referring to the “Corporation” shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of the obligations of the Corporation under this Certificate of Designation with the same effect as if such Successor Entity had been named as the Corporation herein.

 

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f) Calculations. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.

 

g) Notice to the Holders.

 

i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to each Holder by email a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Conversion by Holder. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation (and all of its Subsidiaries, taken as a whole), or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Series Alpha Preferred Stock, and shall cause to be delivered by email to each Holder at its last email address as it shall appear upon the stock books of the Corporation, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this Series Alpha Preferred Stock (or any part hereof) during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

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Section 8. Negative Covenants. As long as any shares of Series Alpha Preferred Stock are outstanding, unless the holders of at least 67% in Stated Value of the then outstanding shares of Series Alpha Preferred Stock shall have otherwise given prior written consent, the Corporation shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

a) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

 

b) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock, Common Stock Equivalents or Junior Securities, other than as to (i) shares issued upon exercise of the Warrants, or the Conversion Shares, in each case as permitted or required under the Transaction Documents, and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Corporation, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors for so long as the Series Alpha Preferred Stock is outstanding;

 

c) pay cash dividends or distributions on Junior Securities of the Corporation;

 

d) enter into any transaction with any Affiliate of the Corporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than a quorum otherwise required for board approval); or

 

e) enter into any agreement with respect to any of the foregoing.

 

Section 9. Miscellaneous.

 

a) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by e-mail attachment, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 2042 Corte Del Nogal, Carlsbad, California 92011, Attention: President, e-mail address mpoirier@qualigeninc.com, or such other e-mail address or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 9. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by e-mail attachment, or sent by a nationally recognized overnight courier service addressed to each Holder at the e-mail address or address of such Holder appearing on the books of the Corporation, or if no such e-mail address or address appears on the books of the Corporation, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via e-mail attachment at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the time of transmission, if such notice or communication is delivered via e-mail attachment at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

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b) Absolute Obligation. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages, accrued dividends and accrued interest, as applicable, on the shares of Series Alpha Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.

 

c) Lost or Mutilated Series Alpha Preferred Stock Certificate. If a Holder’s Series Alpha Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series Alpha Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.

 

d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. All legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Certificate of Designation (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). The Corporation and each Holder hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Certificate of Designation), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. The Corporation and each Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. The Corporation and each Holder hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If the Corporation or any Holder shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

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e) Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

 

f) Severability. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

 

g) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

h) Headings. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.

 

i) Status of Converted or Redeemed Series Alpha Preferred Stock. If any shares of Series Alpha Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of Series Alpha Preferred Stock and shall no longer be designated as Series Alpha Preferred Stock.

 

*********************

 

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RESOLVED, FURTHER, that the president and the secretary of the Corporation be and they hereby are authorized and directed to prepare and file a Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.

 

IN WITNESS WHEREOF, the undersigned have executed this Certificate of Designation of Preferences, Rights and Limitations this 20th day of May, 2020.

 

  /s/ Andrew Ritter     /s/ John Beck
Name: Andrew Ritter   Name: John Beck
Title: President   Title: Secretary

 

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ANNEX A

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder in order to Convert Shares of Series Alpha Preferred Stock)

 

The undersigned hereby elects to convert the number of shares of Series Alpha Preferred Stock indicated below into shares of common stock, par value $0.001 per share (the “Common Stock”), of Ritter Pharmaceuticals, Inc./Qualigen Therapeutics, Inc., a Delaware corporation (the “Corporation”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be reasonably required by the Corporation. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.

 

Conversion calculations:

 

Date to Effect Conversion: _____________________________________________

 

Number of shares of Series Alpha Preferred Stock owned prior to Conversion: _______________

 

Number of shares of Series Alpha Preferred Stock to be Converted: ________________________

 

Stated Value of shares of Series Alpha Preferred Stock to be Converted: ____________________

 

Number of shares of Common Stock to be Issued: ___________________________

 

Applicable Conversion Price:____________________________________________

 

Number of shares of Series Alpha Preferred Stock subsequent to Conversion: ________________

 

Address for Delivery: ______________________

or

DWAC Instructions:

Broker no: _________

Account no: ___________

 

  [HOLDER]
   
  By:
  Name:  
  Title:  

 

  22  

 

 

Exhibit 3.2

 

CERTIFICATE OF AMENDMENT

 

TO

 

THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

Ritter Pharmaceuticals, Inc. (the “Corporation”), a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify that:

 

  1. The name of the corporation is Ritter Pharmaceuticals, Inc.
     
  2. This Certificate of Amendment (the “Certificate of Amendment”) amends the provisions of the Corporation’s Certificate of Incorporation first filed with the Secretary of State on September 16, 2008, as amended (the “Certificate of Incorporation”).
     
  3. Article IV, Subsection A of the Certificate of Incorporation is hereby amended by adding thereto a new third paragraph to read in its entirety as follows:

 

“Effective 8:01 p.m., Eastern Time, on May 22, 2020 (the “Reverse Stock Split Effectiveness Time”) pursuant to the Delaware General Corporation Law and this Certificate of Amendment to the Certificate of Incorporation of the Corporation, each twenty-five (25) shares of Common Stock issued and outstanding immediately prior to the Reverse Stock Split Effectiveness Time shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of Common Stock (the “Reverse Stock Split”). No fractional shares shall be issued in connection with the Reverse Stock Split. All shares of Common Stock (including fractions thereof) issuable upon the Reverse Stock Split to a given stockholder of record shall be aggregated for purposes of determining whether the Reverse Stock Split would result in the issuance of a fractional share. If, after the aforementioned aggregation, the Reverse Stock Split would result in the issuance of a fraction of a share of Common Stock to a stockholder of record, the Corporation shall, in lieu of issuing any such fractional share, round up to the nearest whole number of shares in order bring the number of shares held by such stockholder of record up to the next whole number of shares of Common Stock. No certificates or book-entries representing fractional shares of Common Stock shall be issued in connection with the Reverse Stock Split. Each certificate or book-entry in favor of a stockholder of record that immediately prior to the Reverse Stock Split Effectiveness Time represented shares of Common Stock (“Old Certificates”), shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock represented by the Old Certificate shall have been combined, subject to the elimination of fractional share interests as described above.”

 

  4. This amendment was duly adopted in accordance with the provisions of Section 242 of the DGCL.
     
  5.

This Certificate of Amendment shall become effective at 8:01 p.m., Eastern Time, on May 22, 2020, and no sooner.

 

   

 

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its Chief Executive Officer on this 22nd day of May 2020.

 

  RITTER PHARMACEUTICALS, INC.
     
  By /s/ Andrew Ritter                  
  Name: Andrew Ritter
  Title: Chief Executive Officer

 

[Signature page to Certificate of Amendment to Ritter Certificate of Incorporation (Reverse Stock Split)]

 

   

 

 

 

Exhibit  3.3

 

CERTIFICATE OF MERGER OF

RPG28 MERGER SUB, INC.

(a Delaware corporation)

WITH AND INTO

QUALIGEN, INC.

(a Delaware corporation)

 

Qualigen, Inc., a Delaware corporation (“Qualigen”), which desires to merge with RPG28 Merger Sub, Inc. (“Merger Sub”), a Delaware corporation and wholly-owned subsidiary of Ritter Pharmaceuticals, Inc. (“Ritter”), pursuant to the provisions of Section 251 of the General Corporation Law of the State of Delaware (the “DGCL”), and in lieu of filing the agreement of merger required by Section 251 of the DGCL, does hereby certify as follows:

 

1.       The name and the state of incorporation of each of the constituent corporations (the “Constituent Corporations”) are as follows:

 

Name State of Incorporation
RPG28 Merger Sub, Inc. Delaware
Qualigen, Inc. Delaware

 

2.       An Agreement and Plan of Merger, dated as of January 15, 2020, and as amended on February 1, 2020 and March 26, 2020 (as so amended, the “Merger Agreement”), by and among Ritter Pharmaceuticals, Inc., a Delaware corporation, Merger Sub, and Qualigen has been approved, adopted, certified, executed and acknowledged by both of the Constituent Corporations in accordance with the requirements of Section 251 of the General Corporation Law of the State of Delaware and also by Ritter to the extent so required by law.

 

3.       Qualigen shall be the surviving corporation in the merger (the “Surviving Corporation”). The name of the Surviving Corporation shall be Qualigen, Inc.

 

4.       The Certificate of Incorporation of the Surviving Corporation shall be as set forth in Exhibit A attached hereto (the “Surviving Corporation Certificate of Incorporation”), until thereafter amended in accordance with the General Corporation Law of the State of Delaware.

 

5.       The executed Merger Agreement is on file at the office of the Surviving Corporation at 2042 Corte Del Nogal, Carlsbad, California 92011.

 

6.       A copy of the Merger Agreement will be furnished by the Surviving Corporation, on request and without cost, to any stockholder of either Constituent Corporation.

 

7.       This Certificate of Merger, and the merger provided for herein, shall become effective at 8:08 p.m. Eastern Time, on May 22, 2020.

 

In Witness Whereof, Qualigen, Inc. has caused this Certificate of Merger to be executed by the undersigned, its authorized officer, as of May 22, 2020.

 

  QUALIGEN, INC.
     
  By: /s/ Michael S. Poirier
  Name: Michael S. Poirier
  Title: President and Chief Executive Officer

 

 

 

 

Exhibit A

 

Amended and Restated Certificate of Incorporation of the Surviving Corporation

 

AMENDED AND RESTATED

 

CERTIFICATE OF INCORPORATION

 

OF

 

QUALIGEN, INC.

 

1.       The name of the Corporation is Qualigen, Inc.

 

2.       The Registered Office of the Corporation in the State of Delaware is located at 251 Little Falls Drive, in the City of Wilmington, County of New Castle Zip Code 19808. The name of the Registered Agent at such address upon whom process against this corporation may be served is Corporation Service Company.

 

3.       The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

 

4.       The total amount of stock this corporation is authorized to issue is 1,000 shares (number of authorized shares) with a par value of $0.01 per share.

 

 

 

 

Exhibit 3.4

 

RITTER PHARMACEUTICALS, INC.

 

CERTIFICATE OF AMENDMENT

TO

THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

Ritter Pharmaceuticals, Inc. (the “Corporation”), a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify that:

 

  1. The name of the corporation is Ritter Pharmaceuticals, Inc.
     
  2. This Certificate of Amendment (the “Certificate of Amendment”) amends the provisions of the Corporation’s Certificate of Incorporation first filed with the Secretary of State on September 16, 2008, as amended (the “Certificate of Incorporation”).
     
  3. Article I of the Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:

 

ARTICLE I
NAME

 

The name of the Corporation is Qualigen Therapeutics, Inc. (the “Corporation”).”

 

  4.

This amendment was duly adopted in accordance with the provisions of Section 242 of the DGCL.

     
  5. This Certificate of Amendment shall become effective at 8:10 p.m., Eastern Time, on May 22, 2020, and no sooner.

 

     

 

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its Chief Executive Officer on this 22nd day of May 2020.

 

  RITTER PHARMACEUTICALS, INC.
     
  By /s/ Andrew Ritter                  
  Name: Andrew Ritter
  Title: Chief Executive Officer

 

     

 

 

 

Exhibit 3.5

 

AMENDED AND RESTATED BYLAWS

 

OF

 

QUALIGEN THERAPEUTICS, INC.

 

ARTICLE 1
OFFICES

 

Section 1.01. Offices. The Corporation shall have a registered office (and address) within the State of Delaware and may also have offices at such other places both within and without the State of Delaware as the board of directors of the Corporation (the “Board of Directors”) may from time to time determine or the business of the Corporation may require.

 

Section 1.02. Books. The books of the Corporation may be kept within or without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

 

ARTICLE 2
MEETINGS OF STOCKHOLDERS

 

Section 2.01. Time and Place of Meetings. All meetings of the stockholders shall be held at such place, if any, either within or without the State of Delaware, on such date and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a designation by the Board of Directors).

 

Section 2.02. Annual Meetings. An annual meeting of the stockholders shall be held for the election of directors and to transact such other business as may properly be brought before the meeting. Any other proper business may be transacted at the annual meeting. The Board of Directors may postpone, reschedule or cancel any annual meeting of stockholders previously scheduled by the Board of Directors.

 

Section 2.03. Special Meetings. Special meetings of the stockholders for any purpose or purposes may be called by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer or the President of the Corporation, and may not be called by any other person. Business transacted at any special meeting of the stockholders shall be limited to the purposes stated in the notice. The Board of Directors may postpone, reschedule or cancel any special meeting of stockholders previously scheduled by the Board of Directors. Notwithstanding the foregoing, whenever holders of one or more classes or series of preferred stock shall have the right, voting separately as a class or series, to elect directors, such holders may call, pursuant to the terms of the resolution or resolutions adopted by the Board of Directors, special meetings of holders of such Preferred Stock.

 

Section 2.04. Notice of Meetings and Adjourned Meetings; Waivers of Notice.

 

(a) Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting) and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (“Delaware Law”), the Certificate of Incorporation or these Bylaws, such notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting. Except as otherwise provided herein or permitted by applicable law, notice of stockholders shall be in writing and delivered personally or mailed to the stockholders at their address appearing on the books of the Corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, notice of meetings may be given to stockholders by means of electronic transmission in accordance with applicable law.

 

  1  
 

 

(b) Any meeting of the stockholders, annual or special, may be adjourned from time to time to reconvene at the same or some other place, if any. Unless these Bylaws otherwise require, when a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time, place, if any, thereof and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting as of the record date for determining the stockholders entitled to notice of the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation.

 

(c) A written waiver of any such notice signed by the person entitled thereto, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends 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. Any stockholder so waiving notice of the meeting shall be bound by the proceedings of the meeting in all respects as if due notice thereof had been given. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

 

Section 2.05. Quorum. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, and subject to Delaware Law, the presence, in person or by proxy, of the holders of a majority of the outstanding capital stock of the Corporation entitled to vote at a meeting of stockholders shall constitute a quorum for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the chairman of the meeting may adjourn the meeting in the manner provided in Section 2.04, without notice other than announcement at the meeting, until a quorum shall be present or represented. A quorum once established, shall not be broken by the subsequent withdrawal of enough votes to leave less than a quorum. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Shares of stock of the Corporation belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation, or any subsidiary of the Corporation, to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

 

Section 2.06. Voting; Proxies.

 

(a) Unless otherwise provided in the Certificate of Incorporation and subject to Delaware Law, each stockholder shall be entitled to one vote for each outstanding share of capital stock of the Corporation held by such stockholder. Any share of capital stock of the Corporation held by the Corporation shall have no voting rights. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of the majority of the votes cast by the shares of capital stock of the Corporation present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, provided a quorum is present. Subject to the rights of the holders of any series of preferred stock to elect additional directors under specific circumstances, directors shall be elected by a plurality of the votes cast at a meeting of the stockholders by the holders of stock entitled to vote in the election of directors, provided a quorum is present.

 

(b) Each stockholder entitled to vote at a meeting of stockholders, or to express consent or dissent to a corporate action in writing without a meeting, may authorize another person or persons to act for such stockholder by proxy, appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized, or by proxy sent by cable, telegram or by any means of electronic communication permitted by law, which results in a writing from such stockholder or by his attorney, and delivered to the secretary of the meeting. No proxy shall be voted or acted upon after three (3) years from its date, unless said proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of the proxy or a new proxy bearing a later date.

 

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(c) Voting at meetings of stockholders need not be by written ballot. Votes may be cast by any stockholder entitled to vote in person or by his proxy. In determining the number of votes cast for or against a proposal or nominee, shares abstaining from voting on a matter (including elections) will not be treated as a vote cast, but will be counted for purposes of determining a quorum. A non-vote by a broker will be counted for purposes of determining a quorum but not for purposes of determining the number of votes cast.

 

Section 2.07. Inspector of Elections; Opening and Closing the Polls. The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at the meetings of stockholders and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders, the presiding officer of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by law. The presiding officer of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.

 

Section 2.08. Written Consent of Stockholders Without a Meeting. Any action to 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 or consents in writing, setting forth the action to be 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 and shall be delivered (by hand or by certified or registered mail, return receipt requested) to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent shall bear the date of signature of each stockholder who signs the consent, and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this Section 2.08, written consents signed by a sufficient number of holders to take action are delivered to the Corporation as aforesaid. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by applicable law, be given to those stockholders who have not consented in writing, and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation.

 

Section 2.09. Organization. At each meeting of stockholders, the Chairman of the Board, if one shall have been elected, or in the Chairman’s absence or if one shall not have been elected, the director designated by the vote of the majority of the directors present at such meeting, shall act as chairman of, and preside at, the meeting. The Secretary, or in the Secretary’s absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting, shall act as secretary of the meeting and keep the minutes thereof.

 

Section 2.10. Order of Business. The order of business at all meetings of stockholders shall be as determined by the chairman of the meeting.

 

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Section 2.11. Nomination of Directors. Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible to serve as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at an annual meeting of stockholders (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 2.11, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 2.11. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one hundred twentieth (120th) day in advance of the first anniversary of the preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to such anniversary date or delayed more than sixty (60) days after such anniversary date then to be timely such notice must be received by the Corporation notice not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of the new meeting date commence a new notice time period (or extend any notice time period).

 

Any stockholder notice delivered pursuant to this Section 2.11 shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Exchange Act; (ii) such person’s written consent to serve as a director if elected; (iii) a description of all direct and indirect compensation or other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder of record and beneficial owner or owners, if any, and their respective affiliates and associates, or other persons acting in concert therewith, on the one hand, and each proposed nominee and his or her respective affiliates and associates or other persons acting in concert therewith, on the other hand, including without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder of record making the nomination and any beneficial owner or owners, if any, or other person on whose behalf the nomination is made, or any affiliate or associate thereof or other person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and (iv) a completed and signed questionnaire, representation or agreement as may be required by the Corporation pursuant to Section 3.03 of Article 3 of these Bylaws, and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation’s books, of such stockholder, and of the beneficial owner, if any, on whose behalf the nomination is being made, (ii) the class and number of shares of the Corporation which are owned (beneficially and of record) by such stockholder and owned by the beneficial owner, if any, on whose behalf the nomination is being made, as of the date of the stockholder’s notice, and a representation that the stockholder will notify the Corporation in writing of the class and number of such shares owned of record and beneficially as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (iii) a description of any agreement, arrangement or understanding with respect to such nomination between or among the stockholder and any of its affiliates or associates, and any others (including their names) acting in concert with any of the foregoing, and a representation that the stockholder will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (iv) a description of any agreement, arrangement or understanding (including, regardless of the form of settlement, any derivative, long or short positions, profit interests, forwards, futures, swaps, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions and borrowed or loaned shares) that has been entered into as of the date of the proposing stockholder’s notice, by or on behalf of such stockholder with respect to the Corporation’s securities, or any other agreement, arrangement or understanding that has been made, the effect or intent of which is to create or mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder with respect to the Corporation’s securities, and a representation that the stockholder will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed; (v) a representation that the proposing stockholder is a holder of record of the shares of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, and (vi) a representation whether the proposing stockholder intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve the nomination and/or otherwise to solicit proxies from the stockholders in support of the nomination. For purposes of these Bylaws, a person shall be deemed to be acting in concert with another person if such person knowingly acts toward a common goal relating to the management, governance or control of the corporation in parallel with such other person where (A) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making process and (B) at least one additional factor suggests that persons intend to act in parallel, which additional factors may include attending meetings, conducting discussions or making or soliciting invitations to act in parallel.

 

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The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. No person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this bylaw. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 2.11, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 2.11.

 

Section 2.12. Notice of Business. At any meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Board of Directors or (b) solely with respect to annual meetings, by any stockholder of the Corporation who is a stockholder of record at the time of giving of the notice provided for in this Section 2.12, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 2.12. In addition, any proposal of business must be a proper matter for stockholder action. For business to be properly brought before a stockholder meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one hundred twentieth (120th) day in advance of the first anniversary of the preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to such anniversary date or delayed more than sixty (60) days after such anniversary date then to be timely such notice must be received by the Corporation no later than the later of the close of business on the seventieth (70th) day prior to the date of the meeting or the close of business on the tenth (10th) day following the day on which public announcement of the date of the meeting was made. In no event shall the public announcement of the new meeting date commence a new notice time period (or extend any notice time period). A stockholder’s notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business and of the beneficial owner, if any, on whose behalf the proposal is being made, (c) the class and number of shares of the Corporation which are owned (beneficially and of record) by such stockholder and owned by the beneficial owner, if any, on whose behalf the proposal is being made, as of the date of the stockholder’s notice, and a representation that the stockholder will notify the Corporation in writing of the class and number of such shares owned of record and beneficially as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (d) a description of any agreement, arrangement or understanding with respect to such nomination between or among the stockholder and any of its affiliates or associates, and any others (including their names) acting in concert with any of the foregoing, and a representation that the stockholder will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (e) a description of any agreement, arrangement or understanding (including, regardless of the form of settlement, any derivative, long or short positions, profit interests, forwards, futures, swaps, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions and borrowed or loaned shares) that has been entered into as of the date of the proposing stockholder’s notice, by or on behalf of such stockholder with respect to the Corporation’s securities, or any other agreement, arrangement or understanding that has been made, the effect or intent of which is to create or mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder with respect to the Corporation’s securities, and a representation that the stockholder will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (f) a representation that the proposing stockholder is a holder of record of the shares of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose the business specified in the notice, (g) a representation whether the proposing stockholder intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve the proposal and/or otherwise to solicit proxies from the stockholders in support of the proposal, (h) any material interest of the stockholder in such business, and (i) any other information relating to such stockholder and beneficial owner, if any, on whose behalf the proposal is being made, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the proposal and pursuant to and in accordance with Regulation 14A under the Securities Exchange Act of 1934. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at a stockholder meeting except in accordance with the procedures set forth in this Section 2.12. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of the Bylaws, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing, provisions of this Section 2.12, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, and the rules and regulations thereunder with respect to the matters set forth in this Section 2.12.

 

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Section 2.13. Proxy Rules. The foregoing notice requirements of Section 2.12 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with the applicable rules and regulations promulgated under Regulation 14A under the Securities Exchange Act of 1934 and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting.

 

Section 2.14. Effect of Noncompliance. Notwithstanding anything in these Bylaws to the contrary: (i) no nominations shall be made or business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Article 2, and (ii) unless otherwise required by law, if a stockholder intending to propose business or make nominations at an annual meeting pursuant to this Article 2 does not provide the information required under this Article 2 to the Corporation promptly following the later of the record date or the date notice of the record date is first publicly disclosed, or the proposing stockholder (or a qualified representative of the proposing stockholder) does not appear at the meeting to present the proposed business or nominations, such business or nominations shall not be considered, notwithstanding that proxies in respect of such business or nominations may have been received by the Corporation. The requirements of this Article 2 shall apply to any business or nominations to be brought before an annual meeting by a stockholder whether such business or nomination are to be included in the Corporation’s proxy statement pursuant to Rule 14a-8 of the Exchange Act or presented to stockholders by means of an independently financed proxy solicitation. The requirements of this Article 2 are included to provide the Corporation notice of a stockholder’s intention to bring business or nominations before an annual meeting and shall in no event be construed as imposing upon any stockholder the requirement to seek approval from the Corporation as a condition precedent to bringing any such business or making such nominations before an annual meeting.

 

ARTICLE 3
DIRECTORS

 

Section 3.01. General Powers. Except as otherwise provided by Delaware Law or the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors may adopt such rules and procedures, not inconsistent with the Certificate of Incorporation, these Bylaws, Delaware Law or other applicable law as it may deem proper for the conduct of its meetings and the management of the Corporation

 

Section 3.02. Number, Election and Term of Office. The Board of Directors shall consist of not less than three (3) nor more than eleven (11) directors, with the exact number of directors to be determined from time to time solely by resolution adopted by the affirmative vote of a majority of the entire Board of Directors. Except as otherwise provided in the Certificate of Incorporation, each director shall serve for a term ending on the date of the annual meeting of stockholders next following the annual meeting at which such director was elected. Notwithstanding the foregoing, each director shall hold office until such director’s successor shall have been duly elected and qualified or until such director’s earlier death, resignation or removal. Directors need not be stockholders.

 

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Section 3.03. Eligibility for Nomination as a Director. To be eligible to be a nominee for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 2.11 of Article 2 of these Bylaws or such period as the Board of Directors may specify) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which form of questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (a) is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed in writing to the Corporation or (ii) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (b) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, and (c) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

 

Section 3.04. Quorum and Manner of Acting. Unless the Certificate of Incorporation or these Bylaws require a greater number, the presence of a majority of the total number of directors shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. When a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Board of Directors may transact any business which might have been transacted at the original meeting. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat shall adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

 

Section 3.05. Time and Place of Meetings. The Board of Directors shall hold its meetings at such place, either within or without the State of Delaware, and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a determination by the Board of Directors).

 

Section 3.06. Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such place either within or without the State of Delaware, on such date and at such time as shall be specified in a notice thereof given as hereinafter provided in Section 3.08 herein or in a waiver of notice thereof signed by any director who chooses to waive the requirement of notice.

 

Section 3.07. Regular Meetings. After the place and time of regular meetings of the Board of Directors shall have been determined and notice thereof shall have been once given to each member of the Board of Directors, regular meetings may be held without further notice being given.

 

Section 3.08. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the Chief Executive Officer or the President and shall be called by the Chairman of the Board, the Chief Executive Officer, President or Secretary on the written request of three or more directors. Notice of special meetings of the Board of Directors shall be given to each director at least two days before the date of the meeting in such manner as is determined by the Board of Directors.

 

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Section 3.09. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or by applicable law, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matter: (a) approving or adopting, or recommending to the stockholders, any action or matter expressly required by Delaware Law to be submitted to the stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation. Unless the Board of Directors provides otherwise, at all meetings of such committee, a majority of the then authorized members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at the meeting at which there is a quorum shall be the act of the Committee. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. Except as otherwise provided in the Certificate of Incorporation, these Bylaws, or the resolution of the Board of Directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

 

Section 3.10. Action by Consent. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions, are filed with the minutes of proceedings of the Board of Directors or such committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

Section 3.11. Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or such committee, as the case may be, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

 

Section 3.12. Resignation. Any director may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the Secretary of the Corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

Section 3.13. Vacancies. Unless otherwise provided in the Certificate of Incorporation, vacancies on the Board of Directors resulting from death, resignation, removal or otherwise and newly created directorships resulting from any increase in the number of directors may be filled solely by the affirmative vote of a majority of the remaining directors then in office (although less than a quorum) or by the sole remaining director. Each director so elected shall hold office until the earlier of the expiration of the term of office of the director whom he or she has replaced, a successor is duly elected and qualified or the earlier of such director’s death, resignation or removal. If there are no directors in office, then an election of directors may be held in accordance with Delaware Law. Unless otherwise provided in the Certificate of Incorporation, when one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such future vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in the filling of the other vacancies.

 

Section 3.14. Removal. Except as may otherwise be provided by the DGCL, any director or the entire Board of Directors may be removed, with or without cause, at an annual meeting or at a special meeting called for that purpose, by the holders of a majority of the shares then entitled to vote at an election of directors.

 

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Section 3.15. Compensation. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have authority to fix the compensation of directors, including fees and reimbursement of expenses.

 

Section 3.16. Preferred Stock Directors. Notwithstanding anything else contained herein, whenever the holders of one or more classes or series of Preferred Stock shall have the right, voting separately as a class or series, to elect directors, the election, term of office, filing of vacancies, removal and other features of such directorships shall be governed by the terms of the resolutions applicable thereto adopted by the Board of Directors pursuant to the Certificate of Incorporation, and such directors so elected shall not be subject to the provisions of Sections 3.02, 3.12 and 3.13 of this Article 3 unless otherwise provided therein.

 

ARTICLE 4
OFFICERS

 

Section 4.01. Principal Officers. The officers of the Corporation shall be elected by the Board of Directors and shall include a Chief Executive Officer, a President, a Treasurer and a Secretary. The Board of Directors, in its discretion, may also elect a chairman (who must be a director), one or more vice chairmen (who must be directors) and one or more vice presidents, assistant treasurers, assistant secretaries and other officers. Any two or more offices may be held by the same person.

 

(a) Chief Executive Officer. The Chief Executive Officer shall, when present, preside at all meetings of the stockholders and, unless a Chairman of the Board of Directors has been elected and is present, shall preside at all meetings of the Board of Directors. He or she shall also have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are put into effect. The Chief Executive Officer, unless some other person is specifically authorized by resolution of the Board of Directors, shall sign all bonds, deeds, mortgages, leases, and other contracts of the Corporation. He or she shall have the power to hire and discharge agents and employees who are not Officers of the Corporation.

 

(b) President. The President shall be the chief operating and administrative officer of the Corporation. He or she shall have general responsibility for the management and control of the operations and administration of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of chief operating officer or which are delegated to him or her by the Board of Directors. Subject to the direction of the Board of Directors and the Chief Executive Officer, the President shall have power to sign all stock certificates, contracts, bonds, mortgages and other instruments of the Corporation and shall have general supervision and direction of all of the other officers (other than the Chief Executive Officer), employees and agents of the Corporation, subject in all cases to the orders and resolutions of the Board of Directors and to the direction of the Chief Executive Officer.

 

(c) Treasurer. The Treasurer shall supervise and be responsible for all the funds and securities of the Corporation, the deposit of all moneys and other valuables to the credit of the Corporation in depositories of the Corporation, borrowings and compliance with the provisions of all indentures, agreements and instruments governing such borrowings to which the Corporation is a party, the disbursement of funds of the Corporation and the investment of its funds, and in general shall perform all of the duties incident to the office of the Treasurer. The Treasurer shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Chief Executive Officer, President or as the Board of Directors may from time to time determine.

 

(d) Secretary. The powers and duties of the Secretary are: (i) to act as Secretary at all meetings of the Board of Directors, of the committees of the Board of Directors and of the stockholders and to record the proceedings of such meetings in a book or books to be kept for that purpose; (ii) to see that all notices required to be given by the Corporation are duly given and served; (iii) to act as custodian of the seal of the Corporation and affix the seal or cause it to be affixed to all certificates of stock of the Corporation and to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these Bylaws; (iv) to have charge of the books, records and papers of the Corporation and see that the reports, statements and other documents required by law to be kept and filed are properly kept and filed; and (v) to perform all of the duties incident to the office of Secretary. The Secretary shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Chief Executive Officer, President or as the Board of Directors may from time to time determine.

 

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Section 4.02. Term of Office; Vacancy; and Remuneration. Each officer shall hold office until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal. Any vacancy in any office shall be filled in such manner as the Board of Directors shall determine. The remuneration of all officers of the Corporation shall be fixed by the Board of Directors.

 

Section 4.03. Subordinate Officers. The Board of Directors may delegate to any principal officer the power to appoint and to remove any such subordinate officers, agents or employees.

 

Section 4.04. Removal. Except as otherwise permitted with respect to subordinate officers, any officer may be removed, with or without cause, at any time, by the majority vote of the members of the Board of Directors then in office.

 

Section 4.05. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors (or to a principal officer if the Board of Directors has delegated to such principal officer the power to appoint and to remove such officer) of such person’s resignation. The resignation of any officer shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

Section 4.06. Powers and Duties. The officers of the Corporation shall have such powers and perform such duties incident to each of their respective offices and such other duties as may from time to time be conferred upon or assigned to them by the Board of Directors.

 

ARTICLE 5
CAPITAL STOCK

 

Section 5.01. Certificates for Stock; Uncertificated Shares. The shares of the Corporation shall be represented by certificates, provided that 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 its stock shall be uncertificated shares that may be evidenced by a book entry system maintained by the registrar of such stock. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Except as otherwise provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of shares represented by certificates of the same class and series shall be identical. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, or the President or Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an assistant Secretary of such Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate 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 such person were such officer, transfer agent or registrar at the date of issue. A Corporation shall not have power to issue a certificate in bearer form.

 

Section 5.02. Transfer of Shares. Shares of the stock of the Corporation may be transferred on the record of stockholders of the Corporation by the holder thereof or by such holder’s duly authorized attorney upon surrender of a certificate therefor properly endorsed or upon receipt of proper transfer instructions from the registered holder of uncertificated shares or by such holder’s duly authorized attorney and upon compliance with appropriate procedures for transferring shares in uncertificated form, unless waived by the Corporation.

 

Section 5.03. Authority for Additional Rules Regarding Transfer. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration of certificated or uncertificated shares of the stock of the Corporation, as well as for the issuance of new certificates in lieu of those which may be lost or destroyed, and may require of any stockholder requesting replacement of lost or destroyed certificates, bond in such amount and in such form as they may deem expedient to indemnify the Corporation, and/or the transfer agents, and/or the registrars of its stock against any claims arising in connection therewith.

 

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Section 5.04. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

 

ARTICLE 6
INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

 

Section 6.01. Right to Indemnification. 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 (a “Covered 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 he or she, or a person for whom he or she 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, 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 Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 6.03, the Corporation shall be required to indemnify a Covered Person in connection with a proceeding (or part thereof) commenced by such Covered Person only if the commencement of such proceeding (or part thereof) by the Covered Person was authorized in the specific case by the Board of Directors of the Corporation.

 

Section 6.02. Prepayment of Expenses. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by a Covered 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 Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article 6 or otherwise.

 

Section 6.03. Nonexclusivity of Rights. The rights conferred on any Covered Person by this Article 6 shall not be exclusive of any other rights which such Covered Person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

 

Section 6.04. Other Sources. The Corporation’s obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such other Corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.

 

Section 6.05. Amendment or Repeal. Any right to indemnification or to advancement of expenses of any Covered Person arising hereunder shall not be eliminated or impaired by an amendment to or repeal of these Bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought.

 

Section 6.06. Other Indemnification and Advancement of Expenses. This Article 6 shall not limit the right of the Corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.

 

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ARTICLE 7
GENERAL PROVISIONS

 

Section 7.01. Fixing the Record Date.

 

(a) 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 (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes the record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of 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 that the Board of Directors may fix a new record date for the determination of stockholders entitled to vote at the adjourned meeting and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for the determination of stockholders entitled to vote therewith at the adjourned meeting.

 

(b) 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 (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

Section 7.02. Dividends. Subject to limitations contained in Delaware Law and the Certificate of Incorporation, the Board of Directors may declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, in property or in shares of the capital stock of the Corporation.

 

Section 7.03. Year. The fiscal year of the Corporation shall commence on January 1 and end on December 31 of each year. The fiscal year of the Corporation may be changed by the Board of Directors.

 

Section 7.04. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced.

 

Section 7.05. Voting of Stock Owned by the Corporation. The Board of Directors may authorize any person, on behalf of the Corporation, to attend, vote at and grant proxies to be used at any meeting of stockholders of any Corporation (except this Corporation) in which the Corporation may hold stock.

 

Section 7.06. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time.

 

Section 7.07. Amendments. These Bylaws or any of them, may be altered, amended or repealed, or new Bylaws may be made, by the stockholders entitled to vote thereon at any annual or special meeting thereof or by the Board of Directors. Unless a higher percentage is required by the Certificate of Incorporation as to any matter which is the subject of these Bylaws, all such amendments must be approved by the affirmative vote of the holders of the majority of the total voting power of all outstanding securities of the Corporation then entitled to vote generally in the election of directors, voting together as a single class or by a majority of the Board of Directors.

 

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Exhibit 3.6

 

qualigen, inc.

 

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES ALPHA PREFERRED STOCK

 

PURSUANT TO SECTION 151 OF THE

Delaware GENERAL CORPORATION LAW

 

The undersigned, Michael Poirier and Shishir Sinha, do hereby certify that:

 

1. They are the President and Secretary, respectively, of Qualigen, Inc., a Delaware corporation (the “Corporation”).

 

2. The Corporation is authorized to issue 20,007,000 shares of Preferred Stock, 20,000,000 of which have been issued.

 

3. The following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors”):

 

WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as Preferred Stock, consisting of 20,007,000 shares, $0.01 par value per share, issuable from time to time in one or more series;

 

WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of Preferred Stock and the number of shares constituting any series and the designation thereof, of any of them; and

 

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the Preferred Stock, which shall consist of 7,000 shares of the Preferred Stock which the Corporation has the authority to issue, as follows:

 

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of Preferred Stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of Preferred Stock as follows:

 

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TERMS OF SERIES ALPHA PREFERRED STOCK

 

Section 1. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

 

Alternate Consideration” shall have the meaning set forth in Section 7(e).

 

Bankruptcy Event” means any of the following events: (a) the Corporation or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary thereof, (b) there is commenced against the Corporation or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Corporation or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Corporation or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, or (g) the Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

Base Conversion Price” shall have the meaning set forth in Section 7(b).

 

Beneficial Ownership Limitation” shall have the meaning set forth in Section 6(d).

 

Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

Buy-In” shall have the meaning set forth in Section 6(c)(iv).

 

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Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 39% of the voting securities of the Corporation (other than by means of conversion or exercise of Series Alpha Preferred Stock and the Securities issued together with the Series Alpha Preferred Stock), other than the Merger, (b) the Corporation merges into or consolidates with any other Person, or any Person merges into or consolidates with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately prior to such transaction own less than 61% of the aggregate voting power of the Corporation or the successor entity of such transaction, other than the Merger, (c) the Corporation sells or transfers all or substantially all of its (and all of its Subsidiaries, taken as a whole) assets to another Person and the stockholders of the Corporation immediately prior to such transaction own less than 61% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a one year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the Original Issue Date), or (e) the execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

 

Commission” means the United States Securities and Exchange Commission.

 

Common Stock” means the Corporation’s common stock, par value $0.01 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.

 

Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

Conversion Amount” means the sum of the Stated Value at issue.

 

Conversion Date” shall have the meaning set forth in Section 6(a).

 

Conversion Price” shall have the meaning set forth in Section 6(b).

 

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Conversion Shares” means, collectively, the shares of Common Stock issued and issuable upon conversion of the shares of Series Alpha Preferred Stock in accordance with the terms hereof.

 

Dilutive Issuance” shall have the meaning set forth in Section 7(b).

 

Dilutive Issuance Notice” shall have the meaning set forth in Section 7(b).

 

Effective Date” means the earliest of the date on which a registration statement under the Securities Act registering the Conversion Shares for issuance to, or resale by, the Holder has been declared effective by the Commission, or effectuation of the Merger if the Merger has been preceded by the Commission declaring effective the Form S-4 registration statement filed by Ritter Pharmaceuticals, Inc. on February 4, 2020 as thereafter amended.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Corporation pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Corporation or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any securities issued pursuant to the Purchase Agreement and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of the Purchase Agreement, provided that such securities have not been amended since the date of the Purchase Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of any such securities or to extend the term of such securities (it being expressly understood that decreases in the exercise price of warrants (which were outstanding on the date of the Purchase Agreement) pursuant to the operation of ratchet or other antidilution provisions thereof which provisions have not been amended after the date of the Purchase Agreement do not constitute an “amendment since the date of the Purchase Agreement”), (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Corporation, and provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Corporation and shall provide to the Corporation additional benefits in addition to the investment of funds, but shall not include a transaction in which the Corporation is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities. Issuances of securities in the Merger or assumed by Ritter Pharmaceuticals, Inc. in connection with the Merger, and securities issuable or thereafter issued by Ritter Pharmaceuticals, Inc. upon the conversion, exercise or exchange thereof, are also Exempt Issuances; provided that such securities have not been amended since the date of the Purchase Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities (it being expressly understood that decreases in the exercise price of warrants (which were outstanding on the date of the Purchase Agreement) pursuant to the operation of ratchet or other antidilution provisions thereof which provisions have not been amended after the date of the Purchase Agreement do not constitute an “amendment since the date of the Purchase Agreement”).

 

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Fundamental Transaction” shall have the meaning set forth in Section 7(e).

 

GAAP” means United States generally accepted accounting principles.

 

Holder” shall have the meaning given such term in Section 2.

 

Junior Securities” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior or pari passu to the Series Alpha Preferred Stock in dividend rights or liquidation preference.

 

Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

Liquidation” shall have the meaning set forth in Section 5.

 

Merger” means the proposed merger of the Corporation with a subsidiary of Ritter Pharmaceuticals, Inc. pursuant to that certain Agreement and Plan of Merger dated January 15, 2020, as thereafter amended.

 

New York Courts” shall have the meaning set forth in Section 11(d).

 

Notice of Conversion” shall have the meaning set forth in Section 6(a).

 

Original Issue Date” means the date of the first issuance of any shares of the Series Alpha Preferred Stock regardless of the number of transfers of any particular shares of Series Alpha Preferred Stock and regardless of the number of certificates which may be issued to evidence such Series Alpha Preferred Stock.

 

Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

Purchase Agreement” means the Securities Purchase Agreement, dated as of the Original Issue Date, among the Corporation and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

 

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Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

Securities” means the Series Alpha Preferred Stock and the Conversion Shares.

 

Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

Series Alpha Preferred Stock” shall have the meaning set forth in Section 2.

 

Share Delivery Date” shall have the meaning set forth in Section 6(c).

 

Stated Value” shall have the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.

 

Subsidiary” means any subsidiary of the Corporation as set forth on Schedule 3.1(a) of the Purchase Agreement and shall, where applicable, also include any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.

Successor Entity” shall have the meaning set forth in Section 7(e).

 

Trading Day” means a day on which the principal Trading Market is open for business.

 

Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange (or any successors to any of the foregoing).

 

Transaction Documents” means this Certificate of Designation, the Purchase Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated pursuant to the Purchase Agreement.

 

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Transfer Agent” means the current transfer agent of the Corporation, and any successor transfer agent of the Corporation.

 

Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.17(b) of the Purchase Agreement.

 

VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Corporation, the fees and expenses of which shall be paid by the Corporation.

 

Warrants” shall have the meaning ascribed to such term in Section 1.1 of the Purchase Agreement.

 

Warrant Shares” shall have the meaning ascribed to such term in Section 1.1 of the Purchase Agreement.

 

Section 2. Designation, Amount and Par Value. This series of Preferred Stock of the Corporation shall be designated as its Series Alpha Preferred Stock (the “Series Alpha Preferred Stock”) and the number of shares so designated shall be 7,000 (which shall not be subject to increase without the written consent of the holders of a majority of the then outstanding shares of the Series Alpha Preferred Stock (each, a “Holder” and collectively, the “Holders”)). Each share of Series Alpha Preferred Stock shall have a par value of $0.01 per share and a stated value equal to $1,000, subject to increase set forth in Section 3 below (the “Stated Value”).

 

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Section 3. Dividends.

 

a) As If Common Stock. If the Corporation, at any time while any shares of Series Alpha Preferred Stock are outstanding, pays a dividend or distribution (other than one payable in shares of Common Stock or in Common Stock Equivalents) on shares of Common Stock, Holders as of the record date for such dividend or distribution on Common Stock shall be entitled to receive at the same time as such payment on Common Stock, and the Corporation shall pay, a dividend or distribution on each share of Series Alpha Preferred Stock equal to the per-share amount of the dividend or distribution on Common Stock multiplied by the number of shares of Common Stock into which such share of Series Alpha Preferred Stock was (on such record date) convertible (without regard to any limitations on conversion, including without limitation the Beneficial Ownership Limitation). Such dividend or distribution on Series Alpha Preferred Stock shall be paid in the same form as the dividend or distribution on Common Stock. The Series Alpha Preferred Stock shall not otherwise have any rights to dividends. The fair market value of any dividend or distribution to which a share of Series Alpha Preferred Stock has become entitled pursuant to this Section but which has not yet been paid shall, until such dividend or distribution has been paid on such share of Series Alpha Preferred Stock, be added to the Stated Value of such share of Series Alpha Preferred Stock.

 

b) Other Securities. So long as any Series Alpha Preferred Stock shall remain outstanding, neither the Corporation nor any Subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities or shares pari passu with the Series Alpha Preferred Stock, in each case except as expressly permitted by Section 8(b).

 

Section 4. Voting Rights. The Series Alpha Preferred Stock shall have the right to vote, together with the Common Stock as if all part of a single class and single series, as to all matters on which the Common Stock is entitled to vote, and each then-outstanding share of Series Alpha Preferred Stock shall as to each respective matter to be so voted upon be entitled to a number of votes equal to the number of shares of Common Stock into which such share of Series Alpha Preferred Stock is, as of the record date for determination of stockholders entitled to vote as to such matter (taking into account for such purposes the Beneficial Ownership Limitation as then in effect). Holders shall be entitled to notice of all meetings of Corporation stockholders on the same basis as holders of Common Stock.

 

Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value, plus any fees or liquidated damages then due and owing thereon under this Certificate of Designation, for each share of Series Alpha Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

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Section 6. Conversion.

 

a) Conversions at Option of Holder. Each share of Series Alpha Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth in Section 6(d)) determined by dividing the Stated Value of such share of Series Alpha Preferred Stock by the Conversion Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”). Each Notice of Conversion shall specify the number of shares of Series Alpha Preferred Stock to be converted, the number of shares of Series Alpha Preferred Stock owned prior to the conversion at issue, the number of shares of Series Alpha Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by email such Notice of Conversion to the Corporation (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of shares of Series Alpha Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing the shares of Series Alpha Preferred Stock to the Corporation unless all of the shares of Series Alpha Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Series Alpha Preferred Stock promptly following the Conversion Date at issue. Shares of Series Alpha Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued.

 

b) Conversion Price. The conversion price for the Series Alpha Preferred Stock shall equal $0.218, subject to adjustment herein (the “Conversion Price”).

 

c) Mechanics of Conversion.

 

i. Delivery of Conversion Shares Upon Conversion. Not later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) after each Conversion Date (the “Share Delivery Date”), the Corporation shall deliver, or cause to be delivered, to the converting Holder the number of Conversion Shares being acquired upon the conversion of the Series Alpha Preferred Stock, which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement). On or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, the Corporation shall deliver the Conversion Shares required to be delivered by the Corporation under this Section 6 electronically through the Depository Trust Company or another established clearing corporation performing similar functions. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Corporation’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Conversion.

 

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ii. Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the Corporation shall promptly return to the Holder any original Series Alpha Preferred Stock certificate delivered to the Corporation and the Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Notice of Conversion.

 

iii. Obligation Absolute; Partial Liquidated Damages. The Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Series Alpha Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. In the event a Holder shall elect to convert any or all of the Stated Value of its Series Alpha Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Series Alpha Preferred Stock of such Holder shall have been sought and obtained, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Series Alpha Preferred Stock which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall issue Conversion Shares and, if applicable, cash, upon a properly noticed conversion. If the Corporation fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) by the Share Delivery Date applicable to such conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of Stated Value of Series Alpha Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day on the third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after such damages begin to accrue) for each Trading Day after the Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare a Triggering Event pursuant to Section 10 hereof for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

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iv. Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the Share Delivery Date pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Corporation shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which (x) such Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Series Alpha Preferred Stock equal to the number of shares of Series Alpha Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded) or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Series Alpha Preferred Stock with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver the Conversion Shares upon conversion of the shares of Series Alpha Preferred Stock as required pursuant to the terms hereof.

 

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v. Reservation of Shares Issuable Upon Conversion. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Series Alpha Preferred Stock as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Series Alpha Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then outstanding shares of Series Alpha Preferred Stock hereunder. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

 

vi. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series Alpha Preferred Stock. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share. Notwithstanding anything to the contrary contained herein, but consistent with the provisions of this subsection with respect to fractional Conversion Shares, nothing shall prevent any Holder from converting fractional shares of Series Alpha Preferred Stock.

 

vii. Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Series Alpha Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of such shares of Series Alpha Preferred Stock and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.

 

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d) Beneficial Ownership Limitation. The Corporation shall not effect any conversion of the Series Alpha Preferred Stock, and a Holder shall not have the right to convert any portion of the Series Alpha Preferred Stock, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting as a group together with such Holder or any of such Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of the Series Alpha Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Stated Value of Series Alpha Preferred Stock beneficially owned by such Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, the Series Alpha Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 6(d) applies, the determination of whether the Series Alpha Preferred Stock is convertible (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and of how many shares of Series Alpha Preferred Stock are convertible shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination of whether the shares of Series Alpha Preferred Stock may be converted (in relation to other securities owned by such Holder together with any Affiliates and Attribution Parties) and how many shares of the Series Alpha Preferred Stock are convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within one Trading Day confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Series Alpha Preferred Stock, by such Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Series Alpha Preferred Stock held by the applicable Holder. A Holder, upon notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d) applicable to its Series Alpha Preferred Stock provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Series Alpha Preferred Stock held by the Holder and the provisions of this Section 6(d) shall continue to apply. Any such increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Series Alpha Preferred Stock.

 

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Section 7. Certain Adjustments.

 

a) Stock Dividends and Stock Splits. If the Corporation, at any time while any shares of Series Alpha Preferred Stock are outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, this Series Alpha Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b) Subsequent Equity Sales. If, at any time while any shares of Series Alpha Preferred Stock are outstanding, the Corporation or any Subsidiary, as applicable sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance the Conversion Price shall be reduced to equal the higher of (i) the Base Conversion Price or (ii) $0.21 (the “Floor Price” – such Floor Price to be subject to adjustment in accordance with, but only in accordance with, Section 7(a)). Notwithstanding the foregoing, no adjustment will be made under this Section 7(b) in respect of an Exempt Issuance or in respect of any repricing (triggered or effected after the Original Issue Date) of any derivative securities which were outstanding as of the Original Issue Date. (Standard stock-split-type adjustments under Section 7(a) are not “repricings” for this purpose.) If the Corporation enters into a Variable Rate Transaction, despite the prohibition set forth in the Purchase Agreement, the Corporation shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised. The Corporation shall notify the Holders in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 7(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Corporation provides a Dilutive Issuance Notice pursuant to this Section 7(b), upon the occurrence of any Dilutive Issuance, the Holders are entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether a Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

 

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c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder’s Series Alpha Preferred Stock (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d) Pro Rata Distributions. During such time as any shares of Series Alpha Preferred Stock are outstanding, if the Corporation declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Series Alpha Preferred Stock, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Series Alpha Preferred Stock (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

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e) Fundamental Transaction. The portion of this Section 7(e) following this underscored forepart shall not apply to the Merger. In the event of the Merger, all outstanding shares of Series Alpha Preferred Stock shall be exchanged as specified in the Merger documents. If, at any time while any shares of Series Alpha Preferred Stock are outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the Corporation (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Corporation, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Series Alpha Preferred Stock, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 6(d) on the conversion of this Series Alpha Preferred Stock), the number of shares of Common Stock of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Series Alpha Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 6(d) on the conversion of this Series Alpha Preferred Stock). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series Alpha Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new Series Alpha Preferred Stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such Series Alpha Preferred Stock into Alternate Consideration. The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 7(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Series Alpha Preferred Stock, deliver to the Holder in exchange for this Series Alpha Preferred Stock a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Series Alpha Preferred Stock which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Series Alpha Preferred Stock (without regard to any limitations on the conversion of this Series Alpha Preferred Stock) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Series Alpha Preferred Stock immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate of Designation referring to the “Corporation” shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of the obligations of the Corporation under this Certificate of Designation with the same effect as if such Successor Entity had been named as the Corporation herein.

 

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f) Calculations. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.

 

g) Notice to the Holders.

 

i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to each Holder by email a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

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ii. Notice to Allow Conversion by Holder. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation (and all of its Subsidiaries, taken as a whole), or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Series Alpha Preferred Stock, and shall cause to be delivered by email to each Holder at its last email address as it shall appear upon the stock books of the Corporation, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this Series Alpha Preferred Stock (or any part hereof) during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

Section 8. Negative Covenants. As long as any shares of Series Alpha Preferred Stock are outstanding, unless the holders of at least 67% in Stated Value of the then outstanding shares of Series Alpha Preferred Stock shall have otherwise given prior written consent, the Corporation shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

a) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

 

b) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock, Common Stock Equivalents or Junior Securities, other than as to (i) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Corporation, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors for so long as the Series Alpha Preferred Stock is outstanding;

 

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c) pay cash dividends or distributions on Junior Securities of the Corporation;

 

d) enter into any transaction with any Affiliate of the Corporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than a quorum otherwise required for board approval); or

 

e) enter into any agreement with respect to any of the foregoing.

 

Section 9. Miscellaneous.

 

a) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by e-mail attachment, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 2042 Corte Del Nogal, Carlsbad, California 92011, Attention: President, e-mail address mpoirier@qualigeninc.com, or such other e-mail address or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 9. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by e-mail attachment, or sent by a nationally recognized overnight courier service addressed to each Holder at the e-mail address or address of such Holder appearing on the books of the Corporation, or if no such e-mail address or address appears on the books of the Corporation, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via e-mail attachment at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the time of transmission, if such notice or communication is delivered via e-mail attachment at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

b) Absolute Obligation. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages, accrued dividends and accrued interest, as applicable, on the shares of Series Alpha Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.

 

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c) Lost or Mutilated Series Alpha Preferred Stock Certificate. If a Holder’s Series Alpha Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series Alpha Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.

 

d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. All legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Certificate of Designation (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). The Corporation and each Holder hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Certificate of Designation), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. The Corporation and each Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. The Corporation and each Holder hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If the Corporation or any Holder shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

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e) Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

 

f) Severability. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

 

g) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

h) Headings. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.

 

i) Status of Converted or Redeemed Series Alpha Preferred Stock. If any shares of Series Alpha Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of Series Alpha Preferred Stock and shall no longer be designated as Series Alpha Preferred Stock.

 

*********************

 

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RESOLVED, FURTHER, that the president and the secretary of the Corporation be and they hereby are authorized and directed to prepare and file a Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.

 

IN WITNESS WHEREOF, the undersigned have executed this Certificate of Designation of Preferences, Rights and Limitations this 20th day of May, 2020.

 

  /s/ Michael S. Poirier     /s/ Shishir Sinha
Name: Michael Poirier   Name: Shishir Sinha
Title: President   Title: Secretary

 

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ANNEX A

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder in order to Convert Shares of Series Alpha Preferred Stock)

 

The undersigned hereby elects to convert the number of shares of Series Alpha Preferred Stock indicated below into shares of common stock, par value $0.01 per share (the “Common Stock”), of Qualigen, Inc., a Delaware corporation (the “Corporation”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation in accordance with the Purchase Agreement. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.

 

Conversion calculations:

 

Date to Effect Conversion: _____________________________________________

 

Number of shares of Series Alpha Preferred Stock owned prior to Conversion: _______________

 

Number of shares of Series Alpha Preferred Stock to be Converted: ________________________

 

Stated Value of shares of Series Alpha Preferred Stock to be Converted: ____________________

 

Number of shares of Common Stock to be Issued: ___________________________

 

Applicable Conversion Price:____________________________________________

 

Number of shares of Series Alpha Preferred Stock subsequent to Conversion: ________________

 

Address for Delivery: ______________________

or

DWAC Instructions:

Broker no: _________

Account no: ___________

 

  [HOLDER]
     
  By:                    
  Name:  
  Title:  

 

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Exhibit 10.1

 

EXECUTION VERSION

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into effective as of February 1, 2017 (the “Effective Date”), by and between Qualigen, Inc., a Delaware corporation with its principal office at 2042 Corte Del Nogal, Carlsbad, CA 92011 USA (the “Company”), and Michael Poirier (the “Executive”), whose address is 1743 Wolverine Way, Vista, CA 92084.

 

W I T N E S S E T H:

 

WHEREAS, the Company has engaged the Executive as its President and Chief Executive Officer and desires to continue to obtain the benefits of the Executive’s knowledge, skill and ability in connection with managing the operations and finances of the Company and to continue to employ the Executive as its President and Chief Executive Officer on the terms and conditions hereinafter set forth; and

 

WHEREAS, the Executive desires to provide his services to the Company and to accept employment by the Company on the terms and conditions set forth in this Agreement, which supersedes all prior agreements, whether written or oral, including those under any previous employment agreement between the Executive and the Company;

 

NOW, THEREFORE, in consideration of the mutual promises set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1. Employment and Duties; Term.

 

(a) Subject to the terms and conditions hereinafter set forth, the Company hereby employs the Executive as its President and Chief Executive Officer, and he shall have the duties and responsibilities customarily associated with such positions, including without limitation general responsibility for the management of the Company’s operations and finances. The Executive shall report to the Company’s Board of Directors (the “Board”). The Executive shall also perform such other duties and responsibilities as may be determined and directed by the Board, as long as such duties and responsibilities are generally consistent with those of a President and Chief Executive Officer.

 

(b) The Executive shall serve as a director of the Company or any of its subsidiaries, if validly elected or appointed, and in such executive capacity or capacities with respect to any affiliate of the Company to which he may be elected or appointed, provided that such duties are consistent with those of a company’s president and chief executive officer. The Executive shall receive no additional compensation for services rendered pursuant to this Section 1(b).

 

(c) The Executive’s job location shall be in San Diego County, California, but this provision shall not preclude the Company from moving its headquarters to a location other than in San Diego County, California. Any such relocation by the Company or failure by the Executive to relocate shall not breach the terms of this Agreement.

 

 
 

 

(d) Unless terminated earlier pursuant to any of the provisions of Section 5 of this Agreement, this Agreement shall have an initial term (the “Initial Term”) of three (3) years, commencing as of February 1, 2017 and expiring on January 31, 2020. Following completion of the Initial Term, this Agreement shall automatically renew thereafter on a year-to-year basis for successive one-year periods (i) unless and until terminated by either party pursuant to any of the provisions of Section 5, or (ii) unless the Company or the Executive delivers to the other party written notice of non- renewal at least 90 days prior to the expiration of the Initial Term or any subsequent one-year term (in which event this Agreement shall then terminate upon the expiration of the Initial Term or such one-year extended term, as applicable). The Initial Term and the one-year extensions are collectively referred to herein as the “Term.”

 

2. Executive’s Performance.

 

(a) The Executive hereby accepts the employment contemplated by this Agreement. During the Term, the Executive shall devote substantially all of his business time to the performance of his duties under this Agreement, and he shall perform such duties diligently, in good faith and in a manner consistent with the best interests of the Company and applicable laws. During the Term, the Executive will not, without the prior written approval of the Board, serve or act as a shareholder (except for passive holdings of not more than one percent (1%) of the other entity’s outstanding stock), employee, agent, consultant, officer, director, partner, member, representative, lender or owner of any other business entity, nor (if it would require more than an insubstantial amount of business time or attention) of any non-profit entity.

 

(b) The Executive shall comply with all applicable governmental laws, rules and regulations and with the Company’s policies applicable to all employees of the Company.

 

3. Compensation and Other Benefits.

 

(a) Salary. For his services to the Company during the Term, the Company shall pay the Executive an annual salary (“Salary”) at the rate of $244,455 per year during the period from February 1 through June 30, 2017, and commencing as of July 1, 2017, at the rate of $315,000 per year. The Company shall make all Salary payments to the Executive less required taxes and other withholdings and otherwise in accordance with the Company’s general payroll practices and policies, provided that the Company shall pay installments of Salary to the Executive not less frequently than bi- weekly. The Executive’s Salary shall be reviewed at least annually by the Board or any compensation committee thereof and (i) may be increased from time to time in the sole discretion of the Board or any such compensation committee, and (ii) may otherwise be adjusted by mutual written agreement of the Company and the Executive.

 

(b) Potential Bonus Payments Based on Receipt of CLIA Waivers by Application.

 

(i) Subject to the following terms of this Section 3(b), the Company shall pay the Executive a cash bonus in the amount of $60,000 per assay for each of the first five (5) assays for which the Company, after the Effective Date, receives from the Food and Drug Administration (“FDA”) a Clinical Laboratory Improvement Amendment (or “CLIA”) waiver for use of the Company’s FastPack 2.0 System (each such bonus payment payable under this Section 3(b) being referred to herein as a “CLIA Waiver Bonus Payment”). Each of the Company and the Executive acknowledges that the Company either is seeking or presently intends to seek by application to the FDA a CLIA waiver for each of the following assays: (A) Vitamin D; (B) prostate-specific antigen (“PSA”); (C) testosterone; (D) thyroid-stimulating hormone (“TSH”); and (E) free thyroxine (“FT4”); provided, however, that the Executive further acknowledges that there is no guaranty that the Company will in fact apply for any such waivers, and that the assays for which the Company may apply for a CLIA waiver, if any, and the timing of such applications, are subject to change from time to time in the discretion of the Company. The maximum aggregate CLIA Waiver Bonus Payments that the Executive is eligible to receive under this Section 3(b) is $300,000.

 

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(ii) The Company shall pay any CLIA Waiver Bonus Payment due to the Executive under this Section 3(b), less any required taxes and other applicable withholdings, not later than ninety (90) days following the Company’s receipt of the applicable CLIA waiver for the specific assay. The rights of the Executive (if any) to receive a CLIA Waiver Bonus Payment in respect of a waiver received by the Company after the termination or expiration of this Agreement and the Executive’s employment hereunder shall be as set forth in the applicable provisions of Section 5.

 

(c) Potential Bonus Payments Upon the Occurrence of Liquidity Events.

 

(i) Subject to the terms and conditions set forth in this Section 3(c), upon and concurrent with the closing of any “Liquidity Event” (as defined below) involving the Company, the Company shall pay to the Executive a lump-sum cash bonus (a “Liquidity Event Bonus”) equal to two and one-half percent (2.5%) of the “Net Liquidity Event Proceeds” (as defined below) received in connection with the subject transaction. The Company shall pay any Liquidity Event Bonus due to the Executive under this Section 3(c) concurrently with the closing of the Liquidity Event.

 

(ii) For purposes of this Section 3(c), the following terms shall have the following meanings:

 

(A) “Liquidity Event” shall mean the occurrence of any of the following listed transactions involving the Company in which (1) the consideration paid consists of cash, marketable securities (which are debt or equity securities that are listed for trading on a national or international securities exchange and for which there is a reasonable public float to allow for even trading), or a combination of cash and marketable securities, and (2) such consideration is paid or distributed to holders of the Company’s outstanding capital stock as sale or merger consideration, dividends, distributions, liquidation preferences or distributions, repurchase or redemption proceeds, or on any other basis:

 

(i) the sale for value of all, substantially all or an otherwise material portion of the Company’s assets outside of the ordinary course of business;

 

(ii) any merger or consolidation of the Company with or into, or any other acquisition of the Company by, another corporation, partnership, limited liability company or other entity or person (excluding for this purpose, however, any merger or consolidation of the Company with or into another corporation or entity if the stockholders of the Company prior to the merger, consolidation or other transaction own 50% or more of the voting equity securities of the surviving entity immediately after the consummation of the merger, consolidation or other transaction); and

 

(iii) any recapitalization transaction involving the Company (including, without limitation, a leveraged recapitalization) in which the proceeds are distributed or paid out to holders of the Company’s capital stock.

 

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Each event comprising a Liquidity Event is intended to constitute a “change in ownership or effective control,” or a “change in the ownership of a substantial portion of the assets,” of the Company, as such terms are defined for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and “Liquidity Event” as used herein shall be interpreted consistently therewith.

 

(B) “Liquidity Event Proceeds” shall mean the net cash or value of marketable securities (or combination of cash and marketable securities) received by the Company and its stockholders from or in connection with a Liquidity Event (i) before the payment of the bonus provided for in this Section 3(c) and any other cash bonus due to any other executive officer of the Company in connection with the same Liquidity Event, but (ii) after payment of all expenses incurred by the Company in connection with the Liquidity Event transaction (including, without limitation, fees and expenses of attorneys, accountants, bankers and other financial advisors) and repayment of any indebtedness of the Company then due or secured by any property or assets sold, exchanged or otherwise disposed of a result of the transaction. In connection with any Liquidity Event, the Board shall determine the Liquidity Event Proceeds in good faith consistent with the provisions of this subparagraph (B).

 

(iii) Except as provided below in this subparagraph and in Section 5 of this Agreement, the Executive’s right to receive any Liquidity Event Bonus under this Section 3(c) shall vest ratably in one-third installments on each of February 1, 2018, February 1, 2019 and January 31, 2020, with full vesting to occur on January 31, 2020 (the “Full Vesting Date”); provided, however, that such vesting shall accelerate and the Executive’s right under this Section 3(c) to receive a Liquidity Event Bonus shall be deemed to be fully vested in respect of any Liquidity Event that occurs prior to the Full Vesting Date (but the ratable vesting schedule shall otherwise remain in effect with respect to any subsequent Liquidity Events). The rights of the Executive (if any) to receive a Liquidity Event Bonus (or portion thereof) in connection with any Liquidity Event occurring after the termination or expiration of this Agreement and the Executive’s employment hereunder shall be as set forth in the applicable provisions of Section 5.

 

(iv) For purposes of clarity, but subject to the provisions of subparagraph (v) below, it is possible under this Section 3(c) for there to be multiple Liquidity Events involving the Company over time, and for the Executive to receive Liquidity Event Bonuses under the provisions of this Section 3(c) in connection with each such Liquidity Event.

 

(v) Notwithstanding any other provision contained in this Agreement, the Executive’s rights to receive any Liquidity Event Bonus under this Section 3(c) shall terminate and be of no further force or effect following the occurrence of any Liquidity Event in connection with which (A) the Company is dissolved and liquidated, or (B) all then-outstanding shares of the Company’s capital stock are cancelled, redeemed or otherwise retired except in any such circumstance in which one or more outstanding classes or series of such shares are exchanged for or converted into new securities issued by the Company or any successor entity to the Company (by merger or otherwise), in which circumstance the Executive’s rights under this Section 3(c) shall remain in effect until the subsequent dissolution and liquidation of the Company or such successor or the cancellation, redemption or retirement of such new securities. A Liquidity Event described in this subparagraph (v) that, by these terms, results in the termination of the Executive’s rights under this Section 3(c) is referred to herein as a “Final Liquidity Event.” For purposes of clarity, the Company and the Executive acknowledge and agree that the Executive shall have the right to receive a Liquidity Event Bonus under this Section 3(c) in respect of a Final Liquidity Event, but not in respect of any Liquidity Event that may occur subsequent to the Final Liquidity Event.

 

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(vi) Notwithstanding any other provision of this Agreement, if the total amounts payable pursuant to this Section 3(c), together with any and all other payments to which the Executive may be entitled in connection with a Liquidity Event (or other similar event), would constitute an “excess parachute payment” (as defined in Section 280G of the Internal Revenue Code), the Executive shall receive the greater of: (i) the Liquidity Event Bonus due under this Section 3(c), less any excise tax imposed under Section 4999 of the Internal Revenue Code, or (ii) the largest amount which may be paid without any portion of such amount being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. For purposes of determining the largest amount payable, such payments shall be reduced in such order and manner as the Executive shall specify in writing to the Company; provided that any and all payments that are not “nonqualified deferred compensation” as defined for purposes of Section 409A of the Internal Revenue Code shall be reduced and eliminated before any payment of nonqualified deferred compensation is reduced or eliminated, and any reduction or elimination of payments that are nonqualified deferred compensation shall be made in reverse chronological order of their respective payment due dates. In the event there is a dispute among the parties regarding the extent to which payments must be reduced pursuant to this subparagraph (vi), such dispute shall be settled in accordance with Section 14(g) herein. No such disputed payment shall be made until the dispute is settled.

 

(d) Other Benefits. The Executive shall be eligible on the same basis as other executive officers and employees of the Company (and subject to any other eligibility requirements, cost sharing and other terms and conditions) to participate in and receive benefits under any other bonus plan or any equity or long-term incentive, deferred compensation, retirement, savings, group insurance (including, without limitation, medical, dental, life, accident and disability insurance), group health or other welfare or benefit plan or program as may be approved by the Board of the compensation committee thereof and offered to the Company’s executive officers and employees generally; provided, however, that the severance benefits (if any) payable under Section 5 of this Agreement shall be in lieu of (and not in addition to) any severance benefits that would otherwise be due to the Executive under any severance policy or plan otherwise in effect at the Company upon termination of the Executive’s employment; and provided further that the Company shall not have any obligation to maintain any particular plan or program indefinitely or for any specific period of time. In addition, the Executive shall be entitled to four (4) weeks paid vacation per full year of service, in accordance with and subject to the Company’s vacation accrual plan and policies.

 

4. Reimbursement of Expenses. The Company shall reimburse the Executive, upon presentation of proper expense statements, for all authorized, ordinary and necessary out-of-pocket expenses reasonably incurred by Executive during the Term in connection with the performance of his services pursuant to this Agreement in accordance with the Company’s expense reimbursement policy. .

 

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5. Termination of Employment.

 

(a) Resignation by the Executive. The Executive may terminate this Agreement and his employment hereunder at any time by delivery of at least thirty (30) days’ advance written notice to the Company. In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(a):

 

(i) the Company shall (A) pay the Executive an amount in cash equal to the Executive’s accrued but unpaid Salary and vacation pay through the date of termination, (B) pay the Executive an amount in cash equal to any CLIA Waiver Bonus and any Liquidity Event Bonus that has been earned by the Executive under Section 3 hereof prior to the date of termination but that remains unpaid as of such date, and (C) promptly reimburse any expenses incurred by the Executive through the date of termination and for which the Executive is entitled to receive reimbursement under Section 4 hereof in accordance with the Company’s expense reimbursement policies (all such payments referenced in this subparagraph (i) being collectively referred to in this Agreement as the “Base Termination Payments”);

 

(ii) subject to Section 5(f), the Executive shall retain his rights under Section 3(b) to receive a CLIA Waiver Bonus Payment in respect of any CLIA waiver received by the Company after the effective date of termination but only to the extent that the Company filed its original application in respect of such CLIA waiver during the term of the Executive’s employment or within sixty (60) days following the effective date of termination, it being understood and agreed that the Executive shall not have any right to receive a CLIA Waiver Bonus Payment in respect of any waiver for which the Company first files its application more than 60 days following the effective date of termination (such rights referenced in this subparagraph (ii) being referred to herein as the “Surviving CLIA Waiver Bonus Rights”);

 

(iii) subject to Section 5(f), the Executive shall retain his rights under Section 3(c) to receive Liquidity Event Bonus payments (including in respect of any Liquidity Event that may occur following the effective date of termination) to the extent that such rights have vested under Section 3(c)(iii) as of the effective date of termination, it being understood and agreed that the Executive shall forfeit any such rights with respect to any future Liquidity Events to the extent that such rights have not then vested (such rights referenced in this subparagraph (iii), to the extent so vested and not forfeited, being referred to herein as the “Surviving Liquidity Event Bonus Rights”);

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(vi) except as otherwise expressly provided in this Section 5(a), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(b) Non-Renewal as of End of Initial or Subsequent Term. Either the Company or the Executive may terminate this Agreement and the Executive’s employment hereunder effective upon expiration of the Initial Term or any succeeding term by written notice of non-renewal delivered to the other party at least ninety (90) days’ prior to the applicable expiration date of the then-current term. In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(b):

 

(i) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

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(ii) subject to Section 5(f), the Executive shall retain his Surviving CLIA Waiver Bonus Rights (as defined in Section 5(a)(ii));

 

(iii) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii));

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(vi) except as otherwise expressly provided in this Section 5(b), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(c) Death or Disability of the Executive. This Agreement and the Executive’s employment shall terminate immediately upon the death of the Executive. In addition, this Agreement and Executive’s employment may be terminated by the Company effective upon delivery of written notice to the Executive in the event of the Executive’s Disability. For purposes of this Agreement, the term “Disability” shall mean the Executive’s inability to perform his duties hereunder as President and Chief Executive Officer of the Company, as reasonably determined by the Board, as a result of prolonged absence from work for health reasons or physical or mental disability, illness or incapacity for a continuous period of ninety (90) days, or for shorter periods aggregating four (4) months in any twelve (12) month period.

 

In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(c):

 

(i) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

(ii) subject to Section 5(f), the Executive shall retain his Surviving CLIA Waiver Bonus Rights (as defined in Section 5(a)(ii));

 

(iii) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii)), provided that for purposes of this subparagraph (iii), all vesting of the Executive’s rights under Section 3(c)(iii) shall be accelerated and the Executive shall be deemed to be fully vested in such rights effective as of the date of the Executive’s death or Disability;

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

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(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(vi) except as otherwise expressly provided in this Section 5(c), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(d) Termination by the Company for “Cause.”

 

(i) The Company, effective upon delivery of written notice to the Executive, may terminate this Agreement and the Executive’s employment for “Cause.” For purposes of this Agreement, the term “Cause” shall mean any of the following:

 

(A) a material breach by the Executive of any of Sections 6, 7 or 8 of this Agreement;

 

(B) a material breach by the Executive of any other provision of this Agreement, if such material breach (if susceptible to cure) has continued uncured for a period of at least fifteen (15) days following delivery by the Company to the Executive of written notice of such material breach;

 

(C) fraud, dishonesty or other breach of trust whereby the Executive obtains personal gain or benefit at the expense of or to the detriment of the Company or any of the Company’s subsidiaries or affiliates;

 

(D) a conviction of or plea of nolo contendere or similar plea by the Executive of any felony;

 

(E) a conviction of or plea of nolo contendere or similar plea by of any other crime involving theft, misappropriation of property, dishonesty or moral turpitude;

 

(F) a willful and material violation of applicable law by the Executive in connection with the performance of his duties hereunder;

 

(G) chronic or repeated substance abuse by the Executive, or any other use by the Executive of alcohol, drugs or illegal substances in such a manner as to interfere with the performance of his material duties hereunder; or

 

(H) failure to comply with the lawful directions of the Board which are otherwise consistent with the terms of this Agreement, which failure has continued for a period of at least ten (10) days after delivery by the Company to the Executive of written demand by the Board.

 

Termination of this Agreement by the Company for “Cause” shall be without prejudice to any other right or remedy to which the Company may be entitled at law, in equity or otherwise under this Agreement.

 

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(ii) In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to the preceding Section 5(d)(i):

 

(A) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

(B) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii)) to the extent then vested;

 

(C) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(D) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(E) except as otherwise expressly provided in this Section 5(d)(ii), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(e) Termination by the Company Without “Cause.” The Company, in the sole discretion of the Board and effective upon delivery of not less than thirty (30) days’ advance written notice to the Executive, may terminate this Agreement and the Executive’s employment hereunder at any time and for any reason, including without “Cause.” In the event that the Company terminates the Executive’s employment under this Section 5(e):

 

(i) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

(ii) subject to Section 5(f), the Executive shall retain his Surviving CLIA Waiver Bonus Rights (as defined in Section 5(a)(ii));

 

(iii) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii)), provided that for purposes of this subparagraph (iii), all vesting of the Executive’s rights under Section 3(c)(iii) shall be accelerated and the Executive shall be deemed to be fully vested in such rights effective as of the date of the Executive’s death or Disability;

 

(iv) subject to Section 5(f), conditioned upon receipt by the Company of a general release in form reasonably acceptable to the Company and expiration of any revocation period applicable to such release without the Executive having revoked such release, and in lieu of any severance benefits that may otherwise be payable under any other severance plan or policy of the Company, the Company (A) shall continue to pay to the Executive as severance his Salary at the rate then in effect on the date of termination for a period of one (1) year following the date of termination, such payments to be made by the Company at the times, subject to applicable withholdings and otherwise in accordance with the Company’s general payroll practices and policies, and (B) pay or reimburse the Executive for the cost of COBRA continuation medical and dental insurance coverage for the Executive for the one-year severance period (less any required taxes or withholdings); provided, however, that if the Company determines in its sole discretion that it cannot provide the foregoing COBRA benefits without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable lump-sum payment in an amount equal to the monthly (or then remaining) COBRA premium that Executive would be required to pay to continue his group health coverage for himself as in effect on the termination date (which amount shall be based on the premium for the first month of COBRA coverage) until the date that is twelve (12) months following the Executive’s date of termination. Notwithstanding the foregoing, any severance payments that otherwise would be required to be made under this subparagraph (iv) within forty-five (45) days following the Executive’s date of termination shall instead be made on the Company’s first normal payroll date that is more than forty-five (45) days following the Executive’s date of termination; and

 

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(v) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements; and

 

(vi) except as otherwise expressly provided in this Section 5(e), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(f) Offset for Material Breaches of Restrictive Covenants. If the Executive materially breaches any provision contained in either Section 6 or Section 7 of this Agreement, the Company, from the date of such breach going forward, shall no longer be obligated to make any payments or reimbursements to the Executive or provide any benefits to the Executive under this Section 5 in respect of any Surviving CLIA Waiver Bonus Rights, any Surviving Liquidity Event Bonus Rights, and any rights to receive severance of COBRA benefits under Section 5(e)(iv).

 

6. Trade Secrets and Proprietary Information.

 

(a) Executive recognizes and acknowledges that the Company, through the expenditure of considerable time and money, has developed and will continue to develop in the future information concerning customers, clients, marketing, patents, products, services, business, research and development activities and operational methods of the Company and its customers or clients, contracts, financial or other data, technical data or any other confidential or proprietary information possessed, owned or used by the Company, the disclosure of which could or does have a material adverse effect on the Company, its business, any business it proposes to engage in, its operations, financial condition or prospects and that the same are confidential and proprietary and considered “Confidential Information” of the Company for the purposes of this Agreement. In consideration of his employment, the Executive agrees that he will not, during or after the Term, without the consent of the Board make any disclosure of Confidential Information now or hereafter possessed by the Company, to any person, partnership, corporation or entity either during or after the term here of, except that nothing in this Agreement shall be construed to prohibit Executive from using or disclosing such information (i) if such disclosure is necessary in the normal course of the Company’s business in accordance with Company policies or instructions or authorization from the Board, (ii) such information shall become public knowledge other than by or as a result of disclosure by a person not having a right to make such disclosure, (iii) complying with legal process as provided in Section 6(b) of this Agreement, or (iv) subsequent to the Term, if such information shall have either been developed by Executive independent of any of the Company’s confidential or proprietary information or been disclosed to Executive by a person not subject to a confidentiality agreement with or other obligation of confidentiality to the Company. For the purposes of Sections 6, 7 and 8 of this Agreement, the term “Company” shall include the Company, its parent, its subsidiaries and affiliates.

 

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(b) In the event that any Confidential Information is required to be produced by Executive pursuant to legal process, the Executive shall give the Company notice of such legal process within a reasonable time, but not later than ten business days prior to the date such disclosure is to be made, unless Executive has received less notice, in which event the Executive shall immediately notify the Company. The Company shall have the right to object to any such disclosure, and if the Company objects (at the Company’s cost and expense) in a timely manner, the Executive shall not make any disclosure until there has been a court determination on the Company’s objections. If disclosure is required by a court order, final beyond right of review, or if the Company does not object to the disclosure, the Executive shall make disclosure only to the extent that disclosure is required by the court order, and the Executive will exercise reasonable efforts to obtain reliable assurances that confidential treatment will be accorded the Confidential Information.

 

(c) The Executive shall, upon expiration or termination of the Term, or earlier at the request of the Company, turn over to the Company all documents, papers, computer disks or other material in the Executive’s possession or under the Executive’s control which may contain or be derived from Confidential Information. To the extent that any Confidential Information is on Executive’s hard drive or other storage media, he shall, upon the request of the Company, cause such information to be erased from his computer disks and all other storage media.

 

7. Covenant Regarding Improper Use of Confidential Information.

 

(a) During the period from the date of this Agreement until one (1) year following the date on which Executive’s employment is terminated, Executive will not, directly or indirectly:

 

(i) Utilize the Company’s Confidential Information to persuade or attempt to persuade any person or entity which is or was a customer, client or supplier of the Company to cease doing business with the Company, or to reduce the amount of business it does with the Company (the terms “customer” and “client” as used in this Section 7 to include any potential customer or client to whom the Company submitted bids or proposals, or with whom the Company conducted negotiations, during the term of Executive’s employment or during the twelve (12) months preceding the termination of his employment);

 

(ii) Utilize the Company’s Confidential Information to solicit for himself or any other person or entity other than the Company the business of any person or entity which is a customer or client of the Company, or was a customer or client of the Company within one (1) year prior to the termination of his employment; or

 

(iii) Persuade or attempt to persuade any employee of the Company, or any individual who was an employee of the Company during the one (1) year period prior to the termination of this Agreement, to leave the Company’s employ, or to become employed by any person or entity other than the Company.

 

(b) The Executive acknowledges that the restrictive covenants (the “Restrictive Covenants”) contained in Sections 6 and 7 of this Agreement are a condition of his employment and are reasonable and valid in geographical and temporal scope and in all other respects. If any court or arbitrator determines that any of the Restrictive Covenants, or any part of any of the Restrictive Covenants, is invalid or unenforceable, the remainder of the Restrictive Covenants and parts thereof shall not thereby be affected and shall remain in full force and effect, without regard to the invalid portion. If any court or arbitrator determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable because of the geographic or temporal scope of such provision, such court or arbitrator shall have the power to reduce the geographic or temporal scope of such provision, as the case may be, and, in its reduced form, such provision shall then be enforceable.

 

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8. Ownership of Intellectual Property.

 

(a) “Inventions” means all inventions, ideas, discoveries, developments, methods, data, information, improvements, original works, know-how, including, but not limited to, algorithms, technology, trade secrets, processes, codes and hardware (whether or not reduced to practice and whether or not protectable under the patent, copyright, trade secrecy or similar laws of the United States, the Peoples’ Republic of China or any applicable foreign country which:

 

(i) relate to the Company’s business at the time of conception or reduction to practice or actual or demonstrably anticipated research or development of Company that were conceived, created or developed by the Executive (whether alone or with others, whether or not during working hours or on the Company’s premises or whether or not using material or property provided by the Company) during the Term or having conceived, created or developed prior to the Term while Executive was employed by the Company; and/or

 

(ii) were conceived, created or developed by the Executive (whether alone or with others) during the Term, even if having possibly been conceived, created or developed prior to the Term but completed while in the employ of the Company, or which result from any work performed by the Executive for Company.

 

(b) All Inventions are, will be, and shall constitute “works-for-hire” and the exclusive property of the Company, and the Company may use and exploit them without restriction or additional compensation to the Executive. The Executive shall promptly and fully disclose to the Company any and all Inventions. The Executive shall maintain complete written records of all Inventions and of all work or investigations done or carried out by the Executive at all stages thereof, which records shall be the exclusive property of the Company and will be treated as Confidential Information for all purposes of this Agreement.

 

(c) The Executive hereby irrevocably assigns and transfers to the Company, its successors, assigns or Affiliates, as the case may be, all of Executive’s right, title and interest in and to any Inventions without additional consideration therefor from the moment of their creation or inception, to be held and enjoyed by the Company, its successors, assigns or Affiliates, as the case may be, to the full extent of the term for which any intellectual property protection may be granted and as fully as the same would have been held by Executive had this Agreement, or such assignment or transfer not been made. In addition to the foregoing assignments of Inventions to the Company, Executive hereby irrevocably assigns and transfers to the Company: (i) all worldwide patents, trademarks, copyrights, mask works, trade secrets, applications for the foregoing and other intellectual property rights in any Inventions; and (ii) any and all “Moral Rights” (as defined below) that Executive may have in or with respect to any Inventions. Executive hereby forever waives and agrees never to assert any and all Moral Rights Executive may have in or with respect to any such Inventions, even after the termination of Executive’s employment.

 

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(d) “Moral Rights” means any right to claim authorship of any Inventions, or to withdraw from circulation or control the publication or distribution of any Inventions, and any similar right, existing under judicial or statutory law of any country in the world, or under any treaty, regardless of whether or not such right is denominated or generally referred to as a moral right.

 

(e) Executive agrees to cooperate fully in obtaining patent, copyright or other proprietary protection for such Inventions, all in the name of the Company, its successors, assigns or Affiliates, as the case may be, and at the Company’s cost and expense, and shall execute and deliver all requested applications, assignments and other documents and take such other actions as the Company, its successors, assigns or Affiliates, as the case may be, shall request in order to perfect, enforce and exploit the Company’s, its successors,’ assigns’ or Affiliates,’ as the case may be, right in the Inventions (including transfer of possession to the Company, its successors, assigns or Affiliates, as the case may be, of all Inventions embodied in tangible materials), including granting Company a non-revocable, royalty- free license in any pre-existing works. Executive irrevocably designates and appoints the Company and its duly authorized officers and agents as his agents and attorneys-in-fact to execute and file any and all applications and other necessary documents and to do all other lawfully permitted acts to further perfect and enforce the Company’s, its successors,’ assigns’ or Affiliates,’ (as the case may be), right in the Inventions and to further the prosecution, issuance or enforcement of patents, copyrights, trade secrets and similar protections related to the Inventions with the same legal force and effect as he had executed them himself. The Executive shall receive no additional compensation for complying with Executive’s obligations under this Section 8. The Executive agrees that, to the extent this Agreement shall be construed in accordance with any laws that limit the assignability to the Company, its successors, assigns or Affiliates, as the case may be, of the Inventions, this Agreement shall be interpreted not to apply to any Invention which a court rules or the Company agrees is subject to such state limitation.

 

California Labor Code § 2870 provides as follows:

 

a. Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

 

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer.

 

(2) Result from any work performed by the employee for his employer.

 

b. To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

 

The assignment of Inventions under this Agreement, accordingly, shall not extend to those items set forth in Labor Code § 2870.

 

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(f) Any copyrightable work created by the Executive in connection with or during the performance of his employment duties, whether published or unpublished, shall be the property of the Company as author and owner of copyright in such work.

 

(g) The Executive warrants and represents that there are no Inventions (whether patentable or not), patents, trade secrets, trademarks, trade names, copyrights, or other intellectual property owned by him prior to entering into employment with the Company hereunder, and that he has not executed and will not execute any document or instrument in conflict herewith.

 

(h) An “Affiliate” of the Company shall mean any person or entity which controls, is controlled by or is under common control with the Company.

 

9. Injunctive Relief. The Executive agrees that any violation or threatened violation of any of the provisions of Sections 6, 7 or 8 of this Agreement will cause immediate and irreparable harm to the Company for which money damages would not be an adequate remedy. In the event of any breach or threatened breach of any of said provisions, the Executive consents to the entry of preliminary and permanent injunctions by a court of competent jurisdiction prohibiting the Executive from any violation or threatened violation of such provisions and compelling the Executive to comply with such provisions (without posting a bond or other security). This Section 9 shall not affect or limit, and the injunctive relief provided in this Section 9 shall be in addition to, any other remedies available to the Company at law or in equity or in arbitration for any such violation by the Executive. Subject to Section 7(b) of this Agreement, the provisions of Sections 6, 7 and 8 of this Agreement and this Section 9 shall survive any termination of this Agreement and the Executive’s employment.

 

10. Indemnification. The Company shall enter into a separate agreement with the Company to provide the Executive with payment of legal fees and indemnification to the maximum extent permitted by the Company’s Certificate of Incorporation, By-Laws, and Delaware law. The Company shall also provide officers and directors liability insurance of not less than $5,000,000, and the Company shall be responsible for any deductibles under such policy.

 

11. Key Man Insurance. The Executive will cooperate with the Company in connection with any application by the Company to obtain key-man life insurance on his life, on which the Company will be the beneficiary. Such cooperation shall include the execution of any applications or other documents requiring his signature and submission of insurance applications and submission to a physical examination.

 

12. Code Section 409A Compliance.

 

(a) This Agreement is intended to comply with the provisions of Section 409A of the Code, and, to the extent practicable, this Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder. Terms used in this Agreement shall have the meanings given such terms under Section 409A of the Code if, and to the extent required, in order to comply with Section 409A of the Code.

 

(b) The payment schedules provided hereunder are intended to be exempt from or to comply with the requirements of Section 409A of the Code and shall be interpreted consistently therewith.

 

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(c) Any payments under Section 5 shall be made or shall commence only after the Executive has a “separation from service” with the Company, as defined under Section 409A of the Code and the guidance issued thereunder.

 

(d) Notwithstanding anything to the contrary in this Agreement, to the extent required to avoid additional taxes and interest charged under Section 409A of the Code, if any of the Company’s stock is publicly traded and the Executive is deemed to be a “specified employee” as determined by the Company for purposes of Section 409A(a)(2)(B) of the Code, the Executive agrees that any non-qualified deferred compensation payments due to him under this Agreement in connection with a termination of employment that would otherwise have been payable at any time during the six (6)-month period immediately following such termination of employment shall not be paid prior to, and shall instead be payable in a lump sum on the first day of the seventh (7th) month following the Executive’s separation from service (or, if the Executive dies during such period, within 30 days after the Executive’s death).

 

(e) Each payment of termination benefits under Section 5 of this Agreement, including, without limitation, each installment payment, shall be considered a separate payment, as described in Treasury Regulations Section 1.409A-2(b)(2), for purposes of Section 409A of the Code.

 

(f) Neither the Company nor the Executive shall have the right to accelerate or defer the delivery of any payment under this Agreement that constitutes “nonqualified deferred compensation” subject to Section 409A of the Code, except to the extent specifically permitted or required by Section 409A of the Code.

 

(g) If the Executive is entitled to be paid or reimbursed for any expenses under this Agreement, and such payments or reimbursements are includible in the Executive’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of the Executive to reimbursement of expenses under Section 4 or any other Section of this Agreement shall be subject to liquidation or exchange for another benefit.

 

(h) Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

(i) Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” subject to Section 409A of the Code be subject to offset, counterclaim or recoupment by any other amount payable to the Executive unless otherwise permitted by Section 409A of the Code.

 

13. Certain Representations, Warranties and Covenants of the Parties.

 

(a) The Executive hereby represents and warrants to the Company that: (i) the execution, delivery and performance of this Agreement by the Executive do not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Executive is a party or any judgment, order or decree to which the Executive is subject, (ii) this Agreement constitutes the legal, valid and binding obligation of the Executive, enforceable in accordance with its terms, and (iii) the Executive has not and will not take any action that will conflict with, violate or cause a breach of any noncompete, nonsolicitation or confidentiality agreement to which the Executive is a party or by which the Executive is bound. The Executive hereby acknowledges and represents that he has carefully reviewed this Agreement, that he has consulted with independent legal counsel regarding his rights and obligations under this Agreement (or, after carefully reviewing this Agreement, was given the opportunity to, but has freely decided not to, consult with independent legal counsel), and that he fully understands the terms and conditions contained herein.

 

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(b) The Company represents, warrants and agrees that it has full power and authority to execute and deliver this Agreement and perform its obligations hereunder.

 

14. Miscellaneous.

 

(a) Any notice, consent or communication required under the provisions of this Agreement shall be given in writing and sent or delivered by hand, overnight courier or messenger service, against a signed receipt or acknowledgment of receipt, or by registered or certified mail, return receipt requested, or telecopier, email or similar means of communication (collectively “electronic communications”) if receipt is acknowledged or if transmission is confirmed by mail as provided in this Section 13(a), to the parties at their respective addresses set forth at the beginning of this Agreement or by electronic delivery to the telecopier or email (if any) set forth on the signature page of this Agreement, with notice to the Company being sent to the attention of the Chief Financial Officer of the Company. Either party may, by like notice, change the person, address or electronic communications number or address to which notice is to be sent. If no telecopier number is provided for either party, notice to such party shall not be sent by telecopier.

 

(b) This Agreement shall in all respects be construed and interpreted in accordance with, and the rights of the parties shall be governed by, the laws of the State of California applicable to agreements executed and to be performed wholly in such state without regard to principles of conflicts of laws, except as provided in the first sentence of Section 10.

 

(c) If any term, covenant or condition of this Agreement or the application thereof to any party or circumstance shall, to any extent, be determined to be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law, and any court or arbitrator having jurisdiction may reduce the scope of any provision of this Agreement, including the geographic and temporal restrictions set forth in Section 8 of this Agreement, so that it complies with applicable law.

 

(d) This Agreement constitutes the entire agreement of the Company and the Executive as to the subject matter hereof, superseding as of the Effective Date all prior or contemporaneous written or oral understandings or agreements, with respect to the subject matter covered in this Agreement. This Agreement may not be modified or amended, nor may any right be waived, except by a writing which expressly refers to this Agreement, states that it is intended to be a modification, amendment or waiver and is signed by both parties in the case of a modification or amendment or by the party granting the waiver. No course of conduct or dealing between the parties and no custom or trade usage shall be relied upon to vary the terms of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

 

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(e) During and after the Executive’s employment, the Executive shall cooperate with the Company and its subsidiaries and affiliates in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by the Company or its subsidiaries or affiliates (including the Executive being available to the Company and its subsidiaries and affiliates upon reasonable notice for interviews and factual investigations, appearing at the Company’s or any subsidiary’s or affiliate’s reasonable request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company and its subsidiaries and affiliates all pertinent information and turning over to the Company and its subsidiaries and affiliates all relevant documents that are or may come into the Executive’s possession, all at times and on schedules as reasonably agreed to between the Company and the Executive. In the event the Company or any of its subsidiaries or affiliates requires the Executive’s cooperation in accordance with this subparagraph, the Company shall reimburse the Executive for the Executive’s reasonable out-of-pocket expenses incurred in connection therewith (including lodging and meals, upon submission of receipts and compliance with the Company’s expense reimbursement policies).

 

(f) This Agreement is personal in nature and neither of the parties hereto will, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder; provided, however, that the Company may, without the Executive’s consent, assign its rights and obligations hereunder to (i) any affiliate of the Company or (ii) any subsequent purchaser of the Company or any of its businesses or any material portion of its assets (whether such sale is structured as a sale of stock, sale of assets, merger, recapitalization or otherwise), in each case, in accordance with and as expressly in this Agreement. Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by the Executive’s will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer by the Executive contrary to this subparagraph (e), the Company will have no liability to pay any amount so attempted to be assigned, transferred or delegated. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that executes and delivers the agreement provided for in this subparagraph (e) or that otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

 

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(g) Except for actions, suits, or proceedings taken pursuant to or under Section 6, 7, 8 or 9 of this Agreement, any dispute concerning this Agreement or the rights of the parties hereunder shall be submitted to binding arbitration in San Diego County, California before a single arbitrator associated with JAMS (or other mutually agreeable alternative dispute resolution service) in accordance with its Employment Arbitration Rules & Procedures and subject to JAMS Policy on Employment Arbitration Minimum Standards of Procedural Fairness (the “JAMS Rules”), a copy of which Rules can be found at www.jamsadr.com or obtained from the Company’s human resources department. The arbitration provisions of this Agreement will be governed by the Federal Arbitration Act (9 U.S.C. Section 1 et seq.). In all other respects, this provision will be construed in accordance with the laws of the State of California, without reference to conflicts of law principles. Included within this provision are any claims based on common law or violation of local, state or federal law, such as claims for discrimination or civil rights violations under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the California Family Rights Act, the California Fair Employment and Housing Act, the California Labor Code, or similar statutes. However, claims for unemployment benefits and workers’ compensation claims will not be subject to arbitration. In addition, either party may seek provisional remedies pursuant to California Code of Civil Procedures Section 1281.8(b). There will be no right or authority for any claim subject to arbitration to be heard or arbitrated on a class or collective basis, as a private attorney general, or in a representative capacity on behalf of any other person or entity. If there is a dispute as to whether an issue or claim is arbitrable, the arbitrator will have the authority to resolve any such dispute, including claims as to fraud in the inducement or execution, or claims as to validity, construction, interpretation or enforceability.

 

A neutral arbitrator with experience in arbitrating employment disputes will be chosen by mutual agreement of the parties; however, if the parties are unable to agree upon an arbitrator within a reasonable period of time (not to exceed thirty (30) days after the delivery of any demand for arbitration hereunder), then a neutral arbitrator will be appointed in accordance with the arbitrator selection procedure set forth in the JAMS Rules (or the rules of the selected alternative dispute resolution service). The issue(s) submitted to the arbitrator shall be set forth in each party’s request for arbitration. The arbitrator selected shall have the authority to grant Executive or the Company or both all remedies otherwise available by law; provided, however, that the arbitrator shall not have the power or authority to aware punitive or exemplary damages or to grant injunctive or equitable relief. The arbitrator may not consolidate more than one person’s claim, and may not otherwise preside over any form of a representative, collective or class proceeding. The parties will be permitted to conduct discovery as provided by California Code of Civil Procedure Section 128.05. The arbitration shall provide (i) for written discovery and depositions adequate to give the parties access to documents and witnesses that are essential to the dispute and (ii) for a written decision by the arbitrator that includes the essential findings and conclusions upon which the decision is based. The arbitrator’s decision must be issued no later than thirty (30) days after a dispositive motion is heard and/or an arbitration hearing has been completed. The award of the arbitrator shall be final, binding and conclusive on all parties, and judgment on such award may be entered in any court having jurisdiction.

 

The parties shall each bear their own costs and attorneys’ fees incurred in conducting the arbitration. Where Executive is asserting a claim under a state or federal statute prohibiting discrimination in employment, a public policy claim arising under a statute, or where otherwise required by applicable law to achieve the enforceability of this Agreement, the Company will pay the costs and fees charged by the arbitrator and JAMS (or other mutually selected alternative dispute resolution service) to the extent such costs would not otherwise be incurred in a court proceeding. In all other circumstances, the Executive and the Company will split equally the fees and administrative costs charged by the arbitrator and JAMS. To the extent permissible under the law, however, and following the arbitrator’s ruling on the matter, the arbitrator may rule that the arbitrator’s fees and costs be distributed in an alternative manner. If any party prevails on a statutory claim and the statute provides that the prevailing party is entitled to payment of attorneys’ fees, the arbitrator shall award reasonable fees and costs to the prevailing party based on the same standard as such fees and costs would be awarded if such claim had been asserted in state or federal court.

 

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This mutual arbitration agreement does not prohibit or limit either Party’s right to seek a provisional remedy pursuant to California Code of Civil Procedures Section 1281.8(b), pending the resolution of a dispute by arbitration. The arbitrator shall have no authority to add to or to modify the terms described in this Agreement (including this subparagraph) or the Company’s employee handbook, shall apply all applicable law, and otherwise shall have no lesser and no greater remedial authority than would a court of law resolving the same claim or controversy.

 

AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

(h) Notwithstanding the provisions of Section 13(g) of this Agreement, with respect to any claim for injunctive relief or other equitable remedy pursuant to Section 9 of this Agreement or any claim to enforce an arbitration award or to compel arbitration, each of the parties hereby (i) consents to the exclusive jurisdiction of the federal and state courts sitting in San Diego County, California, (ii) agrees that any process in any action commenced in such court under this Agreement may be served upon it or him personally, either (A) by certified or registered mail, return receipt requested, or by an overnight courier service which obtains evidence of delivery, with the same full force and effect as if personally served upon him in San Diego County, California, or (B) by any other method of service permitted by law, and (iii) waives any claim that the jurisdiction of any such court is not a convenient forum for any such action and any defense of lack of in personam jurisdiction with respect thereof.

 

(i) This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee or, if there be no such designee, to the Executive’s estate.

 

(j) The headings in this Agreement are for convenience of reference only and shall not affect in any way the construction or interpretation of this Agreement.

 

(k) The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party hereto.

 

(l) Notwithstanding any termination of the Executive’s employment under this Agreement, Sections 6 through 14 hereof shall survive and continue in full force until the performance of the obligations thereunder, if any, in accordance with their respective terms.

 

(m) No delay or omission to exercise any right, power or remedy accruing to either party hereto shall impair any such right, power or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof. No waiver of any breach hereof shall be deemed to be a waiver of any other breach hereof theretofore or thereafter occurring. Any waiver of any provision hereof shall be effective only to the extent specifically set forth in an applicable writing. All remedies afforded to either party under this Agreement, by law or otherwise, shall be cumulative and not alternative and shall not preclude assertion by such party of any other rights or the seeking of any other rights or remedies against any other party.

 

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(n) This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. This Agreement and any agreement or instrument entered into in connection with this Agreement, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or by e-mail attachment (e.g., PDF), shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or e-mail to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or e-mail as a defense to the formation of a contract and each such party forever waives any such defense.

 

[Signatures on following page]

 

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

 

Telecopier and Email Signatures
     
  “Company”
     
  QUALIGEN, INC.
     
  By: /s/ Chris Lotz
    Chris Lotz, Vice President and Chief Financial Officer
     
  “Executive”
   
  /s/ Michael S. Poirier
  Michael Poirier

 

[Signature Page of Executive Employment Agreement]

 

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AMENDMENT OF EXECUTIVE EMPLOYMENT AGREEMENT

 

The Executive Employment Agreement dated February 1, 2017 between Qualigen, Inc. and Michael Poirier is hereby amended to change Section 5(a) thereof to read in full as follows:

 

“Resignation by the Executive. The Executive may terminate this Agreement and his employment hereunder at any time by written resignation. A resignation for Good Reason shall be treated hereunder as if it were a termination by the Company without Cause and shall have the effects stated in Section 5(e) with regard to termination without Cause, rather than the effects stated in the sub-subsections of this Section 5(a).

 

“Good Reason” means the occurrence of any of the following circumstances, without the Executive’s express consent: the Executive resigns due to (i) a material reduction of the Executive’s title or authority, (ii) a material reduction in the Executive’s salary or benefits (other than a reduction that generally applies to the officers at the Executive’s level in the Company or, as applicable, after a transaction in which the Company or substantially all its assets is acquired, in the successor entity at that time), (iii) any material breach of this Agreement by the Company which is not cured within 30 days after written notice by the Executive; or (iv) a change of the principal non-temporary location in which the Executive is required to perform the Executive’s services to any location exceeding 35 miles from Carlsbad, California. In no event shall a resignation be considered to be with Good Reason unless the resignation occurs after but within 30 days after the initiation of the item of Good Reason.

 

Termination of this Agreement and of the Executive’s employment by the Executive for Good Reason shall be without prejudice to any other right or remedy to which the Executive may be entitled at law, in equity or otherwise under this Agreement.

 

In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(a) (i.e., resignation without Good Reason):

 

(i) the Company shall (A) pay the Executive an amount in cash equal to the Executive’s accrued but unpaid Salary and vacation pay through the date of termination, (B) pay the Executive an amount in cash equal to any CLIA Waiver Bonus and any Liquidity Event Bonus that has been earned by the Executive under Section 3 hereof prior to the date of termination but that remains unpaid as of such date, and (C) promptly reimburse any expenses incurred by the Executive through the date of termination and for which the Executive is entitled to receive reimbursement under Section 4 hereof in accordance with the Companys expense reimbursement policies (all such payments referenced in this subparagraph (i) being collectively referred to in this Agreement as the Base Termination Payments”);

 

(ii) subject to Section 5(f), the Executive shall retain his rights under Section 3(b) to receive a CLIA Waiver Bonus Payment in respect of any CLIA waiver received by the Company after the effective date of termination but only to the extent that the Company filed its original application in respect of such CLIA waiver during the term of the Executive’s employment or within sixty (60) days following the effective date of termination, it being understood and agreed that the Executive shall not have any right to receive a CLIA Waiver Bonus Payment in respect of any waiver for which the Company first files its application more than 60 days following the effective date of termination (such rights referenced in this subparagraph (ii) being referred to herein as the Surviving CLIA Waiver Bonus Rights”);

 

  1  

 

 

(iii) subject to Section 5(f), the Executive shall retain his rights under Section 3(c) to receive Liquidity Event Bonus payments (including in respect of any Liquidity Event that may occur following the effective date of termination) to the extent that such rights have vested under Section 3(c)(iii) as of the effective date of termination, it being understood and agreed that the Executive shall forfeit any such rights with respect to any future Liquidity Events to the extent that such rights have not then vested (such rights referenced in this subparagraph (iii), to the extent so vested and not forfeited, being referred to herein as the Surviving Liquidity Event Bonus Rights”);

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(vi) except as otherwise expressly provided in this Section 5(a), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.”

 

Except as expressly set forth in this Amendment, the Executive Employment Agreement remains unchanged and in full force and effect.

 

Dated: January 9, 2018

 

QUALIGEN, INC.  
   
By: /s/ Chris Lotz  
Name: Chris Lotz  
Title: VP/CFO  
   
/s/ Michael S. Poirier  
MICHAEL POIRIER  

 

  2  

 

 

Exhibit 10.2

 

EXECUTION VERSION

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into effective as of February 1, 2017 (the “Effective Date”), by and between Qualigen, Inc., a Delaware corporation with its principal office at 2042 Corte Del Nogal, Carlsbad, CA 92011 USA (the “Company”), and Christopher L. Lotz (the “Executive”), whose address is 5486 La Jolla Boulevard, La Jolla, CA 92037.

 

W I T N E S S E T H:

 

WHEREAS, the Company has engaged the Executive as its Vice President and Chief Financial Officer and desires to continue to obtain the benefits of the Executive’s knowledge, skill and ability in connection with managing the accounting, finance and certain other functions of the Company and to continue to employ the Executive as its Vice President and Chief Financial Officer on the terms and conditions hereinafter set forth; and

 

WHEREAS, the Executive desires to provide his services to the Company and to accept employment by the Company on the terms and conditions set forth in this Agreement, which supersedes all prior agreements, whether written or oral, including those under any previous employment agreement between the Executive and the Company;

 

NOW, THEREFORE, in consideration of the mutual promises set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1. Employment and Duties; Term.

 

(a) Subject to the terms and conditions hereinafter set forth, the Company hereby employs the Executive as its Vice President and Chief Financial Officer, and he shall have the duties and responsibilities customarily associated with such positions, including without limitation general responsibility for the management of the Company’s accounting, finance, human resources and information technology functions. The Executive shall report to the Company’s President and Chief Executive Officer. The Executive shall also perform such other duties and responsibilities as may be determined and directed by the Company’s President and Chief Executive Officer or by the Company’s Board of Directors (the “Board”), as long as such duties and responsibilities are generally consistent with those of a Vice President and Chief Financial Officer.

 

(b) The Executive shall serve as a director of the Company or any of its subsidiaries, if validly elected or appointed, and in such executive capacity or capacities with respect to any affiliate of the Company to which he may be elected or appointed, provided that such duties are consistent with those of a company’s vice president and chief financial officer. The Executive shall receive no additional compensation for services rendered pursuant to this Section 1(b).

 

(c) The Executive’s job location shall be in San Diego County, California, but this provision shall not preclude the Company from moving its headquarters to a location other than in San Diego County, California. Any such relocation by the Company or failure by the Executive to relocate shall not breach the terms of this Agreement.

 

 

 

 

(d) Unless terminated earlier pursuant to any of the provisions of Section 5 of this Agreement, this Agreement shall have an initial term (the “Initial Term”) of three (3) years, commencing as of February 1, 2017 and expiring on January 31, 2020. Following completion of the Initial Term, this Agreement shall automatically renew thereafter on a year-to-year basis for successive one-year periods (i) unless and until terminated by either party pursuant to any of the provisions of Section 5, or (ii) unless the Company or the Executive delivers to the other party written notice of non- renewal at least 90 days prior to the expiration of the Initial Term or any subsequent one-year term (in which event this Agreement shall then terminate upon the expiration of the Initial Term or such one-year extended term, as applicable). The Initial Term and the one-year extensions are collectively referred to herein as the “Term.”

 

2. Executive’s Performance.

 

(a) The Executive hereby accepts the employment contemplated by this Agreement. During the Term, the Executive shall devote substantially all of his business time to the performance of his duties under this Agreement, and he shall perform such duties diligently, in good faith and in a manner consistent with the best interests of the Company and applicable laws. During the Term, the Executive will not, without the prior written approval of the Board, serve or act as a shareholder (except for passive holdings of not more than one percent (1%) of the other entity’s outstanding stock), employee, agent, consultant, officer, director, partner, member, representative, lender or owner of any other business entity, nor (if it would require more than an insubstantial amount of business time or attention) of any non-profit entity.

 

(b) The Executive shall comply with all applicable governmental laws, rules and regulations and with the Company’s policies applicable to all employees of the Company.

 

3. Compensation and Other Benefits.

 

(a) Salary. For his services to the Company during the Term, the Company shall pay the Executive an annual salary (“Salary”) at the rate of $204,377 per year during the period from February 1 through June 30, 2017, and commencing as of July 1, 2017, at the rate of $225,000 per year. The Company shall make all Salary payments to the Executive less required taxes and other withholdings and otherwise in accordance with the Company’s general payroll practices and policies, provided that the Company shall pay installments of Salary to the Executive not less frequently than bi-weekly. The Executive’s Salary shall be reviewed at least annually by the Board or any compensation committee thereof and (i) may be increased from time to time in the sole discretion of the Board or any such compensation committee, and (ii) may otherwise be adjusted by mutual written agreement of the Company and the Executive.

 

(b) Potential Bonus Payments Based on Receipt of CLIA Waivers by Application.

 

(i) Subject to the following terms of this Section 3(b), the Company shall pay the Executive a cash bonus in the amount of $20,000 per assay for each of the first five (5) assays for which the Company, after the Effective Date, receives from the Food and Drug Administration (“FDA”) a Clinical Laboratory Improvement Amendment (or “CLIA”) waiver for use of the Company’s FastPack 2.0 System (each such bonus payment payable under this Section 3(b) being referred to herein as a “CLIA Waiver Bonus Payment”). Each of the Company and the Executive acknowledges that the Company either is seeking or presently intends to seek by application to the FDA a CLIA waiver for each of the following assays: (A) Vitamin D; (B) prostate-specific antigen (“PSA”); (C) testosterone; (D) thyroid-stimulating hormone (“TSH”); and (E) free thyroxine (“FT4”); provided, however, that the Executive further acknowledges that there is no guaranty that the Company will in fact apply for any such waivers, and that the assays for which the Company may apply for a CLIA waiver, if any, and the timing of such applications, are subject to change from time to time in the discretion of the Company. The maximum aggregate CLIA Waiver Bonus Payments that the Executive is eligible to receive under this Section 3(b) is $100,000.

 

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(ii) The Company shall pay any CLIA Waiver Bonus Payment due to the Executive under this Section 3(b), less any required taxes and other applicable withholdings, not later than ninety (90) days following the Company’s receipt of the applicable CLIA waiver for the specific assay. The rights of the Executive (if any) to receive a CLIA Waiver Bonus Payment in respect of a waiver received by the Company after the termination or expiration of this Agreement and the Executive’s employment hereunder shall be as set forth in the applicable provisions of Section 5.

 

(c) Potential Bonus Payments Upon the Occurrence of Liquidity Events.

 

(i) Subject to the terms and conditions set forth in this Section 3(c), upon and concurrent with the closing of any “Liquidity Event” (as defined below) involving the Company, the Company shall pay to the Executive a lump-sum cash bonus (a “Liquidity Event Bonus”) equal to one and one-half percent (1.5%) of the “Net Liquidity Event Proceeds” (as defined below) received in connection with the subject transaction. The Company shall pay any Liquidity Event Bonus due to the Executive under this Section 3(c) concurrently with the closing of the Liquidity Event.

 

(ii) For purposes of this Section 3(c), the following terms shall have the following meanings:

 

(A) “Liquidity Event” shall mean the occurrence of any of the following listed transactions involving the Company in which (1) the consideration paid consists of cash, marketable securities (which are debt or equity securities that are listed for trading on a national or international securities exchange and for which there is a reasonable public float to allow for even trading), or a combination of cash and marketable securities, and (2) such consideration is paid or distributed to holders of the Company’s outstanding capital stock as sale or merger consideration, dividends, distributions, liquidation preferences or distributions, repurchase or redemption proceeds, or on any other basis:

 

(i) the sale for value of all, substantially all or an otherwise material portion of the Company’s assets outside of the ordinary course of business;

 

(ii) any merger or consolidation of the Company with or into, or any other acquisition of the Company by, another corporation, partnership, limited liability company or other entity or person (excluding for this purpose, however, any merger or consolidation of the Company with or into another corporation or entity if the stockholders of the Company prior to the merger, consolidation or other transaction own 50% or more of the voting equity securities of the surviving entity immediately after the consummation of the merger, consolidation or other transaction); and

 

(iii) any recapitalization transaction involving the Company (including, without limitation, a leveraged recapitalization) in which the proceeds are distributed or paid out to holders of the Company’s capital stock.

 

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Each event comprising a Liquidity Event is intended to constitute a “change in ownership or effective control,” or a “change in the ownership of a substantial portion of the assets,” of the Company, as such terms are defined for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and “Liquidity Event” as used herein shall be interpreted consistently therewith.

 

(B) “Liquidity Event Proceeds” shall mean the net cash or value of marketable securities (or combination of cash and marketable securities) received by the Company and its stockholders from or in connection with a Liquidity Event (i) before the payment of the bonus provided for in this Section 3(c) and any other cash bonus due to any other executive officer of the Company in connection with the same Liquidity Event, but (ii) after payment of all expenses incurred by the Company in connection with the Liquidity Event transaction (including, without limitation, fees and expenses of attorneys, accountants, bankers and other financial advisors) and repayment of any indebtedness of the Company then due or secured by any property or assets sold, exchanged or otherwise disposed of a result of the transaction. In connection with any Liquidity Event, the Board shall determine the Liquidity Event Proceeds in good faith consistent with the provisions of this subparagraph (B).

 

(iii) Except as provided below in this subparagraph and in Section 5 of this Agreement, the Executive’s right to receive any Liquidity Event Bonus under this Section 3(c) shall vest ratably in one-third installments on each of February 1, 2018, February 1, 2019 and January 31, 2020, with full vesting to occur on January 31, 2020 (the “Full Vesting Date”); provided, however, that such vesting shall accelerate and the Executive’s right under this Section 3(c) to receive a Liquidity Event Bonus shall be deemed to be fully vested in respect of any Liquidity Event that occurs prior to the Full Vesting Date (but the ratable vesting schedule shall otherwise remain in effect with respect to any subsequent Liquidity Events). The rights of the Executive (if any) to receive a Liquidity Event Bonus (or portion thereof) in connection with any Liquidity Event occurring after the termination or expiration of this Agreement and the Executive’s employment hereunder shall be as set forth in the applicable provisions of Section 5.

 

(iv) For purposes of clarity, but subject to the provisions of subparagraph (v) below, it is possible under this Section 3(c) for there to be multiple Liquidity Events involving the Company over time, and for the Executive to receive Liquidity Event Bonuses under the provisions of this Section 3(c) in connection with each such Liquidity Event.

 

(v) Notwithstanding any other provision contained in this Agreement, the Executive’s rights to receive any Liquidity Event Bonus under this Section 3(c) shall terminate and be of no further force or effect following the occurrence of any Liquidity Event in connection with which (A) the Company is dissolved and liquidated, or (B) all then-outstanding shares of the Company’s capital stock are cancelled, redeemed or otherwise retired except in any such circumstance in which one or more outstanding classes or series of such shares are exchanged for or converted into new securities issued by the Company or any successor entity to the Company (by merger or otherwise), in which circumstance the Executive’s rights under this Section 3(c) shall remain in effect until the subsequent dissolution and liquidation of the Company or such successor or the cancellation, redemption or retirement of such new securities. A Liquidity Event described in this subparagraph (v) that, by these terms, results in the termination of the Executive’s rights under this Section 3(c) is referred to herein as a “Final Liquidity Event.” For purposes of clarity, the Company and the Executive acknowledge and agree that the Executive shall have the right to receive a Liquidity Event Bonus under this Section 3(c) in respect of a Final Liquidity Event, but not in respect of any Liquidity Event that may occur subsequent to the Final Liquidity Event.

 

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(vi) Notwithstanding any other provision of this Agreement, if the total amounts payable pursuant to this Section 3(c), together with any and all other payments to which the Executive may be entitled in connection with a Liquidity Event (or other similar event), would constitute an “excess parachute payment” (as defined in Section 280G of the Internal Revenue Code), the Executive shall receive the greater of: (i) the Liquidity Event Bonus due under this Section 3(c), less any excise tax imposed under Section 4999 of the Internal Revenue Code, or (ii) the largest amount which may be paid without any portion of such amount being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. For purposes of determining the largest amount payable, such payments shall be reduced in such order and manner as the Executive shall specify in writing to the Company; provided that any and all payments that are not “nonqualified deferred compensation” as defined for purposes of Section 409A of the Internal Revenue Code shall be reduced and eliminated before any payment of nonqualified deferred compensation is reduced or eliminated, and any reduction or elimination of payments that are nonqualified deferred compensation shall be made in reverse chronological order of their respective payment due dates. In the event there is a dispute among the parties regarding the extent to which payments must be reduced pursuant to this subparagraph (vi), such dispute shall be settled in accordance with Section 14(g) herein. No such disputed payment shall be made until the dispute is settled.

 

(d) Other Benefits. The Executive shall be eligible on the same basis as other executive officers and employees of the Company (and subject to any other eligibility requirements, cost sharing and other terms and conditions) to participate in and receive benefits under any other bonus plan or any equity or long-term incentive, deferred compensation, retirement, savings, group insurance (including, without limitation, medical, dental, life, accident and disability insurance), group health or other welfare or benefit plan or program as may be approved by the Board of the compensation committee thereof and offered to the Company’s executive officers and employees generally; provided, however, that the severance benefits (if any) payable under Section 5 of this Agreement shall be in lieu of (and not in addition to) any severance benefits that would otherwise be due to the Executive under any severance policy or plan otherwise in effect at the Company upon termination of the Executive’s employment; and provided further that the Company shall not have any obligation to maintain any particular plan or program indefinitely or for any specific period of time. In addition, the Executive shall be entitled to four (4) weeks paid vacation per full year of service, in accordance with and subject to the Company’s vacation accrual plan and policies.

 

4. Reimbursement of Expenses. The Company shall reimburse the Executive, upon presentation of proper expense statements, for all authorized, ordinary and necessary out-of-pocket expenses reasonably incurred by Executive during the Term in connection with the performance of his services pursuant to this Agreement in accordance with the Company’s expense reimbursement policy. .

 

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5. Termination of Employment.

 

(a) Resignation by the Executive. The Executive may terminate this Agreement and his employment hereunder at any time by delivery of at least thirty (30) days’ advance written notice to the Company. In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(a):

 

(i) the Company shall (A) pay the Executive an amount in cash equal to the Executive’s accrued but unpaid Salary and vacation pay through the date of termination, (B) pay the Executive an amount in cash equal to any CLIA Waiver Bonus and any Liquidity Event Bonus that has been earned by the Executive under Section 3 hereof prior to the date of termination but that remains unpaid as of such date, and (C) promptly reimburse any expenses incurred by the Executive through the date of termination and for which the Executive is entitled to receive reimbursement under Section 4 hereof in accordance with the Company’s expense reimbursement policies (all such payments referenced in this subparagraph (i) being collectively referred to in this Agreement as the “Base Termination Payments”);

 

(ii) subject to Section 5(f), the Executive shall retain his rights under Section 3(b) to receive a CLIA Waiver Bonus Payment in respect of any CLIA waiver received by the Company after the effective date of termination but only to the extent that the Company filed its original application in respect of such CLIA waiver during the term of the Executive’s employment or within sixty (60) days following the effective date of termination, it being understood and agreed that the Executive shall not have any right to receive a CLIA Waiver Bonus Payment in respect of any waiver for which the Company first files its application more than 60 days following the effective date of termination (such rights referenced in this subparagraph (ii) being referred to herein as the “Surviving CLIA Waiver Bonus Rights”);

 

(iii) subject to Section 5(f), the Executive shall retain his rights under Section 3(c) to receive Liquidity Event Bonus payments (including in respect of any Liquidity Event that may occur following the effective date of termination) to the extent that such rights have vested under Section 3(c)(iii) as of the effective date of termination, it being understood and agreed that the Executive shall forfeit any such rights with respect to any future Liquidity Events to the extent that such rights have not then vested (such rights referenced in this subparagraph (iii), to the extent so vested and not forfeited, being referred to herein as the “Surviving Liquidity Event Bonus Rights”);

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(vi) except as otherwise expressly provided in this Section 5(a), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(b) Non-Renewal as of End of Initial or Subsequent Term. Either the Company or the Executive may terminate this Agreement and the Executive’s employment hereunder effective upon expiration of the Initial Term or any succeeding term by written notice of non-renewal delivered to the other party at least ninety (90) days’ prior to the applicable expiration date of the then-current term. In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(b):

 

(i) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

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(ii) subject to Section 5(f), the Executive shall retain his Surviving CLIA Waiver Bonus Rights (as defined in Section 5(a)(ii));

 

(iii) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii));

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(vi) except as otherwise expressly provided in this Section 5(b), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(c) Death or Disability of the Executive. This Agreement and the Executive’s employment shall terminate immediately upon the death of the Executive. In addition, this Agreement and Executive’s employment may be terminated by the Company effective upon delivery of written notice to the Executive in the event of the Executive’s Disability. For purposes of this Agreement, the term “Disability” shall mean the Executive’s inability to perform his duties hereunder as Vice President and Chief Financial Officer of the Company, as reasonably determined by the Board, as a result of prolonged absence from work for health reasons or physical or mental disability, illness or incapacity for a continuous period of ninety (90) days, or for shorter periods aggregating four (4) months in any twelve (12) month period.

 

In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(c):

 

(i) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

(ii) subject to Section 5(f), the Executive shall retain his Surviving CLIA Waiver Bonus Rights (as defined in Section 5(a)(ii));

 

(iii) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii)), provided that for purposes of this subparagraph (iii), all vesting of the Executive’s rights under Section 3(c)(iii) shall be accelerated and the Executive shall be deemed to be fully vested in such rights effective as of the date of the Executive’s death or Disability;

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

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(vi) except as otherwise expressly provided in this Section 5(c), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(d) Termination by the Company for “Cause.”

 

(i) The Company, effective upon delivery of written notice to the Executive, may terminate this Agreement and the Executive’s employment for “Cause.” For purposes of this Agreement, the term “Cause” shall mean any of the following:

 

(A) a material breach by the Executive of any of Sections 6, 7 or 8 of this Agreement;

 

(B) a material breach by the Executive of any other provision of this Agreement, if such material breach (if susceptible to cure) has continued uncured for a period of at least fifteen (15) days following delivery by the Company to the Executive of written notice of such material breach;

 

(C) fraud, dishonesty or other breach of trust whereby the Executive obtains personal gain or benefit at the expense of or to the detriment of the Company or any of the Company’s subsidiaries or affiliates;

 

(D) a conviction of or plea of nolo contendere or similar plea by the Executive of any felony;

 

(E) a conviction of or plea of nolo contendere or similar plea by of any other crime involving theft, misappropriation of property, dishonesty or moral turpitude;

 

(F) a willful and material violation of applicable law by the Executive in connection with the performance of his duties hereunder;

 

(G) chronic or repeated substance abuse by the Executive, or any other use by the Executive of alcohol, drugs or illegal substances in such a manner as to interfere with the performance of his material duties hereunder; or

 

(H) failure to comply with the lawful directions of the President and Chief Executive Officer or of the Board which are otherwise consistent with the terms of this Agreement, which failure has continued for a period of at least ten (10) days after delivery by the Company to the Executive of written demand by the Board.

 

Termination of this Agreement by the Company for “Cause” shall be without prejudice to any other right or remedy to which the Company may be entitled at law, in equity or otherwise under this Agreement.

 

(ii) In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to the preceding Section 5(d)(i):

 

(A) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

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(B) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii)) to the extent then vested;

 

(C) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(D) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(E) except as otherwise expressly provided in this Section 5(d)(ii), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(e) Termination by the Company Without “Cause.” The Company, in the sole discretion of the Board and effective upon delivery of not less than thirty (30) days’ advance written notice to the Executive, may terminate this Agreement and the Executive’s employment hereunder at any time and for any reason, including without “Cause.” In the event that the Company terminates the Executive’s employment under this Section 5(e):

 

(i) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

(ii) subject to Section 5(f), the Executive shall retain his Surviving CLIA Waiver Bonus Rights (as defined in Section 5(a)(ii));

 

(iii) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii)), provided that for purposes of this subparagraph (iii), all vesting of the Executive’s rights under Section 3(c)(iii) shall be accelerated and the Executive shall be deemed to be fully vested in such rights effective as of the date of the Executive’s death or Disability;

 

(iv) subject to Section 5(f), conditioned upon receipt by the Company of a general release in form reasonably acceptable to the Company and expiration of any revocation period applicable to such release without the Executive having revoked such release, and in lieu of any severance benefits that may otherwise be payable under any other severance plan or policy of the Company, the Company (A) shall continue to pay to the Executive as severance his Salary at the rate then in effect on the date of termination for a period of 180 days following the date of termination, such payments to be made by the Company at the times, subject to applicable withholdings and otherwise in accordance with the Company’s general payroll practices and policies, and (B) pay or reimburse the Executive for the cost of COBRA continuation medical and dental insurance coverage for the Executive for the 180-day severance period (less any required taxes or withholdings); provided, however, that if the Company determines in its sole discretion that it cannot provide the foregoing COBRA benefits without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable lump-sum payment in an amount equal to the monthly (or then remaining) COBRA premium that Executive would be required to pay to continue his group health coverage for himself as in effect on the termination date (which amount shall be based on the premium for the first month of COBRA coverage) until the date that is 180 days following the Executive’s date of termination. Notwithstanding the foregoing, any severance payments that otherwise would be required to be made under this subparagraph (iv) within forty-five (45) days following the Executive’s date of termination shall instead be made on the Company’s first normal payroll date that is more than forty-five (45) days following the Executive’s date of termination; and

 

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(v) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements; and

 

(vi) except as otherwise expressly provided in this Section 5(e), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(f) Offset for Material Breaches of Restrictive Covenants. If the Executive materially breaches any provision contained in either Section 6 or Section 7 of this Agreement, the Company, from the date of such breach going forward, shall no longer be obligated to make any payments or reimbursements to the Executive or provide any benefits to the Executive under this Section 5 in respect of any Surviving CLIA Waiver Bonus Rights, any Surviving Liquidity Event Bonus Rights, and any rights to receive severance of COBRA benefits under Section 5(e)(iv).

 

6. Trade Secrets and Proprietary Information.

 

(a) Executive recognizes and acknowledges that the Company, through the expenditure of considerable time and money, has developed and will continue to develop in the future information concerning customers, clients, marketing, patents, products, services, business, research and development activities and operational methods of the Company and its customers or clients, contracts, financial or other data, technical data or any other confidential or proprietary information possessed, owned or used by the Company, the disclosure of which could or does have a material adverse effect on the Company, its business, any business it proposes to engage in, its operations, financial condition or prospects and that the same are confidential and proprietary and considered “Confidential Information” of the Company for the purposes of this Agreement. In consideration of his employment, the Executive agrees that he will not, during or after the Term, without the consent of the Board make any disclosure of Confidential Information now or hereafter possessed by the Company, to any person, partnership, corporation or entity either during or after the term here of, except that nothing in this Agreement shall be construed to prohibit Executive from using or disclosing such information (i) if such disclosure is necessary in the normal course of the Company’s business in accordance with Company policies or instructions or authorization from the Board, (ii) such information shall become public knowledge other than by or as a result of disclosure by a person not having a right to make such disclosure, (iii) complying with legal process as provided in Section 6(b) of this Agreement, or (iv) subsequent to the Term, if such information shall have either been developed by Executive independent of any of the Company’s confidential or proprietary information or been disclosed to Executive by a person not subject to a confidentiality agreement with or other obligation of confidentiality to the Company. For the purposes of Sections 6, 7 and 8 of this Agreement, the term “Company” shall include the Company, its parent, its subsidiaries and affiliates.

 

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(b) In the event that any Confidential Information is required to be produced by Executive pursuant to legal process, the Executive shall give the Company notice of such legal process within a reasonable time, but not later than ten business days prior to the date such disclosure is to be made, unless Executive has received less notice, in which event the Executive shall immediately notify the Company. The Company shall have the right to object to any such disclosure, and if the Company objects (at the Company’s cost and expense) in a timely manner, the Executive shall not make any disclosure until there has been a court determination on the Company’s objections. If disclosure is required by a court order, final beyond right of review, or if the Company does not object to the disclosure, the Executive shall make disclosure only to the extent that disclosure is required by the court order, and the Executive will exercise reasonable efforts to obtain reliable assurances that confidential treatment will be accorded the Confidential Information.

 

(c) The Executive shall, upon expiration or termination of the Term, or earlier at the request of the Company, turn over to the Company all documents, papers, computer disks or other material in the Executive’s possession or under the Executive’s control which may contain or be derived from Confidential Information. To the extent that any Confidential Information is on Executive’s hard drive or other storage media, he shall, upon the request of the Company, cause such information to be erased from his computer disks and all other storage media.

 

7. Covenant Regarding Improper Use of Confidential Information.

 

(a) During the period from the date of this Agreement until one (1) year following the date on which Executive’s employment is terminated, Executive will not, directly or indirectly:

 

(i) Utilize the Company’s Confidential Information to persuade or attempt to persuade any person or entity which is or was a customer, client or supplier of the Company to cease doing business with the Company, or to reduce the amount of business it does with the Company (the terms “customer” and “client” as used in this Section 7 to include any potential customer or client to whom the Company submitted bids or proposals, or with whom the Company conducted negotiations, during the term of Executive’s employment or during the twelve (12) months preceding the termination of his employment);

 

(ii) Utilize the Company’s Confidential Information to solicit for himself or any other person or entity other than the Company the business of any person or entity which is a customer or client of the Company, or was a customer or client of the Company within one (1) year prior to the termination of his employment; or

 

(iii) Persuade or attempt to persuade any employee of the Company, or any individual who was an employee of the Company during the one (1) year period prior to the termination of this Agreement, to leave the Company’s employ, or to become employed by any person or entity other than the Company.

 

(b) The Executive acknowledges that the restrictive covenants (the “Restrictive Covenants”) contained in Sections 6 and 7 of this Agreement are a condition of his employment and are reasonable and valid in geographical and temporal scope and in all other respects. If any court or arbitrator determines that any of the Restrictive Covenants, or any part of any of the Restrictive Covenants, is invalid or unenforceable, the remainder of the Restrictive Covenants and parts thereof shall not thereby be affected and shall remain in full force and effect, without regard to the invalid portion. If any court or arbitrator determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable because of the geographic or temporal scope of such provision, such court or arbitrator shall have the power to reduce the geographic or temporal scope of such provision, as the case may be, and, in its reduced form, such provision shall then be enforceable.

 

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8. Ownership of Intellectual Property.

 

(a) “Inventions” means all inventions, ideas, discoveries, developments, methods, data, information, improvements, original works, know-how, including, but not limited to, algorithms, technology, trade secrets, processes, codes and hardware (whether or not reduced to practice and whether or not protectable under the patent, copyright, trade secrecy or similar laws of the United States, the Peoples’ Republic of China or any applicable foreign country which:

 

(i) relate to the Company’s business at the time of conception or reduction to practice or actual or demonstrably anticipated research or development of Company that were conceived, created or developed by the Executive (whether alone or with others, whether or not during working hours or on the Company’s premises or whether or not using material or property provided by the Company) during the Term or having conceived, created or developed prior to the Term while Executive was employed by the Company; and/or

 

(ii) were conceived, created or developed by the Executive (whether alone or with others) during the Term, even if having possibly been conceived, created or developed prior to the Term but completed while in the employ of the Company, or which result from any work performed by the Executive for Company.

 

(b) All Inventions are, will be, and shall constitute “works-for-hire” and the exclusive property of the Company, and the Company may use and exploit them without restriction or additional compensation to the Executive. The Executive shall promptly and fully disclose to the Company any and all Inventions. The Executive shall maintain complete written records of all Inventions and of all work or investigations done or carried out by the Executive at all stages thereof, which records shall be the exclusive property of the Company and will be treated as Confidential Information for all purposes of this Agreement.

 

(c) The Executive hereby irrevocably assigns and transfers to the Company, its successors, assigns or Affiliates, as the case may be, all of Executive’s right, title and interest in and to any Inventions without additional consideration therefor from the moment of their creation or inception, to be held and enjoyed by the Company, its successors, assigns or Affiliates, as the case may be, to the full extent of the term for which any intellectual property protection may be granted and as fully as the same would have been held by Executive had this Agreement, or such assignment or transfer not been made. In addition to the foregoing assignments of Inventions to the Company, Executive hereby irrevocably assigns and transfers to the Company: (i) all worldwide patents, trademarks, copyrights, mask works, trade secrets, applications for the foregoing and other intellectual property rights in any Inventions; and (ii) any and all “Moral Rights” (as defined below) that Executive may have in or with respect to any Inventions. Executive hereby forever waives and agrees never to assert any and all Moral Rights Executive may have in or with respect to any such Inventions, even after the termination of Executive’s employment.

 

(d) “Moral Rights” means any right to claim authorship of any Inventions, or to withdraw from circulation or control the publication or distribution of any Inventions, and any similar right, existing under judicial or statutory law of any country in the world, or under any treaty, regardless of whether or not such right is denominated or generally referred to as a moral right.

 

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(e) Executive agrees to cooperate fully in obtaining patent, copyright or other proprietary protection for such Inventions, all in the name of the Company, its successors, assigns or Affiliates, as the case may be, and at the Company’s cost and expense, and shall execute and deliver all requested applications, assignments and other documents and take such other actions as the Company, its successors, assigns or Affiliates, as the case may be, shall request in order to perfect, enforce and exploit the Company’s, its successors,’ assigns’ or Affiliates,’ as the case may be, right in the Inventions (including transfer of possession to the Company, its successors, assigns or Affiliates, as the case may be, of all Inventions embodied in tangible materials), including granting Company a non-revocable, royalty- free license in any pre-existing works. Executive irrevocably designates and appoints the Company and its duly authorized officers and agents as his agents and attorneys-in-fact to execute and file any and all applications and other necessary documents and to do all other lawfully permitted acts to further perfect and enforce the Company’s, its successors,’ assigns’ or Affiliates,’ (as the case may be), right in the Inventions and to further the prosecution, issuance or enforcement of patents, copyrights, trade secrets and similar protections related to the Inventions with the same legal force and effect as he had executed them himself. The Executive shall receive no additional compensation for complying with Executive’s obligations under this Section 8. The Executive agrees that, to the extent this Agreement shall be construed in accordance with any laws that limit the assignability to the Company, its successors, assigns or Affiliates, as the case may be, of the Inventions, this Agreement shall be interpreted not to apply to any Invention which a court rules or the Company agrees is subject to such state limitation.

 

California Labor Code § 2870 provides as follows:

 

a. Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

 

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer.

 

(2) Result from any work performed by the employee for his employer.

 

b. To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

 

The assignment of Inventions under this Agreement, accordingly, shall not extend to those items set forth in Labor Code § 2870.

 

(f) Any copyrightable work created by the Executive in connection with or during the performance of his employment duties, whether published or unpublished, shall be the property of the Company as author and owner of copyright in such work.

 

(g) The Executive warrants and represents that there are no Inventions (whether patentable or not), patents, trade secrets, trademarks, trade names, copyrights, or other intellectual property owned by him prior to entering into employment with the Company hereunder, and that he has not executed and will not execute any document or instrument in conflict herewith.

 

(h) An “Affiliate” of the Company shall mean any person or entity which controls, is controlled by or is under common control with the Company.

 

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9. Injunctive Relief. The Executive agrees that any violation or threatened violation of any of the provisions of Sections 6, 7 or 8 of this Agreement will cause immediate and irreparable harm to the Company for which money damages would not be an adequate remedy. In the event of any breach or threatened breach of any of said provisions, the Executive consents to the entry of preliminary and permanent injunctions by a court of competent jurisdiction prohibiting the Executive from any violation or threatened violation of such provisions and compelling the Executive to comply with such provisions (without posting a bond or other security). This Section 9 shall not affect or limit, and the injunctive relief provided in this Section 9 shall be in addition to, any other remedies available to the Company at law or in equity or in arbitration for any such violation by the Executive. Subject to Section 7(b) of this Agreement, the provisions of Sections 6, 7 and 8 of this Agreement and this Section 9 shall survive any termination of this Agreement and the Executive’s employment.

 

10. Indemnification. The Company shall enter into a separate agreement with the Company to provide the Executive with payment of legal fees and indemnification to the maximum extent permitted by the Company’s Certificate of Incorporation, By-Laws, and Delaware law. The Company shall also provide officers and directors liability insurance of not less than $5,000,000, and the Company shall be responsible for any deductibles under such policy.

 

11. Key Man Insurance. The Executive will cooperate with the Company in connection with any application by the Company to obtain key-man life insurance on his life, on which the Company will be the beneficiary. Such cooperation shall include the execution of any applications or other documents requiring his signature and submission of insurance applications and submission to a physical examination.

 

12. Code Section 409A Compliance.

 

(a) This Agreement is intended to comply with the provisions of Section 409A of the Code, and, to the extent practicable, this Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder. Terms used in this Agreement shall have the meanings given such terms under Section 409A of the Code if, and to the extent required, in order to comply with Section 409A of the Code.

 

(b) The payment schedules provided hereunder are intended to be exempt from or to comply with the requirements of Section 409A of the Code and shall be interpreted consistently therewith.

 

(c) Any payments under Section 5 shall be made or shall commence only after the Executive has a “separation from service” with the Company, as defined under Section 409A of the Code and the guidance issued thereunder.

 

(d) Notwithstanding anything to the contrary in this Agreement, to the extent required to avoid additional taxes and interest charged under Section 409A of the Code, if any of the Company’s stock is publicly traded and the Executive is deemed to be a “specified employee” as determined by the Company for purposes of Section 409A(a)(2)(B) of the Code, the Executive agrees that any non-qualified deferred compensation payments due to him under this Agreement in connection with a termination of employment that would otherwise have been payable at any time during the six (6)-month period immediately following such termination of employment shall not be paid prior to, and shall instead be payable in a lump sum on the first day of the seventh (7th) month following the Executive’s separation from service (or, if the Executive dies during such period, within 30 days after the Executive’s death).

 

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(e) Each payment of termination benefits under Section 5 of this Agreement, including, without limitation, each installment payment, shall be considered a separate payment, as described in Treasury Regulations Section 1.409A-2(b)(2), for purposes of Section 409A of the Code.

 

(f) Neither the Company nor the Executive shall have the right to accelerate or defer the delivery of any payment under this Agreement that constitutes “nonqualified deferred compensation” subject to Section 409A of the Code, except to the extent specifically permitted or required by Section 409A of the Code.

 

(g) If the Executive is entitled to be paid or reimbursed for any expenses under this Agreement, and such payments or reimbursements are includible in the Executive’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of the Executive to reimbursement of expenses under Section 4 or any other Section of this Agreement shall be subject to liquidation or exchange for another benefit.

 

(h) Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

(i) Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” subject to Section 409A of the Code be subject to offset, counterclaim or recoupment by any other amount payable to the Executive unless otherwise permitted by Section 409A of the Code.

 

13. Certain Representations, Warranties and Covenants of the Parties.

 

(a) The Executive hereby represents and warrants to the Company that: (i) the execution, delivery and performance of this Agreement by the Executive do not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Executive is a party or any judgment, order or decree to which the Executive is subject, (ii) this Agreement constitutes the legal, valid and binding obligation of the Executive, enforceable in accordance with its terms, and (iii) the Executive has not and will not take any action that will conflict with, violate or cause a breach of any noncompete, nonsolicitation or confidentiality agreement to which the Executive is a party or by which the Executive is bound. The Executive hereby acknowledges and represents that he has carefully reviewed this Agreement, that he has consulted with independent legal counsel regarding his rights and obligations under this Agreement (or, after carefully reviewing this Agreement, was given the opportunity to, but has freely decided not to, consult with independent legal counsel), and that he fully understands the terms and conditions contained herein.

 

(b) The Company represents, warrants and agrees that it has full power and authority to execute and deliver this Agreement and perform its obligations hereunder.

 

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14. Miscellaneous.

 

(a) Any notice, consent or communication required under the provisions of this Agreement shall be given in writing and sent or delivered by hand, overnight courier or messenger service, against a signed receipt or acknowledgment of receipt, or by registered or certified mail, return receipt requested, or telecopier, email or similar means of communication (collectively “electronic communications”) if receipt is acknowledged or if transmission is confirmed by mail as provided in this Section 13(a), to the parties at their respective addresses set forth at the beginning of this Agreement or by electronic delivery to the telecopier or email (if any) set forth on the signature page of this Agreement, with notice to the Company being sent to the attention of the Chief Executive Officer of the Company. Either party may, by like notice, change the person, address or electronic communications number or address to which notice is to be sent. If no telecopier number is provided for either party, notice to such party shall not be sent by telecopier.

 

(b) This Agreement shall in all respects be construed and interpreted in accordance with, and the rights of the parties shall be governed by, the laws of the State of California applicable to agreements executed and to be performed wholly in such state without regard to principles of conflicts of laws, except as provided in the first sentence of Section 10.

 

(c) If any term, covenant or condition of this Agreement or the application thereof to any party or circumstance shall, to any extent, be determined to be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law, and any court or arbitrator having jurisdiction may reduce the scope of any provision of this Agreement, including the geographic and temporal restrictions set forth in Section 8 of this Agreement, so that it complies with applicable law.

 

(d) This Agreement constitutes the entire agreement of the Company and the Executive as to the subject matter hereof, superseding as of the Effective Date all prior or contemporaneous written or oral understandings or agreements, with respect to the subject matter covered in this Agreement. This Agreement may not be modified or amended, nor may any right be waived, except by a writing which expressly refers to this Agreement, states that it is intended to be a modification, amendment or waiver and is signed by both parties in the case of a modification or amendment or by the party granting the waiver. No course of conduct or dealing between the parties and no custom or trade usage shall be relied upon to vary the terms of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

 

(e) During and after the Executive’s employment, the Executive shall cooperate with the Company and its subsidiaries and affiliates in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by the Company or its subsidiaries or affiliates (including the Executive being available to the Company and its subsidiaries and affiliates upon reasonable notice for interviews and factual investigations, appearing at the Company’s or any subsidiary’s or affiliate’s reasonable request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company and its subsidiaries and affiliates all pertinent information and turning over to the Company and its subsidiaries and affiliates all relevant documents that are or may come into the Executive’s possession, all at times and on schedules as reasonably agreed to between the Company and the Executive. In the event the Company or any of its subsidiaries or affiliates requires the Executive’s cooperation in accordance with this subparagraph, the Company shall reimburse the Executive for the Executive’s reasonable out-of-pocket expenses incurred in connection therewith (including lodging and meals, upon submission of receipts and compliance with the Company’s expense reimbursement policies).

 

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(f) This Agreement is personal in nature and neither of the parties hereto will, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder; provided, however, that the Company may, without the Executive’s consent, assign its rights and obligations hereunder to (i) any affiliate of the Company or (ii) any subsequent purchaser of the Company or any of its businesses or any material portion of its assets (whether such sale is structured as a sale of stock, sale of assets, merger, recapitalization or otherwise), in each case, in accordance with and as expressly in this Agreement. Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by the Executive’s will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer by the Executive contrary to this subparagraph (e), the Company will have no liability to pay any amount so attempted to be assigned, transferred or delegated. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that executes and delivers the agreement provided for in this subparagraph (e) or that otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

 

(g) Except for actions, suits, or proceedings taken pursuant to or under Section 6, 7, 8 or 9 of this Agreement, any dispute concerning this Agreement or the rights of the parties hereunder shall be submitted to binding arbitration in San Diego County, California before a single arbitrator associated with JAMS (or other mutually agreeable alternative dispute resolution service) in accordance with its Employment Arbitration Rules & Procedures and subject to JAMS Policy on Employment Arbitration Minimum Standards of Procedural Fairness (the “JAMS Rules”), a copy of which Rules can be found at www.jamsadr.com or obtained from the Company’s human resources department. The arbitration provisions of this Agreement will be governed by the Federal Arbitration Act (9 U.S.C. Section 1 et seq.). In all other respects, this provision will be construed in accordance with the laws of the State of California, without reference to conflicts of law principles. Included within this provision are any claims based on common law or violation of local, state or federal law, such as claims for discrimination or civil rights violations under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the California Family Rights Act, the California Fair Employment and Housing Act, the California Labor Code, or similar statutes. However, claims for unemployment benefits and workers’ compensation claims will not be subject to arbitration. In addition, either party may seek provisional remedies pursuant to California Code of Civil Procedures Section 1281.8(b). There will be no right or authority for any claim subject to arbitration to be heard or arbitrated on a class or collective basis, as a private attorney general, or in a representative capacity on behalf of any other person or entity. If there is a dispute as to whether an issue or claim is arbitrable, the arbitrator will have the authority to resolve any such dispute, including claims as to fraud in the inducement or execution, or claims as to validity, construction, interpretation or enforceability.

 

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A neutral arbitrator with experience in arbitrating employment disputes will be chosen by mutual agreement of the parties; however, if the parties are unable to agree upon an arbitrator within a reasonable period of time (not to exceed thirty (30) days after the delivery of any demand for arbitration hereunder), then a neutral arbitrator will be appointed in accordance with the arbitrator selection procedure set forth in the JAMS Rules (or the rules of the selected alternative dispute resolution service). The issue(s) submitted to the arbitrator shall be set forth in each party’s request for arbitration. The arbitrator selected shall have the authority to grant Executive or the Company or both all remedies otherwise available by law; provided, however, that the arbitrator shall not have the power or authority to aware punitive or exemplary damages or to grant injunctive or equitable relief. The arbitrator may not consolidate more than one person’s claim, and may not otherwise preside over any form of a representative, collective or class proceeding. The parties will be permitted to conduct discovery as provided by California Code of Civil Procedure Section 128.05. The arbitration shall provide (i) for written discovery and depositions adequate to give the parties access to documents and witnesses that are essential to the dispute and (ii) for a written decision by the arbitrator that includes the essential findings and conclusions upon which the decision is based. The arbitrator’s decision must be issued no later than thirty (30) days after a dispositive motion is heard and/or an arbitration hearing has been completed. The award of the arbitrator shall be final, binding and conclusive on all parties, and judgment on such award may be entered in any court having jurisdiction.

 

The parties shall each bear their own costs and attorneys’ fees incurred in conducting the arbitration. Where Executive is asserting a claim under a state or federal statute prohibiting discrimination in employment, a public policy claim arising under a statute, or where otherwise required by applicable law to achieve the enforceability of this Agreement, the Company will pay the costs and fees charged by the arbitrator and JAMS (or other mutually selected alternative dispute resolution service) to the extent such costs would not otherwise be incurred in a court proceeding. In all other circumstances, the Executive and the Company will split equally the fees and administrative costs charged by the arbitrator and JAMS. To the extent permissible under the law, however, and following the arbitrator’s ruling on the matter, the arbitrator may rule that the arbitrator’s fees and costs be distributed in an alternative manner. If any party prevails on a statutory claim and the statute provides that the prevailing party is entitled to payment of attorneys’ fees, the arbitrator shall award reasonable fees and costs to the prevailing party based on the same standard as such fees and costs would be awarded if such claim had been asserted in state or federal court.

 

This mutual arbitration agreement does not prohibit or limit either Party’s right to seek a provisional remedy pursuant to California Code of Civil Procedures Section 1281.8(b), pending the resolution of a dispute by arbitration. The arbitrator shall have no authority to add to or to modify the terms described in this Agreement (including this subparagraph) or the Company’s employee handbook, shall apply all applicable law, and otherwise shall have no lesser and no greater remedial authority than would a court of law resolving the same claim or controversy.

 

AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

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(h) Notwithstanding the provisions of Section 13(g) of this Agreement, with respect to any claim for injunctive relief or other equitable remedy pursuant to Section 9 of this Agreement or any claim to enforce an arbitration award or to compel arbitration, each of the parties hereby (i) consents to the exclusive jurisdiction of the federal and state courts sitting in San Diego County, California, (ii) agrees that any process in any action commenced in such court under this Agreement may be served upon it or him personally, either (A) by certified or registered mail, return receipt requested, or by an overnight courier service which obtains evidence of delivery, with the same full force and effect as if personally served upon him in San Diego County, California, or (B) by any other method of service permitted by law, and (iii) waives any claim that the jurisdiction of any such court is not a convenient forum for any such action and any defense of lack of in personam jurisdiction with respect thereof.

 

(i) This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee or, if there be no such designee, to the Executive’s estate.

 

(j) The headings in this Agreement are for convenience of reference only and shall not affect in any way the construction or interpretation of this Agreement.

 

(k) The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party hereto.

 

(l) Notwithstanding any termination of the Executive’s employment under this Agreement, Sections 6 through 14 hereof shall survive and continue in full force until the performance of the obligations thereunder, if any, in accordance with their respective terms.

 

(m) No delay or omission to exercise any right, power or remedy accruing to either party hereto shall impair any such right, power or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof. No waiver of any breach hereof shall be deemed to be a waiver of any other breach hereof theretofore or thereafter occurring. Any waiver of any provision hereof shall be effective only to the extent specifically set forth in an applicable writing. All remedies afforded to either party under this Agreement, by law or otherwise, shall be cumulative and not alternative and shall not preclude assertion by such party of any other rights or the seeking of any other rights or remedies against any other party.

 

(n) This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. This Agreement and any agreement or instrument entered into in connection with this Agreement, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or by e-mail attachment (e.g., PDF), shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or e-mail to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or e-mail as a defense to the formation of a contract and each such party forever waives any such defense.

 

[Signatures on following page]

 

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

 

Telecopier and Email Signatures

 

  “Company”
     
  QUALIGEN, INC.
     
  By: /s/ Michael S. Poirier
    Michael S. Poirier, President and Chief Executive Officer
     
  “Executive”
   
  /s/ Christopher L. Lotz
  Christopher L. Lotz

 

[Signature Page of Executive Employment Agreement]

 

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AMENDMENT OF EXECUTIVE EMPLOYMENT AGREEMENT

 

The Executive Employment Agreement dated February 1, 2017 between Qualigen, Inc. and Christopher L. Lotz is hereby amended to change Section 5(a) thereof to read in full as follows:

 

“Resignation by the Executive. The Executive may terminate this Agreement and his employment hereunder at any time by written resignation. A resignation for Good Reason shall be treated hereunder as if it were a termination by the Company without Cause and shall have the effects stated in Section 5(e) with regard to termination without Cause, rather than the effects stated in the sub-subsections of this Section 5(a).

 

“Good Reason” means the occurrence of any of the following circumstances, without the Executive’s express consent: the Executive resigns due to (i) a material reduction of the Executive’s title or authority, (ii) a material reduction in the Executive’s salary or benefits (other than a reduction that generally applies to the officers at the Executive’s level in the Company or, as applicable, after a transaction in which the Company or substantially all its assets is acquired, in the successor entity at that time), (iii) any material breach of this Agreement by the Company which is not cured within 30 days after written notice by the Executive; or (iv) a change of the principal non-temporary location in which the Executive is required to perform the Executive’s services to any location exceeding 35 miles from Carlsbad, California. In no event shall a resignation be considered to be with Good Reason unless the resignation occurs after but within 30 days after the initiation of the item of Good Reason.

 

Termination of this Agreement and of the Executive’s employment by the Executive for Good Reason shall be without prejudice to any other right or remedy to which the Executive may be entitled at law, in equity or otherwise under this Agreement.

 

In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(a) (i.e., resignation without Good Reason):

 

(i) the Company shall (A) pay the Executive an amount in cash equal to the Executive’s accrued but unpaid Salary and vacation pay through the date of termination, (B) pay the Executive an amount in cash equal to any CLIA Waiver Bonus and any Liquidity Event Bonus that has been earned by the Executive under Section 3 hereof prior to the date of termination but that remains unpaid as of such date, and (C) promptly reimburse any expenses incurred by the Executive through the date of termination and for which the Executive is entitled to receive reimbursement under Section 4 hereof in accordance with the Company’s expense reimbursement policies (all such payments referenced in this subparagraph (i) being collectively referred to in this Agreement as the “Base Termination Payments”);

 

(ii) subject to Section 5(f), the Executive shall retain his rights under Section 3(b) to receive a CLIA Waiver Bonus Payment in respect of any CLIA waiver received by the Company after the effective date of termination but only to the extent that the Company filed its original application in respect of such CLIA waiver during the term of the Executive’s employment or within sixty (60) days following the effective date of termination, it being understood and agreed that the Executive shall not have any right to receive a CLIA Waiver Bonus Payment in respect of any waiver for which the Company first files its application more than 60 days following the effective date of termination (such rights referenced in this subparagraph (ii) being referred to herein as the “Surviving CLIA Waiver Bonus Rights”);

 

1

 

 

(iii) subject to Section 5(f), the Executive shall retain his rights under Section 3(c) to receive Liquidity Event Bonus payments (including in respect of any Liquidity Event that may occur following the effective date of termination) to the extent that such rights have vested under Section 3(c)(iii) as of the effective date of termination, it being understood and agreed that the Executive shall forfeit any such rights with respect to any future Liquidity Events to the extent that such rights have not then vested (such rights referenced in this subparagraph (iii), to the extent so vested and not forfeited, being referred to herein as the “Surviving Liquidity Event Bonus Rights”);

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(vi) except as otherwise expressly provided in this Section 5(a), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.”

 

Except as expressly set forth in this Amendment, the Executive Employment Agreement remains unchanged and in full force and effect.

 

Dated: January 9, 2018

 

QUALIGEN, INC.

 

By: /s/ Michael S. Poirier  
Name: Michael S. Poirier  
Title: Chairman/CEO  

 

/s/ Christopher L. Lotz  
CHRISTOPHER L. LOTZ  

 

2

 

 

Exhibit 10.3

 

EXECUTION VERSION

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into effective as of February 1, 2017 (the “Effective Date”), by and between Qualigen, Inc., a Delaware corporation with its principal office at 2042 Corte Del Nogal, Carlsbad, CA 92011 USA (the “Company”), and Shishir K. Sinha (the “Executive”), whose address is 8054 Paseo Avellano, Carlsbad, CA 92009.

 

W I T N E S S E T H:

 

WHEREAS, the Company has engaged the Executive as its Vice President of Operations and Corporate Secretary and desires to continue to obtain the benefits of the Executive’s knowledge, skill and ability in connection with managing the operations of the Company and to continue to employ the Executive as its Vice President of Operations and Corporate Secretary on the terms and conditions hereinafter set forth; and

 

WHEREAS, the Executive desires to provide his services to the Company and to accept employment by the Company on the terms and conditions set forth in this Agreement, which supersedes all prior agreements, whether written or oral, including those under any previous employment agreement between the Executive and the Company;

 

NOW, THEREFORE, in consideration of the mutual promises set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1. Employment and Duties; Term.

 

(a) Subject to the terms and conditions hereinafter set forth, the Company hereby employs the Executive as its Vice President of Operations and Corporate Secretary, and he shall have the duties and responsibilities customarily associated with such positions, including without limitation general responsibility for the operations and corresponding financial results of the Company. The Executive shall report to the Company’s President and Chief Executive Officer. The Executive shall also perform such other duties and responsibilities as may be determined and directed by the Company’s President and Chief Executive Officer or by the Company’s Board of Directors (the “Board”), as long as such duties and responsibilities are generally consistent with those of a Vice President of Operations and Corporate Secretary.

 

(b) The Executive shall serve in such executive capacity or capacities with respect to any affiliate of the Company to which he may be elected or appointed, provided that such duties are consistent with those of a company’s vice president of operations and corporate secretary. The Executive shall receive no additional compensation for services rendered pursuant to this Section 1(b).

 

(c) The Executive’s job location shall be in San Diego County, California, but this provision shall not preclude the Company from moving its headquarters to a location other than in San Diego County, California. Any such relocation by the Company or failure by the Executive to relocate shall not breach the terms of this Agreement.

 

 

 

 

(d) Unless terminated earlier pursuant to any of the provisions of Section 5 of this Agreement, this Agreement shall have an initial term (the “Initial Term”) of three (3) years, commencing as of February 1, 2017 and expiring on January 31, 2020. Following completion of the Initial Term, this Agreement shall automatically renew thereafter on a year-to-year basis for successive one-year periods (i) unless and until terminated by either party pursuant to any of the provisions of Section 5, or (ii) unless the Company or the Executive delivers to the other party written notice of non- renewal at least 90 days prior to the expiration of the Initial Term or any subsequent one-year term (in which event this Agreement shall then terminate upon the expiration of the Initial Term or such one-year extended term, as applicable). The Initial Term and the one-year extensions are collectively referred to herein as the “Term.”

 

2. Executive’s Performance.

 

(a) The Executive hereby accepts the employment contemplated by this Agreement. During the Term, the Executive shall devote substantially all of his business time to the performance of his duties under this Agreement, and he shall perform such duties diligently, in good faith and in a manner consistent with the best interests of the Company and applicable laws. During the Term, the Executive will not, without the prior written approval of the Board, serve or act as a shareholder (except for passive holdings of not more than one percent (1%) of the other entity’s outstanding stock), employee, agent, consultant, officer, director, partner, member, representative, lender or owner of any other business entity, nor (if it would require more than an insubstantial amount of business time or attention) of any non-profit entity.

 

(b) The Executive shall comply with all applicable governmental laws, rules and regulations and with the Company’s policies applicable to all employees of the Company.

 

3. Compensation and Other Benefits.

 

(a) Salary. For his services to the Company during the Term, the Company shall pay the Executive an annual salary (“Salary”) at the rate of $194,259 per year during the period from February 1 through June 30, 2017, and commencing as of July 1, 2017, at the rate of $220,000 per year. The Company shall make all Salary payments to the Executive less required taxes and other withholdings and otherwise in accordance with the Company’s general payroll practices and policies, provided that the Company shall pay installments of Salary to the Executive not less frequently than bi-weekly. The Executive’s Salary shall be reviewed at least annually by the Board or any compensation committee thereof and (i) may be increased from time to time in the sole discretion of the Board or any such compensation committee, and (ii) may otherwise be adjusted by mutual written agreement of the Company and the Executive.

 

(b) Potential Bonus Payments Based on Receipt of CLIA Waivers by Application.

 

(i) Subject to the following terms of this Section 3(b), the Company shall pay the Executive a cash bonus in the amount of $20,000 per assay for each of the first five (5) assays for which the Company, after the Effective Date, receives from the Food and Drug Administration (“FDA”) a Clinical Laboratory Improvement Amendment (or “CLIA”) waiver for use of the Company’s FastPack 2.0 System (each such bonus payment payable under this Section 3(b) being referred to herein as a “CLIA Waiver Bonus Payment”). Each of the Company and the Executive acknowledges that the Company either is seeking or presently intends to seek by application to the FDA a CLIA waiver for each of the following assays: (A) Vitamin D; (B) prostate-specific antigen (“PSA”); (C) testosterone; (D) thyroid-stimulating hormone (“TSH”); and (E) free thyroxine (“FT4”); provided, however, that the Executive further acknowledges that there is no guaranty that the Company will in fact apply for any such waivers, and that the assays for which the Company may apply for a CLIA waiver, if any, and the timing of such applications, are subject to change from time to time in the discretion of the Company. The maximum aggregate CLIA Waiver Bonus Payments that the Executive is eligible to receive under this Section 3(b) is $100,000.

 

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(ii) The Company shall pay any CLIA Waiver Bonus Payment due to the Executive under this Section 3(b), less any required taxes and other applicable withholdings, not later than ninety (90) days following the Company’s receipt of the applicable CLIA waiver for the specific assay. The rights of the Executive (if any) to receive a CLIA Waiver Bonus Payment in respect of a waiver received by the Company after the termination or expiration of this Agreement and the Executive’s employment hereunder shall be as set forth in the applicable provisions of Section 5.

 

(c) Potential Bonus Payments Upon the Occurrence of Liquidity Events.

 

(i) Subject to the terms and conditions set forth in this Section 3(c), upon and concurrent with the closing of any “Liquidity Event” (as defined below) involving the Company, the Company shall pay to the Executive a lump-sum cash bonus (a “Liquidity Event Bonus”) equal to one percent (1.0%) of the “Net Liquidity Event Proceeds” (as defined below) received in connection with the subject transaction. The Company shall pay any Liquidity Event Bonus due to the Executive under this Section 3(c) concurrently with the closing of the Liquidity Event.

 

(ii) For purposes of this Section 3(c), the following terms shall have the following meanings:

 

(A) “Liquidity Event” shall mean the occurrence of any of the following listed transactions involving the Company in which (1) the consideration paid consists of cash, marketable securities (which are debt or equity securities that are listed for trading on a national or international securities exchange and for which there is a reasonable public float to allow for even trading), or a combination of cash and marketable securities, and (2) such consideration is paid or distributed to holders of the Company’s outstanding capital stock as sale or merger consideration, dividends, distributions, liquidation preferences or distributions, repurchase or redemption proceeds, or on any other basis:

 

(i) the sale for value of all, substantially all or an otherwise material portion of the Company’s assets outside of the ordinary course of business;

 

(ii) any merger or consolidation of the Company with or into, or any other acquisition of the Company by, another corporation, partnership, limited liability company or other entity or person (excluding for this purpose, however, any merger or consolidation of the Company with or into another corporation or entity if the stockholders of the Company prior to the merger, consolidation or other transaction own 50% or more of the voting equity securities of the surviving entity immediately after the consummation of the merger, consolidation or other transaction); and

 

(iii) any recapitalization transaction involving the Company (including, without limitation, a leveraged recapitalization) in which the proceeds are distributed or paid out to holders of the Company’s capital stock.

 

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Each event comprising a Liquidity Event is intended to constitute a “change in ownership or effective control,” or a “change in the ownership of a substantial portion of the assets,” of the Company, as such terms are defined for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and “Liquidity Event” as used herein shall be interpreted consistently therewith.

 

(B) “Liquidity Event Proceeds” shall mean the net cash or value of marketable securities (or combination of cash and marketable securities) received by the Company and its stockholders from or in connection with a Liquidity Event (i) before the payment of the bonus provided for in this Section 3(c) and any other cash bonus due to any other executive officer of the Company in connection with the same Liquidity Event, but (ii) after payment of all expenses incurred by the Company in connection with the Liquidity Event transaction (including, without limitation, fees and expenses of attorneys, accountants, bankers and other financial advisors) and repayment of any indebtedness of the Company then due or secured by any property or assets sold, exchanged or otherwise disposed of a result of the transaction. In connection with any Liquidity Event, the Board shall determine the Liquidity Event Proceeds in good faith consistent with the provisions of this subparagraph (B).

 

(iii) Except as provided below in this subparagraph and in Section 5 of this Agreement, the Executive’s right to receive any Liquidity Event Bonus under this Section 3(c) shall vest ratably in one-third installments on each of February 1, 2018, February 1, 2019 and January 31, 2020, with full vesting to occur on January 31, 2020 (the “Full Vesting Date”); provided, however, that such vesting shall accelerate and the Executive’s right under this Section 3(c) to receive a Liquidity Event Bonus shall be deemed to be fully vested in respect of any Liquidity Event that occurs prior to the Full Vesting Date (but the ratable vesting schedule shall otherwise remain in effect with respect to any subsequent Liquidity Events). The rights of the Executive (if any) to receive a Liquidity Event Bonus (or portion thereof) in connection with any Liquidity Event occurring after the termination or expiration of this Agreement and the Executive’s employment hereunder shall be as set forth in the applicable provisions of Section 5.

 

(iv) For purposes of clarity, but subject to the provisions of subparagraph (v) below, it is possible under this Section 3(c) for there to be multiple Liquidity Events involving the Company over time, and for the Executive to receive Liquidity Event Bonuses under the provisions of this Section 3(c) in connection with each such Liquidity Event.

 

(v) Notwithstanding any other provision contained in this Agreement, the Executive’s rights to receive any Liquidity Event Bonus under this Section 3(c) shall terminate and be of no further force or effect following the occurrence of any Liquidity Event in connection with which (A) the Company is dissolved and liquidated, or (B) all then-outstanding shares of the Company’s capital stock are cancelled, redeemed or otherwise retired except in any such circumstance in which one or more outstanding classes or series of such shares are exchanged for or converted into new securities issued by the Company or any successor entity to the Company (by merger or otherwise), in which circumstance the Executive’s rights under this Section 3(c) shall remain in effect until the subsequent dissolution and liquidation of the Company or such successor or the cancellation, redemption or retirement of such new securities. A Liquidity Event described in this subparagraph (v) that, by these terms, results in the termination of the Executive’s rights under this Section 3(c) is referred to herein as a “Final Liquidity Event.” For purposes of clarity, the Company and the Executive acknowledge and agree that the Executive shall have the right to receive a Liquidity Event Bonus under this Section 3(c) in respect of a Final Liquidity Event, but not in respect of any Liquidity Event that may occur subsequent to the Final Liquidity Event.

 

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(vi) Notwithstanding any other provision of this Agreement, if the total amounts payable pursuant to this Section 3(c), together with any and all other payments to which the Executive may be entitled in connection with a Liquidity Event (or other similar event), would constitute an “excess parachute payment” (as defined in Section 280G of the Internal Revenue Code), the Executive shall receive the greater of: (i) the Liquidity Event Bonus due under this Section 3(c), less any excise tax imposed under Section 4999 of the Internal Revenue Code, or (ii) the largest amount which may be paid without any portion of such amount being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. For purposes of determining the largest amount payable, such payments shall be reduced in such order and manner as the Executive shall specify in writing to the Company; provided that any and all payments that are not “nonqualified deferred compensation” as defined for purposes of Section 409A of the Internal Revenue Code shall be reduced and eliminated before any payment of nonqualified deferred compensation is reduced or eliminated, and any reduction or elimination of payments that are nonqualified deferred compensation shall be made in reverse chronological order of their respective payment due dates. In the event there is a dispute among the parties regarding the extent to which payments must be reduced pursuant to this subparagraph (vi), such dispute shall be settled in accordance with Section 14(g) herein. No such disputed payment shall be made until the dispute is settled.

 

(d) Other Benefits. The Executive shall be eligible on the same basis as other executive officers and employees of the Company (and subject to any other eligibility requirements, cost sharing and other terms and conditions) to participate in and receive benefits under any other bonus plan or any equity or long-term incentive, deferred compensation, retirement, savings, group insurance (including, without limitation, medical, dental, life, accident and disability insurance), group health or other welfare or benefit plan or program as may be approved by the Board of the compensation committee thereof and offered to the Company’s executive officers and employees generally; provided, however, that the severance benefits (if any) payable under Section 5 of this Agreement shall be in lieu of (and not in addition to) any severance benefits that would otherwise be due to the Executive under any severance policy or plan otherwise in effect at the Company upon termination of the Executive’s employment; and provided further that the Company shall not have any obligation to maintain any particular plan or program indefinitely or for any specific period of time. In addition, the Executive shall be entitled to four (4) weeks paid vacation per full year of service, in accordance with and subject to the Company’s vacation accrual plan and policies.

 

4. Reimbursement of Expenses. The Company shall reimburse the Executive, upon presentation of proper expense statements, for all authorized, ordinary and necessary out-of-pocket expenses reasonably incurred by Executive during the Term in connection with the performance of his services pursuant to this Agreement in accordance with the Company’s expense reimbursement policy. .

 

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5. Termination of Employment.

 

(a) Resignation by the Executive. The Executive may terminate this Agreement and his employment hereunder at any time by delivery of at least thirty (30) days’ advance written notice to the Company. In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(a):

 

(i) the Company shall (A) pay the Executive an amount in cash equal to the Executive’s accrued but unpaid Salary and vacation pay through the date of termination, (B) pay the Executive an amount in cash equal to any CLIA Waiver Bonus and any Liquidity Event Bonus that has been earned by the Executive under Section 3 hereof prior to the date of termination but that remains unpaid as of such date, and (C) promptly reimburse any expenses incurred by the Executive through the date of termination and for which the Executive is entitled to receive reimbursement under Section 4 hereof in accordance with the Company’s expense reimbursement policies (all such payments referenced in this subparagraph (i) being collectively referred to in this Agreement as the “Base Termination Payments”);

 

(ii) subject to Section 5(f), the Executive shall retain his rights under Section 3(b) to receive a CLIA Waiver Bonus Payment in respect of any CLIA waiver received by the Company after the effective date of termination but only to the extent that the Company filed its original application in respect of such CLIA waiver during the term of the Executive’s employment or within sixty (60) days following the effective date of termination, it being understood and agreed that the Executive shall not have any right to receive a CLIA Waiver Bonus Payment in respect of any waiver for which the Company first files its application more than 60 days following the effective date of termination (such rights referenced in this subparagraph (ii) being referred to herein as the “Surviving CLIA Waiver Bonus Rights”);

 

(iii) subject to Section 5(f), the Executive shall retain his rights under Section 3(c) to receive Liquidity Event Bonus payments (including in respect of any Liquidity Event that may occur following the effective date of termination) to the extent that such rights have vested under Section 3(c)(iii) as of the effective date of termination, it being understood and agreed that the Executive shall forfeit any such rights with respect to any future Liquidity Events to the extent that such rights have not then vested (such rights referenced in this subparagraph (iii), to the extent so vested and not forfeited, being referred to herein as the “Surviving Liquidity Event Bonus Rights”);

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(vi) except as otherwise expressly provided in this Section 5(a), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(b) Non-Renewal as of End of Initial or Subsequent Term. Either the Company or the Executive may terminate this Agreement and the Executive’s employment hereunder effective upon expiration of the Initial Term or any succeeding term by written notice of non-renewal delivered to the other party at least ninety (90) days’ prior to the applicable expiration date of the then-current term. In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(b):

 

(i) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

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(ii) subject to Section 5(f), the Executive shall retain his Surviving CLIA Waiver Bonus Rights (as defined in Section 5(a)(ii));

 

(iii) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii));

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(vi) except as otherwise expressly provided in this Section 5(b), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(c) Death or Disability of the Executive. This Agreement and the Executive’s employment shall terminate immediately upon the death of the Executive. In addition, this Agreement and Executive’s employment may be terminated by the Company effective upon delivery of written notice to the Executive in the event of the Executive’s Disability. For purposes of this Agreement, the term “Disability” shall mean the Executive’s inability to perform his duties hereunder as Vice President of Operations and Corporate Secretary of the Company, as reasonably determined by the Board, as a result of prolonged absence from work for health reasons or physical or mental disability, illness or incapacity for a continuous period of ninety (90) days, or for shorter periods aggregating four (4) months in any twelve (12) month period.

 

In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(c):

 

(i) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

(ii) subject to Section 5(f), the Executive shall retain his Surviving CLIA Waiver Bonus Rights (as defined in Section 5(a)(ii));

 

(iii) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii)), provided that for purposes of this subparagraph (iii), all vesting of the Executive’s rights under Section 3(c)(iii) shall be accelerated and the Executive shall be deemed to be fully vested in such rights effective as of the date of the Executive’s death or Disability;

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

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(vi) except as otherwise expressly provided in this Section 5(c), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(d) Termination by the Company for “Cause.”

 

(i) The Company, effective upon delivery of written notice to the Executive, may terminate this Agreement and the Executive’s employment for “Cause.” For purposes of this Agreement, the term “Cause” shall mean any of the following:

 

(A) a material breach by the Executive of any of Sections 6, 7 or 8 of this Agreement;

 

(B) a material breach by the Executive of any other provision of this Agreement, if such material breach (if susceptible to cure) has continued uncured for a period of at least fifteen (15) days following delivery by the Company to the Executive of written notice of such material breach;

 

(C) fraud, dishonesty or other breach of trust whereby the Executive obtains personal gain or benefit at the expense of or to the detriment of the Company or any of the Company’s subsidiaries or affiliates;

 

(D) a conviction of or plea of nolo contendere or similar plea by the Executive of any felony;

 

(E) a conviction of or plea of nolo contendere or similar plea by of any other crime involving theft, misappropriation of property, dishonesty or moral turpitude;

 

(F) a willful and material violation of applicable law by the Executive in connection with the performance of his duties hereunder;

 

(G) chronic or repeated substance abuse by the Executive, or any other use by the Executive of alcohol, drugs or illegal substances in such a manner as to interfere with the performance of his material duties hereunder; or

 

(H) failure to comply with the lawful directions of the President and Chief Executive Officer or of the Board which are otherwise consistent with the terms of this Agreement, which failure has continued for a period of at least ten (10) days after delivery by the Company to the Executive of written demand by the Board.

 

Termination of this Agreement by the Company for “Cause” shall be without prejudice to any other right or remedy to which the Company may be entitled at law, in equity or otherwise under this Agreement.

 

(ii) In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to the preceding Section 5(d)(i):

 

(A) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

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(B) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii)) to the extent then vested;

 

(C) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(D) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(E) except as otherwise expressly provided in this Section 5(d)(ii), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(e) Termination by the Company Without “Cause.” The Company, in the sole discretion of the Board and effective upon delivery of not less than thirty (30) days’ advance written notice to the Executive, may terminate this Agreement and the Executive’s employment hereunder at any time and for any reason, including without “Cause.” In the event that the Company terminates the Executive’s employment under this Section 5(e):

 

(i) the Company shall make the Base Termination Payments (as defined in Section 5(a)(i));

 

(ii) subject to Section 5(f), the Executive shall retain his Surviving CLIA Waiver Bonus Rights (as defined in Section 5(a)(ii));

 

(iii) subject to Section 5(f), the Executive shall retain his Surviving Liquidity Event Bonus Rights (as defined in Section 5(a)(iii)), provided that for purposes of this subparagraph (iii), all vesting of the Executive’s rights under Section 3(c)(iii) shall be accelerated and the Executive shall be deemed to be fully vested in such rights effective as of the date of the Executive’s death or Disability;

 

(iv) subject to Section 5(f), conditioned upon receipt by the Company of a general release in form reasonably acceptable to the Company and expiration of any revocation period applicable to such release without the Executive having revoked such release, and in lieu of any severance benefits that may otherwise be payable under any other severance plan or policy of the Company, the Company (A) shall continue to pay to the Executive as severance his Salary at the rate then in effect on the date of termination for a period of 180 days following the date of termination, such payments to be made by the Company at the times, subject to applicable withholdings and otherwise in accordance with the Company’s general payroll practices and policies, and (B) pay or reimburse the Executive for the cost of COBRA continuation medical and dental insurance coverage for the Executive for the 180-day severance period (less any required taxes or withholdings); provided, however, that if the Company determines in its sole discretion that it cannot provide the foregoing COBRA benefits without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable lump-sum payment in an amount equal to the monthly (or then remaining) COBRA premium that Executive would be required to pay to continue his group health coverage for himself as in effect on the termination date (which amount shall be based on the premium for the first month of COBRA coverage) until the date that is 180 days following the Executive’s date of termination. Notwithstanding the foregoing, any severance payments that otherwise would be required to be made under this subparagraph (iv) within forty-five (45) days following the Executive’s date of termination shall instead be made on the Company’s first normal payroll date that is more than forty-five (45) days following the Executive’s date of termination; and

 

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(v) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements; and

 

(vi) except as otherwise expressly provided in this Section 5(e), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.

 

(f) Offset for Material Breaches of Restrictive Covenants. If the Executive materially breaches any provision contained in either Section 6 or Section 7 of this Agreement, the Company, from the date of such breach going forward, shall no longer be obligated to make any payments or reimbursements to the Executive or provide any benefits to the Executive under this Section 5 in respect of any Surviving CLIA Waiver Bonus Rights, any Surviving Liquidity Event Bonus Rights, and any rights to receive severance of COBRA benefits under Section 5(e)(iv).

 

6. Trade Secrets and Proprietary Information.

 

(a) Executive recognizes and acknowledges that the Company, through the expenditure of considerable time and money, has developed and will continue to develop in the future information concerning customers, clients, marketing, patents, products, services, business, research and development activities and operational methods of the Company and its customers or clients, contracts, financial or other data, technical data or any other confidential or proprietary information possessed, owned or used by the Company, the disclosure of which could or does have a material adverse effect on the Company, its business, any business it proposes to engage in, its operations, financial condition or prospects and that the same are confidential and proprietary and considered “Confidential Information” of the Company for the purposes of this Agreement. In consideration of his employment, the Executive agrees that he will not, during or after the Term, without the consent of the Board make any disclosure of Confidential Information now or hereafter possessed by the Company, to any person, partnership, corporation or entity either during or after the term here of, except that nothing in this Agreement shall be construed to prohibit Executive from using or disclosing such information (i) if such disclosure is necessary in the normal course of the Company’s business in accordance with Company policies or instructions or authorization from the Board, (ii) such information shall become public knowledge other than by or as a result of disclosure by a person not having a right to make such disclosure, (iii) complying with legal process as provided in Section 6(b) of this Agreement, or (iv) subsequent to the Term, if such information shall have either been developed by Executive independent of any of the Company’s confidential or proprietary information or been disclosed to Executive by a person not subject to a confidentiality agreement with or other obligation of confidentiality to the Company. For the purposes of Sections 6, 7 and 8 of this Agreement, the term “Company” shall include the Company, its parent, its subsidiaries and affiliates.

 

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(b) In the event that any Confidential Information is required to be produced by Executive pursuant to legal process, the Executive shall give the Company notice of such legal process within a reasonable time, but not later than ten business days prior to the date such disclosure is to be made, unless Executive has received less notice, in which event the Executive shall immediately notify the Company. The Company shall have the right to object to any such disclosure, and if the Company objects (at the Company’s cost and expense) in a timely manner, the Executive shall not make any disclosure until there has been a court determination on the Company’s objections. If disclosure is required by a court order, final beyond right of review, or if the Company does not object to the disclosure, the Executive shall make disclosure only to the extent that disclosure is required by the court order, and the Executive will exercise reasonable efforts to obtain reliable assurances that confidential treatment will be accorded the Confidential Information.

 

(c) The Executive shall, upon expiration or termination of the Term, or earlier at the request of the Company, turn over to the Company all documents, papers, computer disks or other material in the Executive’s possession or under the Executive’s control which may contain or be derived from Confidential Information. To the extent that any Confidential Information is on Executive’s hard drive or other storage media, he shall, upon the request of the Company, cause such information to be erased from his computer disks and all other storage media.

 

7. Covenant Regarding Improper Use of Confidential Information.

 

(a) During the period from the date of this Agreement until one (1) year following the date on which Executive’s employment is terminated, Executive will not, directly or indirectly:

 

(i) Utilize the Company’s Confidential Information to persuade or attempt to persuade any person or entity which is or was a customer, client or supplier of the Company to cease doing business with the Company, or to reduce the amount of business it does with the Company (the terms “customer” and “client” as used in this Section 7 to include any potential customer or client to whom the Company submitted bids or proposals, or with whom the Company conducted negotiations, during the term of Executive’s employment or during the twelve (12) months preceding the termination of his employment);

 

(ii) Utilize the Company’s Confidential Information to solicit for himself or any other person or entity other than the Company the business of any person or entity which is a customer or client of the Company, or was a customer or client of the Company within one (1) year prior to the termination of his employment; or

 

(iii) Persuade or attempt to persuade any employee of the Company, or any individual who was an employee of the Company during the one (1) year period prior to the termination of this Agreement, to leave the Company’s employ, or to become employed by any person or entity other than the Company.

 

(b) The Executive acknowledges that the restrictive covenants (the “Restrictive Covenants”) contained in Sections 6 and 7 of this Agreement are a condition of his employment and are reasonable and valid in geographical and temporal scope and in all other respects. If any court or arbitrator determines that any of the Restrictive Covenants, or any part of any of the Restrictive Covenants, is invalid or unenforceable, the remainder of the Restrictive Covenants and parts thereof shall not thereby be affected and shall remain in full force and effect, without regard to the invalid portion. If any court or arbitrator determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable because of the geographic or temporal scope of such provision, such court or arbitrator shall have the power to reduce the geographic or temporal scope of such provision, as the case may be, and, in its reduced form, such provision shall then be enforceable.

 

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8. Ownership of Intellectual Property.

 

(a) “Inventions” means all inventions, ideas, discoveries, developments, methods, data, information, improvements, original works, know-how, including, but not limited to, algorithms, technology, trade secrets, processes, codes and hardware (whether or not reduced to practice and whether or not protectable under the patent, copyright, trade secrecy or similar laws of the United States, the Peoples’ Republic of China or any applicable foreign country which:

 

(i) relate to the Company’s business at the time of conception or reduction to practice or actual or demonstrably anticipated research or development of Company that were conceived, created or developed by the Executive (whether alone or with others, whether or not during working hours or on the Company’s premises or whether or not using material or property provided by the Company) during the Term or having conceived, created or developed prior to the Term while Executive was employed by the Company; and/or

 

(ii) were conceived, created or developed by the Executive (whether alone or with others) during the Term, even if having possibly been conceived, created or developed prior to the Term but completed while in the employ of the Company, or which result from any work performed by the Executive for Company.

 

(b) All Inventions are, will be, and shall constitute “works-for-hire” and the exclusive property of the Company, and the Company may use and exploit them without restriction or additional compensation to the Executive. The Executive shall promptly and fully disclose to the Company any and all Inventions. The Executive shall maintain complete written records of all Inventions and of all work or investigations done or carried out by the Executive at all stages thereof, which records shall be the exclusive property of the Company and will be treated as Confidential Information for all purposes of this Agreement.

 

(c) The Executive hereby irrevocably assigns and transfers to the Company, its successors, assigns or Affiliates, as the case may be, all of Executive’s right, title and interest in and to any Inventions without additional consideration therefor from the moment of their creation or inception, to be held and enjoyed by the Company, its successors, assigns or Affiliates, as the case may be, to the full extent of the term for which any intellectual property protection may be granted and as fully as the same would have been held by Executive had this Agreement, or such assignment or transfer not been made. In addition to the foregoing assignments of Inventions to the Company, Executive hereby irrevocably assigns and transfers to the Company: (i) all worldwide patents, trademarks, copyrights, mask works, trade secrets, applications for the foregoing and other intellectual property rights in any Inventions; and (ii) any and all “Moral Rights” (as defined below) that Executive may have in or with respect to any Inventions. Executive hereby forever waives and agrees never to assert any and all Moral Rights Executive may have in or with respect to any such Inventions, even after the termination of Executive’s employment.

 

(d) “Moral Rights” means any right to claim authorship of any Inventions, or to withdraw from circulation or control the publication or distribution of any Inventions, and any similar right, existing under judicial or statutory law of any country in the world, or under any treaty, regardless of whether or not such right is denominated or generally referred to as a moral right.

 

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(e) Executive agrees to cooperate fully in obtaining patent, copyright or other proprietary protection for such Inventions, all in the name of the Company, its successors, assigns or Affiliates, as the case may be, and at the Company’s cost and expense, and shall execute and deliver all requested applications, assignments and other documents and take such other actions as the Company, its successors, assigns or Affiliates, as the case may be, shall request in order to perfect, enforce and exploit the Company’s, its successors,’ assigns’ or Affiliates,’ as the case may be, right in the Inventions (including transfer of possession to the Company, its successors, assigns or Affiliates, as the case may be, of all Inventions embodied in tangible materials), including granting Company a non-revocable, royalty- free license in any pre-existing works. Executive irrevocably designates and appoints the Company and its duly authorized officers and agents as his agents and attorneys-in-fact to execute and file any and all applications and other necessary documents and to do all other lawfully permitted acts to further perfect and enforce the Company’s, its successors,’ assigns’ or Affiliates,’ (as the case may be), right in the Inventions and to further the prosecution, issuance or enforcement of patents, copyrights, trade secrets and similar protections related to the Inventions with the same legal force and effect as he had executed them himself. The Executive shall receive no additional compensation for complying with Executive’s obligations under this Section 8. The Executive agrees that, to the extent this Agreement shall be construed in accordance with any laws that limit the assignability to the Company, its successors, assigns or Affiliates, as the case may be, of the Inventions, this Agreement shall be interpreted not to apply to any Invention which a court rules or the Company agrees is subject to such state limitation.

 

California Labor Code § 2870 provides as follows:

 

a. Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

 

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer.

 

(2) Result from any work performed by the employee for his employer.

 

b. To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

 

The assignment of Inventions under this Agreement, accordingly, shall not extend to those items set forth in Labor Code § 2870.

 

(f) Any copyrightable work created by the Executive in connection with or during the performance of his employment duties, whether published or unpublished, shall be the property of the Company as author and owner of copyright in such work.

 

(g) The Executive warrants and represents that there are no Inventions (whether patentable or not), patents, trade secrets, trademarks, trade names, copyrights, or other intellectual property owned by him prior to entering into employment with the Company hereunder, and that he has not executed and will not execute any document or instrument in conflict herewith.

 

(h) An “Affiliate” of the Company shall mean any person or entity which controls, is controlled by or is under common control with the Company.

 

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9. Injunctive Relief. The Executive agrees that any violation or threatened violation of any of the provisions of Sections 6, 7 or 8 of this Agreement will cause immediate and irreparable harm to the Company for which money damages would not be an adequate remedy. In the event of any breach or threatened breach of any of said provisions, the Executive consents to the entry of preliminary and permanent injunctions by a court of competent jurisdiction prohibiting the Executive from any violation or threatened violation of such provisions and compelling the Executive to comply with such provisions (without posting a bond or other security). This Section 9 shall not affect or limit, and the injunctive relief provided in this Section 9 shall be in addition to, any other remedies available to the Company at law or in equity or in arbitration for any such violation by the Executive. Subject to Section 7(b) of this Agreement, the provisions of Sections 6, 7 and 8 of this Agreement and this Section 9 shall survive any termination of this Agreement and the Executive’s employment.

 

10. Indemnification. The Company shall enter into a separate agreement with the Company to provide the Executive with payment of legal fees and indemnification to the maximum extent permitted by the Company’s Certificate of Incorporation, By-Laws, and Delaware law. The Company shall also provide officers and directors liability insurance of not less than $5,000,000, and the Company shall be responsible for any deductibles under such policy.

 

11. Key Man Insurance. The Executive will cooperate with the Company in connection with any application by the Company to obtain key-man life insurance on his life, on which the Company will be the beneficiary. Such cooperation shall include the execution of any applications or other documents requiring his signature and submission of insurance applications and submission to a physical examination.

 

12. Code Section 409A Compliance.

 

(a) This Agreement is intended to comply with the provisions of Section 409A of the Code, and, to the extent practicable, this Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder. Terms used in this Agreement shall have the meanings given such terms under Section 409A of the Code if, and to the extent required, in order to comply with Section 409A of the Code.

 

(b) The payment schedules provided hereunder are intended to be exempt from or to comply with the requirements of Section 409A of the Code and shall be interpreted consistently therewith.

 

(c) Any payments under Section 5 shall be made or shall commence only after the Executive has a “separation from service” with the Company, as defined under Section 409A of the Code and the guidance issued thereunder.

 

(d) Notwithstanding anything to the contrary in this Agreement, to the extent required to avoid additional taxes and interest charged under Section 409A of the Code, if any of the Company’s stock is publicly traded and the Executive is deemed to be a “specified employee” as determined by the Company for purposes of Section 409A(a)(2)(B) of the Code, the Executive agrees that any non-qualified deferred compensation payments due to him under this Agreement in connection with a termination of employment that would otherwise have been payable at any time during the six (6)-month period immediately following such termination of employment shall not be paid prior to, and shall instead be payable in a lump sum on the first day of the seventh (7th) month following the Executive’s separation from service (or, if the Executive dies during such period, within 30 days after the Executive’s death).

 

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(e) Each payment of termination benefits under Section 5 of this Agreement, including, without limitation, each installment payment, shall be considered a separate payment, as described in Treasury Regulations Section 1.409A-2(b)(2), for purposes of Section 409A of the Code.

 

(f) Neither the Company nor the Executive shall have the right to accelerate or defer the delivery of any payment under this Agreement that constitutes “nonqualified deferred compensation” subject to Section 409A of the Code, except to the extent specifically permitted or required by Section 409A of the Code.

 

(g) If the Executive is entitled to be paid or reimbursed for any expenses under this Agreement, and such payments or reimbursements are includible in the Executive’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of the Executive to reimbursement of expenses under Section 4 or any other Section of this Agreement shall be subject to liquidation or exchange for another benefit.

 

(h) Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

(i) Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” subject to Section 409A of the Code be subject to offset, counterclaim or recoupment by any other amount payable to the Executive unless otherwise permitted by Section 409A of the Code.

 

13. Certain Representations, Warranties and Covenants of the Parties.

 

(a) The Executive hereby represents and warrants to the Company that: (i) the execution, delivery and performance of this Agreement by the Executive do not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Executive is a party or any judgment, order or decree to which the Executive is subject, (ii) this Agreement constitutes the legal, valid and binding obligation of the Executive, enforceable in accordance with its terms, and (iii) the Executive has not and will not take any action that will conflict with, violate or cause a breach of any noncompete, nonsolicitation or confidentiality agreement to which the Executive is a party or by which the Executive is bound. The Executive hereby acknowledges and represents that he has carefully reviewed this Agreement, that he has consulted with independent legal counsel regarding his rights and obligations under this Agreement (or, after carefully reviewing this Agreement, was given the opportunity to, but has freely decided not to, consult with independent legal counsel), and that he fully understands the terms and conditions contained herein.

 

(b) The Company represents, warrants and agrees that it has full power and authority to execute and deliver this Agreement and perform its obligations hereunder.

 

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14. Miscellaneous.

 

(a) Any notice, consent or communication required under the provisions of this Agreement shall be given in writing and sent or delivered by hand, overnight courier or messenger service, against a signed receipt or acknowledgment of receipt, or by registered or certified mail, return receipt requested, or telecopier, email or similar means of communication (collectively “electronic communications”) if receipt is acknowledged or if transmission is confirmed by mail as provided in this Section 13(a), to the parties at their respective addresses set forth at the beginning of this Agreement or by electronic delivery to the telecopier or email (if any) set forth on the signature page of this Agreement, with notice to the Company being sent to the attention of the Chief Executive Officer of the Company. Either party may, by like notice, change the person, address or electronic communications number or address to which notice is to be sent. If no telecopier number is provided for either party, notice to such party shall not be sent by telecopier.

 

(b) This Agreement shall in all respects be construed and interpreted in accordance with, and the rights of the parties shall be governed by, the laws of the State of California applicable to agreements executed and to be performed wholly in such state without regard to principles of conflicts of laws, except as provided in the first sentence of Section 10.

 

(c) If any term, covenant or condition of this Agreement or the application thereof to any party or circumstance shall, to any extent, be determined to be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law, and any court or arbitrator having jurisdiction may reduce the scope of any provision of this Agreement, including the geographic and temporal restrictions set forth in Section 8 of this Agreement, so that it complies with applicable law.

 

(d) This Agreement constitutes the entire agreement of the Company and the Executive as to the subject matter hereof, superseding as of the Effective Date all prior or contemporaneous written or oral understandings or agreements, with respect to the subject matter covered in this Agreement. This Agreement may not be modified or amended, nor may any right be waived, except by a writing which expressly refers to this Agreement, states that it is intended to be a modification, amendment or waiver and is signed by both parties in the case of a modification or amendment or by the party granting the waiver. No course of conduct or dealing between the parties and no custom or trade usage shall be relied upon to vary the terms of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

 

(e) During and after the Executive’s employment, the Executive shall cooperate with the Company and its subsidiaries and affiliates in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by the Company or its subsidiaries or affiliates (including the Executive being available to the Company and its subsidiaries and affiliates upon reasonable notice for interviews and factual investigations, appearing at the Company’s or any subsidiary’s or affiliate’s reasonable request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company and its subsidiaries and affiliates all pertinent information and turning over to the Company and its subsidiaries and affiliates all relevant documents that are or may come into the Executive’s possession, all at times and on schedules as reasonably agreed to between the Company and the Executive. In the event the Company or any of its subsidiaries or affiliates requires the Executive’s cooperation in accordance with this subparagraph, the Company shall reimburse the Executive for the Executive’s reasonable out-of-pocket expenses incurred in connection therewith (including lodging and meals, upon submission of receipts and compliance with the Company’s expense reimbursement policies).

 

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(f) This Agreement is personal in nature and neither of the parties hereto will, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder; provided, however, that the Company may, without the Executive’s consent, assign its rights and obligations hereunder to (i) any affiliate of the Company or (ii) any subsequent purchaser of the Company or any of its businesses or any material portion of its assets (whether such sale is structured as a sale of stock, sale of assets, merger, recapitalization or otherwise), in each case, in accordance with and as expressly in this Agreement. Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by the Executive’s will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer by the Executive contrary to this subparagraph (e), the Company will have no liability to pay any amount so attempted to be assigned, transferred or delegated. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that executes and delivers the agreement provided for in this subparagraph (e) or that otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

 

(g) Except for actions, suits, or proceedings taken pursuant to or under Section 6, 7, 8 or 9 of this Agreement, any dispute concerning this Agreement or the rights of the parties hereunder shall be submitted to binding arbitration in San Diego County, California before a single arbitrator associated with JAMS (or other mutually agreeable alternative dispute resolution service) in accordance with its Employment Arbitration Rules & Procedures and subject to JAMS Policy on Employment Arbitration Minimum Standards of Procedural Fairness (the “JAMS Rules”), a copy of which Rules can be found at www.jamsadr.com or obtained from the Company’s human resources department. The arbitration provisions of this Agreement will be governed by the Federal Arbitration Act (9 U.S.C. Section 1 et seq.). In all other respects, this provision will be construed in accordance with the laws of the State of California, without reference to conflicts of law principles. Included within this provision are any claims based on common law or violation of local, state or federal law, such as claims for discrimination or civil rights violations under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the California Family Rights Act, the California Fair Employment and Housing Act, the California Labor Code, or similar statutes. However, claims for unemployment benefits and workers’ compensation claims will not be subject to arbitration. In addition, either party may seek provisional remedies pursuant to California Code of Civil Procedures Section 1281.8(b). There will be no right or authority for any claim subject to arbitration to be heard or arbitrated on a class or collective basis, as a private attorney general, or in a representative capacity on behalf of any other person or entity. If there is a dispute as to whether an issue or claim is arbitrable, the arbitrator will have the authority to resolve any such dispute, including claims as to fraud in the inducement or execution, or claims as to validity, construction, interpretation or enforceability.

 

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A neutral arbitrator with experience in arbitrating employment disputes will be chosen by mutual agreement of the parties; however, if the parties are unable to agree upon an arbitrator within a reasonable period of time (not to exceed thirty (30) days after the delivery of any demand for arbitration hereunder), then a neutral arbitrator will be appointed in accordance with the arbitrator selection procedure set forth in the JAMS Rules (or the rules of the selected alternative dispute resolution service). The issue(s) submitted to the arbitrator shall be set forth in each party’s request for arbitration. The arbitrator selected shall have the authority to grant Executive or the Company or both all remedies otherwise available by law; provided, however, that the arbitrator shall not have the power or authority to aware punitive or exemplary damages or to grant injunctive or equitable relief. The arbitrator may not consolidate more than one person’s claim, and may not otherwise preside over any form of a representative, collective or class proceeding. The parties will be permitted to conduct discovery as provided by California Code of Civil Procedure Section 128.05. The arbitration shall provide (i) for written discovery and depositions adequate to give the parties access to documents and witnesses that are essential to the dispute and (ii) for a written decision by the arbitrator that includes the essential findings and conclusions upon which the decision is based. The arbitrator’s decision must be issued no later than thirty (30) days after a dispositive motion is heard and/or an arbitration hearing has been completed. The award of the arbitrator shall be final, binding and conclusive on all parties, and judgment on such award may be entered in any court having jurisdiction.

 

The parties shall each bear their own costs and attorneys’ fees incurred in conducting the arbitration. Where Executive is asserting a claim under a state or federal statute prohibiting discrimination in employment, a public policy claim arising under a statute, or where otherwise required by applicable law to achieve the enforceability of this Agreement, the Company will pay the costs and fees charged by the arbitrator and JAMS (or other mutually selected alternative dispute resolution service) to the extent such costs would not otherwise be incurred in a court proceeding. In all other circumstances, the Executive and the Company will split equally the fees and administrative costs charged by the arbitrator and JAMS. To the extent permissible under the law, however, and following the arbitrator’s ruling on the matter, the arbitrator may rule that the arbitrator’s fees and costs be distributed in an alternative manner. If any party prevails on a statutory claim and the statute provides that the prevailing party is entitled to payment of attorneys’ fees, the arbitrator shall award reasonable fees and costs to the prevailing party based on the same standard as such fees and costs would be awarded if such claim had been asserted in state or federal court.

 

This mutual arbitration agreement does not prohibit or limit either Party’s right to seek a provisional remedy pursuant to California Code of Civil Procedures Section 1281.8(b), pending the resolution of a dispute by arbitration. The arbitrator shall have no authority to add to or to modify the terms described in this Agreement (including this subparagraph) or the Company’s employee handbook, shall apply all applicable law, and otherwise shall have no lesser and no greater remedial authority than would a court of law resolving the same claim or controversy.

 

AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

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(h) Notwithstanding the provisions of Section 13(g) of this Agreement, with respect to any claim for injunctive relief or other equitable remedy pursuant to Section 9 of this Agreement or any claim to enforce an arbitration award or to compel arbitration, each of the parties hereby (i) consents to the exclusive jurisdiction of the federal and state courts sitting in San Diego County, California, (ii) agrees that any process in any action commenced in such court under this Agreement may be served upon it or him personally, either (A) by certified or registered mail, return receipt requested, or by an overnight courier service which obtains evidence of delivery, with the same full force and effect as if personally served upon him in San Diego County, California, or (B) by any other method of service permitted by law, and (iii) waives any claim that the jurisdiction of any such court is not a convenient forum for any such action and any defense of lack of in personam jurisdiction with respect thereof.

 

(i) This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee or, if there be no such designee, to the Executive’s estate.

 

(j) The headings in this Agreement are for convenience of reference only and shall not affect in any way the construction or interpretation of this Agreement.

 

(k) The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party hereto.

 

(l) Notwithstanding any termination of the Executive’s employment under this Agreement, Sections 6 through 14 hereof shall survive and continue in full force until the performance of the obligations thereunder, if any, in accordance with their respective terms.

 

(m) No delay or omission to exercise any right, power or remedy accruing to either party hereto shall impair any such right, power or remedy or shall be construed to be a waiver of or an acquiescence to any breach hereof. No waiver of any breach hereof shall be deemed to be a waiver of any other breach hereof theretofore or thereafter occurring. Any waiver of any provision hereof shall be effective only to the extent specifically set forth in an applicable writing. All remedies afforded to either party under this Agreement, by law or otherwise, shall be cumulative and not alternative and shall not preclude assertion by such party of any other rights or the seeking of any other rights or remedies against any other party.

 

(n) This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. This Agreement and any agreement or instrument entered into in connection with this Agreement, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or by e-mail attachment (e.g., PDF), shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or e-mail to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or e-mail as a defense to the formation of a contract and each such party forever waives any such defense.

 

[Signatures on following page]

 

- 19 -

 

 

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

 

Telecopier and Email Signatures

 

  “Company”
   
  QUALIGEN, INC.
     
  By: /s/ Michael S. Poirier
    Michael S. Poirier, President and Chief Executive Officer

 

  “Executive”
   
  /s/ Shishir Sinha
  Shishir K. Sinha

 

[Signature Page of Executive Employment Agreement]

 

- 20 -

 

 

AMENDMENT OF EXECUTIVE EMPLOYMENT AGREEMENT

 

The Executive Employment Agreement dated February 1, 2017 between Qualigen, Inc. and Shishir K. Sinha is hereby amended to change Section 5(a) thereof to read in full as follows:

 

“Resignation by the Executive. The Executive may terminate this Agreement and his employment hereunder at any time by written resignation. A resignation for Good Reason shall be treated hereunder as if it were a termination by the Company without Cause and shall have the effects stated in Section 5(e) with regard to termination without Cause, rather than the effects stated in the sub-subsections of this Section 5(a).

 

“Good Reason” means the occurrence of any of the following circumstances, without the Executive’s express consent: the Executive resigns due to (i) a material reduction of the Executive’s title or authority, (ii) a material reduction in the Executive’s salary or benefits (other than a reduction that generally applies to the officers at the Executive’s level in the Company or, as applicable, after a transaction in which the Company or substantially all its assets is acquired, in the successor entity at that time), (iii) any material breach of this Agreement by the Company which is not cured within 30 days after written notice by the Executive; or (iv) a change of the principal non-temporary location in which the Executive is required to perform the Executive’s services to any location exceeding 35 miles from Carlsbad, California. In no event shall a resignation be considered to be with Good Reason unless the resignation occurs after but within 30 days after the initiation of the item of Good Reason.

 

Termination of this Agreement and of the Executive’s employment by the Executive for Good Reason shall be without prejudice to any other right or remedy to which the Executive may be entitled at law, in equity or otherwise under this Agreement.

 

In any circumstance involving a termination of this Agreement and of the Executive’s employment pursuant to this Section 5(a) (i.e., resignation without Good Reason):

 

(i) the Company shall (A) pay the Executive an amount in cash equal to the Executive’s accrued but unpaid Salary and vacation pay through the date of termination, (B) pay the Executive an amount in cash equal to any CLIA Waiver Bonus and any Liquidity Event Bonus that has been earned by the Executive under Section 3 hereof prior to the date of termination but that remains unpaid as of such date, and (C) promptly reimburse any expenses incurred by the Executive through the date of termination and for which the Executive is entitled to receive reimbursement under Section 4 hereof in accordance with the Company’s expense reimbursement policies (all such payments referenced in this subparagraph (i) being collectively referred to in this Agreement as the “Base Termination Payments”);

 

(ii) subject to Section 5(f), the Executive shall retain his rights under Section 3(b) to receive a CLIA Waiver Bonus Payment in respect of any CLIA waiver received by the Company after the effective date of termination but only to the extent that the Company filed its original application in respect of such CLIA waiver during the term of the Executive’s employment or within sixty (60) days following the effective date of termination, it being understood and agreed that the Executive shall not have any right to receive a CLIA Waiver Bonus Payment in respect of any waiver for which the Company first files its application more than 60 days following the effective date of termination (such rights referenced in this subparagraph (ii) being referred to herein as the “Surviving CLIA Waiver Bonus Rights”);

 

  1  
 

 

(iii) subject to Section 5(f), the Executive shall retain his rights under Section 3(c) to receive Liquidity Event Bonus payments (including in respect of any Liquidity Event that may occur following the effective date of termination) to the extent that such rights have vested under Section 3(c)(iii) as of the effective date of termination, it being understood and agreed that the Executive shall forfeit any such rights with respect to any future Liquidity Events to the extent that such rights have not then vested (such rights referenced in this subparagraph (iii), to the extent so vested and not forfeited, being referred to herein as the “Surviving Liquidity Event Bonus Rights”);

 

(iv) the Executive shall retain and receive any other rights or benefits (to the extent earned and vested as of the date of termination) under any Company employee benefit plans or arrangements in accordance with the terms of such plans and arrangements;

 

(v) the Executive shall not otherwise be entitled to any severance payments or similar benefits as of the date of termination (except as and to the extent required by applicable law); and

 

(vi) except as otherwise expressly provided in this Section 5(a), any and all other rights of the Executive to receive a Salary, bonus or other compensation or benefits shall terminate as of the effective date of termination.”

 

Except as expressly set forth in this Amendment, the Executive Employment Agreement remains unchanged and in full force and effect.

 

Dated: January 9, 2018

 

QUALIGEN, INC.  
   
By: /s/ Michael S. Poirier  
Name: Michael S. Poirier  
Title: Chairman/CEO  
     
/s/ Shishir Sinha  
SHISHIR K. SINHA  

 

  2  

 

 

Exhibit 10.6

 

Consulting Agreement

 

This Consulting Agreement (the “Agreement”), dated as of August 22, 2018, confirms our understanding with respect to the engagement of GreenBlock Capital LLC, located at 420 Royal Palm Way Palm Beach, Florida 33480 (“Consultant”) to serve as strategic advisor with respect to the matters set forth herein to Qualigen, Inc. (the “Company”).

 

Whereas, the Company has looked at the possibilities of becoming a public entity through the process of a reverse merger into a publicly-traded vehicle; and

 

Whereas, the Company desires to leverage the experience, knowledge and contacts of the Consultant in executing its “go-public” strategy, and the Consulting desires to work closely with the Company’s management to pursue this strategy.

 

Now therefore, the parties agree as follows:

 

1. Services

 

Strategic Advisory and Consulting Services

 

Consultant will serve as a strategic advisor and capital markets consultant to the Company. Such services shall include, but are not limited to, the following (the “Services”):

 

  Advise management on financing structures, reverse mergers, SEC and national exchange regulatory qualifications and requirements, and other general aspects of being a public company. The Services shall specifically not include the sale, negotiation, offer for sale, or purchase of securities of the Company, nor legal or accounting advice.
  Seek, introduce and help negotiate agreements with public entities, strategic partners, service providers, and similar parties critical for the success of going public and being a public company;
  Assist the Company in preparation of their capitalization and shareholder tables, financial statements, financial audits, business plans, corporate presentation materials and similar documents to support a go-public transaction and the on-going structure and growth of the Company;
  Assist in the preparation and due diligence requests, and organization of diligence materials;
  Subsequent to any go-public transaction, assist management with regulatory (SEC and exchanges) reporting requirements, shareholder communications, corporate strategy and other items associated with being a public company; and
  Perform such other strategic advisory services related to the Company, its business, capital structure, and financial structure as Consultant and the Company agree to be appropriate.

 

     
 

 

2. Compensation

 

For the services provided above, the Consultant shall receive an issuance of shares of common stock of the Company (the “Shares”) on the signing hereof equal to 7.5% of the total issued and outstanding capital stock of the Company on a fully diluted basis. The Shares shall be subject to the Repurchase Option and the Extension Payment set forth below.

 

If the Company does not complete a go-public transaction prior to the end of the Term of this Agreement, the Company shall have the right in its sole discretion to repurchase 80% of the Shares from the Consultant for the aggregate amount of $75,000 (the “Repurchase Option”).

 

If the Company completes a go-public transaction prior to the end of the Term of this Agreement, the Company shall extend the Term of this Agreement for an additional six (6) months from the closing of such transaction, and shall increase the Consultant’s fee by issuing additional Shares so that its common stock holdings of the post-merger public company equals 7.5% of the total issued and outstanding common stock on a fully diluted basis (the “Extension Payment”).

 

The structure of the Repurchase Option and the Extension Payment is not meant to act in any way as a success fee; but rather, since a substantial portion of the Consultant’s duties would be performed after a go-public transaction, as a reduction in their overall fee if such closing does not occur, and an increase (or anti-dilution protection) in the event such closing does occur. Consultant is not being compensated in any way for raising capital or the successful closing of a go-public transaction.

 

The Shares will have piggy-back registration rights with the other capital stock of the Company.

 

3. Expenses

 

The Company shall reimburse Consultant for all its pre-approved out-of-pocket expenses incurred in performing its services hereunder including travel.

 

Out of the equity compensation received hereby, the Consultant will be responsible for compensating its own employees and consultants, including any consultants or advisors specifically listed on Schedule A hereof.

 

4. Term and Termination

 

The term of this Agreement shall commence immediately and shall continue for nine (9) months (the “Term”); provided however, if the Company has signed a merger agreement which is in the process of closing at the end of the initial Term, this Agreement shall be extended month-to-month until the closing or termination of that agreement, whichever occurs first. The Term will then be extended after closing per the Extension Payment.

 

     
 

 

5. Other Terms

 

(i)       Nondisclosure. Both during and after the Term, Consultant shall not, and Consultant shall not permit any member, officer, employee, agent or other representative of Consultant or of any other entity which is controlled by Consultant (collectively, “Affiliate”) to disclose to any person other than Affiliates of Consultant, or use for the benefit of Consultant or any Affiliates of Consultant, any terms of this Agreement or any non-public information concerning the Company which has been learned or has come into the possession of Consultant or an Affiliate of Consultant as a result of Consultant’s or such Affiliate’s association with the Company pursuant to this Agreement. In the event of any disclosure required by any applicable law, regulation or judicial or regulatory order or threat of such an order, Consultant shall provide Company written notice of any such disclosure request and shall further notify Company as expeditiously as possible to enable Company to authorize such disclosure, to limit such disclosure, or to take action necessary to prevent and/ or enjoin such disclosure.

 

(ii)       Independent Contractor. Consultant understands and agrees that it will act under this Agreement as an independent contractor, on a best efforts basis and in an introductory capacity to potential strategic partners, groups and/or sub-contractors.

 

(iii)       Indemnity. The Company agrees to indemnify Consultant and its affiliates and their respective directors, officers, employees, agents, and controlling persons (each an “Indemnified Party”) and Consultant agrees to the same for the Company from and against any and all losses, claims, damages and liabilities, joint and several (collectively, “Losses”), to which the Indemnified Party may become subject under any applicable federal or state law; provided that the Company will not be liable to the extent that any Loss is found in a final judgment in a court to have resulted primarily from Consultant or any Indemnified Party’s bad faith, gross negligence, willful misconduct, violation of law, misrepresentation or fraud. In that case, the Company will reimburse any Indemnified Party for all expenses (including reasonable counsel fees and expenses) as such may be incurred in connection with the investigation of or preparation for or defense of any pending or threatened claim or any action or proceeding arising thereof, whether or not such Indemnified Party is a party. The indemnification provided for in this Agreement shall be in addition to any rights that Consultant and/or the Company may have at common law or otherwise.

 

(iv)       Waiver. No provision of this Agreement may be changed or terminated except by a writing signed by the party or parties to be charged therewith. Unless expressly provided, no party to this Agreement will be liable for the performance of any other party’s obligations hereunder. Any party hereto may waive compliance by the other with any of the terms, provisions and conditions set forth herein; provided however, that any such waiver shall be in writing specifically setting forth those provisions waived thereby. No such waiver shall be deemed to constitute or imply waiver of any other term, provision or condition of this Agreement. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute a single agreement. This Agreement is intended to supersede all prior agreements between the parties with respect to the subject matter hereof.

 

     
 

 

(v)       Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida applicable to contracts executed in and to be performed in that state.

 

ACCEPTED AND AGREED TO:

 

GreenBlock Capital      
         
By: /s/ Christopher Nelson   Dated 8/22/18
Name: Christopher Nelson      
Title MG Director      
         
Qualigen, Inc.      
         
By: /s/ Michael Poirier   Dated 8/22/18
Name: Michael Poirier      
Title CEO      

 

     

 

 

Exhibit 10.7

 

AMENDMENT TO CONSULTING AGREEMENT

 

This Amendment to Consulting Agreement (this “Amendment”), dated as of March 6, 2020, amends that certain Consulting Agreement dated August 22, 2018 (the “Agreement”) by and between Qualigen, Inc. (the “Company”) and GreenBlock Capital LLC (“Consultant”).

 

The Company and Consultant agree that the Agreement is hereby amended to modify and replace Section 2 as follows:

 

2. Compensation

 

(i) Fee for Services. For its services from the original date of this Agreement through six (6) months after the closing (“Closing”) of the reverse merger transaction contemplated by the Agreement and Plan of Merger dated January 15, 2020 (as thereafter amended, the “Merger Agreement”) among Ritter Pharmaceuticals, Inc. (“Ritter”), its subsidiary and the Company, the Consultant shall receive a fee (the “Fee”) payable in the form of: (a) a number of shares of Common Stock of the Company (the “Shares”) calculated such that the number of shares of Common Stock so issued would constitute shares of Common Stock of Ritter representing 4.5% (four and one-half percent) of the immediately-post-Merger shares of Common Stock of Ritter on a fully-diluted basis (with such percentage being calculated using the meaning of “fully-diluted” contemplated in the computation of the Merger Agreement’s “Exchange Ratio”), and (b) five-year Warrants to purchase a number of shares of Common Stock of the Company calculated such that such number of underlying shares of Common Stock would, after giving effect to the completion of the Merger and the assumption of warrants (including such Warrants) by Ritter in connection with the Merger, immediately-post-Merger result in the so-assumed Warrants overlying a number of shares of Common Stock of Ritter representing 3% (three percent) of the immediately-post-Merger shares of Common Stock of Ritter on a fully-diluted basis (with such percentage being calculated using the meaning of “fully-diluted” contemplated in the computation of the Merger Agreement’s “Exchange Ratio”) with (i) such Warrants not being exercisable to any extent until 183 days after the Merger, (ii) such Warrants having an initial exercise price per share equal to the exercise price provided in warrants issued by the Company to Alpha Capital Anstalt in connection with the Merger and its related transactions, and (iii) such exercise price per share being adjusted, upon assumption of the Warrants by Ritter in connection with the Merger, for the Merger’s “Exchange Ratio.”

 

(ii) Timing for Earning, Valuation and Forfeiture. The Company and Consultant agree that 25% of the value of the Fee shall be earned as of the Closing of the Merger and the balance over the following six (6) months accruing monthly. For the purposes of this subsection “(ii),” the Shares shall be valued at the lowest price per share of (a) Common Stock issued in connection with the conversion of Company convertible notes or (b) the stated conversion price for convertible preferred stock issued by the Company in connection with an offering, immediately prior to and in connection with the Closing of the Merger. Should the Consultant’s services with the Company be terminated for “cause” during the six (6) months following the Closing of the Merger, the Consultant will forfeit unearned Shares. “Cause” is defined as gross negligence, intentional misconduct or fraud that harms the Company. The Fee is not meant to act in any way as a success fee. A substantial portion of the Consultant’s duties will be performed after the Effective Time. Consultant is not being compensated in any way for raising capital or the successful closing of the Merger.

 

(iii) Issuance Instructions. The Shares and the Warrants shall be issued to Consultant or individually to its principals, as directed in writing by the Consultant prior to the Merger, subject to receipt of customary investment-intent letters.

 

Except as expressly provided herein, the Agreement remains unchanged and in full force and effect.

 

 

 

 

IN WITNESS WHEREOF, GreenBlock Capital LLC and Qualigen, Inc. have executed and delivered this Amendment to Consulting Agreement as of the 6th day of March, 2020.

 

GreenBlock Capital LLC   Qualigen, Inc.
     
By: /s/ Christopher Nelson   By: /s/ Michael S. Poirier
Christopher Nelson   Michael Poirier
Director   President & CEO

 

2

 

 

Exhibit 10.8

 

AMENDMENT NO. 2 TO CONSULTING AGREEMENT

 

This Amendment No. 2 to Consulting Agreement (this “Amendment”), dated as of May 3, 2020, amends that certain Consulting Agreement dated August 22, 2018 (as previously amended on March 6, 2020, the “Agreement”) by and between Qualigen, Inc. (the “Company”) and GreenBlock Capital LLC (“Consultant”).

 

The Company and Consultant agree that the Agreement is hereby amended to modify and replace Section 2(ii) and Section 2(iii) as follows:

 

(ii) Timing for Earning, Valuation and Forfeiture. The Company and Consultant agree that the Fee shall be earned as of the Closing of the Merger. For the purposes of this subsection “(ii),” the Shares shall be valued at the lowest price per share of (a) Common Stock issued in connection with the conversion of Company convertible notes or (b) the stated conversion price for convertible preferred stock issued by the Company in connection with an offering, immediately prior to and in connection with the Closing of the Merger. The Fee is not meant to act in any way as a success fee. A substantial portion of the Consultant’s duties will be performed after the Effective Time, as indicated by the portion of the Fee paid in Warrants. Consultant is not being compensated in any way for raising capital or the successful closing of the Merger.

 

(iii) Issuance Instructions. The Shares and the Warrants shall be issued to Consultant or individually to its principals and advisors, as directed in writing by Consultant prior to the Merger, subject to receipt of customary investment-intent letters.

 

Except as expressly provided herein, the Agreement remains unchanged and in full force and effect.

 

IN WITNESS WHEREOF, GreenBlock Capital LLC and Qualigen, Inc. have executed and delivered this Amendment No. 2 to Consulting Agreement as of the 3rd day of May, 2020.

 

GreenBlock Capital LLC   Qualigen, Inc.
     
By: /s/ Christopher Nelson   By: /s/ Michael S. Poirier
Christopher Nelson   Michael Poirier
Principal   President & CEO

 

 

 

 

Exhibit 10.9

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

qualigen, inc.

 

Warrant Shares: _______ Initial Exercisability Date: November 21, 2020

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, ________or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date first set forth above (the “Initial Exercisability Date”) and on or prior to 5:00 p.m. (New York City time) on the fifth anniversary of the day which is 183 days before the Initial Exercisability Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Qualigen, Inc., a Delaware corporation (the “Company”), up to a number of shares of Common Stock calculated such that the number of shares of Common Stock underlying the Warrant would, after giving effect to the completion of the Merger and the assumption of the Warrant by Parent in connection with the Merger, be exercisable for shares of Common Stock of Parent representing __/__ of 3% of the immediately-post-Merger shares of Common Stock of Parent on a fully-diluted basis (with such percentage being calculated using the meaning of “fully-diluted” contemplated in the computation of the Merger Agreement’s “Exchange Ratio” shares) (subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated May 20, 2020, among the Company and the purchasers signatory thereto.

 

  1  

 

 

Section 2Exercise.

 

a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercisability Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $0.327, subject to adjustment hereunder (the “Exercise Price”).

 

c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

  (A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;

 

  2  

 

 

  (B) = the Exercise Price of this Warrant, as adjusted hereunder; and
       
  (X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).

 

Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

  3  

 

 

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

 

d) Mechanics of Exercise.

 

i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.

 

ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

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iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

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vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

 

vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

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e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

Section 3Certain Adjustments.

 

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

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b) Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance at such effective price), then simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance the Exercise Price shall be reduced and only reduced to equal the Base Share Price. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance or in respect of any repricing (triggered or effected after the issuance date of this Warrant) of any derivative securities which were outstanding as of the issuance date of this Warrant. (Standard stock-split-type adjustments under Section 3(a) are not “repricings” for this purpose.) The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. If the Company enters into a Variable Rate Transaction, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

 

c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

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d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant. There are expressly excluded from this Section 3(d), and from the definition of “Distribution,” the distribution, as contemplated in anticipation of the Merger, to Parent’s pre-Merger stockholders of contingent value rights associated with Parent’s legacy business and technology and any payments ever made upon such contingent value rights.

 

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e) Fundamental Transaction. The Company covenants to, in the event of the Merger, cause Parent to expressly and in writing assume this Warrant. The portion of this Section 3(e) following this underscored forepart shall not apply to the Merger if, in the event of the Merger, the Company causes Parent to expressly and in writing assume this Warrant. Upon such assumption of this Warrant by Parent upon the Merger, (i) the Warrant shall thereafter not be exercisable for Common Stock but instead shall be exercisable (subject to any limitation in Section 2(e) on the exercise of this Warrant) for a number of shares of common stock of Parent equal to the number of shares of Common Stock for which it was exercisable immediately before the Merger (without regard to any limitation in Section 2(e) on the exercise of this Warrant) times the “Exchange Ratio” as applied in the Merger, (ii) the Exercise Price per share of common stock of Parent shall be equal to the Exercise Price applicable immediately before the Merger divided by the “Exchange Ratio” as applied in the Merger (subject to any subsequent exercise price adjustment under Section 2(b) of this Warrant), and (iii) Parent shall succeed to, and be substituted for the Company on a prospective basis with respect to this Warrant (so that from and after the date of the Merger, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to Parent), and Parent may exercise every right and power of the Company and shall assume (to the exclusion of any further obligation of the Company) all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if Parent had been named as the Company herein. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, that, if the Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, Holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the greater of (x) the last VWAP immediately prior to the public announcement of such Fundamental Transaction and (y) the last VWAP immediately prior to the consummation of such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within the later of (i) five Business Days of the Holder’s election and (ii) the date of consummation of the Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

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f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

g) Notice to Holder.

 

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

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h) Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.

 

Section 4Transfer of Warrant.

 

a) Transferability. This Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

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c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

Section 5Miscellaneous.

 

a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d) Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

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Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms 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 actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

f) Restrictions. The Holder, by acceptance of this Warrant, acknowledges that the Warrant Shares acquired upon the exercise of this Warrant may have restrictions upon resale imposed by state and federal securities laws. The Holder, by acceptance of this Warrant, covenants to comply with any such restrictions upon resale imposed by state and federal securities laws.

 

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

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i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of May 22, 2020.

 

 

QUALIGEN, INC.

                                                        
  By:  
  Name:  
 

Title:

 

 

  15  

 

 

NOTICE OF EXERCISE

 

To: qualigen, inc.

 

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of (check applicable box):

 

[  ] in lawful money of the United States; or

 

[  ] [if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

_______________________________

 

_______________________________

 

_______________________________

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

 

 
 

 

 EXHIBIT B

 

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)

       
Phone Number:     _____________________________________________
       
Email Address:     _____________________________________________
       
Dated: _______________ __, ______    
       
Holder’s Signature: _________________________________    
       
Holder’s Address: _________________________________    

 

 

 

 

Exhibit 10.10

 

COMMON STOCK PURCHASE WARRANT

 

qualigen THERAPEUTICS, inc.

 

Warrant Shares: _____ Initial Exercisability Date: November 21, 2020

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, ______________or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date first set forth above (the “Initial Exercisability Date”) and on or prior to 5:00 p.m. (New York City time) on the fifth anniversary of the day which is 183 days before the Initial Exercisability Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Qualigen Therapeutics, Inc., a Delaware corporation (the “Company”), up to a number of shares of Common Stock calculated such that the number of shares of Common Stock underlying the Warrant would, after giving effect to the completion of the Merger and the assumption of the associated Qualigen, Inc. warrant by the Company in connection with the Merger, be exercisable for shares of Common Stock of the Company representing __/__ of 3% of the immediately-post-Merger shares of Common Stock of the Company on a fully-diluted basis (with such percentage being calculated using the meaning of “fully-diluted” contemplated in the computation of the Merger Agreement’s “Exchange Ratio” shares) (subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

This Warrant is the Warrant issued to the Holder in exchange for the corresponding Warrant which had been issued on May 22, 2020 by Qualigen, Inc. and which corresponding Warrant had been assumed by the Company pursuant to the Merger. By accepting this Warrant, the Holder acknowledges that such corresponding Qualigen, Inc. Warrant is (pursuant to its express terms in expectation of such event) no longer exercisable, and that such corresponding Warrant has instead been replaced by this Warrant.

 

Section 1. Definitions. As used in this Warrant, the following capitalized terms shall have the following meanings:

 

a) “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

b) “Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

c) “Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

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d) “Merger” means the merger transaction in which a wholly-owned subsidiary of the Company was merged into Qualigen, Inc. pursuant to that certain Agreement and Plan of Merger dated January 15, 2020, as thereafter amended.

 

e) “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

f) “Trading Day” means a day on which the principal Trading Market is open for trading.

 

g) “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question (or, if the Common Stock is not listed or quoted for trading on any of the following markets or exchanges on the date in question but the common stock of the Company is listed or quoted for trading on any of the following markets or exchanges on the date in question, then any of the following markets or exchanges on which the common stock of Parent is listed or quoted for trading on the date in question): the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).

 

h) “Transfer Agent” means the current transfer agent of the Company, and any successor transfer agent of the Company.

 

i) “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit, whereby the Company may issue securities at a future determined price.

 

Section 2. Exercise.

 

a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercisability Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

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b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $1.11, subject to adjustment hereunder (the “Exercise Price”).

 

c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) =   as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
     
(B) =   the Exercise Price of this Warrant, as adjusted hereunder; and
     
(X) =   the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

3

 

 

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).

 

Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

 

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d) Mechanics of Exercise.

 

i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.

 

ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

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iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

 

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vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Securities Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Securities Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

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Section 3. Certain Adjustments.

 

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b) Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance at such effective price), then simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance the Exercise Price shall be reduced and only reduced to equal the Base Share Price. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance or in respect of any repricing (triggered or effected after the issuance date of this Warrant) of any derivative securities which were outstanding as of the issuance date of this Warrant. (Standard stock-split-type adjustments under Section 3(a) are not “repricings” for this purpose.) The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. If the Company enters into a Variable Rate Transaction, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

 

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c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant. There are expressly excluded from this Section 3(d), and from the definition of “Distribution,” the distribution, as contemplated in anticipation of the Merger, to the Company’s pre-Merger stockholders of contingent value rights associated with the Company’s legacy technology and any payments ever made upon such contingent value rights.

 

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e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, that, if the Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, Holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the greater of (x) the last VWAP immediately prior to the public announcement of such Fundamental Transaction and (y) the last VWAP immediately prior to the consummation of such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within the later of (i) five Business Days of the Holder’s election and (ii) the date of consummation of the Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

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f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

g) Notice to Holder.

 

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

h) Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.

 

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Section 4. Transfer of Warrant.

 

a) Transferability. This Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

Section 5. Miscellaneous.

 

a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

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c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d) Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms 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 actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

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e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. .

 

f) Restrictions. The Holder, by acceptance of this Warrant, acknowledges that the Warrant Shares acquired upon the exercise of this Warrant may have restrictions upon resale imposed by state and federal securities laws. The Holder, by acceptance of this Warrant, covenants to comply with any such restrictions upon resale imposed by state and federal securities laws.

 

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via email attachment at the Holder’s e-mail address on file with the Company at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email attachment at the Holder’s e-mail address on file with the Company on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing to the Holder’s mail address on file with the Company, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the Holder.

 

i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

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l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of May 22, 2020.

 

  QUALIGEN THERAPEUTICS, INC.
     
  By:             
  Name:
  Title:                        

 

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NOTICE OF EXERCISE

 

To: qualigen THERAPEUTICS, inc.

 

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of (check applicable box):

 

[  ] in lawful money of the United States; or

 

[  ] [if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

     

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

     
     
     
     
     

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

 

 

 

 

EXHIBIT B

 

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)
     
Phone Number:    
     
Email Address:    
     
     
Dated: _______________ __, ______    
     
Holder’s Signature:      
       
Holder’s Address:      

 

 

 

 

Exhibit 10.11

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of May 20, 2020 between Qualigen, Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Certificate of Designation (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:

 

Acquiring Person” shall have the meaning ascribed to such term in Section 4.7.

 

Action” shall have the meaning ascribed to such term in Section 3.1(j).

 

Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

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

 

Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

Certificate of Designation” means the Certificate of Designation to be filed prior to the Closing by the Company with the Secretary of State of Delaware, in the form of Exhibit A attached hereto.

 

Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

 

 

 

 

Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived.

 

Commission” means the United States Securities and Exchange Commission.

 

Commitment Shares” means the shares of Series Alpha Preferred Stock issued in consideration of the Purchasers’ commitment to purchase the Series Alpha Preferred Stock as set forth in Section 4.3.

 

Common Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

Company Counsel” means Stradling Yocca Carlson & Rauth, a Professional Corporation, with offices located at 4365 Executive Drive, Suite 1500, San Diego, California 92121.

 

Conversion Price” shall have the meaning ascribed to such term in the Certificate of Designation.

 

Conversion Shares” shall have the meaning ascribed to such term in the Certificate of Designation.

 

Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.

 

Effective Date” shall have the meaning ascribed to such term in the Certificate of Designation.

 

EGS” means Ellenoff Grossman & Schole LLP, with offices located at 1345 Avenue of the Americas, New York, New York 10105-0302.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

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Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Company, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock (or into Common Stock of Parent) issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities (it being expressly understood that decreases in the exercise price of warrants (which were outstanding on the date of this Agreement) pursuant to the operation of ratchet or other antidilution provisions thereof which provisions have not been amended after the date of this Agreement do not constitute an “amendment since the date of this Agreement”), and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, and provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities. Issuances of securities in the Merger or assumed by Parent in connection with the Merger, and securities issuable or thereafter issued by Parent upon the conversion, exercise or exchange thereof, are also Exempt Issuances; provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities (it being expressly understood that decreases in the exercise price of warrants (which were outstanding on the date of this Agreement) pursuant to the operation of ratchet or other antidilution provisions thereof which provisions have not been amended after the date of this Agreement do not constitute an “amendment since the date of this Agreement”).

 

FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

 

Indebtedness” shall have the meaning ascribed to such term in Section 3.1(bb).

 

Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

 

Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

 

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Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

 

Material Permits” shall have the meaning ascribed to such term in Section 3.1(n).

 

Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.

 

Merger” means the proposed merger of the Company with a wholly-owned subsidiary of Parent pursuant to that certain Agreement and Plan of Merger dated January 15, 2020, as thereafter amended.

 

Parent” means Ritter Pharmaceuticals, Inc.

 

Participation Maximum” shall have the meaning ascribed to such term in Section 4.12(a).

 

Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

Pre-Notice” shall have the meaning ascribed to such term in Section 4.12(b).

 

Pro Rata Portion” shall have the meaning ascribed to such term in Section 4.12(e).

 

Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.

 

Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants or conversion in full of all shares of Series Alpha Preferred Stock, ignoring any conversion or exercise limits set forth therein, and assuming that any previously unconverted shares of Series Alpha Preferred Stock are held until the third anniversary of the Closing Date.

 

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Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

Securities” means the Series Alpha Preferred Stock, the Warrants, the Warrant Shares and the Underlying Shares.

 

Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

Series Alpha Preferred Stock” means the up to 4,010 shares of the Company’s Series Alpha Preferred Stock issued hereunder having the rights, preferences and privileges set forth in the Certificate of Designation, in the form of Exhibit A hereto.

 

Stated Value” means $1,000 per share of Series Alpha Preferred Stock.

 

Subscription Amount” shall mean, as to each Purchaser, the aggregate amount to be paid for the Series Alpha Preferred Stock purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

 

Subsequent Financing” shall have the meaning ascribed to such term in Section 4.12(a).

 

Subsequent Financing Notice” shall have the meaning ascribed to such term in Section 4.12(b).

 

Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

Trading Day” means a day on which the principal Trading Market is open for trading.

 

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Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question (or, if the Common Stock is not listed or quoted for trading on any of the following markets or exchanges on the date in question but the common stock of Parent is listed or quoted for trading on any of the following markets or exchanges on the date in question, then any of the following markets or exchanges on which the common stock of Parent is listed or quoted for trading on the date in question): the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).

 

Transaction Documents” means this Agreement, the Certificate of Designation, the Warrants, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

Transfer Agent” means the current transfer agent of the Company, and any successor transfer agent of the Company.

 

Underlying Shares” means the shares of Common Stock issued and issuable upon conversion of the Series Alpha Preferred Stock in accordance with the terms of the Certificate of Designation or upon exercise of the Warrants in accordance with the terms of the Warrants.

 

Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.17(b).

 

VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

Warrants” means, collectively, the Common Stock purchase warrants delivered at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to five years, in the form of Exhibit B attached hereto.

 

Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

 

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ARTICLE II.

PURCHASE AND SALE

 

2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of $4,010,000 of shares of Series Alpha Preferred Stock with an aggregate Stated Value for each Purchaser equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser, and Warrants as determined by pursuant to Section 2.2(a). The aggregate number of shares of Series Alpha Preferred Stock sold hereunder shall be up to 4,010. Each Purchaser shall deliver to the Company via wire transfer immediately available funds equal to such Purchaser’s Subscription Amount and the Company shall deliver to each Purchaser its respective shares of Series Alpha Preferred Stock and Warrants as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of EGS or such other location as the parties shall mutually agree.

 

2.2 Deliveries.

 

(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following (it being understood, however, that despite the following wording the Warrants and the Commitment Shares shall all be delivered to and in favor of Alpha and not to or in favor of any other Purchasers):

 

(i) this Agreement duly executed by the Company;

 

(ii) a legal opinion of Company Counsel, substantially in the form of Exhibit C attached hereto;

 

(iii) a certificate evidencing a number of shares of Series Alpha Preferred Stock equal to such Purchaser’s Subscription Amount divided by the Stated Value, registered in the name of such Purchaser;

 

(iv) a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock calculated such that the number of shares of Common Stock underlying all Warrants issued to all Purchasers in the aggregate would, after giving effect to the completion of the Merger and the assumption of the Warrants by Parent in connection with the Merger, be exercisable for shares of Common Stock of Parent representing 1% of the immediately-post-Merger shares of Common Stock of Parent on a fully-diluted basis (with such percentage being calculated using the meaning of “fully-diluted” contemplated in the computation of the Merger Agreement’s “Exchange Ratio”), with an exercise price equal to $0.327, subject to adjustment therein;

 

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(v) the Commitment Shares in the form of a certificate representing a number of shares of Series Alpha Preferred Stock calculated such that the number of shares of Series Alpha Preferred Stock issued as Commitment Shares to all Purchasers in the aggregate would, after giving effect to the completion of the Merger and the assumption of the Warrants by Parent in connection with the Merger, immediately-post-Merger constitute shares of Series Alpha Preferred Stock of Parent overlying 5% of the immediately-post-Merger shares of Common Stock of Parent on a fully-diluted basis (with such percentage being calculated using the meaning of “fully-diluted” contemplated in the computation of the Merger Agreement’s “Exchange Ratio”);

 

(vi) evidence of the filing and acceptance of the Certificate of Designation from the Secretary of State of Delaware; and

 

(vii) the Company shall have provided each Purchaser with the Company’s wire instructions, on Company letterhead and executed by the Chief Executive Officer or Chief Financial Officer;

 

(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:

 

(i) this Agreement duly executed by such Purchaser; and

 

(ii) such Purchaser’s Subscription Amount by wire transfer to the account specified in writing by the Company.

 

2.3 Closing Conditions.

 

(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed;

 

(iii) the Merger shall be in all ways positioned to be consummated and all parties to the Merger Agreement shall be ready, willing and able to so consummate (including all closing conditions under the Merger Agreement having been duly satisfied or waived); and

 

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(iv) the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

 

(b) The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

 

(iii) the Merger shall be in all ways positioned to be consummated and all parties to the Merger Agreement shall be ready, willing and able to so consummate (including all closing conditions under the Merger Agreement having been duly satisfied or waived);

 

(iv) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

 

(v) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

 

(vi) from the date hereof to the Closing Date, trading in the common stock of Parent shall not have been suspended by the Commission or the Company’s principal Trading Market and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

 

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ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules (or in any other section of the Disclosure Schedules if its applicability to the corresponding section of the Disclosure Schedules is apparent), the Company hereby makes the following representations and warranties to each Purchaser:

 

(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, no such Schedule 3.1(a) shall be provided and all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

(b) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party have been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its respective terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

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(d) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar adjustments, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

(f) Issuance of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Underlying Shares, when and if issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the date hereof.

 

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(g) Capitalization. The capitalization of the Company as of the date hereof is as set forth in Parent’s Form S-4 registration statement filed with the Commission on February 4, 2020, as thereafter amended. The Company has not issued any capital stock since December 31, 2019, other than pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of December 31, 2019. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities or as disclosed in Parent’s Form S-4 registration statement filed with the Commission on February 4, 2020, as thereafter amended, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents or capital stock of any Subsidiary. The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities to any Person (other than the Purchasers and GreenBlock Capital LLC). There are no outstanding securities or instruments of the Company or any Subsidiary with any provision that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company or any Subsidiary, except for preferred stock weighted-average antidilution provisions which have been waived in connection with the transactions contemplated by this Agreement. There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

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(h) RESERVED.

 

(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements provided to the Purchasers, except as set forth on Schedule 3.1(i), (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. Except for the issuance of the Securities contemplated by this Agreement or as set forth in Parent’s Form S-4 registration statement filed with the Commission on February 4, 2020, as thereafter amended, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been disclosed to the Purchasers.

 

(j) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been in the past five years, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

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(k) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(m) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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(n) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

(o) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

 

(p) Intellectual Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(q) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

 

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(r) Transactions with Affiliates and Employees. None of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

 

(s) Internal Accounting Controls. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(t) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person other than GreenBlock Capital LLC with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(u) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby.

 

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(v) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

(w) RESERVED.

 

(x) RESERVED.

 

(y) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

 

(z) Disclosure. To the knowledge of the Company, all of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

 

(aa) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act which would require the registration of any such securities under the Securities Act.

 

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(bb) Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(bb) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

(cc) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.

 

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(dd) No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(ee) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision of FCPA.

 

(ff) Accountants. The Company’s accounting firm is Squar Milner LLP. To the knowledge and belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s annual audited financial statements for the fiscal year ending 2019.

 

(gg) RESERVED.

 

(hh) No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is not in past-due status with respect to any fees owed to its accountants and lawyers which past-due status as to such fees could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.

 

(ii) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

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(jj) RESERVED.

 

(kk) RESERVED.

 

(ll) FDA. As to each product subject to the jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical Product”), such Pharmaceutical Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed by the Company in compliance with all applicable requirements under FDCA and similar laws, rules and regulations relating to registration, investigational use, premarket clearance, licensure, or application approval, good manufacturing practices, good laboratory practices, good clinical practices, product listing, quotas, labeling, advertising, record keeping and filing of reports, except where the failure to be in compliance would not have a Material Adverse Effect. There is no pending, completed or, to the Company’s knowledge, threatened, action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge, complaint, or investigation) against the Company or any of its Subsidiaries, and none of the Company or any of its Subsidiaries has received any notice, warning letter or other communication from the FDA or any other governmental entity, which (i) contests the premarket clearance, licensure, registration, or approval of, the uses of, the distribution of, the manufacturing or packaging of, the testing of, the sale of, or the labeling and promotion of any Pharmaceutical Product, (ii) withdraws its approval of, requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising or sales promotional materials relating to, any Pharmaceutical Product, (iii) imposes a clinical hold on any clinical investigation by the Company or any of its Subsidiaries, (iv) enjoins production at any facility of the Company or any of its Subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction with the Company or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws, rules or regulations by the Company or any of its Subsidiaries, and which, either individually or in the aggregate, would have a Material Adverse Effect. The properties, business and operations of the Company have been and are being conducted in all material respects in accordance with all applicable laws, rules and regulations of the FDA. The Company has not been informed by the FDA that the FDA will prohibit the marketing, sale, license or use in the United States of any product proposed to be developed, produced or marketed by the Company nor has the FDA expressed any concern as to approving or clearing for marketing any product being developed or proposed to be developed by the Company.

 

(mm) RESERVED.

 

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(nn) Stock Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

 

(oo) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

 

(pp) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.

 

(qq) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

(rr) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.

 

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(ss) No Disqualification Events. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under the Securities Act, none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Purchasers a copy of any disclosures provided thereunder.

 

(tt) Other Covered Persons. The Company is not aware of any person (other than GreenBlock Capital LLC or any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Securities.

 

(uu) Notice of Disqualification Events. The Company will notify the Purchasers in writing, prior to the Closing Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.

 

3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):

 

(a) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

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(b) Own Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

(c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants or converts any shares of Series Alpha Preferred Stock, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.

 

(d) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e) General Solicitation. Such Purchaser is not, to such Purchaser’s knowledge, purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or, to the knowledge of such Purchaser, any other general solicitation or general advertisement.

 

The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby.

 

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ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer Restrictions.

 

(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.

 

(b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:

 

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.

 

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(c) Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144 (assuming cashless exercise of the Warrants), (iii) if such Underlying Shares are eligible for sale under Rule 144 (assuming cashless exercise of the Warrants), without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Underlying Shares and without volume or manner-of-sale restrictions or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent or the Purchaser promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by a Purchaser, respectively. If all or any shares of Series Alpha Preferred Stock are converted or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144 and the Company is then in compliance with the current public information required under Rule 144, or if the Underlying Shares may be sold under Rule 144 (assuming cashless exercise of the Warrants) without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Underlying Shares and without volume or manner-of-sale restrictions or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Underlying Shares shall be issued free of all legends. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c), it will, no later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend.

 

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(d) In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, (i) as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend and (ii) if the Company fails to (a) issue and deliver (or cause to be delivered) to a Purchaser by the Legend Removal Date a certificate representing the Securities so delivered to the Company by such Purchaser that is free from all restrictive and other legends and (b) if after the Legend Removal Date such Purchaser purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Purchaser of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock that such Purchaser anticipated receiving from the Company without any restrictive legend, then, an amount equal to the excess of such Purchaser’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of (x) such number of Underlying Shares that the Company was required to deliver to such Purchaser by the Legend Removal Date multiplied by (y) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing on the date of the delivery by such Purchaser to the Company of the applicable Underlying Shares (as the case may be) and ending on the date of such delivery and payment under this clause (ii).

 

(e) Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell (if at all and if ever) any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.

 

4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

 

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4.3 Commitment Fee; Warrants.

 

(a) As additional consideration, the Company agrees to issue the Commitment Shares to Alpha at the Closing.

 

(b) As additional consideration, the Company agrees to issue the Warrants to Alpha at the Closing.

 

4.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

4.5 Conversion and Exercise Procedures. Each of the form of Notice of Exercise included in the Warrants and the form of Notice of Conversion included in the Certificate of Designation set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants or convert the Series Alpha Preferred Stock. Without limiting the preceding sentences, no ink-original Notice of Exercise or Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise or Notice of Conversion form be required in order to exercise the Warrants or convert the Series Alpha Preferred Stock. No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise their Warrants or convert their Series Alpha Preferred Stock. The Company shall honor exercises of the Warrants and conversions of the Series Alpha Preferred Stock and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

 

4.6 RESERVED.

 

4.7 Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

 

4.8 RESERVED.

 

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4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and shall not use such proceeds: (a) for the satisfaction of any portion of the Company’s debt (other than to pay Sekisui Diagnostics, LLC the $890,000 plus any accrued interest for the R&D Payment and Sekisui Vitamin D Costs as defined in and owed pursuant to the Letter of Intent dated March 16, 2018 (as amended August 22, 2018) between Sekisui Diagnostics, LLC and the Company and other than payment of trade payables in the ordinary course of the Company’s business and prior practices (including a $100,000 license agreement milestone payment to Advanced Cancer Therapeutics, LLC)), (b) for the redemption of any Common Stock or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations.

 

4.10 Indemnification of Purchasers. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is solely based upon a material breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof (with settlement rights) with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.10 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.

 

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4.11 Reservation of Securities.

 

(a) The Company shall maintain a reserve of the Required Minimum from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.

 

(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than 130% of (i) the Required Minimum on such date, minus (ii) the number of shares of Common Stock previously issued pursuant to the Transaction Documents, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time (minus the number of shares of Common Stock previously issued pursuant to the Transaction Documents), as soon as possible and in any event not later than the 75th day after such date, provided that the Company will not be required at any time to authorize a number of shares of Common Stock greater than the maximum remaining number of shares of Common Stock that could possibly be issued after such time pursuant to the Transaction Documents.

 

4.12 Participation in Future Financing.

 

(a) From the date hereof until the date that is the 18 month anniversary of the Effective Date, upon any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration, Indebtedness or a combination of units thereof (a “Subsequent Financing”), each Purchaser shall have the right to participate in up to an amount of the Subsequent Financing equal to the greater of (a) a percentage of the Subsequent Financing equal to such Purchaser’s then percentage ownership of outstanding Common Stock on a fully-diluted basis (with such percentage being calculated using the meaning of “fully-diluted” contemplated in the computation of the Merger Agreement’s “Exchange Ratio”), or (b) $5,000,000 (the “Participation Maximum”) on the same terms, conditions and price provided for in the Subsequent Financing.

 

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(b) At least five (5) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”). Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.

 

(c) Any Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice that such Purchaser is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing and warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice. If the Company receives no such notice from a Purchaser as of such fifth (5th) Trading Day, such Purchaser shall be deemed to have notified the Company that it does not elect to participate.

 

(d) If by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice, notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees to participate) is, in the aggregate, less than the total amount of the Subsequent Financing, then the Company may effect the remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice.

 

(e) If by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice, the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the Participation Maximum. “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities purchased on the Closing Date by a Purchaser participating under this Section 4.12 and (y) the sum of the aggregate Subscription Amounts of Securities purchased on the Closing Date by all Purchasers participating under this Section 4.12.

 

(f) The Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.12, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after the date of the initial Subsequent Financing Notice.

 

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(g) The Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents related to the Subsequent Financing shall not include any term or provision that, directly or indirectly, will, or is intended to, exclude one or more of the Purchasers from participating in a Subsequent Financing, including, but not limited to, provisions whereby such Purchaser shall be required to agree to any restrictions on trading as to any of the Securities purchased hereunder or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written consent of such Purchaser.

 

(h) Notwithstanding anything to the contrary in this Section 4.12 and unless otherwise agreed to by such Purchaser, the Company shall either confirm in writing to such Purchaser that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser will not be in possession of any material, non-public information, by the tenth (10th) Business Day following delivery of the Subsequent Financing Notice. If by such tenth (10th) Business Day, no public disclosure regarding a transaction with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by such Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.

 

(i) Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of an Exempt Issuance.

 

4.13 Most Favored Nation. As of the Closing Date, and until the earlier of (x) such date that is the 12-month anniversary of the Closing Date, or (y) such time where Alpha ceases to hold Preferred Shares convertible into at least 4.99% of the issue and outstanding voting shares of the Company (or, after the Merger, of Parent), if the Company shall engage in any future financing transactions, other than Exempted Issuances, with any investor, the Company will provide the Purchasers with written notice (the “MFN Notice”) thereof promptly but in no event later than 10 days after the closing of such financing transactions. Included with the MFN Notice shall be a copy of all documentation relating to such financing transaction and shall include, upon written request of the Purchaser, any additional information related to such subsequent investment as may be reasonably requested by the Purchaser. In the event the Purchaser reasonably determines that the terms of the subsequent investment are preferable to the terms of this Agreement, the Purchaser will notify the Company in writing. Promptly after receipt of such written notice from the Purchaser, the Company agrees to amend and restate the terms of this Agreement, to be identical to the instruments evidencing the subsequent investment.

 

4.14 Equal Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

 

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4.15 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules. As of the closing of the Merger, the Purchasers shall not be in possession of any material non-public information concerning the Company, the Merger, or Parent, provided to them by the Company or Parent and, to the knowledge of the Company, the Purchaser is not an Affiliate of the Company.

 

4.16 Blue Sky Filings. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.

 

4.17 Subsequent Financings.

 

(a) Other than with the prior written consent of the Purchasers, for a period of 181 days after the effective time of the Merger, the Company shall not issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents.

 

(b) From the date hereof until such time as no Purchaser holds any of the Series Alpha Preferred Stock, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company of Common Stock or Common Stock Equivalents (or a combination of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit, whereby the Company may issue securities at a future determined price. Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.

 

Notwithstanding the foregoing, this Section 4.17 shall not apply in respect of an Exempt Issuance.

 

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4.18 Repricing of Prior Common Stock Equivalents. Other than with the prior written consent of the Purchasers, the Company shall not, after the Closing Date and until such time as no Purchaser holds any of the shares of Series Alpha Preferred Stock (or holds any convertible preferred stock of any issuer which is issued in exchange for shares of Series Alpha Preferred Stock in a merger) or holds any Warrants (or holds any warrants of any issuer which are issued in exchange for Warrants in a merger or which are assumed by any issuer in connection with a merger with the Company), reprice any derivative securities which were outstanding on the Closing Date. (Standard stock-split-type adjustments are not “repricings” for this purpose.) This Section 4.18 shall not apply to Exempt Securities.

 

The Company shall cause any issuer into which it merges or which acquires the Company in the form of a reverse triangular merger to comply with the same covenant (mutatis mutandis) for the benefit of the Purchasers, and shall cause such other issuer to state such same covenant (mutatis mutandis) in writing for the benefit of the Purchasers if the Purchasers so request to such other issuer.

 

ARTICLE V.

MISCELLANEOUS

 

5.1 Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before the fifth (5th) Trading Day following the date hereof; provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).

 

5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse Alpha Capital Anstalt (“Alpha”) the non-accountable sum of $50,000 for its due diligence and legal fees and expenses. Accordingly, in lieu of the foregoing payments, the aggregate amount that Alpha is to pay for the Securities at the Closing shall be reduced by $50,000 in lieu thereof. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.

 

5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

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5.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via email attachment at the e-mail address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email attachment at the e-mail address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.

 

5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and Purchasers which purchased at least 67% in interest of the Series Alpha Preferred Stock based on the initial Subscription Amounts hereunder or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought, provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.

 

5.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

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5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.10.

 

5.9 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence an Action or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.10, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action or Proceeding.

 

5.10 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.

 

5.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such “.pdf” signature page were an original thereof.

 

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5.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that, in the case of a rescission of a conversion of the Series Alpha Preferred Stock or exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).

 

5.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

5.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

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5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any Action or Proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.

 

5.18 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through EGS. EGS does not represent any of the Purchasers other than Alpha and only represents Alpha. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

 

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5.19 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

5.20 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

5.21 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents 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 the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

5.22 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

(Signature Pages Follow)

 

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

qualigen, inc.   Address for Notice:
       
By: /s/ Michael S. Poirier   Email: mpoirier@qualigeninc.com
Name: Michael S. Poirier      
Title: Chief Executive Officer      
         

With a copy to (which shall not constitute notice) to:

Stradling Yocca Carlson & Rauth, a Professional Corporation

4365 Executive Drive, Suite 1500

San Diego, California 92121

Attn: Hayden Trubitt

 

 

Email:

 

 

 

htrubitt@sycr.com

 

 

 

Acknowledged and agreed effective upon completion of the Merger and solely as to Sections 4.10, 4.12, 4.13, 4.15 and 4.17 as it relates to rights of the Purchasers after completion of the Merger:

 

RITTER PHARMACEUTICALS, INC.      
       
By /s/ Andrew J. Ritter   Email: andrew@ritterpharma.com
Name: Andrew Ritter      
Title: Chief Executive Officer      

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

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[PURCHASER SIGNATURE PAGES TO QUALIGEN SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

Name of Purchaser: Alpha Capital Anstalt

 

Signature of Authorized Signatory of Purchaser: /s/ Nicola Feuerstein

 

Name of Authorized Signatory: Nicola Feuerstein

 

Title of Authorized Signatory: Director

 

Email Address of Authorized Signatory: info@alphacapital.li

 

Address for Notice to Purchaser:

 

LH Financial Services

510 Madison Avenue

Suite 1400

New York, N.Y. 10022

 

Address for Delivery of Securities to Purchaser (if not same as address for notice):

 

 

Subscription Amount: $ 4,010,000

 

Shares of Series Alpha Preferred Stock: 4.010

 

Warrant Shares: 916,189

 

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Exhibit 10.12

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

qualigen, inc.

 

Warrant Shares: 916,189 Initial Exercisability Date: May 22, 2020

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Alpha Capital Anstalt or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the issuance date of this Warrant (the “Initial Exercisability Date”) and on or prior to 5:00 p.m. (New York City time) on the fifth anniversary of the Initial Exercisability Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Qualigen, Inc., a Delaware corporation (the “Company”), up to a number of shares of Common Stock calculated such that the number of shares of Common Stock underlying the Warrant would, after giving effect to the completion of the Merger and the assumption of the Warrant by Parent in connection with the Merger, be exercisable for shares of Common Stock of Parent representing 1% of the immediately-post-Merger shares of Common Stock of Parent on a fully-diluted basis (with such percentage being calculated using the meaning of “fully-diluted” contemplated in the computation of the Merger Agreement’s “Exchange Ratio” shares) (subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated May 20, 2020, among the Company and the purchasers signatory thereto.

 

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Section 2Exercise.

 

a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercisability Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $0.327, subject to adjustment hereunder (the “Exercise Price”).

 

c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) =   as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;

 

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(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

 

(X) =   the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).

 

Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

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VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

 

d) Mechanics of Exercise.

 

i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is (more than six months after the Initial Exercisability Date) being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.

 

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ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

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v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

 

vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

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e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

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Section 3Certain Adjustments.

 

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

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b) Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance at such effective price), then simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance the Exercise Price shall be reduced and only reduced to equal the Base Share Price. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance or in respect of any repricing (triggered or effected after the issuance date of this Warrant) of any derivative securities which were outstanding as of the issuance date of this Warrant. (Standard stock-split-type adjustments under Section 3(a) are not “repricings” for this purpose.) The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. If the Company enters into a Variable Rate Transaction, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

 

c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

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d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant. There are expressly excluded from this Section 3(d), and from the definition of “Distribution,” the distribution, as contemplated in anticipation of the Merger, to Parent’s pre-Merger stockholders of contingent value rights associated with Parent’s legacy business and technology and any payments ever made upon such contingent value rights.

 

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e) Fundamental Transaction. The Company covenants to, in the event of the Merger, cause Parent to expressly and in writing assume this Warrant. The portion of this Section 3(e) following this underscored forepart shall not apply to the Merger if, in the event of the Merger, the Company causes Parent to expressly and in writing assume this Warrant. Upon such assumption of this Warrant by Parent upon the Merger, (i) the Warrant shall thereafter not be exercisable for Common Stock but instead shall be exercisable (subject to any limitation in Section 2(e) on the exercise of this Warrant) for a number of shares of common stock of Parent equal to the number of shares of Common Stock for which it was exercisable immediately before the Merger (without regard to any limitation in Section 2(e) on the exercise of this Warrant) times the “Exchange Ratio” as applied in the Merger, (ii) the Exercise Price per share of common stock of Parent shall be equal to the Exercise Price applicable immediately before the Merger divided by the “Exchange Ratio” as applied in the Merger (subject to any subsequent exercise price adjustment under Section 2(b) of this Warrant), and (iii) Parent shall succeed to, and be substituted for the Company on a prospective basis with respect to this Warrant (so that from and after the date of the Merger, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to Parent), and Parent may exercise every right and power of the Company and shall assume (to the exclusion of any further obligation of the Company) all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if Parent had been named as the Company herein. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, that, if the Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, Holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the greater of (x) the last VWAP immediately prior to the public announcement of such Fundamental Transaction and (y) the last VWAP immediately prior to the consummation of such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within the later of (i) five Business Days of the Holder’s election and (ii) the date of consummation of the Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

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f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

g) Notice to Holder.

 

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

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h) Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.

 

Section 4Transfer of Warrant.

 

a) Transferability. This Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

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b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

Section 5Conversion of Debenture Interest. By acceptance of this Warrant, the Holder agrees (and the Company also agrees) that Section 2(a) of the 10% Senior Convertible Debenture issued by the Company to the Holder on September 7, 2018 (and as thereafter amended to date) is hereby amended to provide that upon a Going Public Event (as defined in such Debenture), the accrued interest on such Debenture shall be converted into and paid in the form of Common Stock (at the Conversion Price (as defined in such Debenture)) rather than in the form of cash, in addition to the principal amount of such Debenture (pursuant to Section 4(b) of such Debenture) being mandatorily converted into Common Stock (at the Conversion Price) upon such Going Public Event.

 

Section 6Miscellaneous.

 

a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

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d) Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms 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 actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

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e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

f) Restrictions. The Holder, by acceptance of this Warrant, acknowledges that the Warrant Shares acquired upon the exercise of this Warrant may have restrictions upon resale imposed by state and federal securities laws. The Holder, by acceptance of this Warrant, covenants to comply with any such restrictions upon resale imposed by state and federal securities laws.

 

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

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l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

********************

 

(Signature Page Follows)

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

 

QUALIGEN, INC.

                                                        
  By: /s/ Michael S. Poirier 
  Name: Michael S. Poirier 
 

Title:

CEO 

 

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NOTICE OF EXERCISE

 

To: qualigen, inc.

 

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of (check applicable box):

 

[  ] in lawful money of the United States; or

 

[  ] [if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

_______________________________

 

_______________________________

 

_______________________________

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

 

 
 

 

EXHIBIT B

 

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)

       
Phone Number:     _____________________________________________
       
Email Address:     _____________________________________________
       
Dated: _______________ __, ______    
       
Holder’s Signature: _________________________________    
       
Holder’s Address: _________________________________    

 

 

 

 

Exhibit 10.13

 

COMMON STOCK PURCHASE WARRANT

 

qualigen THERAPEUTICS, inc.

 

Warrant Shares: 270,478 Initial Exercisability Date: May 22, 2020

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Alpha Capital Anstalt or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the issuance date of this Warrant (the “Initial Exercisability Date”) and on or prior to 5:00 p.m. (New York City time) on the fifth anniversary of the Initial Exercisability Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Qualigen Therapeutics, Inc., a Delaware corporation (the “Company”), up to a number of shares of Common Stock calculated such that the number of shares of Common Stock underlying the Warrant would, after giving effect to the completion of the Merger and the assumption of the Warrant by Parent in connection with the Merger, be exercisable for shares of Common Stock of Parent representing 1% of the immediately-post-Merger shares of Common Stock of Parent on a fully-diluted basis (with such percentage being calculated using the meaning of “fully-diluted” contemplated in the computation of the Merger Agreement’s “Exchange Ratio” shares) (subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

This Warrant is the Warrant issued to the Holder in exchange for the corresponding Warrant which had been issued on May 22, 2020 by Qualigen, Inc. and which corresponding Warrant had been assumed by the Company pursuant to the Merger. By accepting this Warrant, the Holder acknowledges that such corresponding Qualigen, Inc. Warrant is (pursuant to its express terms in expectation of such event) no longer exercisable, and that such corresponding Warrant has instead been replaced by this Warrant.

 

Section 1Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated May 20, 2020, among the Company’s subsidiary Qualigen, Inc. and the purchasers signatory thereto.

 

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Section 2Exercise.

 

a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercisability Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $1.11, subject to adjustment hereunder (the “Exercise Price”).

 

c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) =   as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;

 

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

 

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(X) =    the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).

 

Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

 

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d) Mechanics of Exercise.

 

i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is (more than six months after the Initial Exercisability Date) being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.

 

ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

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iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

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vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

 

vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

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Section 3Certain Adjustments.

 

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b) Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance at such effective price), then simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance the Exercise Price shall be reduced and only reduced to equal the Base Share Price. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance or in respect of any repricing (triggered or effected after the issuance date of this Warrant) of any derivative securities which were outstanding as of the issuance date of this Warrant. (Standard stock-split-type adjustments under Section 3(a) are not “repricings” for this purpose.) The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. If the Company enters into a Variable Rate Transaction, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

 

c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

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d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant. There are expressly excluded from this Section 3(d), and from the definition of “Distribution,” the distribution, as contemplated in connection with the Merger, to Parent’s pre-Merger stockholders of record of contingent value rights associated with Parent’s legacy technology and any payments ever made upon such contingent value rights.

 

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e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, that, if the Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, Holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the greater of (x) the last VWAP immediately prior to the public announcement of such Fundamental Transaction and (y) the last VWAP immediately prior to the consummation of such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within the later of (i) five Business Days of the Holder’s election and (ii) the date of consummation of the Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

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f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

g) Notice to Holder.

 

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

h) Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.

 

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Section 4Transfer of Warrant.

 

a) Transferability. This Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

Section 5Miscellaneous.

 

a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

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c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d) Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms 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 actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

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e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

f) Restrictions. The Holder, by acceptance of this Warrant, acknowledges that the Warrant Shares acquired upon the exercise of this Warrant may have restrictions upon resale imposed by state and federal securities laws. The Holder, by acceptance of this Warrant, covenants to comply with any such restrictions upon resale imposed by state and federal securities laws.

 

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

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m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of May 22, 2020.

 

 

QUALIGEN THERAPEUTICS, INC.

                                                        
  By: s/ Michael S. Poirier 
  Name: Michael S. Poirier 
 

Title:

CEO 

 

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NOTICE OF EXERCISE

 

To: qualigen THERAPEUTICS, inc.

 

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of (check applicable box):

 

[  ] in lawful money of the United States; or

 

[  ] [if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

_______________________________

 

_______________________________

 

_______________________________

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

 

 
 

 

 EXHIBIT B

 

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)

       
Phone Number:     _____________________________________________
       
Email Address:     _____________________________________________
       
Dated: _______________ __, ______    
       
Holder’s Signature: _________________________________    
       
Holder’s Address: _________________________________    

 

 

 

 

Exhibit 10.14

 

RITTER PHARMACEUTICALS, INC.

NOTICE OF GRANT OF STOCK OPTION

 

The Grantee has been granted an option (the Option) to purchase certain Shares of Ritter Pharmaceuticals, Inc. (the “Company”) pursuant to the Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan (the Plan), as follows:

 

Grantee: Andrew J. Ritter_____________________
   
Date of Grant: May 18, 2020_______________________
   
Number of Option Shares: ___583,068________________________
   
Exercise Price: $0.64______________________
   
Option Expiration Date: The date four (4) years after the Date of Grant
   
Tax Status of Option: Nonstatutory Stock Option.
   
Vested Shares: The Option Shares shall become fully vested and exercisable upon the consummation of the Company’s reverse-merger transaction involving Qualigen, Inc.

 

Lock-Up Restrictions: The Grantee shall be subject to a 180-day lock-up period with respect to the Option as described in the Stock Option Agreement.

 

Capitalized terms not defined herein shall have the meaning as set forth in the 2015 Equity Incentive Plan.

 

The Exercise Price represents an amount the Company believes to be no less than 100% of the Fair Market Value of a Share on the Date of Grant, determined in good faith in compliance with the requirements of Section 409A of the Code. However, there is no guarantee that the Internal Revenue Service (the “IRS”) will agree with the Company’s determination. A subsequent IRS determination that the Exercise Price is less than such fair market value could result in adverse tax consequences to the Grantee. By signing below, the Grantee agrees that the Company, its Directors, officers and shareholders shall not be held liable for any tax, penalty, interest or cost incurred by the Grantee as a result of such determination by the IRS. The Grantee is urged to consult with his or her own tax advisor regarding the tax consequences of the Option, including the application of Section 409A.

By their signatures below, the Company and the Grantee agree that the Option is governed by this Grant Notice and by the provisions of the Plan and the Stock Option Agreement, both of which are attached to and made a part of this document. The Grantee acknowledges receipt of copies of the Plan and the Stock Option Agreement, represents that the Grantee has read and is familiar with their provisions, and hereby accepts the Option subject to all of their terms and conditions.

 

RITTER PHARMACEUTICALS, INC.   GRANTEE
         
By: /s/ Ira E. Ritter                      /s/ Andrew J. Ritter
Name: Ira E. Ritter   Name: Andrew J. Ritter
Title: Chairman of the Board of Directors   Date: May 18, 2020
Address:     Address:  

 

ATTACHMENTS: Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan, as amended to the Date of Grant; Stock Option Agreement and Exercise Notice

 

 

 

 

Ritter Pharmaceuticals, inc.

STOCK OPTION AGREEMENT

 

Ritter Pharmaceuticals, Inc. has granted to the Grantee named in the Notice of Grant of Stock Option (the “Grant Notice”) to which this Stock Option Agreement (the “Option Agreement”) is attached an option (the “Option”) to purchase certain Shares upon the terms and conditions set forth in the Grant Notice 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 Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan (the “Plan”), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Grantee: (a) acknowledges receipt of, and represents that the Grantee has read and is familiar with the terms and conditions of, the Grant Notice, this Option Agreement and the Plan, (b) accepts the Option subject to all of the terms and conditions of the Grant Notice, this Option Agreement and the Plan, and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Grant Notice, 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 Grant Notice or the Plan.

 

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 Grant Notice.

 

a. Incentive Stock Option. If the Grant Notice 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 Grantee should consult with the Grantee’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 GRANTEE: 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 Grant Notice 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 Grant Notice designates this Option as an Incentive Stock Option, then to the extent that the Option (together with all Incentive Stock Options granted to the Grantee 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 Subsection 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 Shares is determined as of the time the option with respect to such Shares is granted. If the Code is amended to provide for a different limitation from that set forth in this Subsection 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 Subsection 2.2, the Grantee may designate which portion of such Option the Grantee is exercising. In the absence of such designation, the Grantee 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 GRANTEE: 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.)

 

 

 

 

3. Administration.

 

All questions of interpretation concerning the Grant Notice, 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 Board. All such determinations by the Board 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 Board 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.

 

4. Exercise of the Option.

 

4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable on and after the vesting criteria set forth in the Grant Notice has been satisfied 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 13.2 of the Plan.

 

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 Grantee 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 Grantee 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 Grantee 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 Grantee’s election to exercise the Option, the number of Shares for which the Option is being exercised and such other representations and agreements as to the Grantee’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 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.

 

4.3 Payment of Exercise Price.

 

a. Forms of Consideration Authorized. Payment of the exercise price for the Shares being purchased pursuant to the Option shall be made by any of the following, or a combination of the following, at the election of Grantee:

 

i. cash or check denominated in U.S. dollars,

ii. Shares (including Shares otherwise issuable in settlement of the Award) or Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required,

 

 

 

 

iii. payment through a broker in accordance with procedures permitted by applicable law and regulations, or

iv. other form of legal consideration acceptable to the Administrator.

 

4.4 Tax Withholding.

 

(a) In General. At the time the Award Agreement is executed, or at any time thereafter as requested by the Company, the Grantee hereby authorizes withholding from payroll and any other amounts payable to the Grantee, and otherwise agrees to make adequate provision for, any sums required to satisfy (in cash or, if and only if the Company so elects in its sole discretion, otherwise) the federal, state, local and foreign tax withholding obligations of the Company, if any, which arise in connection with the grant, vesting or exercise of the Option or the issuance of Shares in settlement thereof. The Company shall have no obligation to deliver Shares until the tax obligations of the Company have been satisfied by the Grantee.

 

(b) Withholding in Securities. The Company may, in its discretion, require the Grantee to satisfy all or any portion of the tax obligations by deducting from the Shares otherwise deliverable to the Grantee in settlement of the Option a number of Shares having a Fair Market Value, as determined by the Company as of the date on which the tax obligations arise, not in excess of the amount of such tax obligations determined by the applicable withholding rates. In the event that the Company determines that the tax obligations will not be satisfied by the method described above, Grantee authorizes the designated plan administrator or any successor plan administrator, to sell a number of Shares that are purchased under the Option, which the Company determines is sufficient to generate an amount that meets the tax obligations plus additional Shares, as necessary. To account for rounding and market fluctuation, and to pay such tax withholding amounts to the Company. The Shares may be sold as part of a block trade with other Grantees of the Plan in which all Grantees receive an average price. Any adverse consequences to the Grantee resulting from the procedure permitted under this Subsection 4.4, including, without limitation, tax consequences, shall be the sole responsibility of the Grantee.

 

(c) Consultation. The Grantee hereby acknowledges that he or she understands that the Grantee may suffer adverse tax consequences as a result of the Grantee’s exercise of the Option or disposition of the Shares. The Grantee hereby represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the exercise of the Option or disposition of the Shares and that the Grantee is not relying on the Company for any tax advice.

 

4.5 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of Shares 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 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 Shares may then be listed. 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 Grantee 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.

 

4.6 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 Grantee, the Option shall be exercisable only by the Grantee or the Grantee’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 Grantee or the Grantee’s beneficiary, except transfer by will or by the laws of descent and distribution. Following the death of the Grantee, the Option, to the extent provided in Section 7, may be exercised by the Grantee’s legal representative or by any person empowered to do so under the deceased Grantee’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, or (b) the close of business on the last date for exercising the Option following Grantee’s Termination of Service as described in Section 7, or (c) a Change in Control to the extent provided in the Plan.

 

7. Effect of Termination of Service.

 

7.1 Option Exercisability. The Option shall terminate immediately upon the Grantee’s Termination of Service to the extent that it is then unvested and shall be exercisable after the Grantee’s Termination of Service to the extent it is then unexercised and vested only during the applicable time period as determined below and thereafter shall terminate.

 

a. Termination for Cause. Notwithstanding any other provision of this Option Agreement, if the Grantee’s Termination of Service is for Cause, the Option, whether or not vested, shall terminate and cease to be exercisable immediately upon such Termination of Service.

 

b. Other Termination of Service. If the Grantee’s Termination of Service is for any reason, except Cause, the Option, to the extent unexercised and vested on the date of Grantee’s Termination of Service, may be exercised by the Grantee at any time prior to the expiration of twenty-four (24) months after the date of Grantee’s Termination of Service, but in any event no later than the Option Expiration Date.

 

7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing other than Termination of Service for Cause, if the exercise of the Option within the applicable time periods set forth in Subsection 7.1 is prevented by the provisions of Subsection 4.5, the Option shall remain exercisable until thirty (30) days after the date such exercise first would no longer be prevented by such provisions, but in any event no later than the Option Expiration Date and in no event later than the end of the applicable time period under this Section 7.

 

7.3 Special Rule Regarding Termination of Service. As a special rule and notwithstanding the terms set out in the Plan: an occurrence which may be characterized as a Termination of Service shall be deemed not to constitute a Termination of Service if within five (5) days after such occurrence the Grantee begins service to the Company as an Advisor.

 

8. Rights as a Stockholder, Director, Employee or Consultant.

 

The Grantee 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 the Plan.

 

If the Grantee is an Employee, the Grantee understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Grantee, the Grantee’s employment is “at will” and is for no specified term. Nothing in this Option Agreement shall confer upon the Grantee 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 Grantee’s service as a Director, an Employee or Consultant, as the case may be, at any time. Furthermore, Options are not part of Grantee’s employment contract (if any) with the Company or Company Group, Grantee’s salary, Grantee’s normal or expected compensation, or other remuneration for any purposes, including for purposes of computing severance pay or other termination compensation or indemnity.

 

 

 

 

9. Notice of Sales Upon Disqualifying Disposition.

 

The Grantee shall dispose of the Shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, if the Grant Notice designates this Option as an Incentive Stock Option, the Grantee shall (a) promptly notify the stock plan administrator for the Company if the Grantee disposes of any of the Shares acquired pursuant to the Option within one (1) year after the date the Grantee 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 Grantee disposes of such Shares in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Grantee shall hold all Shares acquired pursuant to the Option in the Grantee’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 Shares to notify the Company of any such transfers. The obligation of the Grantee 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.

 

10. Lock-Up Restrictions.

 

The Grantee agrees that, without the prior written consent of the Company, during the period commencing at the Date of Grant and continuing until 180 days after the Date of Grant, the undersigned will not: (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of or lend, directly or indirectly, the Option or any shares of Common Stock of the Company issuable upon exercise of the Option (collectively, the “Lock-Up Securities”); (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to, the registration of any Lock-Up Securities; (4) grant any proxies or powers of attorney with respect to any Lock-Up Securities, deposit any Lock-Up Securities into a voting trust or enter into a voting agreement or similar arrangement or commitment with respect to any Lock-Up Securities; or (5) publicly disclose the intention to do any of the foregoing (each of the foregoing restrictions, the “Lock-Up Restrictions”).

 

Notwithstanding the above, the Lock-Up Restrictions will automatically terminate on the date that is 180 days after the Date of Grant. The period during which the Lock-Up Restrictions apply to the Lock-Up Securities will be deemed the “Lock-Up Period”.

 

The Grantee agrees that during the Lock-Up Period, the undersigned will not engage in any hedging or other transaction with respect to any Lock-Up Securities that reasonably could be expected to result in a sale or disposition of such Lock-Up Securities even if such Lock-Up Securities would be disposed of by someone other than the Grantee. Such prohibited hedging or other transactions would include any short sale or any purchase, sale or grant of any right (including any put or call option) with respect to such Lock-Up Securities or to any security that includes, relates to, or derives any significant part of its value from such Lock-Up Securities.

 

Notwithstanding the foregoing, the Grantee may transfer any of the Lock-Up Securities (i) as a bona fide gift or charitable contribution, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the Grantee, (iii) by testate succession or intestate succession, (iv) by operation of law pursuant to a qualified domestic order or in connection with a divorce settlement, (v) to any immediate family member, any investment fund, family partnership, family limited liability company or other entity controlled or managed by the undersigned or the immediate family of the undersigned, (vi) to a nominee or custodian to whom a disposition or transfer would be permissible under clauses (i) through (v), (vii) to the Company in a transaction exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), upon a vesting event of the Lock-Up Securities or upon the exercise of Lock-Up Securities on a “cashless” or “net exercise” basis or to cover tax withholding obligations of the undersigned in connection with such vesting or exercise (but excluding any exercise that would involve a sale in the open market of any Lock-Up Securities), (viii) pursuant to a change of control of the Company to the extent provided for in the Plan, provided that in the event that such change of control transaction is not completed, the Lock-Up Securities will remain subject to the Lock-Up Restrictions, or (ix) pursuant to an order of a court or regulatory agency; provided, in the case of clauses (i)-(vi), that (A) such transfer will not involve a disposition for value and (B) the transferee promptly provides the Company with its written agreement to be bound by these Lock-Up Restrictions upon consummation of such transaction; and provided, further, in the case of clauses (i)-(vii), no filing by any party under Section 16(a) of the Exchange Act will be required or made voluntarily in connection with such transfer. For purposes of this Agreement, “immediate family” will mean any relationship by blood, marriage or adoption, not more remote than first cousin.

 

 

 

 

In addition, the Lock-Up Restrictions will not apply to the exercise of the Option (other than any exercise that would involve a sale in the open market); provided that it will apply to any of the Lock-Up Securities issued upon such exercise.

 Any attempted transfer in violation of the Lock-Up Restrictions will be of no effect and null and void and will not be recorded on the share register of the Company. In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of Lock-Up Securities if such transfer would constitute a violation or breach of these Lock-Up Restrictions. The Company may cause the legend set forth below to be placed upon any certificate(s) or other documents, ledgers or instruments evidencing the undersigned’s ownership of Lock-Up Securities:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY ONLY BE TRANSFERRED IN COMPLIANCE WITH THE LOCK-UP RESTRICTIONS APPLICATION TO SUCH SECURITIES, A COPY OF THE STOCK OPTION AGREEMENT CONTAINING THESE LOCK-UP RESTRICTIONS IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

11. Miscellaneous Provisions.

 

11.1 Termination or Amendment. The Board may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in the Plan in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Grantee unless such termination or amendment is necessary to comply with any applicable law or government regulation, including, but not limited to Section 409A of the Code. No amendment or addition to this Option Agreement shall be effective unless in writing.

 

11.2 Compliance with Section 409A. The Company intends that income realized by the Grantee pursuant to the Plan and this Option Agreement will not be subject to taxation under Section 409A of the Code. The provisions of the Plan and this Option Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. The Company, in its reasonable discretion, may amend (including retroactively) the Plan and this Agreement in order to conform to the applicable requirements of Section 409A of the Code, including amendments to facilitate the Grantee’s ability to avoid taxation under Section 409A of the Code. However, the preceding provisions shall not be construed as a guarantee by the Company of any particular tax result for income realized by the Grantee pursuant to the Plan or this Option Agreement. In any event, and except for the responsibilities of the Company set forth in Subsection 4.4., no Participating Company shall be responsible for the payment of any applicable taxes on income realized by the Grantee pursuant to the Plan or this Option Agreement.

 

11.3 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.

 

11.4 Binding Effect. Subject to the restrictions on transfer set forth herein, this Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

 

 

 

 

11.5 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 Grantee by the 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 Grant Notice 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 Grant Notice, this Option Agreement, and any reports of the Company provided generally to the Company’s shareholders, may be delivered to the Grantee electronically. In addition, if permitted by the Company, the Grantee may deliver electronically the Grant Notice 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 Grantee acknowledges that the Grantee has read Subsection 11.5(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 Grant Notice and Exercise Notice, as described in Subsection 11.5(a). The Grantee acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Grantee by contacting the Company by telephone or in writing. The Grantee further acknowledges that the Grantee will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Grantee understands that the Grantee 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 Grantee may revoke his or her consent to the electronic delivery of documents described in Subsection 11.5(a) or may change the electronic mail address to which such documents are to be delivered (if Grantee 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 Grantee understands that he or she is not required to consent to electronic delivery of documents described in Subsection 11.5(a).

 

11.6 Integrated Agreement. The Grant Notice, this Option Agreement and the Plan, together with any employment, service or other agreement with the Grantee and Company Group referring to the Option, shall constitute the entire understanding and agreement of the Grantee and the Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Grantee and the Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, the Option Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and effect.

 

11.7 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.

 

11.8 Counterparts. The Grant Notice 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.

 

****

 

 

 

 

Incentive Stock Option   Grantee:  
X Nonstatutory Stock Option      

 

Date:  

 

STOCK OPTION EXERCISE NOTICE

 

Ritter Pharmaceuticals, Inc.

Attention: ________________

 

Ladies and Gentlemen:

 

1. Option. I was granted an option (the Option) to purchase shares of the common stock (the Shares) of Ritter Pharmaceuticals, Inc. (the Company) pursuant to the Company’s 2015 Equity Incentive Plan (the Plan), my Notice of Grant of Stock Option (the Grant Notice) and my Stock Option Agreement (the Option Agreement) as follows:

 

  Date of Grant: ______________________  
  Number of Option Shares: ______________________  
  Exercise Price per Share: $_____________________  

 

2. Exercise of Option. I hereby elect to exercise the Option to purchase the following number of Shares, all of which are Vested Shares, in accordance with the Grant Notice and the Option Agreement:

 

  Total Shares Purchased: ______________________  
  Total Exercise Price (Total Shares X Price per Share) $_____________________  

 

3. Payments. I enclose payment in full of the total exercise price for the Shares in the following form(s), as authorized by my Option Agreement:

 

  Cashless Exercise    
         
  Cash / Check: $_____________________  
         
  Tender of Company Shares: Contact Plan Administrator  

 

4. Tax Withholding. I authorize payroll withholding, net-share withholding and otherwise will make adequate provision for the federal, state, local and foreign tax withholding obligations of the Company, if any, in connection with the Option.

 

5. Grantee Information.

 

  My address is:    
       
       

 

  My Social Security Number is:    

 

6. Notice of Disqualifying Disposition. If the Option is an Incentive Stock Option, I agree that I will promptly notify the Chief Financial Officer of the Company if I transfer any of the Shares within one (1) year from the date I exercise all or part of the Option or within two (2) years of the Date of Grant.

 

7. Tax Consultation. I hereby acknowledge that I understand that I may suffer adverse tax consequences as a result of my purchase or disposition of the Shares. I hereby represent that I am not relying on the Company for any tax advice.

 

 

 

 

8. Binding Effect. I understand that I am purchasing the Shares pursuant to the terms of the Plan, the Grant Notice and my Option Agreement, copies of which I have received and carefully read and understand. This Agreement shall inure to the benefit of and be binding upon my heirs, executors, administrators, successors and assigns.

 

      Very truly yours,
       
       
      (Signature)

 

Receipt of the above is hereby acknowledged.    
Ritter Pharmaceuticals, Inc.    
       
By:                     
       
Title:      
       
Dated:      

 

 

 

 

Exhibit 10.15

 

RITTER PHARMACEUTICALS, INC.

NOTICE OF GRANT OF STOCK OPTION

 

The Grantee has been granted an option (the Option) to purchase certain Shares of Ritter Pharmaceuticals, Inc. (the “Company”) pursuant to the Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan (the Plan), as follows:

 

Grantee: Ira E. Ritter_____________________
   
Date of Grant: May 18, 2020_______________________
   
Number of Option Shares: ___361,501________________________
   
Exercise Price: $ 0.64______________________
   
Option Expiration Date: The date four (4) years after the Date of Grant
   
Tax Status of Option: Nonstatutory Stock Option.
   
Vested Shares: The Option Shares shall become fully vested and exercisable upon the consummation of the Company’s reverse-merger transaction involving Qualigen, Inc.

 

Lock-Up Restrictions: The Grantee shall be subject to a 180-day lock-up period with respect to the Option as described in the Stock Option Agreement.

 

Capitalized terms not defined herein shall have the meaning as set forth in the 2015 Equity Incentive Plan.

 

The Exercise Price represents an amount the Company believes to be no less than 100% of the Fair Market Value of a Share on the Date of Grant, determined in good faith in compliance with the requirements of Section 409A of the Code. However, there is no guarantee that the Internal Revenue Service (the “IRS”) will agree with the Company’s determination. A subsequent IRS determination that the Exercise Price is less than such fair market value could result in adverse tax consequences to the Grantee. By signing below, the Grantee agrees that the Company, its Directors, officers and shareholders shall not be held liable for any tax, penalty, interest or cost incurred by the Grantee as a result of such determination by the IRS. The Grantee is urged to consult with his or her own tax advisor regarding the tax consequences of the Option, including the application of Section 409A.

By their signatures below, the Company and the Grantee agree that the Option is governed by this Grant Notice and by the provisions of the Plan and the Stock Option Agreement, both of which are attached to and made a part of this document. The Grantee acknowledges receipt of copies of the Plan and the Stock Option Agreement, represents that the Grantee has read and is familiar with their provisions, and hereby accepts the Option subject to all of their terms and conditions.

 

RITTER PHARMACEUTICALS, INC.   GRANTEE
         
By: /s/ Andrew J. Ritter                            /s/ Ira E. Ritter                         
Name: Andrew J. Ritter   Name: Ira E. Ritter
Title: Chief Executive Officer   Date: May 18, 2020
Address:     Address:  

 

ATTACHMENTS: Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan, as amended to the Date of Grant; Stock Option Agreement and Exercise Notice

 

 

 

 

Ritter Pharmaceuticals, inc.

STOCK OPTION AGREEMENT

 

Ritter Pharmaceuticals, Inc. has granted to the Grantee named in the Notice of Grant of Stock Option (the “Grant Notice”) to which this Stock Option Agreement (the “Option Agreement”) is attached an option (the “Option”) to purchase certain Shares upon the terms and conditions set forth in the Grant Notice 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 Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan (the “Plan”), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Grantee: (a) acknowledges receipt of, and represents that the Grantee has read and is familiar with the terms and conditions of, the Grant Notice, this Option Agreement and the Plan, (b) accepts the Option subject to all of the terms and conditions of the Grant Notice, this Option Agreement and the Plan, and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Grant Notice, 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 Grant Notice or the Plan.

 

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 Grant Notice.

 

a. Incentive Stock Option. If the Grant Notice 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 Grantee should consult with the Grantee’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 GRANTEE: 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 Grant Notice 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 Grant Notice designates this Option as an Incentive Stock Option, then to the extent that the Option (together with all Incentive Stock Options granted to the Grantee 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 Subsection 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 Shares is determined as of the time the option with respect to such Shares is granted. If the Code is amended to provide for a different limitation from that set forth in this Subsection 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 Subsection 2.2, the Grantee may designate which portion of such Option the Grantee is exercising. In the absence of such designation, the Grantee 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 GRANTEE: 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.)

 

 

 

 

3. Administration.

 

All questions of interpretation concerning the Grant Notice, 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 Board. All such determinations by the Board 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 Board 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.

 

4. Exercise of the Option.

 

4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable on and after the vesting criteria set forth in the Grant Notice has been satisfied 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 13.2 of the Plan.

 

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 Grantee 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 Grantee 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 Grantee 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 Grantee’s election to exercise the Option, the number of Shares for which the Option is being exercised and such other representations and agreements as to the Grantee’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 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.

 

4.3 Payment of Exercise Price.

 

a. Forms of Consideration Authorized. Payment of the exercise price for the Shares being purchased pursuant to the Option shall be made by any of the following, or a combination of the following, at the election of Grantee:

 

i. cash or check denominated in U.S. dollars,

ii. Shares (including Shares otherwise issuable in settlement of the Award) or Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required,

 

 

 

 

iii. payment through a broker in accordance with procedures permitted by applicable law and regulations, or

iv. other form of legal consideration acceptable to the Administrator.

 

4.4 Tax Withholding.

 

(a) In General. At the time the Award Agreement is executed, or at any time thereafter as requested by the Company, the Grantee hereby authorizes withholding from payroll and any other amounts payable to the Grantee, and otherwise agrees to make adequate provision for, any sums required to satisfy (in cash or, if and only if the Company so elects in its sole discretion, otherwise) the federal, state, local and foreign tax withholding obligations of the Company, if any, which arise in connection with the grant, vesting or exercise of the Option or the issuance of Shares in settlement thereof. The Company shall have no obligation to deliver Shares until the tax obligations of the Company have been satisfied by the Grantee.

 

(b) Withholding in Securities. The Company may, in its discretion, require the Grantee to satisfy all or any portion of the tax obligations by deducting from the Shares otherwise deliverable to the Grantee in settlement of the Option a number of Shares having a Fair Market Value, as determined by the Company as of the date on which the tax obligations arise, not in excess of the amount of such tax obligations determined by the applicable withholding rates. In the event that the Company determines that the tax obligations will not be satisfied by the method described above, Grantee authorizes the designated plan administrator or any successor plan administrator, to sell a number of Shares that are purchased under the Option, which the Company determines is sufficient to generate an amount that meets the tax obligations plus additional Shares, as necessary. To account for rounding and market fluctuation, and to pay such tax withholding amounts to the Company. The Shares may be sold as part of a block trade with other Grantees of the Plan in which all Grantees receive an average price. Any adverse consequences to the Grantee resulting from the procedure permitted under this Subsection 4.4, including, without limitation, tax consequences, shall be the sole responsibility of the Grantee.

 

(c) Consultation. The Grantee hereby acknowledges that he or she understands that the Grantee may suffer adverse tax consequences as a result of the Grantee’s exercise of the Option or disposition of the Shares. The Grantee hereby represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the exercise of the Option or disposition of the Shares and that the Grantee is not relying on the Company for any tax advice.

 

4.5 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of Shares 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 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 Shares may then be listed. 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 Grantee 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.

 

4.6 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 Grantee, the Option shall be exercisable only by the Grantee or the Grantee’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 Grantee or the Grantee’s beneficiary, except transfer by will or by the laws of descent and distribution. Following the death of the Grantee, the Option, to the extent provided in Section 7, may be exercised by the Grantee’s legal representative or by any person empowered to do so under the deceased Grantee’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, or (b) the close of business on the last date for exercising the Option following Grantee’s Termination of Service as described in Section 7, or (c) a Change in Control to the extent provided in the Plan.

 

7. Effect of Termination of Service.

 

7.1 Option Exercisability. The Option shall terminate immediately upon the Grantee’s Termination of Service to the extent that it is then unvested and shall be exercisable after the Grantee’s Termination of Service to the extent it is then unexercised and vested only during the applicable time period as determined below and thereafter shall terminate.

 

a. Termination for Cause. Notwithstanding any other provision of this Option Agreement, if the Grantee’s Termination of Service is for Cause, the Option, whether or not vested, shall terminate and cease to be exercisable immediately upon such Termination of Service.

 

b. Other Termination of Service. If the Grantee’s Termination of Service is for any reason, except Cause, the Option, to the extent unexercised and vested on the date of Grantee’s Termination of Service, may be exercised by the Grantee at any time prior to the expiration of twenty-four (24) months after the date of Grantee’s Termination of Service, but in any event no later than the Option Expiration Date.

 

7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing other than Termination of Service for Cause, if the exercise of the Option within the applicable time periods set forth in Subsection 7.1 is prevented by the provisions of Subsection 4.5, the Option shall remain exercisable until thirty (30) days after the date such exercise first would no longer be prevented by such provisions, but in any event no later than the Option Expiration Date and in no event later than the end of the applicable time period under this Section 7.

 

7.3 Special Rule Regarding Termination of Service. As a special rule and notwithstanding the terms set out in the Plan: an occurrence which may be characterized as a Termination of Service shall be deemed not to constitute a Termination of Service if within five (5) days after such occurrence the Grantee begins service to the Company as an Advisor.

 

8. Rights as a Stockholder, Director, Employee or Consultant.

 

The Grantee 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 the Plan.

 

If the Grantee is an Employee, the Grantee understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Grantee, the Grantee’s employment is “at will” and is for no specified term. Nothing in this Option Agreement shall confer upon the Grantee 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 Grantee’s service as a Director, an Employee or Consultant, as the case may be, at any time. Furthermore, Options are not part of Grantee’s employment contract (if any) with the Company or Company Group, Grantee’s salary, Grantee’s normal or expected compensation, or other remuneration for any purposes, including for purposes of computing severance pay or other termination compensation or indemnity.

 

 

 

 

9. Notice of Sales Upon Disqualifying Disposition.

 

The Grantee shall dispose of the Shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, if the Grant Notice designates this Option as an Incentive Stock Option, the Grantee shall (a) promptly notify the stock plan administrator for the Company if the Grantee disposes of any of the Shares acquired pursuant to the Option within one (1) year after the date the Grantee 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 Grantee disposes of such Shares in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Grantee shall hold all Shares acquired pursuant to the Option in the Grantee’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 Shares to notify the Company of any such transfers. The obligation of the Grantee 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.

 

10. Lock-Up Restrictions.

 

The Grantee agrees that, without the prior written consent of the Company, during the period commencing at the Date of Grant and continuing until 180 days after the Date of Grant, the undersigned will not: (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of or lend, directly or indirectly, the Option or any shares of Common Stock of the Company issuable upon exercise of the Option (collectively, the “Lock-Up Securities”); (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to, the registration of any Lock-Up Securities; (4) grant any proxies or powers of attorney with respect to any Lock-Up Securities, deposit any Lock-Up Securities into a voting trust or enter into a voting agreement or similar arrangement or commitment with respect to any Lock-Up Securities; or (5) publicly disclose the intention to do any of the foregoing (each of the foregoing restrictions, the “Lock-Up Restrictions”).

 

Notwithstanding the above, the Lock-Up Restrictions will automatically terminate on the date that is 180 days after the Date of Grant. The period during which the Lock-Up Restrictions apply to the Lock-Up Securities will be deemed the “Lock-Up Period”.

 

The Grantee agrees that during the Lock-Up Period, the undersigned will not engage in any hedging or other transaction with respect to any Lock-Up Securities that reasonably could be expected to result in a sale or disposition of such Lock-Up Securities even if such Lock-Up Securities would be disposed of by someone other than the Grantee. Such prohibited hedging or other transactions would include any short sale or any purchase, sale or grant of any right (including any put or call option) with respect to such Lock-Up Securities or to any security that includes, relates to, or derives any significant part of its value from such Lock-Up Securities.

 

Notwithstanding the foregoing, the Grantee may transfer any of the Lock-Up Securities (i) as a bona fide gift or charitable contribution, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the Grantee, (iii) by testate succession or intestate succession, (iv) by operation of law pursuant to a qualified domestic order or in connection with a divorce settlement, (v) to any immediate family member, any investment fund, family partnership, family limited liability company or other entity controlled or managed by the undersigned or the immediate family of the undersigned, (vi) to a nominee or custodian to whom a disposition or transfer would be permissible under clauses (i) through (v), (vii) to the Company in a transaction exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), upon a vesting event of the Lock-Up Securities or upon the exercise of Lock-Up Securities on a “cashless” or “net exercise” basis or to cover tax withholding obligations of the undersigned in connection with such vesting or exercise (but excluding any exercise that would involve a sale in the open market of any Lock-Up Securities), (viii) pursuant to a change of control of the Company to the extent provided for in the Plan, provided that in the event that such change of control transaction is not completed, the Lock-Up Securities will remain subject to the Lock-Up Restrictions, or (ix) pursuant to an order of a court or regulatory agency; provided, in the case of clauses (i)-(vi), that (A) such transfer will not involve a disposition for value and (B) the transferee promptly provides the Company with its written agreement to be bound by these Lock-Up Restrictions upon consummation of such transaction; and provided, further, in the case of clauses (i)-(vii), no filing by any party under Section 16(a) of the Exchange Act will be required or made voluntarily in connection with such transfer. For purposes of this Agreement, “immediate family” will mean any relationship by blood, marriage or adoption, not more remote than first cousin.

 

 

 

 

In addition, the Lock-Up Restrictions will not apply to the exercise of the Option (other than any exercise that would involve a sale in the open market); provided that it will apply to any of the Lock-Up Securities issued upon such exercise.

 

Any attempted transfer in violation of the Lock-Up Restrictions will be of no effect and null and void and will not be recorded on the share register of the Company. In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of Lock-Up Securities if such transfer would constitute a violation or breach of these Lock-Up Restrictions. The Company may cause the legend set forth below to be placed upon any certificate(s) or other documents, ledgers or instruments evidencing the undersigned’s ownership of Lock-Up Securities:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY ONLY BE TRANSFERRED IN COMPLIANCE WITH THE LOCK-UP RESTRICTIONS APPLICATION TO SUCH SECURITIES, A COPY OF THE STOCK OPTION AGREEMENT CONTAINING THESE LOCK-UP RESTRICTIONS IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

11. Miscellaneous Provisions.

 

11.1 Termination or Amendment. The Board may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in the Plan in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Grantee unless such termination or amendment is necessary to comply with any applicable law or government regulation, including, but not limited to Section 409A of the Code. No amendment or addition to this Option Agreement shall be effective unless in writing.

 

11.2 Compliance with Section 409A. The Company intends that income realized by the Grantee pursuant to the Plan and this Option Agreement will not be subject to taxation under Section 409A of the Code. The provisions of the Plan and this Option Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. The Company, in its reasonable discretion, may amend (including retroactively) the Plan and this Agreement in order to conform to the applicable requirements of Section 409A of the Code, including amendments to facilitate the Grantee’s ability to avoid taxation under Section 409A of the Code. However, the preceding provisions shall not be construed as a guarantee by the Company of any particular tax result for income realized by the Grantee pursuant to the Plan or this Option Agreement. In any event, and except for the responsibilities of the Company set forth in Subsection 4.4., no Participating Company shall be responsible for the payment of any applicable taxes on income realized by the Grantee pursuant to the Plan or this Option Agreement.

 

11.3 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.

 

11.4 Binding Effect. Subject to the restrictions on transfer set forth herein, this Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

 

 

 

 

11.5 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 Grantee by the 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 Grant Notice 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 Grant Notice, this Option Agreement, and any reports of the Company provided generally to the Company’s shareholders, may be delivered to the Grantee electronically. In addition, if permitted by the Company, the Grantee may deliver electronically the Grant Notice 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 Grantee acknowledges that the Grantee has read Subsection 11.5(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 Grant Notice and Exercise Notice, as described in Subsection 11.5(a). The Grantee acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Grantee by contacting the Company by telephone or in writing. The Grantee further acknowledges that the Grantee will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Grantee understands that the Grantee 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 Grantee may revoke his or her consent to the electronic delivery of documents described in Subsection 11.5(a) or may change the electronic mail address to which such documents are to be delivered (if Grantee 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 Grantee understands that he or she is not required to consent to electronic delivery of documents described in Subsection 11.5(a).

 

11.6 Integrated Agreement. The Grant Notice, this Option Agreement and the Plan, together with any employment, service or other agreement with the Grantee and Company Group referring to the Option, shall constitute the entire understanding and agreement of the Grantee and the Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Grantee and the Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, the Option Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and effect.

 

11.7 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.

 

11.8 Counterparts. The Grant Notice 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.

 

****

 

 

 

 

Incentive Stock Option   Grantee:  
X Nonstatutory Stock Option      

 

Date:  

 

STOCK OPTION EXERCISE NOTICE

 

Ritter Pharmaceuticals, Inc.

Attention: ________________

 

Ladies and Gentlemen:

 

1. Option. I was granted an option (the Option) to purchase shares of the common stock (the Shares) of Ritter Pharmaceuticals, Inc. (the Company) pursuant to the Company’s 2015 Equity Incentive Plan (the Plan), my Notice of Grant of Stock Option (the Grant Notice) and my Stock Option Agreement (the Option Agreement) as follows:

 

  Date of Grant: ______________________  
  Number of Option Shares: ______________________  
  Exercise Price per Share: $_____________________  

 

2. Exercise of Option. I hereby elect to exercise the Option to purchase the following number of Shares, all of which are Vested Shares, in accordance with the Grant Notice and the Option Agreement:

 

  Total Shares Purchased: ______________________  
  Total Exercise Price (Total Shares X Price per Share) $_____________________  

 

3. Payments. I enclose payment in full of the total exercise price for the Shares in the following form(s), as authorized by my Option Agreement:

 

  Cashless Exercise    
         
  Cash / Check: $_____________________  
         
  Tender of Company Shares: Contact Plan Administrator  

 

4. Tax Withholding. I authorize payroll withholding, net-share withholding and otherwise will make adequate provision for the federal, state, local and foreign tax withholding obligations of the Company, if any, in connection with the Option.

 

5. Grantee Information.

 

  My address is:    
       
       

 

  My Social Security Number is:    

 

6. Notice of Disqualifying Disposition. If the Option is an Incentive Stock Option, I agree that I will promptly notify the Chief Financial Officer of the Company if I transfer any of the Shares within one (1) year from the date I exercise all or part of the Option or within two (2) years of the Date of Grant.

 

7. Tax Consultation. I hereby acknowledge that I understand that I may suffer adverse tax consequences as a result of my purchase or disposition of the Shares. I hereby represent that I am not relying on the Company for any tax advice.

 

 

 

 

8. Binding Effect. I understand that I am purchasing the Shares pursuant to the terms of the Plan, the Grant Notice and my Option Agreement, copies of which I have received and carefully read and understand. This Agreement shall inure to the benefit of and be binding upon my heirs, executors, administrators, successors and assigns.

 

      Very truly yours,
       
       
      (Signature)

 

Receipt of the above is hereby acknowledged.    
Ritter Pharmaceuticals, Inc.    
       
By:                     
       
Title:      
       
Dated:      

 

 

 

 

Exhibit 10.16

 

RITTER PHARMACEUTICALS, INC.

NOTICE OF GRANT OF STOCK OPTION

 

The Grantee has been granted an option (the Option) to purchase certain Shares of Ritter Pharmaceuticals, Inc. (the “Company”) pursuant to the Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan (the Plan), as follows:

 

Grantee: John W. Beck_____________________
   
Date of Grant: May 18, 2020_______________________
   
Number of Option Shares: ___221,566________________________
   
Exercise Price: $ 0.64______________________
   
Option Expiration Date: The date four (4) years after the Date of Grant
   
Tax Status of Option: Nonstatutory Stock Option.
   
Vested Shares: The Option Shares shall become fully vested and exercisable upon the consummation of the Company’s reverse-merger transaction involving Qualigen, Inc.

 

Lock-Up Restrictions: The Grantee shall be subject to a 180-day lock-up period with respect to the Option as described in the Stock Option Agreement.

 

Capitalized terms not defined herein shall have the meaning as set forth in the 2015 Equity Incentive Plan.

 

The Exercise Price represents an amount the Company believes to be no less than 100% of the Fair Market Value of a Share on the Date of Grant, determined in good faith in compliance with the requirements of Section 409A of the Code. However, there is no guarantee that the Internal Revenue Service (the “IRS”) will agree with the Company’s determination. A subsequent IRS determination that the Exercise Price is less than such fair market value could result in adverse tax consequences to the Grantee. By signing below, the Grantee agrees that the Company, its Directors, officers and shareholders shall not be held liable for any tax, penalty, interest or cost incurred by the Grantee as a result of such determination by the IRS. The Grantee is urged to consult with his or her own tax advisor regarding the tax consequences of the Option, including the application of Section 409A.

By their signatures below, the Company and the Grantee agree that the Option is governed by this Grant Notice and by the provisions of the Plan and the Stock Option Agreement, both of which are attached to and made a part of this document. The Grantee acknowledges receipt of copies of the Plan and the Stock Option Agreement, represents that the Grantee has read and is familiar with their provisions, and hereby accepts the Option subject to all of their terms and conditions.

 

RITTER PHARMACEUTICALS, INC.   GRANTEE
         
By: /s/ Andrew J. Ritter                           /s/ John W. Beck
Name: Andrew J. Ritter   Name: John W. Beck
Title: Chief Executive Officer   Date: May 18, 2020
Address:     Address:  

 

ATTACHMENTS: Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan, as amended to the Date of Grant; Stock Option Agreement and Exercise Notice

 

 

 

 

Ritter Pharmaceuticals, inc.

STOCK OPTION AGREEMENT

 

Ritter Pharmaceuticals, Inc. has granted to the Grantee named in the Notice of Grant of Stock Option (the “Grant Notice”) to which this Stock Option Agreement (the “Option Agreement”) is attached an option (the “Option”) to purchase certain Shares upon the terms and conditions set forth in the Grant Notice 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 Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan (the “Plan”), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Grantee: (a) acknowledges receipt of, and represents that the Grantee has read and is familiar with the terms and conditions of, the Grant Notice, this Option Agreement and the Plan, (b) accepts the Option subject to all of the terms and conditions of the Grant Notice, this Option Agreement and the Plan, and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Grant Notice, 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 Grant Notice or the Plan.

 

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 Grant Notice.

 

a. Incentive Stock Option. If the Grant Notice 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 Grantee should consult with the Grantee’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 GRANTEE: 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 Grant Notice 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 Grant Notice designates this Option as an Incentive Stock Option, then to the extent that the Option (together with all Incentive Stock Options granted to the Grantee 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 Subsection 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 Shares is determined as of the time the option with respect to such Shares is granted. If the Code is amended to provide for a different limitation from that set forth in this Subsection 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 Subsection 2.2, the Grantee may designate which portion of such Option the Grantee is exercising. In the absence of such designation, the Grantee 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 GRANTEE: 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.)

 

 

 

 

3. Administration.

 

All questions of interpretation concerning the Grant Notice, 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 Board. All such determinations by the Board 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 Board 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.

 

4. Exercise of the Option.

 

4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable on and after the vesting criteria set forth in the Grant Notice has been satisfied 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 13.2 of the Plan.

 

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 Grantee 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 Grantee 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 Grantee 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 Grantee’s election to exercise the Option, the number of Shares for which the Option is being exercised and such other representations and agreements as to the Grantee’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 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.

 

4.3 Payment of Exercise Price.

 

a. Forms of Consideration Authorized. Payment of the exercise price for the Shares being purchased pursuant to the Option shall be made by any of the following, or a combination of the following, at the election of Grantee:

 

i. cash or check denominated in U.S. dollars,

ii. Shares (including Shares otherwise issuable in settlement of the Award) or Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required,

 

 

 

 

iii. payment through a broker in accordance with procedures permitted by applicable law and regulations, or

iv. other form of legal consideration acceptable to the Administrator.

 

4.4 Tax Withholding.

 

(a) In General. At the time the Award Agreement is executed, or at any time thereafter as requested by the Company, the Grantee hereby authorizes withholding from payroll and any other amounts payable to the Grantee, and otherwise agrees to make adequate provision for, any sums required to satisfy (in cash or, if and only if the Company so elects in its sole discretion, otherwise) the federal, state, local and foreign tax withholding obligations of the Company, if any, which arise in connection with the grant, vesting or exercise of the Option or the issuance of Shares in settlement thereof. The Company shall have no obligation to deliver Shares until the tax obligations of the Company have been satisfied by the Grantee.

 

(b) Withholding in Securities. The Company may, in its discretion, require the Grantee to satisfy all or any portion of the tax obligations by deducting from the Shares otherwise deliverable to the Grantee in settlement of the Option a number of Shares having a Fair Market Value, as determined by the Company as of the date on which the tax obligations arise, not in excess of the amount of such tax obligations determined by the applicable withholding rates. In the event that the Company determines that the tax obligations will not be satisfied by the method described above, Grantee authorizes the designated plan administrator or any successor plan administrator, to sell a number of Shares that are purchased under the Option, which the Company determines is sufficient to generate an amount that meets the tax obligations plus additional Shares, as necessary. To account for rounding and market fluctuation, and to pay such tax withholding amounts to the Company. The Shares may be sold as part of a block trade with other Grantees of the Plan in which all Grantees receive an average price. Any adverse consequences to the Grantee resulting from the procedure permitted under this Subsection 4.4, including, without limitation, tax consequences, shall be the sole responsibility of the Grantee.

 

(c) Consultation. The Grantee hereby acknowledges that he or she understands that the Grantee may suffer adverse tax consequences as a result of the Grantee’s exercise of the Option or disposition of the Shares. The Grantee hereby represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the exercise of the Option or disposition of the Shares and that the Grantee is not relying on the Company for any tax advice.

 

4.5 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of Shares 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 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 Shares may then be listed. 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 Grantee 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.

 

4.6 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 Grantee, the Option shall be exercisable only by the Grantee or the Grantee’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 Grantee or the Grantee’s beneficiary, except transfer by will or by the laws of descent and distribution. Following the death of the Grantee, the Option, to the extent provided in Section 7, may be exercised by the Grantee’s legal representative or by any person empowered to do so under the deceased Grantee’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, or (b) the close of business on the last date for exercising the Option following Grantee’s Termination of Service as described in Section 7, or (c) a Change in Control to the extent provided in the Plan.

 

7. Effect of Termination of Service.

 

7.1 Option Exercisability. The Option shall terminate immediately upon the Grantee’s Termination of Service to the extent that it is then unvested and shall be exercisable after the Grantee’s Termination of Service to the extent it is then unexercised and vested only during the applicable time period as determined below and thereafter shall terminate.

 

a. Termination for Cause. Notwithstanding any other provision of this Option Agreement, if the Grantee’s Termination of Service is for Cause, the Option, whether or not vested, shall terminate and cease to be exercisable immediately upon such Termination of Service.

 

b. Other Termination of Service. If the Grantee’s Termination of Service is for any reason, except Cause, the Option, to the extent unexercised and vested on the date of Grantee’s Termination of Service, may be exercised by the Grantee at any time prior to the expiration of twenty-four (24) months after the date of Grantee’s Termination of Service, but in any event no later than the Option Expiration Date.

 

7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing other than Termination of Service for Cause, if the exercise of the Option within the applicable time periods set forth in Subsection 7.1 is prevented by the provisions of Subsection 4.5, the Option shall remain exercisable until thirty (30) days after the date such exercise first would no longer be prevented by such provisions, but in any event no later than the Option Expiration Date and in no event later than the end of the applicable time period under this Section 7.

 

7.3 Special Rule Regarding Termination of Service. As a special rule and notwithstanding the terms set out in the Plan: an occurrence which may be characterized as a Termination of Service shall be deemed not to constitute a Termination of Service if within five (5) days after such occurrence the Grantee begins service to the Company as an Advisor.

 

8. Rights as a Stockholder, Director, Employee or Consultant.

 

The Grantee 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 the Plan.

 

If the Grantee is an Employee, the Grantee understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Grantee, the Grantee’s employment is “at will” and is for no specified term. Nothing in this Option Agreement shall confer upon the Grantee 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 Grantee’s service as a Director, an Employee or Consultant, as the case may be, at any time. Furthermore, Options are not part of Grantee’s employment contract (if any) with the Company or Company Group, Grantee’s salary, Grantee’s normal or expected compensation, or other remuneration for any purposes, including for purposes of computing severance pay or other termination compensation or indemnity.

 

 

 

 

9. Notice of Sales Upon Disqualifying Disposition.

 

The Grantee shall dispose of the Shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, if the Grant Notice designates this Option as an Incentive Stock Option, the Grantee shall (a) promptly notify the stock plan administrator for the Company if the Grantee disposes of any of the Shares acquired pursuant to the Option within one (1) year after the date the Grantee 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 Grantee disposes of such Shares in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Grantee shall hold all Shares acquired pursuant to the Option in the Grantee’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 Shares to notify the Company of any such transfers. The obligation of the Grantee 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.

 

10. Lock-Up Restrictions.

 

The Grantee agrees that, without the prior written consent of the Company, during the period commencing at the Date of Grant and continuing until 180 days after the Date of Grant, the undersigned will not: (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of or lend, directly or indirectly, the Option or any shares of Common Stock of the Company issuable upon exercise of the Option (collectively, the “Lock-Up Securities”); (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to, the registration of any Lock-Up Securities; (4) grant any proxies or powers of attorney with respect to any Lock-Up Securities, deposit any Lock-Up Securities into a voting trust or enter into a voting agreement or similar arrangement or commitment with respect to any Lock-Up Securities; or (5) publicly disclose the intention to do any of the foregoing (each of the foregoing restrictions, the “Lock-Up Restrictions”).

 

Notwithstanding the above, the Lock-Up Restrictions will automatically terminate on the date that is 180 days after the Date of Grant. The period during which the Lock-Up Restrictions apply to the Lock-Up Securities will be deemed the “Lock-Up Period”.

 

The Grantee agrees that during the Lock-Up Period, the undersigned will not engage in any hedging or other transaction with respect to any Lock-Up Securities that reasonably could be expected to result in a sale or disposition of such Lock-Up Securities even if such Lock-Up Securities would be disposed of by someone other than the Grantee. Such prohibited hedging or other transactions would include any short sale or any purchase, sale or grant of any right (including any put or call option) with respect to such Lock-Up Securities or to any security that includes, relates to, or derives any significant part of its value from such Lock-Up Securities.

 

Notwithstanding the foregoing, the Grantee may transfer any of the Lock-Up Securities (i) as a bona fide gift or charitable contribution, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the Grantee, (iii) by testate succession or intestate succession, (iv) by operation of law pursuant to a qualified domestic order or in connection with a divorce settlement, (v) to any immediate family member, any investment fund, family partnership, family limited liability company or other entity controlled or managed by the undersigned or the immediate family of the undersigned, (vi) to a nominee or custodian to whom a disposition or transfer would be permissible under clauses (i) through (v), (vii) to the Company in a transaction exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), upon a vesting event of the Lock-Up Securities or upon the exercise of Lock-Up Securities on a “cashless” or “net exercise” basis or to cover tax withholding obligations of the undersigned in connection with such vesting or exercise (but excluding any exercise that would involve a sale in the open market of any Lock-Up Securities), (viii) pursuant to a change of control of the Company to the extent provided for in the Plan, provided that in the event that such change of control transaction is not completed, the Lock-Up Securities will remain subject to the Lock-Up Restrictions, or (ix) pursuant to an order of a court or regulatory agency; provided, in the case of clauses (i)-(vi), that (A) such transfer will not involve a disposition for value and (B) the transferee promptly provides the Company with its written agreement to be bound by these Lock-Up Restrictions upon consummation of such transaction; and provided, further, in the case of clauses (i)-(vii), no filing by any party under Section 16(a) of the Exchange Act will be required or made voluntarily in connection with such transfer. For purposes of this Agreement, “immediate family” will mean any relationship by blood, marriage or adoption, not more remote than first cousin.

 

 

 

 

In addition, the Lock-Up Restrictions will not apply to the exercise of the Option (other than any exercise that would involve a sale in the open market); provided that it will apply to any of the Lock-Up Securities issued upon such exercise.

 

Any attempted transfer in violation of the Lock-Up Restrictions will be of no effect and null and void and will not be recorded on the share register of the Company. In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of Lock-Up Securities if such transfer would constitute a violation or breach of these Lock-Up Restrictions. The Company may cause the legend set forth below to be placed upon any certificate(s) or other documents, ledgers or instruments evidencing the undersigned’s ownership of Lock-Up Securities:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY ONLY BE TRANSFERRED IN COMPLIANCE WITH THE LOCK-UP RESTRICTIONS APPLICATION TO SUCH SECURITIES, A COPY OF THE STOCK OPTION AGREEMENT CONTAINING THESE LOCK-UP RESTRICTIONS IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

11. Miscellaneous Provisions.

 

11.1 Termination or Amendment. The Board may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in the Plan in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Grantee unless such termination or amendment is necessary to comply with any applicable law or government regulation, including, but not limited to Section 409A of the Code. No amendment or addition to this Option Agreement shall be effective unless in writing.

 

11.2 Compliance with Section 409A. The Company intends that income realized by the Grantee pursuant to the Plan and this Option Agreement will not be subject to taxation under Section 409A of the Code. The provisions of the Plan and this Option Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. The Company, in its reasonable discretion, may amend (including retroactively) the Plan and this Agreement in order to conform to the applicable requirements of Section 409A of the Code, including amendments to facilitate the Grantee’s ability to avoid taxation under Section 409A of the Code. However, the preceding provisions shall not be construed as a guarantee by the Company of any particular tax result for income realized by the Grantee pursuant to the Plan or this Option Agreement. In any event, and except for the responsibilities of the Company set forth in Subsection 4.4., no Participating Company shall be responsible for the payment of any applicable taxes on income realized by the Grantee pursuant to the Plan or this Option Agreement.

 

11.3 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.

 

11.4 Binding Effect. Subject to the restrictions on transfer set forth herein, this Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

 

 

 

 

11.5 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 Grantee by the 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 Grant Notice 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 Grant Notice, this Option Agreement, and any reports of the Company provided generally to the Company’s shareholders, may be delivered to the Grantee electronically. In addition, if permitted by the Company, the Grantee may deliver electronically the Grant Notice 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 Grantee acknowledges that the Grantee has read Subsection 11.5(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 Grant Notice and Exercise Notice, as described in Subsection 11.5(a). The Grantee acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Grantee by contacting the Company by telephone or in writing. The Grantee further acknowledges that the Grantee will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Grantee understands that the Grantee 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 Grantee may revoke his or her consent to the electronic delivery of documents described in Subsection 11.5(a) or may change the electronic mail address to which such documents are to be delivered (if Grantee 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 Grantee understands that he or she is not required to consent to electronic delivery of documents described in Subsection 11.5(a).

 

11.6 Integrated Agreement. The Grant Notice, this Option Agreement and the Plan, together with any employment, service or other agreement with the Grantee and Company Group referring to the Option, shall constitute the entire understanding and agreement of the Grantee and the Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Grantee and the Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, the Option Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and effect.

 

11.7 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.

 

11.8 Counterparts. The Grant Notice 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.

 

****

 

 

 

 

Incentive Stock Option   Grantee:  
X Nonstatutory Stock Option      

 

Date:  

 

STOCK OPTION EXERCISE NOTICE

 

Ritter Pharmaceuticals, Inc.

Attention: ________________

 

Ladies and Gentlemen:

 

1. Option. I was granted an option (the Option) to purchase shares of the common stock (the Shares) of Ritter Pharmaceuticals, Inc. (the Company) pursuant to the Company’s 2015 Equity Incentive Plan (the Plan), my Notice of Grant of Stock Option (the Grant Notice) and my Stock Option Agreement (the Option Agreement) as follows:

 

  Date of Grant: ______________________  
  Number of Option Shares: ______________________  
  Exercise Price per Share: $_____________________  

 

2. Exercise of Option. I hereby elect to exercise the Option to purchase the following number of Shares, all of which are Vested Shares, in accordance with the Grant Notice and the Option Agreement:

 

  Total Shares Purchased: ______________________  
  Total Exercise Price (Total Shares X Price per Share) $_____________________  

 

3. Payments. I enclose payment in full of the total exercise price for the Shares in the following form(s), as authorized by my Option Agreement:

 

  Cashless Exercise    
         
  Cash / Check: $_____________________  
         
  Tender of Company Shares: Contact Plan Administrator  

 

4. Tax Withholding. I authorize payroll withholding, net-share withholding and otherwise will make adequate provision for the federal, state, local and foreign tax withholding obligations of the Company, if any, in connection with the Option.

 

5. Grantee Information.

 

  My address is:    
       
       

 

  My Social Security Number is:    

 

6. Notice of Disqualifying Disposition. If the Option is an Incentive Stock Option, I agree that I will promptly notify the Chief Financial Officer of the Company if I transfer any of the Shares within one (1) year from the date I exercise all or part of the Option or within two (2) years of the Date of Grant.

 

7. Tax Consultation. I hereby acknowledge that I understand that I may suffer adverse tax consequences as a result of my purchase or disposition of the Shares. I hereby represent that I am not relying on the Company for any tax advice.

 

 

 

 

8. Binding Effect. I understand that I am purchasing the Shares pursuant to the terms of the Plan, the Grant Notice and my Option Agreement, copies of which I have received and carefully read and understand. This Agreement shall inure to the benefit of and be binding upon my heirs, executors, administrators, successors and assigns.

 

      Very truly yours,
       
       
      (Signature)

 

Receipt of the above is hereby acknowledged.    
Ritter Pharmaceuticals, Inc.    
       
By:                     
       
Title:      
       
Dated:      

 

 

 

 

Exhibit 10.17

 

Execution Version

 

CONSULTING AGREEMENT

 

This Consulting Agreement (the “Agreement”) is entered into as of this 22nd day of May, 2020 (the “Effective Date”) by and between Qualigen Therapeutics, Inc. (formerly known as Ritter Pharmaceuticals, Inc.), at 2042 Corte Del Nogal, Carlsbad, California 92011 (the “Company”), and Andrew J. Ritter, at 2800 W. Oxnard St. # 250, Woodland Hills, CA 91367 (“Consultant”). Company and the Consultant are collectively referred to herein as the “Parties.”

 

TERMS AND CONDITIONS

 

1. Services. Consultant shall perform the services (“Services”) described in the Statement of Work attached hereto as Exhibit A, and any subsequent Statement of Work mutually agreed upon by the Parties in writing in the form attached hereto as Exhibit A and signed by authorized representatives of each Party (each, a “Statement of Work”).

 

2. Fees; Invoices; Payment. In consideration for the performance of the Services by Consultant, Company agrees to pay Consultant for Services rendered as stipulated in the applicable Statement of Work. Consultant shall submit invoices upon achievement of milestones as set forth in the applicable Statement of Work. The invoices will be paid within 14 days following receipt of invoice, absent any unresolved contract or billing issues.

 

3. Effective Date; Term. This Agreement shall be effective as of the Effective Date, and shall end on the Expiration Date outlined on the applicable Statement of Work, unless extended by mutual written agreement signed by both parties or terminated earlier by either party under Section 8.

 

4. Nature of Engagement.

 

  a. Independent Contractor. It is the express intention of the parties that Consultant provides services as an independent contractor and not an employee, agent, joint venture or partner of Company. Nothing in this Agreement shall be interpreted or construed as creating or establishing any relationship to the contrary. Both Parties acknowledge that Consultant is not an employee for federal and state tax purposes. Company shall not have the right to direct or control the means, manner, or details by which Consultant accomplishes the Services, nor will Company instruct Consultant as to when, where, or how the order of tasks are to be performed, subject to the agreed upon details in the Statement of Work attached hereto and all reasonable deadlines set by Company. The Consultant shall have the right to control and determine the time, place, methods, manner and means of performing the services, subject to the agreed upon details in the Statement of Work attached. In performing the services, the amount of time devoted by the Consultant on any given day will be entirely within the Consultant’s control, and the Company will rely on the Consultant to put in the amount of time necessary to fulfill the requirements of this Agreement. The Consultant reserves the right to decline a proposed project at any time. The Consultant is not required to attend meetings at the Company, or make on-site visits to the Company. At the option of Company, Consultant may be required to execute other documents evidencing compliance with Consultant’s tax obligations related to this Agreement, including without limitation, a federal Form W-9 and any other tax and/or work eligibility documentation required for Company to remit payment. Consultant shall retain the right to perform services for others during the term of this Agreement.

 

 

 

 

  b. State and Federal Taxes. Consultant is responsible for paying all required state and federal taxes and insurance. In particular:
       
    Company will not withhold FICA (social security) and medicare taxes from Consultant’s payments.
       
    Company will not make state or federal unemployment contributions on behalf of Consultant.
       
    Company will not obtain workers’ compensation insurance on behalf of Consultant.
       
    Company will not withhold state or federal income tax from payments made to Consultant.
       
    Company will not make disability insurance contributions on behalf of Consultant.

 

5. Proprietary Information. “Proprietary Information” shall mean all information and materials that relate to the business of Company, its parents, subsidiaries, affiliates, and/or any of their donors, users, viewers, licensors, licensees and distributors, in any form and whether or not labeled or identified as confidential or proprietary, including but not limited to, (a) information about actual or potential investees or grantees; (b) financial and other information about costs, revenue, profits or forecasts; (c) information regarding business strategy, marketing or methods of operation; (d) personnel files and information about compensation and benefits; (e) third party information or materials that Company or its parents, subsidiaries or affiliates agree to hold in confidence; and (f) technologies, concepts, methods, sources, methods of doing business, patterns, processes, compounds, formulae, programs, devices, tools, compilations of information, development, manufacturing, purchasing, engineering, computer programs (whether in source code or object code), theories, techniques, procedures, strategies, systems, written works, and designs. Proprietary Information shall not include: (i) information or materials that are or become generally known to the public through lawful means and through no fault of Consultant; or (ii) information or materials known to Consultant without confidentiality restrictions prior to the initial disclosure by Company.

 

6. Confidentiality. At all times, both during the term of this Agreement and thereafter in perpetuity, Consultant shall keep and hold all Proprietary Information and IP (as defined below) in strict confidence and trust, and will not disclose any such Proprietary Information to any third party whatsoever without the prior written consent of Company, except to Consultant’s legal counsel or if required by court order from a court of competent jurisdiction, provided that Consultant shall first notify Company such that Company has an opportunity to object to such court order. Consultant will not use any such Proprietary Information except as may be necessary in order to perform Consultant’s Services under this Agreement. Consultant agrees to notify Company of any unauthorized release or use of Proprietary Information.

 

Notwithstanding the foregoing, Consultant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, in the event that Consultant files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Consultant may disclose the trade secret to her attorney and use the trade secret information in the court proceeding, if Consultant: (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

 

2

 

 

7. Ownership; Assignment. All inventions, improvements, designs, works of authorship, formulas, processes, methods, software, databases, trade secrets, know-how and ideas, and any other results or proceeds of Consultant’s services for Company made, conceived, developed, created or incorporated by Consultant, either alone or jointly with others, in connection with the services provided under this Agreement or otherwise related to the Proprietary Information whether or not patentable, copyrightable or protectable as trade secrets, and all patents, copyright rights, trade secret rights and other intellectual property rights related thereto (“IP”) shall be and remain the sole property of Company and its assigns in perpetuity, and Consultant hereby assigns and agrees to assign all right, title and interest in and to such IP to Company and its assigns. Consultant irrevocably assigns and agrees to assign to the Company, in each case without additional consideration, all right, title, and interest throughout the world in and to these materials, including all intellectual property rights and unrestricted copyright. Consultant agrees to waive and not to assert any and all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral,” or the like to all IP.

 

8. Termination. The duration of this Agreement shall be for the Consultant Term, as defined in the Contingent Value Rights Agreement. Upon termination of this Agreement for any reason, Consultant agrees to promptly deliver to Company all documents and materials whatsoever and in whatever form, whether hard copy and/or digital, containing any Proprietary Information or IP whatsoever or otherwise pertaining to Consultant’s services, and any other documents, materials or property furnished by Company to Consultant. Upon the termination of this Agreement, Consultant shall immediately cease performing any services under this Agreement.

 

9. Compliance with Laws. Consultant agrees to comply with all applicable laws and regulations during the term of this Agreement.

 

10. Relationship of the Parties. Neither party shall have any right or authority, express or implied, to assume or create any obligation of any kind, or to make any representation or warranty, on behalf of the other party or to bind the other party in any respect whatsoever.

 

11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts wholly performed therein (regardless of where actually performed) without regard to principles of conflicts of laws.

 

12. Indemnification.

 

  a. The Company agrees to indemnify and hold harmless Consultant as set forth in Section 6.3 of the Contingent Value Rights Agreement.

 

3

 

 

  b. Consultant agrees to indemnify and hold harmless the Company against any liability, damages, loss or expense (including reasonable attorney fees and expenses of litigation) arising out of claims brought by a third party based on or related to the actions of Consultant in the performance of this Agreement or any Services performed or products developed or made under this Agreement, but only to the extent arising from the gross negligence or intentionally wrongful acts of Consultant. Except for liabilities arising from the gross negligence or intentionally wrongful acts of Consultant, any liability whatsoever of Consultant hereunder or otherwise relating to or arising out of performance of the Services will be limited in the aggregate to the fees and charges paid hereunder by the Company to Consultant (but not including Expenses) with respect to such Services.

 

13. Notice. All notices, requests, demands and other communications under this Agreement must be in writing and given by personal delivery, sent by trackable U.S. mail or FedEx or email, addressed to the party for which it is intended at its address set forth on the first page of this Agreement (or such other address as such party may later designate) and shall be effective upon receipt.

 

14. Waiver. The waiver by either party of a breach of or a default under any provision of this Agreement shall not be effective unless in writing and shall not be construed as a waiver of any past, subsequent or contemporaneous breach of or default under the same or any other provision of this Agreement, nor shall any delay or omission on the part of either party to exercise or avail itself of any right or remedy that it has or may have hereunder operate as a waiver of any right or remedy.

 

15. Severability. If any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, such provision shall be enforced to the maximum extent lawfully possible so as to affect the intent of the parties, and the remainder of this Agreement shall remain in full force and effect.

 

16. Captions; Interpretation. All captions and headings in this Agreement are for the purposes of reference and convenience only, and shall not limit or expand the provisions of this Agreement. This Agreement shall be deemed to have been drafted by all parties and, in the event of a dispute, no party hereto shall be entitled to claim that any provision should be construed against any other party by reason of the fact that it was drafted by one particular party.

 

17. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed original, and together which shall constitute one in the same instrument. Electronically transmitted counterparts shall be deemed originals for all purposes.

 

18. Entire Agreement; Amendments. This Agreement (including the Statement of Work, as well as the Contingent Value Rights Agreement which continues in full force and effect) constitutes the entire agreement with respect to the subject matter hereof, and shall supersede any prior or contemporaneous oral or written agreements, understandings or communications or past courses of dealing between Company and Consultant with respect to the subject matter hereof. This Agreement may not be amended or modified, except in a writing signed by duly authorized representatives of both parties.

 

SIGNATURES ON FOLLOWING PAGE

 

4

 

 

IN WITNESS WHEREOF, the parties or authorized representatives thereof have duly executed this Consulting Agreement as of the Effective Date.

 

QUALIGEN THERAPEUTICS, INC.:

 

By: /s/ Michael Poirier  
  An Authorized Signatory  
     
CONSULTANT:  
     
By: /s/ Andrew J. Ritter  
  Andrew J. Ritter  

 

 

 

 

EXHIBIT A

STATEMENT OF WORK

 

This Statement of Work is by and between Qualigen Therapeutics, Inc. (the “Company”), and Andrew J. Ritter (“Consultant”). This Statement of Work is subject to all terms and conditions of the Consulting Agreement (“Agreement”) between Company and Consultant to which this Statement of Work is attached.

 

SERVICES DESCRIPTION   Consultant shall provide services as outlined in Section 2.6 of the Contingent Value Rights Agreement between the parties related to “Legacy Monetization” activities as outlined in section 1.1 of the Contingent Value Rights Agreement.
PRICING/PAYMENT   Consultant will bill the Company at a rate of $275 an hour for any hours providing these services to the Company in good faith. Consultant will provide documentation for its billings.
INSURANCE   Pursuant to (and subject to the terms, conditions and limitations of) the last paragraph of Section 6.3 of the Contingent Value Rights Agreement, the Company shall use reasonable efforts to have Consultant included (by rider/endorsement) on the Company’s directors and officers liability insurance policy, if any, as an additional insured person (for acts and omissions in the capacity of Consultant under this Agreement).
SURVIVAL   Expiration or termination of services under this Statement of Work does not affect the continuity of services under any separate written consulting agreement. Further, expiration or termination of services under this Statement of Work does not alter the terms of the Contingent Value Rights Agreement, which remains in full force and effect in accordance with its own terms.

 

I have reviewed this page:

 

Consultant Initials /s/ AJR Company Initials /s/ MP

 

 

 

 

Exhibit 10.18

 

Execution Version

 

CONSULTING AGREEMENT

 

This Consulting Agreement (the “Agreement”) is entered into as of this 22nd day of May, 2020 (the “Effective Date”) by and between Qualigen Therapeutics, Inc. (formerly known as Ritter Pharmaceuticals, Inc.), at 2042 Corte Del Nogal, Carlsbad, California 92011 (the “Company”), and Stonehenge Partners, LLC, at 2800 W. Oxnard St. # 250, Woodland Hills, CA 91367 (“Consultant”). Company and the Consultant are collectively referred to herein as the “Parties.”

 

TERMS AND CONDITIONS

 

1. Services. Consultant shall perform the services (“Services”) described in the Statement of Work attached hereto as Exhibit A, and any subsequent Statement of Work mutually agreed upon by the Parties in writing in the form attached hereto as Exhibit A and signed by authorized representatives of each Party (each, a “Statement of Work”).

 

2. Fees; Invoices; Payment. In consideration for the performance of the Services by Consultant, Company agrees to pay Consultant for Services rendered as stipulated in the applicable Statement of Work. Consultant shall submit invoices upon achievement of milestones as set forth in the applicable Statement of Work. The invoices will be paid within 14 days following receipt of invoice, absent any unresolved contract or billing issues.

 

3. Effective Date; Term. This Agreement shall be effective as of the Effective Date, and shall end 6-months from the Effective Date, unless extended by mutual written agreement signed by both parties – all subject to Section 8.

 

4. Nature of Engagement.

 

  a. Independent Contractor. It is the express intention of the parties that Consultant (and its personnel) provides services as an independent contractor and not an employee, agent, joint venture or partner of Company. Nothing in this Agreement shall be interpreted or construed as creating or establishing any relationship to the contrary. Both Parties acknowledge that Consultant is not an employee for federal and state tax purposes. Company shall not have the right to direct or control the means, manner, or details by which Consultant accomplishes the Services, nor will Company instruct Consultant as to when, where, or how the order of tasks are to be performed, subject to the agreed upon details in the Statement of Work attached hereto and all reasonable deadlines set by Company. The Consultant shall have the right to control and determine the time, place, methods, manner and means of performing the services, subject to the agreed upon details in the Statement of Work attached. In performing the services, the amount of time devoted by the Consultant on any given day will be entirely within the Consultant’s control, and the Company will rely on the Consultant to put in the amount of time necessary to fulfill the requirements of this Agreement. The Consultant reserves the right to decline a proposed project at any time. The Consultant is not required to attend meetings at the Company, or make on-site visits to the Company. At the option of Company, Consultant may be required to execute other documents evidencing compliance with Consultant’s tax obligations related to this Agreement, including without limitation, a federal Form W-9 and any other tax and/or work eligibility documentation required for Company to remit payment. Consultant shall retain the right to perform services for others during the term of this Agreement.

 

 

 

 

  b. State and Federal Taxes. Consultant is responsible for paying all required state and federal taxes and insurance for itself and its personnel. In particular:

 

  Company will not withhold FICA (social security) and Medicare taxes from Consultant’s payments.
     
  Company will not make state or federal unemployment contributions on behalf of Consultant or its personnel.
     
  Company will not obtain workers’ compensation insurance on behalf of Consultant or its personnel.
     
  Company will not withhold state or federal income tax from payments made to Consultant.
     
  Company will not make disability insurance contributions on behalf of Consultant or its personnel.

 

5. Proprietary Information. “Proprietary Information” shall mean all information and materials that relate to the business of Company, its parents, subsidiaries, affiliates, and/or any of their donors, users, viewers, licensors, licensees and distributors, in any form and whether or not labeled or identified as confidential or proprietary, including but not limited to, (a) information about actual or potential investees or grantees; (b) financial and other information about costs, revenue, profits or forecasts; (c) information regarding business strategy, marketing or methods of operation; (d) personnel files and information about compensation and benefits; (e) third party information or materials that Company or its parents, subsidiaries or affiliates agree to hold in confidence; and (f) technologies, concepts, methods, sources, methods of doing business, patterns, processes, compounds, formulae, programs, devices, tools, compilations of information, development, manufacturing, purchasing, engineering, computer programs (whether in source code or object code), theories, techniques, procedures, strategies, systems, written works, and designs. Proprietary Information shall not include: (i) information or materials that are or become generally known to the public through lawful means and through no fault of Consultant or its personnel; or (ii) information or materials known to Consultant without confidentiality restrictions prior to the initial disclosure by Company.

 

6. Confidentiality. At all times, both during the term of this Agreement and thereafter in perpetuity, Consultant shall keep and hold all Proprietary Information and IP (as defined below) in strict confidence and trust, and will not disclose any such Proprietary Information to any third party whatsoever without the prior written consent of Company, except to Consultant’s legal counsel or if required by court order from a court of competent jurisdiction, provided that Consultant shall first notify Company such that Company has an opportunity to object to such court order. Consultant will not use any such Proprietary Information except as may be necessary in order to perform Consultant’s Services under this Agreement. Consultant agrees to notify Company of any unauthorized release or use of Proprietary Information. Consultant agrees to require its personnel to abide by this Section 6, as if it applied directly to such personnel.

 

 

 

 

Notwithstanding the foregoing, Consultant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, in the event that Consultant files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Consultant may disclose the trade secret to her attorney and use the trade secret information in the court proceeding, if Consultant: (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

 

7. Ownership; Assignment. All inventions, improvements, designs, works of authorship, formulas, processes, methods, software, databases, trade secrets, know-how and ideas, and any other results or proceeds of Consultant’s services for Company made, conceived, developed, created or incorporated by Consultant, either alone or jointly with others, in connection with the services provided under this Agreement or otherwise related to the Proprietary Information whether or not patentable, copyrightable or protectable as trade secrets, and all patents, copyright rights, trade secret rights and other intellectual property rights related thereto (“IP”) shall be and remain the sole property of Company and its assigns in perpetuity, and Consultant hereby assigns and agrees to assign all right, title and interest in and to such IP to Company and its assigns. Consultant irrevocably assigns and agrees to assign to the Company, in each case without additional consideration, all right, title, and interest throughout the world in and to these materials, including all intellectual property rights and unrestricted copyright. Consultant agrees to waive and not to assert any and all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral,” or the like to all IP. Consultant agrees to require its personnel to abide by this Section 7, as if it applied directly to such personnel.

 

8. Termination. The Company agrees to engage Consultant for an initial period of six months starting on the Effective Date. After this initial six-month period, the Company may terminate the engagement at any time by providing written notice to Consultant. During this initial six-month period, as well as during any continued engagement thereafter, Consultant may terminate the engagement at any time by providing written notice to the Company. Upon termination of this Agreement for any reason, Consultant agrees to promptly deliver to Company all documents and materials whatsoever and in whatever form, whether hard copy and/or digital, containing any Proprietary Information or IP whatsoever or otherwise pertaining to Consultant’s services, and any other documents, materials or property furnished by Company to Consultant. Upon the termination of this Agreement, Consultant shall immediately cease performing any services under this Agreement.

 

9. Compliance with Laws. Consultant agrees to comply with all applicable laws and regulations during the term of this Agreement.

 

10. Relationship of the Parties. Neither party shall have any right or authority, express or implied, to assume or create any obligation of any kind, or to make any representation or warranty, on behalf of the other party or to bind the other party in any respect whatsoever.

 

 

 

 

11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts wholly performed therein (regardless of where actually performed) without regard to principles of conflicts of laws.

 

12. Indemnification. Consultant agrees to indemnify and hold harmless the Company against any liability, damages, loss or expense (including reasonable attorney fees and expenses of litigation) arising out of claims brought by a third party based on or related to the actions of Consultant in the performance of this Agreement or any Services performed or products developed or made under this Agreement, but only to the extent arising from the gross negligence or intentionally wrongful acts of Consultant. Except for liabilities arising from the gross negligence or intentionally wrongful acts of Consultant or its personnel, any liability whatsoever of Consultant hereunder or otherwise relating to or arising out of performance of the Services will be limited in the aggregate to the fees and charges paid hereunder by the Company to Consultant (but not including Expenses) with respect to such Services.

 

13. Notice. All notices, requests, demands and other communications under this Agreement must be in writing and given by personal delivery, sent by trackable U.S. mail or FedEx or email, addressed to the party for which it is intended at its address set forth on the first page of this Agreement (or such other address as such party may later designate) and shall be effective upon receipt.

 

14. Waiver. The waiver by either party of a breach of or a default under any provision of this Agreement shall not be effective unless in writing and shall not be construed as a waiver of any past, subsequent or contemporaneous breach of or default under the same or any other provision of this Agreement, nor shall any delay or omission on the part of either party to exercise or avail itself of any right or remedy that it has or may have hereunder operate as a waiver of any right or remedy.

 

15. Severability. If any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, such provision shall be enforced to the maximum extent lawfully possible so as to affect the intent of the parties, and the remainder of this Agreement shall remain in full force and effect.

 

16. Captions; Interpretation. All captions and headings in this Agreement are for the purposes of reference and convenience only, and shall not limit or expand the provisions of this Agreement. This Agreement shall be deemed to have been drafted by all parties and, in the event of a dispute, no party hereto shall be entitled to claim that any provision should be construed against any other party by reason of the fact that it was drafted by one particular party.

 

17. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed original, and together which shall constitute one in the same instrument. Electronically transmitted counterparts shall be deemed originals for all purposes.

 

18. Entire Agreement; Amendments. This Agreement (including the Statement of Work) constitutes the entire agreement with respect to the subject matter hereof, and shall supersede any prior or contemporaneous oral or written agreements, understandings or communications or past courses of dealing between Company and Consultant with respect to the subject matter hereof. This Agreement may not be amended or modified, except in a writing signed by duly authorized representatives of both parties.

 

SIGNATURES ON FOLLOWING PAGE

 

 

 

 

IN WITNESS WHEREOF, the parties or authorized representatives thereof have duly executed this Consulting Agreement as of the Effective Date.

 

QUALIGEN THERAPEUTICS, INC.:

 

By: /s/ Michael Poirier  
  An Authorized Signatory  
     
STONEHENGE PARTNERS, LLC:  
     
By: /s/ Andrew J. Ritter  
  Andrew J. Ritter  

 

 

 

 

EXHIBIT A

STATEMENT OF WORK

 

This Statement of Work is by and between Qualigen Therapeutics, Inc. (the “Company”), and Stonehenge Partners, LLC (“Consultant”). This Statement of Work is subject to all terms and conditions of the Consulting Agreement (“Agreement”) between Company and Consultant to which this Statement of Work is attached.

 

SERVICES DESCRIPTION   Consultant shall provide support to the Company’s CEO as reasonably requested. Consultant will help support public market activities such as: investor relations, strategy, messaging and contacts, assisting in financing strategy, introductions to bankers, analysts among others.

PRICING/PAYMENT

 

Consultant will commit to at least 10 hours of work a week and will be paid a flat fee of $11,000 a month for this 10 hours of work a week.

    Consultant will bill the Company at a rate of $275 an hour for any hours providing services to the Company above and beyond this 10 hours per week, but only to the extent such additional hours have been expressly requested in writing by the Company.
EXPIRATION   Expiration or termination of services under this Statement of Work does not affect the continuity of services under any other Statement of Work. Further, expiration or termination of services under this Statement of Work does not alter the terms of the Contingent Value Rights Agreement, which remains in full force and effect in accordance with its own terms.

 

I have reviewed this page:

 

Consultant Initials /s/ AJR Company Initials /s/ MP

 

 

 

 

Exhibit 10.19

 

CONSULTING AGREEMENT

 

This Consulting Agreement (the “Agreement”) is entered into as of this 22nd day of May, 2020 (the “Effective Date”) by and between Qualigen Therapeutics, Inc. (formerly known as Ritter Pharmaceuticals, Inc.), at 2042 Corte Del Nogal, Carlsbad, California 92011 (the “Company”), and CFB Financial, Inc., at 2360 Nabal Street, Escondido, California 92025 (“Consultant”). Company and the Consultant are collectively referred to herein as the “Parties.”

 

TERMS AND CONDITIONS

 

1. Services. Consultant shall perform the services (“Services”) described in the Statement of Work attached hereto as Exhibit A, and any subsequent Statement of Work mutually agreed upon by the Parties in writing in the form attached hereto as Exhibit A and signed by authorized representatives of each Party (each, a “Statement of Work”).

 

2. Fees; Invoices; Payment. In consideration for the performance of the Services by Consultant, Company agrees to pay Consultant for Services rendered as stipulated in the applicable Statement of Work. Consultant shall submit invoices upon achievement of milestones as set forth in the applicable Statement of Work. The invoices will be paid within 14 days following receipt of invoice, absent any unresolved contract or billing issues.

 

3. Effective Date; Term. This Agreement shall be effective as of the Effective Date, and shall end 6-months from the Effective Date, unless extended by mutual written agreement signed by both parties – all subject to Section 8.

 

4. Nature of Engagement.

 

  a. Independent Contractor. It is the express intention of the parties that Consultant (and its personnel) provides services as an independent contractor and not an employee, agent, joint venture or partner of Company. Nothing in this Agreement shall be interpreted or construed as creating or establishing any relationship to the contrary. Both Parties acknowledge that Consultant is not an employee for federal and state tax purposes. Company shall not have the right to direct or control the means, manner, or details by which Consultant accomplishes the Services, nor will Company instruct Consultant as to when, where, or how the order of tasks are to be performed, subject to the agreed upon details in the Statement of Work attached hereto and all reasonable deadlines set by Company. The Consultant shall have the right to control and determine the time, place, methods, manner and means of performing the services, subject to the agreed upon details in the Statement of Work attached. In performing the services, the amount of time devoted by the Consultant on any given day will be entirely within the Consultant’s control, and the Company will rely on the Consultant to put in the amount of time necessary to fulfill the requirements of this Agreement. The Consultant reserves the right to decline a proposed project at any time. The Consultant is not required to attend meetings at the Company, or make on-site visits to the Company. At the option of Company, Consultant may be required to execute other documents evidencing compliance with Consultant’s tax obligations related to this Agreement, including without limitation, a federal Form W-9 and any other tax and/or work eligibility documentation required for Company to remit payment. Consultant shall retain the right to perform services for others during the term of this Agreement.

 

 

 

 

  b. State and Federal Taxes. Consultant is responsible for paying all required state and federal taxes and insurance for itself and its personnel. In particular:

 

  Company will not withhold FICA (social security) and Medicare taxes from Consultant’s payments.
     
  Company will not make state or federal unemployment contributions on behalf of Consultant or its personnel.
     
  Company will not obtain workers’ compensation insurance on behalf of Consultant or its personnel.
     
  Company will not withhold state or federal income tax from payments made to Consultant.
     
  Company will not make disability insurance contributions on behalf of Consultant or its personnel.

 

5. Proprietary Information. “Proprietary Information” shall mean all information and materials that relate to the business of Company, its parents, subsidiaries, affiliates, and/or any of their donors, users, viewers, licensors, licensees and distributors, in any form and whether or not labeled or identified as confidential or proprietary, including but not limited to, (a) information about actual or potential investees or grantees; (b) financial and other information about costs, revenue, profits or forecasts; (c) information regarding business strategy, marketing or methods of operation; (d) personnel files and information about compensation and benefits; (e) third party information or materials that Company or its parents, subsidiaries or affiliates agree to hold in confidence; and (f) technologies, concepts, methods, sources, methods of doing business, patterns, processes, compounds, formulae, programs, devices, tools, compilations of information, development, manufacturing, purchasing, engineering, computer programs (whether in source code or object code), theories, techniques, procedures, strategies, systems, written works, and designs. Proprietary Information shall not include: (i) information or materials that are or become generally known to the public through lawful means and through no fault of Consultant or its personnel; or (ii) information or materials known to Consultant without confidentiality restrictions prior to the initial disclosure by Company.

 

6. Confidentiality. At all times, both during the term of this Agreement and thereafter in perpetuity, Consultant shall keep and hold all Proprietary Information and IP (as defined below) in strict confidence and trust, and will not disclose any such Proprietary Information to any third party whatsoever without the prior written consent of Company, except to Consultant’s legal counsel or if required by court order from a court of competent jurisdiction, provided that Consultant shall first notify Company such that Company has an opportunity to object to such court order. Consultant will not use any such Proprietary Information except as may be necessary in order to perform Consultant’s Services under this Agreement. Consultant agrees to notify Company of any unauthorized release or use of Proprietary Information. Consultant agrees to require its personnel to abide by this Section 6, as if it applied directly to such personnel.

 

2

 

 

Notwithstanding the foregoing, Consultant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, in the event that Consultant files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Consultant may disclose the trade secret to her attorney and use the trade secret information in the court proceeding, if Consultant: (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

 

7. Ownership; Assignment. All inventions, improvements, designs, works of authorship, formulas, processes, methods, software, databases, trade secrets, know-how and ideas, and any other results or proceeds of Consultant’s services for Company made, conceived, developed, created or incorporated by Consultant, either alone or jointly with others, in connection with the services provided under this Agreement or otherwise related to the Proprietary Information whether or not patentable, copyrightable or protectable as trade secrets, and all patents, copyright rights, trade secret rights and other intellectual property rights related thereto (“IP”) shall be and remain the sole property of Company and its assigns in perpetuity, and Consultant hereby assigns and agrees to assign all right, title and interest in and to such IP to Company and its assigns. Consultant irrevocably assigns and agrees to assign to the Company, in each case without additional consideration, all right, title, and interest throughout the world in and to these materials, including all intellectual property rights and unrestricted copyright. Consultant agrees to waive and not to assert any and all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral,” or the like to all IP. Consultant agrees to require its personnel to abide by this Section 7, as if it applied directly to such personnel.

 

8. Termination. The Company agrees to engage Consultant for an initial period of six months starting on the Effective Date. After this initial six-month period, the Company may terminate the engagement at any time by providing written notice to Consultant. During this initial six-month period, as well as during any continued engagement thereafter, Consultant may terminate the engagement at any time by providing written notice to the Company. Upon termination of this Agreement for any reason, Consultant agrees to promptly deliver to Company all documents and materials whatsoever and in whatever form, whether hard copy and/or digital, containing any Proprietary Information or IP whatsoever or otherwise pertaining to Consultant’s services, and any other documents, materials or property furnished by Company to Consultant. Upon the termination of this Agreement, Consultant shall immediately cease performing any services under this Agreement.

 

9. Compliance with Laws. Consultant agrees to comply with all applicable laws and regulations during the term of this Agreement.

 

10. Relationship of the Parties. Neither party shall have any right or authority, express or implied, to assume or create any obligation of any kind, or to make any representation or warranty, on behalf of the other party or to bind the other party in any respect whatsoever.

 

3

 

 

11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts wholly performed therein (regardless of where actually performed) without regard to principles of conflicts of laws.

 

12. Indemnification. Consultant agrees to indemnify and hold harmless the Company against any liability, damages, loss or expense (including reasonable attorney fees and expenses of litigation) arising out of claims brought by a third party based on or related to the actions of Consultant in the performance of this Agreement or any Services performed or products developed or made under this Agreement, but only to the extent arising from the gross negligence or intentionally wrongful acts of Consultant. Except for liabilities arising from the gross negligence or intentionally wrongful acts of Consultant or its personnel, any liability whatsoever of Consultant hereunder or otherwise relating to or arising out of performance of the Services will be limited in the aggregate to the fees and charges paid hereunder by the Company to Consultant (but not including Expenses) with respect to such Services.

 

13. Notice. All notices, requests, demands and other communications under this Agreement must be in writing and given by personal delivery, sent by trackable U.S. mail or FedEx or email, addressed to the party for which it is intended at its address set forth on the first page of this Agreement (or such other address as such party may later designate) and shall be effective upon receipt.

 

14. Waiver. The waiver by either party of a breach of or a default under any provision of this Agreement shall not be effective unless in writing and shall not be construed as a waiver of any past, subsequent or contemporaneous breach of or default under the same or any other provision of this Agreement, nor shall any delay or omission on the part of either party to exercise or avail itself of any right or remedy that it has or may have hereunder operate as a waiver of any right or remedy.

 

15. Severability. If any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, such provision shall be enforced to the maximum extent lawfully possible so as to affect the intent of the parties, and the remainder of this Agreement shall remain in full force and effect.

 

16. Captions; Interpretation. All captions and headings in this Agreement are for the purposes of reference and convenience only, and shall not limit or expand the provisions of this Agreement. This Agreement shall be deemed to have been drafted by all parties and, in the event of a dispute, no party hereto shall be entitled to claim that any provision should be construed against any other party by reason of the fact that it was drafted by one particular party.

 

17. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed original, and together which shall constitute one in the same instrument. Electronically transmitted counterparts shall be deemed originals for all purposes.

 

18. Entire Agreement; Amendments. This Agreement (including the Statement of Work) constitutes the entire agreement with respect to the subject matter hereof, and shall supersede any prior or contemporaneous oral or written agreements, understandings or communications or past courses of dealing between Company and Consultant with respect to the subject matter hereof. This Agreement may not be amended or modified, except in a writing signed by duly authorized representatives of both parties.

 

SIGNATURES ON FOLLOWING PAGE

 

4

 

 

IN WITNESS WHEREOF, the parties or authorized representatives thereof have duly executed this Consulting Agreement as of the Effective Date.

 

QUALIGEN THERAPEUTICS, INC.:  
     
By: /s/ Michael Poirier  
  An Authorized Signatory  
     
CFB FINANCIAL, INC.:  
     
By: /s/ John W. Beck  
  John W. Beck  

 

 

 

 

EXHIBIT A

STATEMENT OF WORK

 

This Statement of Work is by and between Qualigen Therapeutics, Inc. (the “Company”), and CFB Financial, Inc. (“Consultant”). This Statement of Work is subject to all terms and conditions of the Consulting Agreement (“Agreement”) between Company and Consultant to which this Statement of Work is attached.

 

SERVICES

DESCRIPTION

  Consultant shall provide support to the Company’s CEO and CFO as reasonably requested. Financial consulting services may include, but are not limited to financial and reporting matters, NASDAQ, SEC, and audits. Consultant shall establish structures and best practices in managing the internal workings of the Company in order for it to follow good governance and other public market expectations.
       
PRICING/PAYMENT   Consultant will commit to at least 10 hours of work a week and will be paid a flat fee of $8,000 a month for this 10 hours of work a week.
    Consultant will bill the Company at a rate of $200 an hour for any hours providing services to the Company above and beyond this 10 hours per week, but only to the extent such additional hours have been expressly requested in writing by the Company.
       
EXPIRATION   Expiration or termination of services under this Statement of Work does not affect the continuity of services under any other Statement of Work. Further, expiration or termination of services under this Statement of Work does not alter the terms of the Contingent Value Rights Agreement, which remains in full force and effect in accordance with its own terms.

 

I have reviewed this page:

 

Consultant Initials /s/ JB Company Initials /s/ MP

 

 

 

 

Exhibit 10.20

 

QUALIGEN THERAPEUTICS, INC.

 

2020 STOCK INCENTIVE PLAN

 

As adopted by the Board of Directors on April 8, 2020 (and as thereafter amended)

 

ARTICLE 1

PURPOSES OF THE PLAN; TERM

 

1.1 Purposes. The purposes of the Plan are (a) to enhance the Company’s ability to attract and retain the services of qualified employees, officers, directors, consultants and other service providers upon whose judgment, initiative and efforts the successful conduct and development of the Company’s business largely depends and (b) to provide additional incentives to such persons or entities to devote their utmost effort and skill to the advancement and betterment of the Company, by providing them an opportunity to participate in the ownership of the Company and thereby have an interest in the success and increased value of the Company.

 

1.2 Term. Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date and will terminate 10 years from the Effective Date.

 

ARTICLE 2

DEFINITIONS

 

For purposes of this Plan, terms not otherwise defined herein will have the meanings indicated below:

 

2.1 Affiliate” means (i) any entity that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (ii) any entity in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.

 

2.2 Award” means any award under the Plan, including any Option, Restricted Stock, Stock Bonus, Stock Appreciation Right, Restricted Stock Unit or Performance Awards.

 

2.3 Award Agreement” means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, and country-specific appendix thereto for grants to non-U.S. Participants, which will be in substantially a form (which need not be the same for each Participant) that the Committee (or in the case of Award agreements that are not used for Insiders, the Committee’s delegate(s)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.

 

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

 

     

 

 

2.5 Cause” means termination of Service because of (a) any willful, material violation by the Participant of any law or regulation applicable to the business of the Company or a Parent, Subsidiary or Affiliate of the Company, the Participant’s conviction for or guilty plea to a felony or a crime involving moral turpitude or any willful perpetration by the Participant of a common law fraud; (b) the Participant’s commission of an act of personal dishonesty which involves personal profit in connection with the Company or any other entity having a business relationship with the Company; (c) any material breach by the Participant of any provision of any agreement or understanding between the Company or any Parent, Subsidiary or Affiliate of the Company and the Participant regarding the terms of the Participant’s Service, including the willful and continued failure or refusal of the Participant to perform the material duties required of such Participant as an Employee, Officer, Director, Non-Employee Director or Consultant of the Company or a Parent, Subsidiary or Affiliate of the Company, other than as a result of having a Disability or a breach of any applicable invention assignment and confidentiality agreement or similar agreement between the Company or a Parent, Subsidiary or Affiliate of the Company and the Participant; (d) Participant’s disregard of the policies of the Company or any Parent, Subsidiary or Affiliate of the Company so as to cause loss, damage or injury to the property, reputation or employees of the Company or a Parent, Subsidiary or Affiliate of the Company or (e) any other misconduct by the Participant which is materially injurious to the financial condition or business reputation of or is otherwise materially injurious to the Company or a Parent, Subsidiary or Affiliate of the Company. The determination as to whether a Participant is being terminated for Cause will be made in good faith by the Company and will be final and binding on the Participant. The foregoing definition does not in any way limit the Company’s ability to terminate a Participant’s employment or consulting relationship at any time as provided in Section 13.11, and the term “Company” will be interpreted to include any Affiliate, Subsidiary or Parent, as appropriate. Notwithstanding the foregoing, the foregoing definition of “Cause” may, in part or in whole, be modified or replaced in each individual employment agreement or Award Agreement with any Participant, provided that such document supersedes the definition provided in this Section 2.5.

 

2.6 Common Stock” means the Common Stock, par value $0.001 per share, of the Company.

 

2.7 Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

 

2.8 Committee” means the Board, the Compensation Committee of the Board or those persons to whom administration of the Plan or part of the Plan has been delegated as permitted by law.

 

2.9 Company” means Qualigen Therapeutics, Inc. or any successor corporation.

 

2.10 Consultant” means any natural person, including an advisor or independent contractor, engaged by the Company or a Parent, Subsidiary or Affiliate to render services to such entity.

 

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2.11 Corporate Transaction” means the occurrence of any of the following events: (a) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company’s then-outstanding voting securities; provided, however, that for purposes of this clause (a) (i) the acquisition of additional securities by any one Person who is considered to own more than 50% of the total voting power of the securities of the Company will not be considered a Corporate Transaction, and (ii) a Corporate Transaction shall not be deemed to occur on account of the acquisition of securities of the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (c) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; (d) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Company) or (e) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; provided, however, that for purposes of this clause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction. For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or similar business transaction with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Corporate Transaction, such amount will become payable only if the event constituting a Corporate Transaction would also qualify as 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, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time .

 

2.12 Director” means a member of the Board.

 

2.13 Disability” means in the case of incentive stock options, total and permanent disability as defined in Section 22(e)(3) of the Code and in the case of other Awards, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

 

2.14 Effective Date” means the date of adoption of this Plan by the Board.

 

2.15 Employee” means any person, including Officers and Directors, providing services as an employee to the Company or any Parent, Subsidiary or Affiliate. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.

 

2.16 Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

 

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2.17 Exchange Program” means a program pursuant to which (a) outstanding Awards are surrendered, cancelled or exchanged for cash, the same type of Award or a different Award (or combination thereof) or (b) the exercise price of an outstanding Award is increased or reduced.

 

2.18 Exercise Price” means, with respect to an Option, the price at which a holder may purchase the Shares issuable upon exercise of an Option and with respect to a SAR, the price at which the SAR is granted to the holder thereof.

 

2.19 Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows: (a) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Committee deems reliable; (b) if such Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable or (c) if none of the foregoing is applicable, by the Board or the Committee in good faith using any reasonable method of evaluation in a manner consistent with the valuation principles under Section 409A of the Code.

 

2.20 Insider” means an officer or director of the Company or any other person whose transactions in the Company’s Common Stock are subject to Section 16 of the Exchange Act.

 

2.21 IRS” means the United States Internal Revenue Service.

 

2.22 Non-Employee Director” means a Director who is not an Employee of the Company or any Parent or Subsidiary.

 

2.23 Option” means an award of an option to purchase Shares pursuant to Article 4 or Article 10.

 

2.24 Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

2.25 Participant” means a person who holds an Award under this Plan.

 

2.26 Performance Award” means cash or stock granted pursuant to Article 9 or Article 10.

 

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2.27 Performance Factors” means any performance factors selected by the Committee and specified in an Award Agreement, including, without limitation, the following factors, either individually, alternatively or in any combination, applied to the Company as a whole or any business unit or Subsidiary, either individually, alternatively or in any combination, on a GAAP or non-GAAP basis, and measured, to the extent applicable on an absolute basis or relative to a pre-established target, to determine whether the performance goals established by the Committee with respect to applicable Awards have been satisfied: (a) profit before tax; (b) billings; (c) revenue; (d) net revenue; (e) earnings (which may include earnings before interest and taxes, earnings before taxes and net earnings); (f) operating income; (g) operating margin; (h) operating profit; (i) controllable operating profit; (j) net operating profit; (k) net profit; (l) gross margin; (m) operating expenses or operating expenses as a percentage of revenue; (n) net income; (o) earnings per share; (p) total stockholder return; (q) market share; (r) return on assets or net assets; (s) the Company’s stock price; (t) growth in stockholder value relative to a pre-determined index; (u) return on equity; (v) return on invested capital; (w) cash flow (including free cash flow or operating cash flows); (x) cash conversion cycle; (y) economic value added; (z) individual confidential business objectives; (aa) contract awards or backlog; (bb) overhead or other expense reduction; (cc) credit rating; (dd) strategic plan development and implementation; (ee) succession plan development and implementation; (ff) improvement in workforce diversity; (gg) customer indicators; (hh) new product invention or innovation; (ii) attainment of research and development milestones; (jj) improvements in productivity; (kk) bookings; (ll) attainment of objective operating goals and employee metrics and (mm) any other metric that is capable of measurement as determined by the Committee. The Committee may, in recognition of unusual or non-recurring items such as acquisition-related activities or changes in applicable accounting rules, provide for one or more equitable adjustments (based on objective standards) to the Performance Factors to preserve the Committee’s original intent regarding the Performance Factors at the time of the initial award grant. It is within the sole discretion of the Committee to make or not make any such equitable adjustments.

 

2.28 Performance Period” means the period of service determined by the Committee during which years of service or performance is to be measured for the Award.

 

2.29 Performance Share” means an Award granted pursuant to Article 9 or Article 10, the payment which is contingent upon achieving certain performance goals established by the Committee.

 

2.30 Performance Unit” means an Award granted pursuant to Article 9 or Article 10, the payment which is contingent upon achieving certain performance goals established by the Committee.

 

2.31 Permitted Transferee” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law (including adoptive relationships) of the Employee, any person sharing the Employee’s household (other than a tenant or employee), a trust in which these persons (or the Employee) have more than 50% of the beneficial interest, a foundation in which these persons (or the Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than 50% of the voting interests.

 

2.32 Plan” means this Qualigen Therapeutics, Inc. 2020 Stock Incentive Plan.

 

2.33 Purchase Price” means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option or SAR.

 

2.34 Restricted Stock Award” means an award of Shares pursuant to Article 5 or Article 10 or issued pursuant to the early exercise of an Option.

 

2.35 Restricted Stock Unit” means an Award granted pursuant to Article 8 or Article 10.

 

2.36 SEC” means the United States Securities and Exchange Commission.

 

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2.37 Securities Act” means the United States Securities Act of 1933, as amended.

 

2.38 Service” means service as an Employee, Consultant, Director or Non-Employee Director, to the Company or a Parent, Subsidiary or Affiliate, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. An Employee will not be deemed to have ceased to provide Service in the case of (a) sick leave; (b) military leave or (c) any other leave of absence approved by the Company; provided, that such leave is for a period of not more than 90 days (x) unless reemployment upon the expiration of such leave is guaranteed by contract or statute or (y) unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees in writing. In the case of any Employee on an approved leave of absence or a reduction in hours worked (for illustrative purposes only, a change in schedule from that of full-time to part-time), the Committee may make such provisions respecting suspension of or modification of vesting of the Award while on leave from the employ of the Company or a Parent, Subsidiary or Affiliate or during such change in working hours as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement. In the event of military leave, if required by applicable laws, vesting will continue for the longest period that vesting continues under any other statutory or Company approved leave of absence and, upon a Participant’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment Rights Act), he or she will be given vesting credit with respect to Awards to the same extent as would have applied had the Participant continued to provide services to the Company throughout the leave on the same terms as he or she was providing Services immediately before such leave. An employee will have terminated employment as of the date he or she ceases provide services (regardless of whether the termination is in breach of local employment laws or is later found to be invalid) and employment will not be extended by any notice period or garden leave mandated by local law, provided however, that a change in status from an employee to a consultant or advisor will not terminate the service provider’s Service, unless determined by the Committee, in its discretion. The Committee will have sole discretion to determine whether a Participant has ceased to provide Services and the effective date on which the Participant ceased to provide Services.

 

2.39 Shares” means shares of the Company’s Common Stock and the common stock of any successor entity.

 

2.40 Stock Appreciation Right” means an Award granted pursuant to Article 7 or Article 10.

 

2.41 Stock Bonus” means an Award granted pursuant to Article 6 or Article 10.

 

2.42 Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

2.43 Treasury Regulations” means regulations promulgated by the United States Treasury Department.

 

2.44 Unvested Shares” means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any successor thereto).

 

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ARTICLE 3

PLAN SHARES

 

3.1 Number of Shares Available. Subject to Section 3.5 and Article 12 and any other applicable provisions hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan as of the date of adoption of the Plan by the Board, is 101,428,918 Shares (equating to, after the May 22, 2020 reverse stock split, 4,057,157 Shares).

 

3.2 Lapsed, Returned Awards. Shares subject to Awards, and Shares issued under the Plan under any Award, will again be available for grant and issuance in connection with subsequent Awards under this Plan to the extent such Shares: (a) are subject to issuance upon exercise of an Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any reason other than exercise of the Option or SAR; (b) are subject to Awards granted under this Plan that are forfeited or are repurchased by the Company at the original issue price; (c) are subject to Awards granted under this Plan that otherwise terminate without such Shares being issued; or (d) are surrendered pursuant to an Exchange Program. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Shares used to pay the exercise price of an Award or withheld to satisfy the tax withholding obligations related to an Award will become available for future grant or sale under the Plan. For the avoidance of doubt, Shares that otherwise become available for grant and issuance because of the provisions of this Section 3.2 will not include Shares subject to Awards that initially became available because of the substitution clause in Section 12.2 hereof.

 

3.3 Minimum Share Reserve. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all outstanding Awards granted under this Plan.

 

3.4 Limitations; Eligibility. No more than 98,000,000 Shares will be issued pursuant to the exercise of ISOs. ISOs may be granted only to Employees. All other Awards may be granted to Employees, Consultants, Directors and Non-Employee Directors; provided such Consultants, Directors and Non-Employee Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction.

 

3.5 Adjustment of Shares. If the number of outstanding Shares is changed by a stock dividend, extraordinary dividends or distributions (whether in cash, shares or other property, other than a regular cash dividend) recapitalization, stock split, reverse stock split, subdivision, combination, reclassification, spin-off or similar change in the capital structure of the Company without consideration, then (a) the number of Shares reserved for issuance and future grant under the Plan set forth in Section 3.1, (b) the Exercise Prices of and number of Shares subject to outstanding Options and SARs; (c) the number of Shares subject to other outstanding Awards; (d) the maximum number of shares that may be issued as ISOs set forth in Section 3.4; and (e) the number of Shares that may be granted as Awards to Non-Employee Directors as set forth in Article 10, will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws, provided that fractions of a Share will not be issued.

 

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ARTICLE 4

OPTIONS

 

4.1 Options. An Option is the right but not the obligation to purchase a Share, subject to certain conditions, if applicable. The Committee may grant Options to eligible Employees, Consultants and Directors and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may vest and be exercised, and all other terms and conditions of the Option.

 

4.2 Option Grant. Each Option granted under this Plan will identify the Option as an ISO or an NSO. An Option may be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will: (a) determine the nature, length and starting date of any Performance Period for each Option and (b) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to Options that are subject to different performance goals and other criteria.

 

4.3 Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option or a specified future date. The Award Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option.

 

4.4 Exercise Period. Options may be vested and exercisable within the times or upon the conditions as set forth in the Award Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of 10 years from the date the Option is granted; and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than 10% of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company (“Ten Percent Stockholder”) will be exercisable after the expiration of five years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.

 

4.5 Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted, provided that (a) the Exercise Price of an Option will be not less than 100% of the Fair Market Value of the Shares on the date of grant and (b) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than 110% of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 13.1 and the Award Agreement and in accordance with any procedures established by the Company.

 

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4.6 Method of Exercise. Any Option granted hereunder will be vested and exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An Option will be deemed exercised when the Company receives: (a) notice of exercise (in such form as the Committee may specify from time to time) from the person entitled to exercise the Option (and/or via electronic execution through the authorized third party administrator) and (b) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is before the date the Shares are issued, except as provided in Section 3.5. Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

 

4.7 Termination of Service. If the Participant’s Service terminates for any reason except for Cause or the Participant’s death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and no later than three (3) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise beyond three (3) months after the date Participant’s Service terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options. If the Participant’s Service terminates because of the Participant’s death (or the Participant dies within three (3) months after Participant’s Service terminates other than for Cause or because of the Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant’s legal representative or authorized assignee no later than twelve (12) months after the date Participant’s Service terminates (or such shorter time period or longer time period as may be determined by the Committee), but in any event no later than the expiration date of the Options. If the Participant’s Service terminates because of the Participant’s Disability, then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant (or the Participant’s legal representative or authorized assignee) no later than twelve (12) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise beyond (a) three (3) months after the date Participant’s Service terminates when the termination of Service is for a Disability that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code or (b) twelve (12) months after the date Participant’s Service terminates when the termination of Service is for a Disability that is a “permanent and total disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NSO), but in any event no later than the expiration date of the Options. If the Participant is terminated for Cause, then Participant’s Options will expire on such Participant’s date of termination of Service or at such later time and on such conditions as are determined by the Committee, but in any no event later than the expiration date of the Options. Unless otherwise provided in the Award Agreement, Cause will have the meaning set forth in the Plan.

 

4.8 Limitations on Exercise. The Committee may specify a minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent any Participant from exercising the Option for the full number of Shares for which it is then exercisable.

 

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4.9 Limitations on ISOs. With respect to Awards granted as ISOs, to the extent that the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as NSOs. For purposes of this Section 4.9, ISOs will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.

 

4.10 Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 13.8, by written notice to affected Participants, the Committee may reduce the Exercise Price of outstanding Options without the consent of such Participants; provided, however, that the Exercise Price may not be reduced below the Fair Market Value on the date the action is taken to reduce the Exercise Price.

 

4.11 No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.

 

ARTICLE 5

 


RESTRICTED STOCK AWARDS

 

5.1 Restricted Stock Awards. A Restricted Stock Award is an offer by the Company to sell to an eligible Employee, Consultant or Director Shares that are subject to restrictions (“Restricted Stock”). The Committee will determine to whom an offer will be made, the number of Shares the Participant may purchase, the Purchase Price, the restrictions under which the Shares will be subject and all other terms and conditions of the Restricted Stock Award, subject to the Plan.

 

5.2 Restricted Stock Purchase Agreement. All purchases under a Restricted Stock Award will be evidenced by an Award Agreement. Except as may otherwise be provided in an Award Agreement, a Participant accepts a Restricted Stock Award by signing and delivering to the Company an Award Agreement with full payment of the Purchase Price, within 30 days from the date the Award Agreement was delivered to the Participant. If the Participant does not accept such Award within 30 days, then the offer of such Restricted Stock Award will terminate, unless the Committee determines otherwise.

 

5.3 Purchase Price. The Purchase Price for a Restricted Stock Award will be determined by the Committee and may be less than Fair Market Value on the date the Restricted Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section 13.1, the Award Agreement and any procedures established by the Company.

 

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5.4 Terms of Restricted Stock Awards. Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are required by law. These restrictions may be based on completion of a specified number of years of service with the Company or upon completion of Performance Factors, if any, during any Performance Period as set out in advance in the Participant’s Award Agreement. Before the grant of a Restricted Stock Award, the Committee will: (a) determine the nature, length and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.

 

5.5 Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).

 

ARTICLE 6

STOCK BONUS AWARDS

 

6.1 Stock Bonus Awards. A Stock Bonus Award is an award to an eligible Employee, Consultant or Director of Shares for Services to be rendered or for past Services already rendered to the Company or any Parent or Subsidiary. All Stock Bonus Awards will be made pursuant to an Award Agreement. No payment from the Participant will be required for Shares awarded pursuant to a Stock Bonus Award.

 

6.2 Terms of Stock Bonus Awards. The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These restrictions may be based upon completion of a specified number of years of service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participant’s Stock Bonus Agreement. Before the grant of any Stock Bonus Award the Committee will: (a) determine the nature, length and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors to be used to measure performance goals and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria.

 

6.3 Form of Payment to Participant. Payment may be made in the form of cash, whole Shares or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, as determined in the sole discretion of the Committee.

 

6.4 Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).

 

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ARTICLE 7

STOCK APPRECIATION RIGHTS

 

7.1 Stock Appreciation Rights. A Stock Appreciation Right (“SAR”) is an award to an eligible Employee, Consultant or Director that may be settled in cash or Shares (which may consist of Restricted Stock) having a value equal to (a) the difference between the Fair Market Value on the date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled (subject to any maximum number of Shares that may be issuable as specified in an Award Agreement). All SARs will be made pursuant to an Award Agreement.

 

7.2 Terms of SARs. The Committee will determine the terms of each SAR, including: (a) the number of Shares subject to the SAR; (b) the Exercise Price and the time or times during which the SAR may be settled; (c) the consideration to be distributed on settlement of the SAR and (d) the effect of the Participant’s termination of Service on each SAR. The Exercise Price of the SAR will be determined by the Committee when the SAR is granted, and may not be less than Fair Market Value on the date of grant. A SAR may be awarded upon satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for each SAR and (y) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to SARs that are subject to different Performance Factors and other criteria.

 

7.3 Exercise Period and Expiration Date. A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Award Agreement governing such SAR. The SAR Agreement will set forth the expiration date; provided that no SAR will be exercisable after the expiration of 10 years from the date the SAR is granted. The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee). Notwithstanding the foregoing, the rules of Section 4.7 also will apply to SARs.

 

7.4 Form of Settlement. Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price; times (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the Company for the SAR exercise may be in cash, in Shares of equivalent value or in some combination thereof. The portion of a SAR being settled may be paid currently or on a deferred basis with such interest or dividend equivalent, if any, as the Committee determines, provided that the terms of the SAR and any deferral satisfy the requirements of Section 409A of the Code.

 

7.5 Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).

 

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ARTICLE 8

RESTRICTED STOCK UNITS

 

8.1 Restricted Stock Units. A Restricted Stock Unit (“RSU”) is an award to an eligible Employee, Consultant or Director covering a number of Shares that may be settled in cash and/or by issuance of Shares (which may consist of Restricted Stock). All RSUs will be made pursuant to an Award Agreement.

 

8.2 Terms of RSUs. The Committee will determine the terms of an RSU including: (a) the number of Shares subject to the RSU; (b) the time or times during which the RSU may be settled; (c) the amount (including any minimum amount), nature (which may include cash, Shares or a combination of both) and valuation of the consideration to be paid or distributed on settlement; (d) the effect of the Participant’s termination of Service on each RSU; and (e) such other terms as the Committee may determine. An RSU may be awarded upon satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participant’s Award Agreement. If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for the RSU; (y) select from among the Performance Factors to be used to measure the performance, if any and (z) determine the number of Shares deemed subject to the RSU. Performance Periods may overlap and participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria.

 

8.3 Timing of Settlement. Payment of earned RSUs will be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement. The Committee may permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code.

 

8.4 Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).

 

ARTICLE 9

PERFORMANCE AWARDS

 

9.1 Performance Awards. A Performance Award is an award to an eligible Employee, Consultant or Director of a cash bonus or an award of Performance Shares or Performance Units denominated in Shares that may be settled in cash or by issuance of those Shares (which may consist of Restricted Stock). Grants of Performance Awards will be made pursuant to an Award Agreement.

 

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9.2 Types of Performance Awards. Performance Awards will include Performance Shares, Performance Units, and cash-based Awards as set forth in Sections 9.2(a), 9.2(b), and 9.2(c) below.

 

(a) Performance Shares. The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded and determine the number of Performance Shares and the terms and conditions of each such Award. Performance Shares will consist of a unit valued by reference to a designated number of Shares, the value of which may be paid to the Participant by delivery of Shares or, if set forth in the instrument evidencing the Award, of such property as the Committee will determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. The amount to be paid under an Award of Performance Shares may be adjusted on the basis of such further consideration as the Committee will determine in its sole discretion.

 

(b) Performance Units. The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units will consist of a unit valued by reference to a designated amount of property other than Shares, which value may be paid to the Participant by delivery of such property as the Committee will determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee.

 

(c) Cash Performance Awards. The Committee may also grant cash-based Performance Awards to Participants under the terms of this Plan. Such awards will be based on the attainment of performance goals using the Performance Factors within this Plan that are established by the Committee for the relevant performance period.

 

9.3 Terms of Performance Awards. The Committee will determine, and each Award Agreement will set forth, the terms of each Performance Award including, without limitation: (a) the amount of any cash bonus; (b) the number of Shares deemed subject to Performance Awards; (c) the Performance Factors and Performance Period that will determine the time and extent to which each Performance Award will be settled; (d) the consideration to be distributed on settlement and (e) the effect of the Participant’s termination of Service on each Performance Award. In establishing Performance Factors and the Performance Period the Committee will: (x) determine the nature, length and starting date of any Performance Period; (y) select from among the Performance Factors to be used and (z) determine the number of Shares deemed subject to the award of Performance Shares. Before settlement the Committee will determine the extent to which Performance Awards have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods and different performance goals and other criteria.

 

9.4 Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee).

 

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ARTICLE 10

GRANTS TO NON-EMPLOYEE DIRECTORS

 

10.1 Grants To Non-Employee Directors. Non-Employee Directors are eligible to receive any type of Award offered under this Plan except ISOs. Awards pursuant to this Article 10 may be automatically made pursuant to policy adopted by the Board or made from time to time as determined in the discretion of the Board. The aggregate number of Shares subject to Awards granted to a Non-Employee Director pursuant to this Article 10 in any calendar year taken together with any cash fees paid by the Company to such Non-Employee Director during such calendar year, will not exceed $5,000,000 (calculating the value of any Award based on the grant date fair value of such Award for financial reporting purposes), provided, however, that this maximum number can later be increased by the Board effective for the calendar year next commencing thereafter without further stockholder approval.

 

10.2 Eligibility. Awards pursuant to this Article 10 will be granted only to Non-Employee Directors. A Non-Employee Director who is elected or re-elected as a member of the Board will be eligible to receive an Award under this Article 10.

 

10.3 Vesting, Exercisability and Settlement. Except as set forth in Article 12, Awards will vest, become exercisable and be settled as determined by the Board. With respect to Options and SARs, the exercise price granted to Non-Employee Directors will not be less than the Fair Market Value of the Shares at the time that such Option or SAR is granted.

 

10.4 Election to receive Awards in Lieu of Cash. If permitted by the Committee, a Non-Employee Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash or Awards or a combination thereof, as determined by the Committee. Such Awards will be issued under the Plan. An election under this Section 10.4 will be filed with the Company on the form prescribed by the Company.

 

ARTICLE 11

ADMINISTRATION OF THE PLAN

 

11.1 Committee Composition; Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan, except, however, the Board will establish the terms for the grant of an Award to Non-Employee Directors. The Committee will have the authority to: (a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan; (b) prescribe, amend and rescind rules and regulations relating to this Plan or any Award; (c) select persons to receive Awards; (d) determine the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder, including the exercise price, the time or times when Awards may vest and be exercised (which may be based on performance criteria) or settled, any vesting acceleration or waiver of forfeiture restrictions, the method to satisfy tax withholding obligations or any other tax liability legally due and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine; (e) determine the number of Shares or other consideration subject to Awards; (f) determine the Fair Market Value in good faith and interpret the applicable provisions of this Plan and the definition of Fair Market Value in connection with circumstances that impact the Fair Market Value, if necessary; (g) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of or as alternatives to other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company; (h) grant waivers of Plan or Award conditions; (i) determine the vesting, exercisability and payment of Awards; (j) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement; (k) determine whether an Award has been earned; (l) institute any Exchange Program and determine the terms and conditions thereof; (m) reduce or waive any criteria with respect to Performance Factors; (n) adjust Performance Factors to take into account changes in law and accounting or tax rules as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships; (o) adopt terms and conditions, rules and procedures (including the adoption of any sub-plan under this Plan) relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United States; (p) to adopt or decline to adopt, amend or terminate any written plan described in Section 83(i)(2)(C)(i)(II) of the Code under which in a calendar year not less than 80 percent of all employees who provide services to the Company in the United States (or any possession of the United States) are granted stock options with the same rights and privileges to receive qualified stock within the meaning of Section 83(i)(2)(A) or to take or decline to take such other steps or actions as may be necessary to cause the Company to be an eligible corporation within the meaning of Section 83(i)(2)(C) with respect to any calendar year; (q) exercise negative discretion on Performance Awards, reducing or eliminating the amount to be paid to Participants; (r) make all other determinations necessary or advisable for the administration of this Plan and (s) delegate any of the foregoing to one or more officers, each of whom is also a Director, pursuant to a specific delegation as permitted by applicable law, including Section 157(c) of the Delaware General Corporation Law, provided, however, that any such delegation may only be with respect to Participants who are not Insiders.

 

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11.2 Committee Interpretation and Discretion. Any determination made by the Committee with respect to any Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination will be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement will be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee will be final and binding on the Company and the Participant. The Committee may delegate to one or more officers, each of whom is also a Director, the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution will be final and binding on the Company and the Participant.

 

11.3 Section 16 of the Exchange Act. Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more “non-employee directors” (as defined in the regulations promulgated under Section 16 of the Exchange Act). The Committee may adjust the performance goals to account for changes in law and accounting and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships, including (a) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges; (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management or (c) a change in accounting standards required by generally accepted accounting principles.

 

11.4 Documentation. The Award Agreement for a given Award, the Plan and any other documents may be delivered to, and accepted by, a Participant or any other person in any manner (including electronic distribution or posting) that meets applicable legal requirements.

 

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11.5 Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws and practices in other countries in which the Company and its Subsidiaries operate or have employees or other individuals eligible for Awards, the Committee, in its sole discretion, will have the power and authority to: (a) determine which Subsidiaries and Affiliates will be covered by the Plan; (b) determine which individuals outside the United States are eligible to participate in the Plan, which may include individuals who provide services to the Company, Subsidiary or Affiliate under an agreement with a foreign nation or agency; (c) modify the terms and conditions of any Award granted to individuals outside the United States or foreign nationals to comply with applicable foreign laws, policies, customs and practices; (d) establish sub-plans and modify exercise procedures and other terms and procedures, to the extent the Committee determines such actions to be necessary or advisable (and such sub-plans and/or modifications will be attached to this Plan as appendices); provided, however, that no such sub-plans and/or modifications will increase the share limitations contained in Section 3.1 or Section 3.4 hereof and (e) take any action, before or after an Award is made, that the Committee determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards will be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code or any other applicable United States governing statute or law.

 

ARTICLE 12

CORPORATE TRANSACTIONS

 

12.1 Assumption or Replacement of Awards by Successor. In the event of a Corporate Transaction, any or all outstanding Awards may be assumed or replaced by the successor corporation, which assumption or replacement will be binding on all Participants. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant. In the event such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, then notwithstanding any other provision in this Plan to the contrary, unless provided otherwise in an Award Agreement, such Awards will have their vesting accelerate as to all shares subject to such Award (and any applicable right of repurchase fully lapse) immediately before the Corporate Transaction. In addition, in the event such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, the Committee will notify the Participant in writing or electronically that such Award will be exercisable for a period of time determined by the Committee in its sole discretion, and such Award will terminate upon the expiration of such period. The Committee shall have the discretion to provide in each Award Agreement the terms and conditions applicable to such Award upon the occurrence of a Corporation Transaction. Awards need not be treated similarly in a Corporate Transaction and the terms and conditions in an Award Agreement shall have precedence over the provisions set forth in this Section 12.1.

 

12.2 Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in substitution of such other company’s award or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the Purchase Price or the Exercise Price, as the case may be, and the number and nature of Shares issuable upon exercise or settlement of any such Award will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option in substitution rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. Substitute Awards will not reduce the number of Shares authorized for grant under the Plan or authorized for grant to a Participant in a calendar year.

 

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ARTICLE 13

MISCELLANEOUS

 

13.1 Payment For Share Purchases. Payment from a Participant for Shares purchased pursuant to this Plan may be made in cash or by check or, where expressly approved for the Participant by the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement): (a) by cancellation of indebtedness of the Company to the Participant; (b) by surrender of shares of the Company held by the Participant that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Award will be exercised or settled; (c) by waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent or Subsidiary of the Company; (d) by consideration received by the Company pursuant to a broker-assisted or other form of cashless exercise program implemented by the Company in connection with the Plan; (e) by any combination of the foregoing or (f) by any other method of payment as is permitted by applicable law.

 

13.2 Withholding Taxes. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan or the applicable tax event occurs, the Company may require the Participant to remit to the Company or to the Parent or Subsidiary employing the Participant an amount sufficient to satisfy applicable U.S. federal, state, local and international withholding tax requirements or any other tax or social insurance liability legally due from the Participant before the delivery of Shares pursuant to exercise or settlement of any Award. Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash, such payment will be net of an amount sufficient to satisfy applicable U.S. federal, state, local and international withholding tax or social insurance requirements or any other tax liability legally due from the Participant. Unless otherwise determined by the Committee, the Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld. The Committee, or its delegate(s), as permitted by applicable law, in its sole discretion and pursuant to such procedures as it may specify from time to time and to limitations of local law, may require or permit a Participant to satisfy such tax withholding obligation or any other tax liability legally due from the Participant, in whole or in part by paying cash, electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value, delivering to the Company already-owned Shares having a Fair Market Value, or withholding from the proceeds of the sale of otherwise deliverable Shares acquired pursuant to an Award either through a voluntary sale or through a mandatory sale arranged by the Company. The Company may withhold or account for such tax withholding obligations by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory tax rate for the applicable tax jurisdiction, to the extent consistent with applicable laws.

 

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13.3 Transferability. Unless determined otherwise by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution. If the Committee makes an Award transferable, including by instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or by domestic relations order to a Permitted Transferee, such Award will contain such additional terms and conditions as the Committee deems appropriate. All Awards will be exercisable: (a) during the Participant’s lifetime only by (i) the Participant or (ii) the Participant’s guardian or legal representative; (b) after the Participant’s death, by the legal representative of the Participant’s heirs or legatees and (c) in the case of all awards except ISOs, by a Permitted Transferee.

 

13.4 Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock.

 

13.5 Restrictions on Shares. At the discretion of the Committee, any Award Agreement may provide that, in the event of Participant’s termination of Service, the Company, or its assignee, shall have the right, exercisable at the discretion of the Committee, to repurchase Shares acquired pursuant to an Award Agreement at any time on such terms as may be provided in the Award Agreement. The terms upon which such repurchase right shall be exercisable (including but not limited to the period and procedure for exercise and the timing and method of payment for the purchased Shares) shall be established by the Committee and set forth in the Award Agreement. At the discretion of the Committee, any Award Agreement may provide that, in the event of a proposed transfer of Shares acquired pursuant to an Award Agreement by the Participant, the transfer of any such Shares may be subject to rights of first refusal by the Company, as may be provided in the Award Agreement.

 

13.6 Certificates. All Shares or other securities whether or not certificated, delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable U.S. federal, state or foreign securities law or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted and any non-U.S. exchange controls or securities law restrictions to which the Shares are subject.

 

13.7 Escrow; Pledge of Shares. To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of the Participant’s obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.

 

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13.8 Repricing; Exchange and Buyout of Awards. Without prior stockholder approval the Committee may (a) reprice Options or SARs (and where such repricing is a reduction in the Exercise Price of outstanding Options or SARs, the consent of the affected Participants is not required provided written notice is provided to them, notwithstanding any adverse tax consequences to them arising from the repricing) and (b) with the consent of the respective Participants (unless not required pursuant to Section 4.10), pay cash or issue new Awards in exchange for the surrender and cancellation of any, or all, outstanding Awards.

 

13.9 Deferrals. The Committee may determine that the delivery of Shares, payment of cash or a combination thereof upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made only in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Committee may provide for distributions while a Participant is providing Services to the Company or any Parent or Subsidiary.

 

13.10 Securities Law and Other Regulatory Compliance. An Award will not be effective unless such Award is in compliance with all applicable U.S. and foreign federal and state securities and exchange control laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan before: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable and (b) completion of any registration or other qualification of such Shares under any state or federal or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any foreign or state securities laws, exchange control laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.

 

13.11 No Obligation To Employ. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of or to continue any other relationship with the Company or any Parent, Subsidiary or Affiliate or limit in any way the right of the Company or any Parent, Subsidiary or Affiliate to terminate Participant’s employment or other relationship at any time.

 

13.12 Adoption and Stockholder Approval. This Plan will be subject to the approval of the Company’s stockholders, consistent with applicable laws, within twelve (12) months after the date this Plan is adopted by the Board.

 

13.13 Governing Law. This Plan and all Awards granted hereunder will be granted by and construed in accordance with the laws of the State of Delaware (excluding its conflict of law rules).

 

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13.14 Amendment or Termination of Plan. The Board may at any time terminate or amend this Plan in any respect, including amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval; provided further, that a Participant’s Award will be governed by the version of this Plan then in effect at the time such Award was granted. No termination or amendment of the Plan will affect any then-outstanding Award unless expressly provided by the Committee. In any event, no termination or amendment of the Plan or any outstanding Award may adversely affect any then outstanding Award without the consent of the Participant, unless such termination or amendment is necessary to comply with applicable law, regulation or rule.

 

13.15 Nonexclusivity of the Plan. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including the granting of stock awards and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

 

13.16 Insider Trading Policy. Each Participant who receives an Award will comply with any policy adopted by the Company from time to time covering transactions in the Company’s securities by Employees, officers and/or directors of the Company.

 

13.17 All Awards Subject to Company Clawback or Recoupment Policy. All Awards, subject to applicable law, will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant’s employment or other service with the Company that is applicable to executive officers, employees, directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards.

 

13.18 Electronic Delivery. Any reference herein to a “written” agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).

 

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Exhibit 10.21

 

Qualigen, Inc.
INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (this “Agreement”), dated as of ______, 20__, is entered into between Qualigen, Inc., a Delaware corporation (the “Company”), and [____________] (“Indemnitee”).

 

WHEREAS, Indemnitee’s service to the Company substantially benefits the Company;

 

WHEREAS, individuals are reluctant to serve as directors or officers of corporations or in certain other capacities unless they are provided with adequate protection through insurance or indemnification against the risks of claims and actions against them arising out of such service;

 

WHEREAS, Indemnitee does not regard the protection currently provided by applicable law, the Company’s governing documents and any insurance as adequate under the present circumstances, and Indemnitee may not be willing to serve as a director or officer without additional protection;

 

WHEREAS, in order to induce Indemnitee to continue to provide services to the Company, it is reasonable, prudent and necessary for the Company to contractually obligate itself to indemnify, and to advance expenses on behalf of, Indemnitee as permitted by applicable law; and

 

WHEREAS, this Agreement is a supplement to and in furtherance of the indemnification provided in the Company’s certificate of incorporation and bylaws, and any resolutions adopted pursuant thereto, and this Agreement shall not be deemed a substitute therefor, nor shall this Agreement be deemed to limit, diminish or abrogate any rights of Indemnitee thereunder;

 

NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows:

 

1. Definitions. 

 

(a) “Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person. For purposes of this definition, “control” (including with correlative meanings, the terms “controlling,” “controlled by” and under “common control with”) means the possession, directly or indirectly, of the power (i) to vote a majority of the equity interests having voting power for the election of directors, managers or Persons on similar governing bodies of such other Person or (ii) to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, as trustee or executor, as general partner or managing member, or otherwise.

 

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

 

(i) Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities;

 

(ii) Change in Board Composition. During any period of two consecutive years (not including any period before the execution of this Agreement), individuals who at the beginning of such period constitute the Company’s board of directors, and any new directors (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 1(b)(i), 1(b)(iii) or 1(b)(iv)) whose election by the board of directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Company’s board of directors;

 

 
 

 

(iii) Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately before such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity; and

 

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

 

For purposes of this Section 1(b), “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3 under the Securities Exchange Act of 1934, as amended; provided, however, that “Beneficial Owner” shall exclude any Person otherwise becoming a Beneficial Owner by reason of (i) the stockholders of the Company approving a merger of the Company with another entity or (ii) the Company’s board of directors approving a sale of securities by the Company to such Person.

 

(c) “Corporate Status” describes the status of a person who is or was a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other Enterprise.

 

(d) “DGCL” means the General Corporation Law of the State of Delaware.

 

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

 

(f) “Enterprise” means the Company and any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary.

 

(g) “Expenses” include all reasonable out-of-pocket attorneys’ fees, retainers, court costs, transcript costs, fees and costs of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond or other appeal bond or their equivalent, and (ii) for purposes of Section 12(d), Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee. For Expenses to be indemnifiable hereunder they must have been actually and reasonably incurred.

 

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(h) “Independent Counsel” means a law firm, or a partner or member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than as Independent Counsel with respect to matters concerning Indemnitee under this Agreement, or other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s entitlement to indemnification under this Agreement.

 

(i) “Person” shall have the meaning as set forth in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended; provided, however, that “Person” shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

 

(j) “Proceeding” means any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, a potential party, a non-party witness or otherwise by reason of (i) the fact that Indemnitee is or was a director or officer of the Company (whether or not before the date of this Agreement), (ii) any action taken by Indemnitee or any action or inaction on Indemnitee’s part while acting as a director or officer of the Company (whether or not before the date of this Agreement), or (iii) the fact that he or she is or was serving (whether or not before the date of this Agreement) at the request of the Company as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other Enterprise, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification or advancement of expenses can be provided under this Agreement.

 

(k) Representatives” of any Person shall mean the directors, officers, employees, managers, consultants, financial advisors, counsel, accountants, trustees and other representatives and agents of such Person.

 

(l) Reference to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

 

2. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 2 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 2, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful.

 

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3. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 3 in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged by a court of competent jurisdiction to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such expenses as the Delaware Court of Chancery or such other court shall deem proper.

 

4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. To the extent that Indemnitee has been successful (on the merits or otherwise) in defense of any Proceeding referred to in Section 2 or Section 3 hereof or in defense of any claim, issue or matter therein, the Company shall indemnify Indemnitee against Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

 

5. Indemnification for Expenses of a Witness. To the extent that Indemnitee is, by reason of his or her Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified to the extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. 

 

6. Additional Indemnification. 

 

(a) Notwithstanding any limitation in Sections 2, 3 or 4, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his or her behalf in connection with the Proceeding or any claim, issue or matter therein.

 

(b) For purposes of Section 6(a), the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:

 

(i) the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL; and

 

(ii) the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

 

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7. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any Proceeding (or any part of any Proceeding):

 

(a) for which payment has actually been made to or on behalf of Indemnitee under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;

 

(b) for an accounting or disgorgement of profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of federal, state or local statutory law or common law, if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);

 

(c) for any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Securities Exchange Act of 1934, as amended (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 304 of the Sarbanes-Oxley Act of 2002), if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);

 

(d) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees, agents or other indemnitees, unless (i) the Company’s board of directors authorized the Proceeding (or the relevant part of the Proceeding) before its initiation, (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (iii) otherwise authorized in Section 12(d) or (iv) otherwise required by applicable law; or

 

(e) if prohibited by applicable law.

 

8. Advances of Expenses. The Company shall advance the Expenses incurred by Indemnitee in connection with any Proceeding before its final disposition, and such advancement shall be made as soon as reasonably practicable, but in any event no later than 45 days, after the receipt by the Company of a written statement or statements (with reasonably supporting documentation) requesting such advances from time to time (which shall include invoices received by Indemnitee in connection with such Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditure made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice). Advances shall be unsecured and interest free and made without regard to Indemnitee’s ability to repay such advances. Indemnitee hereby undertakes to repay any advance to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. This Section 8. shall not apply to the extent advancement is prohibited by law and shall not apply to any Proceeding for which indemnity is not permitted under this Agreement, but shall apply to any Proceeding referenced in Section 7(c) or 7(d) before a determination that Indemnitee is not entitled to be indemnified by the Company

 

9. Procedures for Notification and Defense of Claim. 

 

(a) Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses promptly following the receipt by Indemnitee of notice thereof. The written notification to the Company shall include, in reasonable detail, a description of the nature of the Proceeding and the facts underlying the Proceeding. The failure by Indemnitee to notify the Company will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights except to the extent the Company is prejudiced in its defense of such Proceeding.

 

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(b) If, at the time of the receipt of a notice of a Proceeding pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of the Proceeding to the insurers in accordance with the procedures set forth in the applicable policies. The Company shall thereafter take all commercially reasonable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

 

(c) In the event the Company shall be obligated to pay the Expenses, judgments, fines or amounts paid in settlement incurred by Indemnitee with respect to any Proceeding, as provided in this Agreement, the Company, if appropriate, shall be entitled to assume the defense of such Proceeding, with counsel reasonably acceptable to Indemnitee, upon the delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee 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 Indemnitee’s own counsel in such Proceeding at Indemnitee’s expense and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized in writing by the Company, (B) counsel to the Company or Indemnitee shall have reasonably concluded that there may be a conflict of interest or position, or reasonably believes that a conflict is likely to arise, on any significant issue between the Company and 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, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company, except as otherwise expressly provided by this Agreement. The Company shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Company or its Affiliates or as to which counsel for the Company or Indemnitee shall have reasonably made the conclusion provided for in clause (B) above.

 

(d) Indemnitee shall give the Company such information and cooperation in connection with the Proceeding as the Company may reasonably require.

 

10. Procedures upon Application for Indemnification. 

 

(a) To obtain indemnification, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and as is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Proceeding. The Company shall, as soon as reasonably practicable after receipt of such a request for indemnification, advise the board of directors that Indemnitee has requested indemnification. Any delay in providing the request will not relieve the Company from its obligations under this Agreement, except to the extent such failure is prejudicial.

 

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(b) Upon written request by Indemnitee for indemnification pursuant to Section 10(a), a determination with respect to Indemnitee’s entitlement thereto shall be made in the specific case (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Company’s board of directors, a copy of which shall be delivered to Indemnitee or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Company’s board of directors, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Company’s board of directors, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Company’s board of directors, a copy of which shall be delivered to Indemnitee or (D) if so directed by the Company board of directors, by the stockholders of the Company. If it is determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within 15 days after such determination. Indemnitee shall cooperate with the person, persons or entity making the determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorney’s fees and disbursements) reasonably incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company, to the extent permitted by applicable law.

 

(c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(b), the Independent Counsel shall be selected as provided in this Section 10(c). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Company’s board of directors, and the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Company’s board of directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1(h) of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after the later of (i) submission by Indemnitee of a written request for indemnification pursuant to Section 10(a) hereof and (ii) the final disposition of the Proceeding, the parties have not agreed upon an Independent Counsel, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 10(b) hereof. Upon the due commencement of any judicial proceeding pursuant to Section 12(a) of this Agreement, the Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

 

(d) The Company agrees to pay the reasonable fees and expenses of any Independent Counsel and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

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11. Presumptions and Effect of Certain Proceedings. 

 

(a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption.

 

(b) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

 

(c) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) if and to the extent that Indemnitee has otherwise actually received such payment under this Agreement or any insurance policy, contract, agreement or otherwise.

 

(d) For purposes of any determination of good faith, Indemnitee (if a director and in Indemnitee’s capacity as such) shall be deemed to have acted in good faith to the extent Indemnitee relied in good faith on (i) the records or books of account of the Enterprise, including financial statements, (ii) information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, (iii) the advice of legal counsel for the Enterprise or its board of directors or counsel selected by any committee of the board of directors or (iv) information or records given or reports made to the Enterprise by an independent certified public accountant, an appraiser, investment banker or other expert selected with reasonable care by the Enterprise or its board of directors or any committee of the board of directors. The provisions of this Section 11(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

 

(e) Neither the knowledge, actions nor failure to act of any other director, officer, agent or employee of the Enterprise shall be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

 

12. Remedies of Indemnitee. 

 

(a) Subject to Section 12(e), in the event that (i) a determination is made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 8(b) or Section 12(d) of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10 of this Agreement within 30 days after the later of the receipt by the Company of the request for indemnification or the final disposition of the Proceeding, (iv) payment of indemnification pursuant to this Agreement is not made (A) within 15 days after a determination has been made that Indemnitee is entitled to indemnification or (B) with respect to indemnification pursuant to Sections 4, 5 and 12(d) of this Agreement, within 30 days after receipt by the Company of a written request therefor, or (v) the Company or any other person or entity takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of Expenses. The Company shall not oppose Indemnitee’s right to seek any such adjudication in accordance with this Agreement.

 

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(b) Neither (i) the failure of the Company, its board of directors, any committee or subgroup of the board of directors, Independent Counsel or stockholders to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor (ii) an actual determination by the Company, its board of directors, any committee or subgroup of the board of directors, Independent Counsel or stockholders that Indemnitee has not met the applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct. In the event that a determination shall have been made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 12 shall be conducted in all respects as a de novo trial, on the merits, and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding commenced pursuant to this Section 12, the Company shall, to the fullest extent not prohibited by law, have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

 

(c) To the fullest extent not prohibited by law, the Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement. If a determination shall have been made pursuant to Section 10 of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 12, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statements not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 

(d) To the extent not prohibited by law, the Company shall indemnify Indemnitee against all Expenses that are incurred by Indemnitee in connection with any action for indemnification or advancement of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company to the extent Indemnitee is successful in such action, and, if requested by Indemnitee, shall (as soon as reasonably practicable, but in any event no later than 30 days, after receipt by the Company of a written request therefor) advance such Expenses to Indemnitee, subject to the provisions of Section 8.

 

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification shall be required to be made before the final disposition of the Proceeding.

 

13. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amounts incurred by Indemnitee, whether for Expenses, judgments, fines or amounts paid or to be paid in settlement, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the events and transactions giving rise to such Proceeding; and (ii) the relative fault of Indemnitee and the Company (and its other directors, officers, employees and agents) in connection with such events and transactions. 

 

14. Non-exclusivity. The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s certificate of incorporation or bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s certificate of incorporation and bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change, subject to the restrictions expressly set forth herein or therein. Except as expressly set forth herein, no right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. Except as expressly set forth herein, the assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

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15. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually received payment for such amounts under any insurance policy, contract, agreement or otherwise.

 

16. Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, trustees, general partners, managing members, officers, employees, agents or fiduciaries of the Company or any other Enterprise, Indemnitee shall be covered by such policy or policies to the same extent as the most favorably-insured persons under such policy or policies in a comparable position.

 

17. Subrogation. In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. 

 

18. Services to the Company. Indemnitee agrees to serve as a director or officer of the Company or, at the request of the Company, as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of another Enterprise, for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his or her resignation or is removed from such position. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee. Indemnitee specifically acknowledges that any employment with the Company (or any of its subsidiaries or any Enterprise) is at will, and Indemnitee may be discharged at any time for any reason, with or without cause, with or without notice, except as may be otherwise expressly provided in any executed, written employment contract between Indemnitee and the Company (or any of its subsidiaries or any Enterprise), any existing formal severance policies adopted by the Company’s board of directors or, with respect to service as a director or officer of the Company, the Company’s certificate of incorporation or bylaws or the DGCL. No such document shall be subject to any oral modification thereof.

 

19. Duration. This Agreement shall continue until and terminate upon the later of (a) 10 years after the date that Indemnitee shall have ceased to serve as a director or officer of the Company or as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of any other Enterprise, as applicable; or (b) one year after the final termination of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 12 of this Agreement relating thereto.

 

  10  
 

 

20. Successors. This Agreement shall be binding upon the Company and its successors and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company, and shall inure to the benefit of Indemnitee and Indemnitee’s heirs, executors and administrators.

 

21. Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order or other applicable law, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

22. Enforcement. The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company. 

 

23. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Company’s certificate of incorporation and bylaws and applicable law.

 

24. Modification and Waiver. No supplement, modification or amendment to this Agreement shall be binding unless executed in writing by the parties hereto. No amendment, alteration or repeal of this Agreement shall adversely affect any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status before such amendment, alteration or repeal. No waiver of any of the provisions of this Agreement shall constitute or be deemed a waiver of any other provision of this Agreement nor shall any waiver constitute a continuing waiver.

 

25. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand, messenger or courier service addressed: 

(a) if to Indemnitee, to Indemnitee’s address as shown on the signature page of this Agreement or in the Company records, as may be updated in accordance with the provisions hereof; or

 

(b) if to the Company, to the attention of the Chief Executive Officer or Chief Financial Officer of the Company at Qualigen, Inc., 2042 Corte del Nogal, Carlsbad, CA 92011, or at such other current address as the Company shall have furnished to Indemnitee.

 

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Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, the next business day after the date of deposit with such courier (by the courier’s stated time for enabling next-business-day delivery), or if deposited after such stated time then the second business day after the date of such deposit), or (ii) if sent via mail in the United States, at the earlier of its receipt or five days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid.

 

26. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court of Chancery, and not in any other state or federal court in the United States of America or any court in any other country, (b) consent to submit to the exclusive jurisdiction of the Delaware Court of Chancery for purposes of any action or proceeding arising out of or in connection with this Agreement, (c) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court of Chancery, and (d) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court of Chancery has been brought in an improper or inconvenient forum. 

 

27. Counterparts. This Agreement may be executed in 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. This Agreement may also be executed and delivered by electronic means and in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. 

 

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

 

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

 

cOMPANY:   Indemnitee:
     
Qualigen, Inc.    
      [Indemnitee]
       
By:                    Address:
Name:      
Title:      

 

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Exhibit 10.22

 

lock-up agreement

 

Ritter Pharmaceuticals, Inc.

1880 Century Park East, Suite 1000

Los Angeles, CA 90067

 

This Lock-Up Agreement (this “Agreement”) is executed in connection with the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) by and among Ritter Pharmaceuticals, Inc. (“Parent”), RP Merger Sub, Inc. (“Merger Sub”), and Qualigen, Inc. (“Company”), dated as of January 15, 2020, as thereafter amended. Capitalized terms used herein but not defined will have the meanings ascribed to such terms in the Merger Agreement.

 

In connection with, and as an inducement to, the parties entering into the Merger Agreement and for other good and valuable consideration, the undersigned agrees that, without the prior written consent of Parent, during the period commencing at the Effective Time and continuing until 180 days after the Effective Time, the undersigned will not: (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of or lend, directly or indirectly, any shares of Common Stock of Parent (the “Parent Common Stock”) or any securities convertible into, exercisable or exchangeable for or that represent the right to receive Parent Common Stock (including without limitation, Parent Common Stock or such other securities which may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and securities of Parent which may be issued upon exercise of a stock option or warrant) whether now owned or hereafter acquired (collectively, the “Securities”); (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Parent Common Stock or such other securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to, the registration of any Parent Common Stock or any security convertible into or exercisable or exchangeable for Parent Common Stock; (4) grant any proxies or powers of attorney with respect to any Securities, deposit any Securities into a voting trust or enter into a voting agreement or similar arrangement or commitment with respect to any Securities; or (5) publicly disclose the intention to do any of the foregoing (each of the foregoing restrictions, the “Lock-Up Restrictions”).

 

Notwithstanding the above, the Lock-Up Restrictions will automatically terminate on the date that is 180 days after the Effective Time. The period during which the Lock-Up Restrictions apply to the Securities will be deemed the “Lock-Up Period”.

 

The undersigned agrees that during the Lock-Up Period, the undersigned will not engage in any hedging or other transaction with respect to any Securities which reasonably could be expected to result in a sale or disposition of such Securities even if such Securities would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include any short sale or any purchase, sale or grant of any right (including any put or call option) with respect to such Securities or to any security that includes, relates to, or derives any significant part of its value from such Securities.

 

 

 

 

Notwithstanding the foregoing, the undersigned may transfer any of the Securities (i) as a bona fide gift or charitable contribution, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, (iii) if the undersigned is a business entity (1) to a direct or indirect affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned or (2) as distributions or dividends of shares of Parent Common Stock or any security convertible into or exercisable for Parent Common Stock to limited partners, members or stockholders of, or other similar equity holders in, the undersigned, (iv) if the undersigned is a trust, to its beneficiary or trustee, (v) by testate succession or intestate succession, (vi) by operation of law pursuant to a qualified domestic order or in connection with a divorce settlement, (vii) to any immediate family member, any investment fund, family partnership, family limited liability company or other entity controlled or managed by the undersigned or the immediate family of the undersigned, (viii) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (i) through (vii), (ix) to Parent in a transaction exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) upon a vesting event of the Securities or upon the exercise of options or warrants to purchase Parent Common Stock on a “cashless” or “net exercise” basis or to cover tax withholding obligations of the undersigned in connection with such vesting or exercise (but excluding any exercise that would involve a sale in the open market of any securities relating to such options or warrants), (x) to Parent in connection with the termination of employment or other termination of a service provider and pursuant to any option of the Parent existing as of the Effective Time to repurchase such shares or securities, (xi) acquired by the undersigned in open market transactions after the Effective Time, (xii) pursuant to a change of control of Parent, provided that in the event that such change of control transaction is not completed, the Securities will remain subject to the Lock-Up Restrictions, or (xiii) pursuant to an order of a court or regulatory agency; provided, in the case of clauses (i)-(viii), that (A) such transfer will not involve a disposition for value and (B) the transferee promptly provides Parent with its written agreement to be bound by the terms and conditions of this Agreement upon consummation of such transaction; and provided, further, in the case of clauses (i)-(xi), no filing by any party under Section 16(a) of the Exchange Act will be required or made voluntarily in connection with such transfer. For purposes of this Agreement, “immediate family” will mean any relationship by blood, marriage or adoption, not more remote than first cousin.

 

In addition, the foregoing restrictions will not apply to (i) the exercise of stock options (other than any exercise that would involve a sale in the open market); provided that it will apply to any of the Securities issued upon such exercise, (ii) the conversion or exercise of warrants (other than any conversion or exercise that would involve a sale in the open market); provided that it will apply to any of the Securities issued upon such conversion or exercise, or (iii) the establishment of any contract, instruction or plan (a “Plan”) that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act; provided that no sales of the Securities will be made pursuant to such a Plan prior to the expiration of the Lock-Up Period, and such a Plan may only be established if no public announcement and no filing with the Securities and Exchange Commission or other regulatory authority will be required or made voluntarily prior to the expiration of the applicable Lock-Up Period. Any attempted transfer in violation of this Agreement will be of no effect and null and void and will not be recorded on the share register of Parent. In furtherance of the foregoing, Parent and its transfer agent and registrar are hereby authorized to decline to make any transfer of shares of Parent Common Stock if such transfer would constitute a violation or breach of this Agreement. Parent may cause the legend set forth below to be placed upon any certificate(s) or other documents, ledgers or instruments evidencing the undersigned’s ownership of Parent Common Stock:

 

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THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY ONLY BE TRANSFERRED IN COMPLIANCE WITH A LOCK-UP AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

In the event that any other holder of Parent’s securities that is subject to a substantially similar agreement is permitted by Parent to sell, transfer or dispose of shares of Parent Common Stock for value other than as permitted by this or a substantially similar agreement, the same percentage of shares of Parent Common Stock held by the undersigned will be immediately and fully released on the same terms from the Lock-Up Restrictions (the “Pro-Rata Release”); provided, however, that such Pro-Rata Release will not be applied unless and until permission has been granted by Parent to equity holder(s) to sell, transfer or dispose, in the aggregate, of more than 1% of the number of shares of Parent Common Stock originally subject to a substantially similar agreement.

 

Upon the release of any of the Securities from this Agreement, Parent will cooperate with the undersigned to facilitate the timely preparation and delivery of certificates representing the Securities without the restrictive legend above or the withdrawal of any stop transfer instructions.

 

The undersigned understands that the undersigned will be released from all obligations under this Agreement upon the earlier of (i) the expiration of the Lock-Up Period, and (ii) if the Merger Agreement is terminated prior to the Effective Time pursuant to its terms, upon the date of such termination.

 

The undersigned understands that Parent, Merger Sub and Company are entering into the Merger Agreement in reliance upon this Agreement.

 

This Agreement and any claim, controversy or dispute arising under or related to this Agreement will be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the conflict of laws principles thereof.

 

(Signature Page Follows)

 

  3  

 

 

This Agreement, and any certificates, documents, instruments and writings that are delivered pursuant hereto, constitutes the entire agreement and understanding of Parent, Company and the undersigned in respect of the subject matter hereof and supersedes all prior understandings, agreements or representations by or among Parent, Company and the undersigned, written or oral, to the extent they relate in any way to the subject matter hereof. This Agreement may be executed in several counterparts, each of which will be deemed an original and all of which will constitute one and the same instrument. The exchange of a fully executed Agreement (in counterparts or otherwise) by Parent and the undersigned by facsimile or electronic transmission in .pdf format will be sufficient to bind such parties to the terms and conditions of this Agreement.

 

  Very truly yours,
     
   
  Printed Name of Holder
     
     
  By:      
    Signature
     
   
    Printed Name of Person Signing
    (and indicate capacity of person signing if signing as custodian, trustee, or on behalf of an entity)

 

[Signature Page to Lock-Up Agreement]

 

  4  

 

 

Exhibit 14.1

 

QUALIGEN THERAPEUTICS, INC.

 

CODE OF BUSINESS CONDUCT AND ETHICS

 

It is the general policy of Qualigen Therapeutics, Inc. (“Qualigen” or the “Company”) to conduct its business activities and transactions with the highest level of integrity and ethical standards and in accordance with all applicable laws. While no code of business conduct and ethics can replace the thoughtful behavior of an ethical director, officer or employee, the Company’s Board of Directors has established this Code of Business Conduct and Ethics (the “Code”) to provide guidance to the Company’s directors, officers and employees to help them recognize and deal with ethical issues, provide mechanisms to report unethical or illegal conduct and contribute positively to the Company’s culture of honesty and accountability. Every director, officer and employee of the Company must acknowledge his or her review of, and agreement to comply with, this Code as a condition of his or her continued relationship with the Company. Where applicable, the Code also should be provided to and followed by the Company’s agents and representatives, including consultants.

 

The fundamental principle that underlies the way we do business at the Company is good judgment, and an understanding of the legal and ethical principles that enhance that judgment. This Code serves as an overview of the Company’s guiding principles. Because the Company’s business depends upon its reputation, and on the integrity and principled business conduct of its directors, officers and employees, in many instances this Code goes beyond the requirements of the law. The Code embodies such rules regarding individual and peer responsibilities as well as responsibilities to employees, customers, suppliers, shareholders, the public and other stakeholders. More specifically, the Code is designed to:

 

  promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest;
     
  promote full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the “SEC”) and in other public communications made by the Company;
     
  promote compliance with applicable governmental laws, rules and regulations;
     
  promote the protection of Company assets, including corporate opportunities and confidential information;
     
  promote fair dealing practices;
     
  deter wrongdoing; and
     
  ensure accountability for adherence to the Code.

 

While no Code or policy can anticipate every situation that may arise, the standards set forth in this Code are guidelines that should govern conduct of our business at all times. All directors, officers and employees are expected to exercise reasonable judgment when conducting the Company’s business and to seek to avoid even the appearance of improper behavior. If you are confronted with situations not covered by this Code or have questions regarding the matters addressed in this Code, you are expected to speak with your supervisor, the Compliance Officer under this Code or any other member of management. The Compliance Officer under this Code is the Company’s Chief Financial Officer, or such other officer or person as determined by the Company’s Board of Directors from time to time.

 

 
 

 

While this Code is not intended to, and does not in any way constitute an employment contract or assurance of continued employment and does not create any rights in any director, officer, employee, shareholder, or other person or entity, it does create obligations upon the employee, officer, director, shareholder or other person or entity that must be adhered to. Failure to adhere to the standards set forth herein will lead to disciplinary action including, but not limited to, termination of employment for cause and, if applicable, removal as an officer or director.

 

It is the obligation of each and every director, officer, and employee of the Company to become familiar with the goals and policies of the Company and to integrate them into every aspect of the business. The Company’s standard has been and will continue to be that of the highest ethical conduct. Each director, officer and employee must comply with the letter and spirit of this Code.

 

I. Conflict of Interest

 

All directors, officers, and employees owe a duty of loyalty to the Company and must avoid any business, financial, or other direct or indirect interests or relationships which conflict with or which divide his or her loyalty to the Company. A “conflict of interest” occurs when the private interest of a director, officer, or employee (or the interest of a member of his or her family) interferes in any way, or appears to interfere with the interests of the Company as a whole. A conflict of interest can arise when a director, officer or employee (or a member of his or her family) takes actions or has interests that may make it difficult to perform his or her work for the Company objectively and effectively. Conflicts of interest also arise when a director, officer, or employee, or a member of his or her family receives improper personal benefits as a result of his or her position with the Company.

 

It is the Company’s policy that no director, officer, employee or agent, or their immediate families, may engage in any activity that gives rise to an actual or perceived conflict of interest unless such conflict of interest is fully disclosed to the Company and approved by the Chief Executive Officer after consultation with outside counsel or, with respect to directors and officers, is approved by the Board of Directors, and, in each case, only after a determination is made that the activity is not harmful to the Company or otherwise improper.

 

Loans by the Company to, or guarantees by the Company of obligations of, employees, their family members or entities in which they have a direct or indirect interest are of special concern and could constitute improper personal benefits to the recipients of such loans or guarantees, depending on the facts and circumstances. Loans by the Company to, or guarantees by the Company of obligations of, any director or executive officer, their family members or entities in which they have a direct or indirect interest are expressly prohibited.

 

Conflicts of interests may not always be obvious and clear-cut. This Code does not attempt to describe all possible conflicts of interest which could develop and, as such, those suspecting a conflict of interest should bring it to the attention of a supervisor, manager, or other appropriate personnel.

 

Some of the more common conflicts are set out below.

 

  Interest in other businesses. Employees and members of their families must avoid direct or indirect financial relationships with other businesses that could cause divided loyalties. This does not mean that family members are precluded from being employed by one of the Company’s customers, competitors, or suppliers, but that employees must avoid conducting Company business with such family members, or others with whom they have a significant personal relationship, unless they have prior authorization from the Company.

 

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  Relationship of Company with third parties. Directors, officers, and employees may not engage in any conduct or activities that are inconsistent with the Company’s best interests or that disrupt or impair the Company’s relationship with any person or entity with which the Company has or proposes to enter into a business or contractual relationship. Ownership of, or an interest in, a competitor or in a business with which the Company has or is contemplating a relationship may be a conflict of interest which requires disclosure under the Code.
     
  Investments in public companies. Passive investments of not more than one percent of the total outstanding shares of companies listed on a national securities exchange or quoted on another securities trading board or platform are permitted without the Company’s approval provided that the investment is not so large financially either in absolute dollars or as a percentage of the individual’s total investment portfolio that it creates the appearance of a conflict of interest. Any such investment must not involve the use of confidential “inside” or proprietary information gained from such person’s relationship with the Company. Investments in diversified publicly traded mutual funds are not deemed subject to these conflict of interest guidelines.
     
  Compensation from non-Company sources. Directors, officers, and employees may not accept compensation, in any form, for services performed for the Company, from any source other than the Company (unless specifically authorized by the Company). Any form of compensation, including, by way of example and not limitation, honorariums, appearance fees, jury duty fees, and the like, are reimbursable to the Company if the Company is providing compensation to you while you are away from your ordinary duties.
     
  Gifts or entertainment. Directors, officers, employees, and members of their families may not offer, give or receive gifts or entertainment to or from persons or entities who deal with the Company, where such gift or entertainment is being made or offered in order to (i) influence the actions of a director as a member of the Board or (ii) influence the actions of an officer or employee in such person’s capacity as an employee or officer, as applicable, of the Company, or where acceptance of the gifts or entertainment would create the appearance of a conflict of interest. Social amenities customarily associated with legitimate business relationships are permissible including lunches, dinners, and gifts of modest value.

 

II. Corporate Opportunities

 

A more specific form of conflict of interest is usurpation of a corporate opportunity. Directors, officers, and employees owe a duty to the Company to advance the Company’s legitimate interests when the opportunity to do so arises. Directors, officers and employees are prohibited from: (a) taking for themselves personal opportunities (including those for the benefit of family members) that are discovered through the use of corporate property, information or their positions with the Company; (b) using the Company’s property, information, time, or position for personal gain (including gain of friends or family members); or (c) competing with the Company, directly or indirectly, for business opportunities; provided, however, that if the Company’s disinterested directors determine that the Company will not pursue an opportunity that relates to the Company’s business, a director, executive officer or employee may do so.

 

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III. Insider Trading

 

Directors, officers and employees are not permitted to use, share or disseminate confidential information for stock trading purposes or for any other purpose except the conduct of our business. To use confidential information for personal benefit or to “tip” others who might make an investment decision on the basis of such information is strictly prohibited. Directors, officers and employees are also required to comply with any more specific Insider Trading Policy adopted by the Company from time to time.

 

IV. Confidential Information

 

Confidential information generated and gathered through conduct of the Company’s business must be safeguarded. Confidential information related to the Company may include a variety of materials and information regarding the ongoing operations and plans of the Company, and may also include information that customers or collaborators have provided to us. For example, confidential information may include product development plans, clinical and research results, regulatory matters, patents, trademarks, copyrights, laboratory processes, patient information, information regarding anonymous research participants, medical information regarding research participants, information regarding the financial health of the Company, salary and personnel information and marketing and sales plans.

 

Directors, officers and employees shall not disclose confidential information, whether intentionally or inadvertently, to any third party (including friends and family), unless such third party has a need to know the information for legitimate, business-related reasons and the third party has signed a nondisclosure agreement approved by the Company’s management. In the case of information regarding patients or research participants, consent of the patient or research participants is required. Additionally, all directors, officers and employees should take appropriate precautions to ensure that confidential or sensitive business information, whether it is proprietary to the Company or another company, is not communicated within the Company except to employees who have a need to know such information to perform their job. This duty of confidentiality is important both as to the Company’s competitive position and with respect to the securities laws applicable to the Company as a public company. Directors, officers and employees must also abide by any specific agreements, such as a Confidential Information and Invention Assignment Agreement, regarding confidentiality between such person and the Company.

 

Consistent with the foregoing, all directors, officers and employees should be discreet with respect to confidential information about the Company; directors, officers and employees should not discuss confidential information in public places, leave confidential documents unattended or transmit confidential documents using unsecured means of communication. All directors, officers and employees should refrain from sharing login identities or passwords because sharing login identities or passwords could result in granting unauthorized access via computers to confidential patient information, financial data, confidential research data or employee personal information.

 

The obligation to preserve confidential information continues even after a director’s, officer’s or employee’s appointment and/or employment, as applicable, ends. In connection with this obligation, directors, officers and/or employees may be asked to execute a confidentiality agreement when they begin their employment or service to the Company and should consult such agreement for further information regarding their responsibilities in this area.

 

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V. Patient Information

 

Patient information must not be accessed, removed, discussed with, or disclosed to unauthorized persons, either within or outside the Company, without proper consent. All individuals having access to confidential patient information are bound by strict ethical and legal restrictions on the release of medical data. No individual therefore may disclose to a third party, including his/her own family, information learned from medical records, patient accounts, management information systems, or any other confidential sources during the course of his/her work. No individual may access confidential information which they do not have a “need to know” to carry out their job duties. Individuals may not access, release, or discuss the medical information of others without proper consent, unless the individual must do so to carry out specific assigned job functions.

 

VI. Individual Matters

 

No one may access, remove, alter, or disclose information without the proper authorization. Falsification, destruction, or unauthorized access or release of confidential organizational and/or individual records is strictly prohibited. Confidential documents must be disposed of properly.

 

VII. Protection and Proper Use of Company Assets

 

All Company assets should be used for legitimate business purposes. Directors, officers and employees must protect the Company’s assets and ensure their efficient use. No secret or unrecorded fund of Company assets or cash shall be established or maintained for any purpose. Anyone spending or obligating Company funds should be certain that the transaction is properly and appropriately documented and that the Company receives appropriate value in return. Theft, loss, misuse, carelessness, and waste of assets have a direct impact on the Company’s profitability and are prohibited. Company equipment, supplies, resources and other assets should not be used for non-Company business, though incidental personal use may be permitted.

 

The obligation of employees to protect the Company’s assets includes its proprietary information which includes intellectual property such as trade secrets, patents, trademarks, copyrights, as well as business, marketing, and service plans, engineering and manufacturing ideas, designs, databases, records, salary information, and any unpublished financial data reports. Unauthorized use or distribution of this information would violate Company policy and could also be illegal and result in civil or criminal penalties.

 

VIII. Competition and Fair Dealing

 

The Company seeks to outperform its competition fairly and honestly. The Company seeks competitive advantages through superior performance, never through unethical or illegal business practices. Directors, officers and employees must deal fairly with the Company’s customers, suppliers, partners, service providers, competitors, employees and anyone else with whom such person has contact in the course of performing such person’s job. No director, officer or employee may take unfair advantage of anyone through manipulation, concealment, abuse or privileged information, misrepresentation of facts or any other unfair dealing practice.

 

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IX. Compliance with Laws, Rules, and Regulations

 

Obeying the law, both in letter and in spirit, is the foundation on which this Company’s ethical standards are built. Directors, officers, and employees shall comply, and oversee compliance by others, with all laws, rules, and regulations applicable to the Company. Although not all employees are expected to know the details of these laws, it is important to know enough to determine when to seek advice from supervisors, managers, or other appropriate personnel.

 

  A. Equal Employment Opportunity. In particular, the Company places a high value on diversity and strongly believes that all people are unique and should be respected for their individual abilities and, as such, recognizes its responsibility to provide equal employment opportunities to all qualified individuals.
     
  B. Harassment-Free Workplace. It is the Company’s policy to provide a work environment for its employees that is free from harassment, including any verbal or physical harassment regarding the racial, ethnic, religious, physical or sexual characteristics or sexual orientation of another, and for all directors, officers and employees to treat each other, customers and all other persons encountered in the course of business with respect.
     
  C. Drugs, Alcohol, and Tobacco Usage. The Company wants to establish and maintain a work environment that is free from the effects of alcohol and drug abuse and that is congenial for all employees. The Company maintains a strict policy against the use of drugs, alcohol, and tobacco on premises. The occasional allowance of the use of alcohol on the premises, such as a Company party or celebration conducted by and under the auspices and control of management, should not be misconstrued as a waiver of the Company’s policy on the use of alcohol on the premises.
     
  D. Health and Safety Matters. It is the Company’s policy to provide to each employee a safe and healthy work environment and each employee has the responsibility for maintaining a safe and healthy workplace for all employees by following safety and health rules and practices established by the Company and reporting accidents, injuries, and unsafe equipment, practices, and conditions.
     
  E. Antitrust Matters. It is the Company’s policy to compete fairly and legitimately and to comply with all antitrust laws. At a minimum, these laws require that there be no agreements or understandings between the Company and its competitors that affect prices, terms, or conditions of sale and that there be no other agreements unreasonably restraining full and fair competition. There should be no discussions with competitors regarding prices to be charged by the Company or others. Similarly, agreements among competitors as to the territories or markets in which competitive products will be sold are illegal. The antitrust laws apply to many aspects of business behavior; it is therefore critical that employees raise any issues relating to these matters with the President.
     
  F. Payments to Government Personnel. The United States Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country. In addition, the United States government has a number of laws and regulations regarding business gratuities which may be accepted by U.S. government personnel. The promise, offer or delivery to an official or employee of the U.S. government of a gift, favor, or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules.

 

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Any employee who violates the law or this Code may be subject to immediate disciplinary action, including possible termination of employment or affiliation with the Company.

 

X. Accuracy of Books and Records and Financial Reporting

 

The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions.

 

All of the Company’s books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company’s transactions and must conform both to applicable legal requirements and to the Company’s system of internal controls. All Company business data, records and reports must be prepared truthfully and accurately. If you use a business expense account or a corporate credit card, expenses to be reimbursed must be documented and recorded accurately. If you are not sure whether an expense is appropriate, ask your supervisor. The Company’s business records must be maintained for the periods specified in the Company’s applicable record retention policies.

 

Employees who are responsible for accounting matters and/or contribute to or prepare the Company’s financial statements, periodic reports filed with the Securities and Exchange Commission or other public disclosure documents or communications should do so in accordance with the following guidelines:

 

  All accounting records, as well as reports produced from those records, must be prepared in accordance with the laws of each applicable jurisdiction.
     
  All records must fairly and accurately reflect the transactions or occurrences to which they relate.
     
  All records must fairly and accurately reflect, in reasonably detail, the Company’s assets, liabilities, revenues and expenses.
     
  The Company’s accounting records must not contain any false or intentionally misleading entries.
     
  No transactions should be intentionally misclassified as to accounts, departments or accounting periods.
     
  All transactions must be supported by accurate documentation in reasonable detail and recorded in the proper account and in the proper accounting period.
     
  No information should be concealed from internal auditors or independent auditors.
     
  Compliance with the Company’s system of internal accounting controls is required.

 

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XI. Communications with the Press, Analysts and Shareholders and other Outside Entities

 

As a public company, Qualigen must comply with certain legal and regulatory requirements in connection with the dissemination of information to the investing public. To ensure compliance with applicable legal and regulatory requirements, no officer, director or employee, other than an Authorized Spokesperson (as defined below), may discuss news or events concerning Qualigen with shareholders, potential investors, investment companies, investment managers, broker-dealers, analysts, members of the press or general media or any other person who is not affiliated with Qualigen or is not otherwise subject to confidentiality obligations regarding Company information. For purposes of this policy, Authorized Spokesperson shall mean the Chief Executive Officer, Chief Financial Officer, President or persons specifically designated by the Chief Executive Officer, Chief Financial Officer, or President to speak with respect to a particular topic or purpose. If any director, officer or employee who is not an Authorized Spokesperson receives an inquiry about Qualigen, they must refer the inquiry to an Authorized Spokesperson. Directors, officers and employees are also required to comply with any more specific policy on corporate communications that may be adopted by the Company.

 

XII. Use of the Internet and Communications Systems

 

Access to the Internet and to all Company electronic communication systems, such as electronic mail (email) and voice mail, are made available to employees solely for the purpose of carrying out legitimate business of the Company and incidental use. These systems are the property of the Company and all communications are subject to review by appropriate and authorized Company personnel at any time. Users should have no expectation of personal privacy in their use of the Company’s electronic communications systems. Access to the Internet via modem puts both a user’s computer and the entire Company’s Internet at risk and, as such, users must use approved mechanisms, tools and procedures for these activities including the use of thumb drives. Use of the Company’s computer resources or communications systems for any of the following reasons is prohibited: abusive or otherwise objectionable language, information which is illegal or obscene, messages which defame or libel others, and use which interferes with the work of employee or others, including sexual or other harassment violative of applicable Equal Employment Opportunity laws and Company policies. Personal use of email is discouraged, except of course, for emergency reasons which the employee must verify if questioned by management.

 

XIII. Document Retention and Management

 

Accurate business records must be maintained, retained, and stored in a consistent and reliable manner in order to comply with the requirements of various laws as well as to provide for effective operations. Officers and employees are expected to become familiar with the Company’s policies regarding records management.

 

XIV. Amendments to and/or Waivers of the Code of Business Conduct and Ethics

 

Any waiver of this Code for executive officers or directors may be made only by the Board, and will be promptly disclosed to shareholders along with the reason for the waiver, as required by applicable law and/or rules and regulations of Nasdaq, or such other exchange where the Company’s securities may be listed. Any waivers of this Code for other employees may be made by the Board or the corporate governance committee thereof.

 

XV. Implementation

 

Violations of this Code or of any direction given by management in order to effect the provisions, goals, and aims of this Code may result in disciplinary action, up to and including termination for cause of employment and, if applicable, removal as an officer or director.

 

-8-
 

 

XVI. Reporting Violations of the Code

 

Employees are responsible for being aware of the corporate policies applicable to their activities and complying with them fully. If you become aware of a violation of this Code or believe that a violation may take place in the future, you must promptly report the matter. Failure to report a known violation allows misconduct to go unremedied and is itself grounds for discipline. Ordinarily, the report may be made to the employee’s immediate supervisor who, in turn, must report it to the Compliance Officer. If the report pertains to concerns regarding questionable accounting or auditing matters, the employee should direct the report to the Chair of the Audit Committee of the Board of Directors.

 

Reports concerning potential violations of this Code may also be made directly to the Compliance Officer, in person or in writing, and may be made anonymously, in the employee’s discretion, through the following methods:

 

  Contact the Compliance Officer by email at compliance@qualigeninc.com or by mail at Qualigen Therapeutics, Inc., 2042 Corte Del Nogal, Carlsbad, CA 92011, Attn: Compliance Officer.
     
  Contact the Compliance Officer by phone at: (760) 918-9165.

 

Employees submitting a report on an anonymous basis are strongly encouraged to keep a copy of the report (if made in writing) and a record of the time and date of their submission, as well as a description of the matter as reported if the report was not in writing.

 

Employees are encouraged to provide as much specific information as possible, including names, dates, places and events that took place, relevant documents and the employee’s perception of why the incident(s) may constitute misconduct.

 

If possible, the employee should provide a means by which she/he can be contacted in the event that an investigator needs to follow-up or wants to report back to the employee.

 

We will not allow retaliation against an employee for reporting a possible violation of this Code unless it can be shown that the report was knowingly false. Retaliation for reporting a violation of this Code is illegal under federal law and prohibited under this Code. Any such retaliation will result in discipline up to and including termination of employment and may also result in criminal prosecution. The employee is protected from retaliation even if the investigator does not agree that there has been a violation. However, if the employee making the report was involved in improper activity, the fact that he or she reported it will not necessarily prevent him or her from being disciplined for his or her participation in the violation. In these circumstances, the Company may consider the employee’s conduct in promptly reporting the information as a mitigating factor in any disciplinary decision.

 

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Exhibit 99.1

 

 

 

Qualigen Therapeutics Announces Merger Closing

 

Common stock begins trading today on NASDAQ under the ticker QLGN

Company raises $4 million in a private placement

 

CARLSBAD, Calif. (May 26, 2020) – Qualigen Therapeutics, Inc. (NASDAQ: QLGN) (Qualigen or the Company) (formerly known as Ritter Pharmaceuticals, Inc. and formerly traded under the symbol RTTR), has completed its previously announced merger transaction with Qualigen, Inc., a company focused on the development of novel therapeutic products for the treatment of cancer and infectious diseases, as well as the worldwide sales of its flagship FastPack® rapid diagnostic platform. The combined company will operate under the name Qualigen Therapeutics, Inc. pursuing the business of Qualigen, Inc., and the Company’s common stock will commence trading on the Nasdaq Capital Market at the open of trading today under the ticker symbol QLGN.

 

“We are delighted to complete this transaction and extend a warm greeting to the former Ritter Pharmaceuticals shareholders,” commented Michael Poirier, the new Chairman, President and Chief Executive Officer of the Company. “We look forward to developing Qualigen’s novel therapeutics pipeline for the treatment of cancer and infectious diseases, and expanding the reach and applications of our core FastPack diagnostic platform. The merger and concurrent financing provide Qualigen with enhanced resources and flexibility to pursue our corporate strategy and advance our programs.”

 

In connection with the reverse merger transaction, a majority of the Company’s board of directors now consists of persons who had been directors of Qualigen, Inc., and all of the Company’s officers now consist of persons who had been officers of Qualigen, Inc.

 

Immediately prior to and in connection with the merger, Qualigen, Inc. completed a private placement of preferred stock to an institutional investor resulting in gross proceeds of approximately $4 million. In return, Qualigen, Inc. issued convertible preferred shares and warrants, which were exchanged in the merger for equivalent convertible preferred shares and warrants of the Company. These preferred shares and warrants contain a restriction from the holder owning more than 9.9% of the voting power of the Company, as well as anti-dilution and other customary investor protection provisions.

 

The Company issued common shares in the merger in exchange for all of Qualigen, Inc.’s common shares (including Qualigen, Inc. common shares into which all of Qualigen, Inc.’s outstanding preferred shares, excluding the preferred shares issued in the private placement, and almost all outstanding convertible notes had been converted immediately before the merger). A majority of the new Company common shares issued in the merger are subject to a six-month lockup agreement.

 

As a result of the merger and after taking into account the previously announced 1-for-25 reverse split of Ritter Pharmaceuticals common shares that became effective at the close of trading on May 22, 2020, the Company currently has a total of approximately 12.53 million shares of common stock outstanding, approximately 7.25 million additional shares of common stock potentially issuable upon the conversion of preferred stock and approximately 3.22 million outstanding common stock options and warrants. All legacy holders of Ritter Pharmaceuticals common shares remain stockholders of the Company, subject to the effect of the 1-for-25 reverse split of Ritter Pharmaceuticals common shares that became effective at the close of trading on May 22, 2020.

 

 
 

 

A Current Report on Form 8-K regarding the merger transaction and the financing will be filed with the Securities and Exchange Commission.

 

Qualigen Business Overview

 

Qualigen is a biotechnology company focused on developing novel products for the treatment and testing of cancer and infectious diseases. Its current commercial product is the FastPack rapid diagnostic testing system. This “Laboratory in a Pouch” is installed in physician offices, clinics and small hospitals around the world, and quickly detects diseases and medical conditions at the point-of-care. Since its inception almost 20 years ago, FastPack has generated more than $100 million in commercial sales. Qualigen’s worldwide distributor for FastPack is Sekisui Diagnostics, a subsidiary of a multibillion-dollar Japanese chemical and technology company. Sekisui owns approximately 15.8% of Qualigen’s outstanding common shares.

 

Qualigen’s therapeutic product pipeline includes pharmaceuticals being developed in collaboration with the University of Louisville and other partners, and an early stage proprietary blood cleansing system:

 

AS1411 and Gold Nanoparticle ALAN (AS1411-GNP): drug candidates that use a specialized segment of DNA, aptamers, to target and destroy tumor cells, enhance radiation therapy and aid in tumor scanning. Developed and previously placed into clinical trials for cancer therapeutics, the base AS1411 aptamer drug is now also being researched for halting replication of viral-based infectious diseases in humans. ALAN is expected to begin Phase I clinical trials for cancer in 2021.
RAS-F3: a small-molecule RAS oncogene protein-protein inhibitor that blocks RAS mutations directly, thereby inhibiting tumor formation. A RAS gene isoform (KRAS, HRAS or NRAS) is present in about one-fourth of all cancers, including pancreatic, colon and lung. Qualigen entered into a Sponsored Research Agreement with the University of Louisville for development of several small-molecule RAS Inhibitor drug candidates.
STARS™ blood cleansing system: using DNA aptamers and core, commercialized FastPack particle coating technology, STARS is being developed to remove tumor-produced compounds and viruses from a patient’s blood. Proof-of-concept has been established with in vitro testing.

 

Qualigen has 34 issued and pending patents worldwide to protect its technology, and has licensed rights to a further 10 patents. The Company also has 23 issued and pending patents worldwide held jointly with a third party. The Company’s new management team from Qualigen, Inc. has a proven track record of securing U.S. Food and Drug Administration (FDA) approvals and commercializing innovative technologies.

 

As previously disclosed, the Company does not intend to carry on Ritter Pharmaceuticals’ legacy business of developing therapeutic products that modulate the gut microbiome to treat gastrointestinal diseases. Holders of Company common stock as of immediately before the time the reverse stock split and merger were consummated will be entitled to receive a distribution of nontransferable contingent value rights (CVRs) from the Company. The CVRs will provide their holders with potential cash payment rights in the event of certain monetizations (if any and if ever) within a certain time period of this Ritter intellectual property.

 

 
 

 

Advisors

 

Ritter Pharmaceuticals’ financial advisor for the merger transaction was A.G.P./Alliance Global Partners. Reed Smith LLP served as legal counsel to Ritter Pharmaceuticals for the merger transaction and Stradling Yocca Carlson & Rauth served as legal counsel to Qualigen, Inc. for the merger transaction.

 

Conference Call

 

Qualigen’s management intends to hold a public business update conference call during the third quarter of 2020 to present an overview of the company and answer questions. Details of the call including instructions on how to participate will be announced prior to the date of the call.

 

About Qualigen Therapeutics, Inc.

 

Qualigen Therapeutics, Inc. is a biotechnology company focused on developing novel therapeutics for the treatment of cancer and infectious diseases, as well as maintaining and expanding its core FDA-approved FastPack® System, which has been used successfully in diagnostics for almost 20 years. The Company’s cancer therapeutics pipeline includes ALAN (AS1411-GNP), RAS-F3 and STARS™. ALAN (AS1411-GNP) is a DNA coated gold nanoparticle cancer drug candidate that has the potential to target various types of cancer with minimal side effects. The foundational aptamer of ALAN, AS1411, is also being studied for use in treating viral-based infectious diseases. RAS-F3 is a small molecule RAS oncogene protein-protein inhibitor for blocking RAS mutations that lead to tumor formation, especially in pancreatic, colorectal and lung cancers. STARS is a DNA/RNA-based treatment device for removal from circulating blood of precisely targeted tumor-produced and viral compounds. Qualigen’s facility in Carlsbad, California is FDA and ISO Certified and its FastPack® product line is sold worldwide by its commercial partner Sekisui Diagnostics, LLC. For more information, please visit https://www.qualigeninc.com/.

 

Forward-Looking Statements

 

This news release contains forward-looking statements by the Company that involve risks and uncertainties and reflect the Company’s judgment as of the date of this release. These statements include those related to potential future development, testing and launch of products and product candidates, and the benefits of having a public-company platform. Actual events or results may differ from our expectations. For example, there can be no assurance that we will successfully develop any drugs or therapeutic devices; that preclinical or clinical development will be successful; that future clinical trial data will be favorable or that such trials will confirm any improvements over other products or lack negative impacts; that any drugs or therapeutic devices will receive required regulatory approvals or that they will be commercially successful; that we will be able to procure or earn sufficient working capital to complete the development, testing and launch of our prospective therapeutic products; or that we will be able to maintain or expand market demand and/or market share for our diagnostic products. Our stock price could be harmed if any of the events or trends contemplated by the forward-looking statements fails to occur or is delayed or if any actual future event otherwise differs from expectations. Additional information concerning these and other risk factors affecting the Company’s business (including events beyond the Company’s control, such as epidemics and resulting changes) can be found in the Company’s prior filings with the Securities and Exchange Commission, available at www.sec.gov. The Company disclaims any intent or obligation to update these forward-looking statements beyond the date of this news release, except as required by law. This caution is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

 

Contacts:

 

LHA Investor Relations

Yvonne Briggs

ybriggs@lhai.com

or

Bruce Voss

bvoss@lhai.com

 

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