UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): April 29, 2020

9 Meters Biopharma, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
001-37797
 
27-3948465
(State or other jurisdiction of
incorporation or organization)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)

8480 Honeycutt Road, Suite 120, Raleigh, NC 27615
(Address of principal executive offices) (Zip Code)

(919) 275-1933
(Registrant’s telephone number, include area code)

Innovate Biopharmaceuticals, Inc.
(Former Name or Former Address, if Changed Since Last Report)
 
Securities registered pursuant to Section 12(b) of the Act: 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock $0.0001 Par Value
NMTR
The Nasdaq Stock Market LLC
 
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))
 
Emerging growth company ☒

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.☒

Introductory Note
On April 30, 2020, Innovate Biopharmaceuticals, Inc., renamed 9 Meters Biopharma, Inc., a Delaware corporation, (the “Company”), consummated its merger with RDD Pharma Ltd., a company organized under the laws of Israel (“RDD”), in accordance with the terms of a previously disclosed Agreement and Plan of Merger and Reorganization (the “RDD Merger Agreement”), dated as of October 6, 2019, as amended on December 17, 2019, between the Company, RDD, INNT Merger Sub 1 Ltd., a company organized under the laws of Israel and a directly, wholly-owned subsidiary of the Company (“INNT Merger Sub”), and Orbimed Israel Partners, Limited Partnership, as the Shareholder Representative. Pursuant to the RDD Merger Agreement, INNT Merger Sub was merged with and into RDD (the “RDD Merger”), with RDD continuing as the surviving corporation and a direct wholly-owned subsidiary of the Company. The Company retained its public reporting and NASDAQ listing status.
Item 1.01     Entry into a Material Definitive Agreement.

Financing

As previously disclosed, a closing condition of the RDD Merger Agreement was financing commitments of at least $10,000,000 (the “Financing”). On April 29, 2020, the Company entered into a Securities Purchase Agreement with various investors pursuant to which the Company agreed to issue and sell to the investors units ("Units") consisting of one share of Series A Convertible Preferred Stock (the "Series A Preferred Stock") and one five-year warrant (the "Warrants") to purchase one share of Series A Preferred stock, for an aggregate of (i) 382,783 shares of Series A Preferred Stock, which are convertible into 38,278,300 shares (the “Conversion Shares”) of common stock, par value $0.0001 per share (the “Common Stock”), and (ii) Warrants to purchase up to 382,783 shares of Series A Preferred Stock, which are convertible into 38,278,300 shares of Common Stock (the “Conversion Warrant Shares”). The exercise price of the Warrants is $58.94 per share of Series A Preferred Stock, subject to adjustments as provided under the terms of the Warrants. In addition, broker warrants covering 7,261 Units and broker warrants covering 8,806 shares of Series A Preferred Stock, which are convertible into 2,332,800 shares of Common Stock in the aggregate, were issued in connection with the Financing. The closing of the Financing occurred on May 4, 2020.

Reference is made to the discussion of the Series A Preferred Stock in Item 5.03 of this Current Report on Form 8-K, which is incorporated into this Item 1.01 by reference.

William Blair & Company, L.L.C. acted as the sole lead placement agent for the Financing. GP Nurmenkari, Inc., National Securities, Westpark Capital, and Wynston Hill Capital acted as co-placement agents in connection with the Financing.

The total proceeds of the Financing were $22.5 million and the net proceeds to the Company from the Financing were approximately $19.1 million, after deducting placement agent fees and other offering expenses. Proceeds from the Financing will be used for the acquisition of Naia Rare Diseases, Inc., an exempted company incorporated under the laws of the Cayman Islands (“Naia”), and for working capital and general corporate purposes.

The Securities Purchase Agreement contains customary representations, warranties and covenants by the Company, indemnification obligations of the Company, including for liabilities under the Securities Act of 1933, as amended (the “Securities Act”), and other obligations of the parties. The representations, warranties, and covenants contained in the Securities Purchase Agreement were made only for purposes of such agreement and are made as of specific dates; are solely for the benefit of the parties (except as specifically set forth therein); may be subject to qualifications and limitations agreed upon by the parties in connection with negotiating the terms of the Securities Purchase Agreement, including being qualified by confidential disclosures made for the purpose of allocating contractual risk between the parties, instead of establishing matters as facts; and may be subject





to standards of materiality and knowledge applicable to the contracting parties that differ from those applicable to the investors generally. Investors should not rely on the representations, warranties, and covenants or any description thereof as characterizations of the actual state of facts or condition of the Company.

Pursuant to the terms of the Securities Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the investors pursuant to which the Company is required, among other things, to file with the U.S. Securities and Exchange Commission a shelf registration statement with respect to the Conversion Shares and the Conversion Warrant Shares held by such investors within 30 days following the closing of the Financing (the “Resale Registration Statement”). The Registration Rights Agreement contains customary terms and conditions for a transaction of this type.

The information contained in this Current Report on Form 8-K is not an offer to sell or a solicitation of an offer to buy the Series A Preferred Stock or Warrants or any other securities of the Company.

The foregoing description of the Securities Purchase Agreement, the Warrants, and the Registration Rights Agreement, are qualified in their entirety by reference to the complete text of the Securities Purchase Agreement, which is filed as Exhibit 10.1 hereto, the form of Warrant, which is filed as Exhibit 4.1 hereto, and the Registration Rights Agreement, which is filed as Exhibit 10.2 hereto, all of which are incorporated herein by reference.

Support Agreements

Effective April 29, 2020, stockholders representing a majority of the Common Stock entered into a voting agreement with the Company (the “Support Agreements”) providing that, among other things, each stockholder party to the Company Support Agreement will vote all of the Common Stock held by them in favor of the conversion of the Series A Preferred Stock issued in the Financing into Common Stock. Additionally, stockholders representing a majority of the Common Stock agreed to vote all of the Common Stock held by them in favor of an increase of the authorized shares available for issuance under the Company’s 2012 Omnibus Incentive Plan.

The foregoing description of the Support Agreements is qualified in its entirety by reference to the complete text of the Form of Support Agreement, a copy of which is filed as Exhibit 10.3 hereto and is incorporated herein by reference.

Naia Rare Diseases

On April 30, 2020, the Company entered into an Agreement and Plan of Merger (the “Naia Merger Agreement”) by and among the Company, Naia Merger Sub, Inc., a Delaware corporation and indirect wholly owned subsidiary of the Company (“First Merger Sub”), Second Naia Merger Sub, LLC, a Delaware limited liability company and indirect wholly owned subsidiary of the Company (“Second Merger Sub”), Naia, and Naia Limited, an exempted company incorporated under the laws of the Cayman Islands, as Shareholders’ Agent. The Naia Merger Agreement provides for the initial merger of First Merger Sub with and into Naia, with Naia surviving as an indirect wholly owned subsidiary of the Company, and the second merger of Naia with and into Second Merger Sub (together, the “Naia Merger”), with Second Merger Sub surviving and continuing as an indirect wholly owned subsidiary of the Company.

The consideration for the Naia Merger will be $2,112,000 in cash and $2,850,000 in shares of Common Stock, plus the payment of certain amounts paid prior to closing of the merger by Naia pursuant to its license agreements with Amunix totaling approximately $70,000. Consideration for the Naia Merger also includes future development and sales milestone payments worth up to $80,424,000 and royalties on net sales of certain products to which Naia has exclusive rights by license. The Company also agreed to register for resale the shares of Common Stock issued to Naia pursuant to the Naia Merger Agreement on the Resale Registration Statement.

The Naia Merger Agreement contains customary representations, warranties and covenants by the Company, First Merger Sub, Second Merger Sub, Naia and the Shareholders’ Agent, including mutual indemnification provisions that require the Company, First Merger Sub and Second Merger Sub, on the one hand, and Naia’s shareholders, on the other hand, to indemnify the other party for losses resulting from a breach of its respective representations, warranties or covenants in the Naia Merger Agreement. The representations, warranties, and covenants contained in the Naia Merger Agreement were made only for purposes of such agreement and are made as of specific dates; are solely for the benefit of the parties (except as specifically set forth therein); may be subject to qualifications and limitations agreed upon by the parties in connection with negotiating the terms of the Naia Merger Agreement, including being qualified by confidential disclosures made for the purpose of allocating contractual risk between the parties, instead of establishing matters as facts; and may be subject to standards of materiality and knowledge applicable to the contracting parties that differ from those applicable to the investors generally. Investors should not rely on the representations, warranties, and covenants or any description thereof as characterizations of the actual state of facts or condition of the Company.






The foregoing description of the Naia Merger Agreement is qualified in its entirety by reference to the complete text of the Naia Merger Agreement, a copy of which is filed as Exhibit 2.1 hereto and is incorporated herein by reference.

Item 2.01. Completion of Acquisition or Disposition of Assets.

RDD Merger

On April 30, 2020, the RDD Merger was consummated in accordance with the terms of the RDD Merger Agreement, and all outstanding ordinary and preferred shares of RDD, nominal value of NIS 0.01 each, were converted into the right to receive shares of validly issued, fully paid and non-assessable shares of Common Stock. Additionally, each outstanding RDD stock option was converted into and became an option exercisable for Common Stock with the number and exercise price adjusted to be consistent with the merger consideration. Each outstanding RDD warrant was exercised or cancelled prior to the effective time of the RDD Merger.

As of April 30, 2020, following the completion of the RDD Merger, the pre-closing Innovate stockholders owned approximately 62.0% of the combined company’s Common Stock and the former RDD shareholders owned approximately 38.0% of the combined company’s Common Stock, on a fully diluted basis. As of May 4, 2020, after giving effect to the closing of the RDD Merger, the Financing (as described in Item 1.01), and the Offer to Amend and Exercise (as described in Item 8.01), there were 91,387,975 million shares of Common Stock outstanding, and 382,783 shares of Series A Preferred Stock outstanding, which will be convertible into 38,278,300 shares of Common Stock.

To provide a fund for satisfaction of the Company’s post-closing rights to indemnification under the RDD Merger Agreement, an aggregate of 10% of the shares of Common Stock issued to RDD was placed in escrow, in accordance with an escrow agreement for a period of six months. The former RDD shareholders’ right to indemnification will be satisfied through the issuance of these additional shares of Common Stock.

On February 14, 2020, prior to the consummation of the RDD Merger, the stockholders of the Company approved the issuance of the Common Stock to the RDD shareholders in connection with the RDD Merger and the related transactions at a special meeting of stockholders. On February 3, 2020, prior to the consummation of the RDD Merger, the shareholders of RDD approved the RDD Merger Agreement at a special meeting of RDD shareholders.

The foregoing description of the RDD Merger Agreement is not complete and is qualified in its entirety by reference to the RDD Merger Agreement, which was previously filed as Exhibit 2.1 to the Current Report on Form 8-K filed on October 7, 2019, and the First Amendment to the RDD Merger Agreement, which was filed as Exhibit 2.1 to the Current Report on Form 8-K filed on December 17, 2019, and both are incorporated herein by reference.

Item 3.02.    Unregistered Sales of Equity Securities.

RDD Merger

Pursuant to the terms of the RDD Merger Agreement and in connection with the RDD Merger, the Company issued shares of Common Stock to former RDD shareholders. The number of shares issued, the nature of the transaction and the nature and amount of consideration received by the Company are described in Item 2.01 of this Form 8-K, which is incorporated by reference into this Item 3.02. The shares of Common Stock issued in connection with the RDD Merger were not registered under the Securities Act in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and on similar exemptions under applicable state laws.

Financing

Pursuant to the terms of the Securities Purchase Agreement and in connection with the Financing, the Company issued shares of Series A Preferred Stock and Warrants to the investors. The number of shares issued, the nature of the transaction and the nature and amount of consideration received by the Company are described in Item 1.01 of this Form 8-K, which is incorporated by reference into this Item 3.02. The shares of Series A Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares issued in connection with the Financing were not registered under the Securities Act in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and by Rule 506 of Registration D, promulgated under the Securities Act, and on similar exemptions under applicable state laws.

Item 5.01.     Changes in Control of Registrant.






Reference is made to Item 2.01 and Item 5.02 of this Current Report on Form 8-K, which are incorporated into this Item 5.01 by reference.

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

Effective upon the consummation of the RDD Merger, Jay P. Madan, Anthony E. Maida III, Ph.D., M.A., M.B.A., and Saira Ramasastry, M.S., M. Phil., resigned from the Innovate Board of Directors (the “Board”) and Mark Sirgo, Pharm.D., Nissim Darvish, M.D., Ph.D., and John Temperato were appointed to the Board. The resignation of directors from the Board was not due to a disagreement with the Company on any matter relating to its operations, policies or practices.

Accordingly, immediately following the effective time of the RDD Merger, the directors serving on the Board are: Dr. Darvish, Lorin K. Johnson, Ph.D., Sandeep Laumas, M.D., Roy Proujansky, M.D., Dr. Sirgo (Chair) and Mr. Temperato. Drs. Darvish and Sirgo and Mr. Temperato served as directors of RDD prior to the closing of the RDD Merger. The Board has affirmatively determined that all directors, except for Dr. Laumas and Mr. Temperato, are independent directors within the meaning of the applicable Nasdaq listing standards. The members of the audit committee are Drs. Darvish, Johnson and Sirgo (Chair); the members of the compensation committee are Drs. Darvish and Johnson (Chair); and the members of the nominating and corporate governance committee are Drs. Darvish (Chair) and Johnson.

The Board approved option grants to each of Drs. Darvish and Sirgo to purchase 50,000 shares of Common Stock which will vest in equal installments over 36 months.
 
Indemnification Agreements

In connection with the RDD Merger, Drs. Darvish and Sirgo and Mr. Temperato have entered into the standard director indemnification agreement with the Company, effective as of April 30, 2020. The form indemnification agreement was previously filed as Exhibit 10.3 to the Current Report on Form 8-K, filed on February 2, 2018, and is incorporated by reference into this Item 5.02.

Separation Agreements

In connection with the RDD Merger, the Company entered into a Separation Agreement with each of Dr. Laumas (in his capacity as Chief Executive Officer of the Company, not in his capacity as a director) (the “Laumas Separation Agreement”) and Jay P. Madan, M.S., the Company’s President and Chief Business Officer (the “Madan Separation Agreement”), subject to a seven-day revocation period, as required by law, for each executive’s full release of any claims against the Company to the maximum extent permitted by law, in exchange for certain severance benefits. Dr. Laumas and Mr, Madan resigned from their positions as Chief Executive Officer and President and Chief Business Officer of the Company, respectively. Pursuant to the Laumas Separation Agreement, effective on the closing date of the Merger, Dr. Laumas received severance pay of $275,000, payable in installments over the 12-month period following separation, and 12 months of COBRA supplement. Pursuant to the Madan Separation Agreement, effective on the closing date of the Merger, Mr. Madan received severance pay of $285,000, payable in installments over the 12-month period following separation, a bonus payment of $220,163, paid in lump sum on the same payroll date on which severance pay commences, and 12 months of COBRA supplement. In addition, Mr. Madan will provide assistance to the Company, as requested by the Company, for transition for the one month following the separation date and will be compensated at $200 per hour for such services upon submission of an invoice detailing such services.

The foregoing summaries of the material terms of the Laumas Separation Agreement and the Madan Separation Agreement are qualified in their entirety by reference to the complete text of the agreements, copies of which are filed hereto as Exhibit 10.4 and Exhibit 10.5, respectively, and are incorporated herein by reference.

John Temperato

Effective upon the consummation of the RDD Merger, the Company entered into an employment agreement with Mr. Temperato for him to serve as the Company’s Chief Executive Officer (the “Employment Agreement”).

Mr. Temperato, 55, served as the Chief Executive Officer of RDD from March 2019 until April 2020. Prior to joining RDD, Mr. Temperato held various leadership roles, including most notably U.S. President & Chief Operating Officer with Atlantic Healthcare,





President & Chief Operating Officer/Chief Commercial Officer with Melinta Therapeutics, and Senior Vice President of Sales and Managed Markets with Salix Pharmaceuticals. Notably, at Salix Pharmaceuticals (Salix), Mr. Temperato played a critical role in the successful commercialization and growth of their broad GI portfolio and executed over ten launches during his tenure at the company driving growth of company revenues from $119 million in 2004 to $2 billion in 2015. Across his career, Mr. Temperato has been instrumental in defining and executing capital efficient go-to-market strategies, business development strategy and overseeing the commercialization and life-cycle management for small molecules, devices, and biologics. Additionally, he has developed strategies for reimbursement and external healthcare policy. He holds a Bachelor of Science degree from the University of Bridgeport in Bridgeport, Connecticut.

Mr. Temperato has no familial relationships with any executive officer or director of the Company. There have been no transactions in which the Company has participated and in which Mr. Temperato has had a direct or indirect material interest that would be required to be disclosed under Item 404(a) of Regulation S-K.

Pursuant to the Employment Agreement, Mr. Temperato began full-time employment with the Company upon the effective time of the RDD Merger on April 30, 2020, at an initial base salary of $450,000 per year, subject to review and adjustment by the Board from time to time. The Board approved an option grant to Mr. Temperato to purchase 1,000,000 shares of Common Stock, which will vest 25% upon grant, with the remainder vesting in 48 equal month installments, provided that Mr. Temperato remains an employee of the Company as of each such vesting date. Mr. Temperato will be eligible to receive a discretionary annual bonus with a target amount of 40% of his base salary, as determined by the Board in its sole discretion (and pro-rated for 2020). Mr. Temperato will also be eligible to participate in the Company’s other employee benefit plans as in effect from time to time on the same basis as are generally made available to other senior executive employees of the Company.

If the employment of Mr. Temperato is terminated by the Company without “Cause” or by Mr. Temperato for “Good Reason” (each as defined in the Employment Agreement), in each case subject to Mr. Temperato entering into and not revoking a separation agreement, Mr. Temperato will be eligible to receive 12 months of his then-current base salary, the prorated amount of his target year-end bonus, and accelerated vesting of his unvested options and restricted stock unit awards that were scheduled to vest in the 12 months following termination.

The foregoing summary of the material terms of the Employment Agreement is qualified in its entirety by reference to the complete text of the agreement, a copy of which is filed as Exhibit 10.6 hereto and is incorporated herein by reference.

Transaction Bonus

In connection with the consummation of the Merger, the Board approved the grant of transaction bonuses payable to certain executive officers of the Company. The Company approved the grant of a transaction bonus for the executive’s efforts in assisting the Company to consummate the Merger to each of Dr. Laumas, the former Chief Executive Officer of the Company, in the amount of $212,438 and an option to purchase 389,294 shares of Common Stock, Edward Sitar, the Chief Financial Officer of the Company, in the amount of $213,750 and an option to purchase 176,156 shares of Common Stock, and Mr. Madan, the Company’s former President and Chief Business Officer, in the amount of $220,163 and an option to purchase 203,406 shares of Common Stock. Each transaction bonus option grant was immediately vested and has an exercise price of $0.60. Additionally, the Board approved a retention award for Mr. Sitar of an option exercisable for 125,000 shares of Common Stock, of which 25% shall be immediately vested and the remainder vests in 48 equal monthly installments, with an exercise price of $0.70.

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

On April 29, 2020, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock with the Secretary of State of the State of Delaware (the “Certificate of Designation”) creating a new series of authorized preferred stock of the Company designated as the “Series A Convertible Preferred Stock”. The Certificate of Designation became effective with the Secretary of State of the State of Delaware upon filing.

The number of shares of Series A Preferred Stock designated shall be up to 600,000. Holders of Series A Preferred Stock are entitled to receive dividends on shares of Series A Preferred Stock equal, on an as-if-converted-to-Common-Stock basis, and in the same form as dividends actually paid on shares of the Common Stock. Except as otherwise required by law, the Series A Preferred Stock does not have voting rights. However, as long as any shares of Series A Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock, (b) alter or amend the Certificate of Designation, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series A Preferred Stock, (d) increase the number of authorized shares of Series A Preferred Stock, (e) pay certain dividends or (f) enter into any agreement with respect to any of the foregoing. The Series A Preferred Stock





does not have a preference upon any liquidation, dissolution or winding-up of the Company. Pursuant to the terms of the Certificate of Designation, the Company is not permitted to issue any shares of Common Stock upon conversion of the Series A Preferred Stock unless the Company obtains shareholder approval, provided that holders of Series A Preferred Stock may opt out of automatic conversion only to the extent such holder would beneficially own more than 4.99% of the outstanding shares of Common Stock at the time of stockholder approval. Each share of Series A Preferred Stock is convertible into Common Stock, based on an initial conversion ratio of 1:100, as adjusted in accordance with the Certificate of Designation, upon receipt of the approval of the Company’s stockholders.

On May 1, 2020, the Company filed an amendment to its amended and restated certificate of incorporation (the “Name Change Charter Amendment”) to change the name of the corporation from “Innovate Biopharmaceuticals, Inc.” to “9 Meters Biopharma, Inc.”.

The foregoing descriptions of the Certificate of Designation and the Name Change Charter Amendment are not complete and are qualified in their entirety by reference to the documents attached hereto as Exhibits 3.1 and 3.2, respectively, which are incorporated herein by reference.
Item 8.01.    Other Events.
Press Releases
On April 30, 2020 and May 4, 2020, the Company issued press releases regarding the matters discussed in this Current Report on Form 8-K. Copies of the press releases are attached hereto as Exhibit 99.1 and 99.2 and are incorporated herein by reference.
Warrant Tender Offer
Pursuant to an offer to Amend and Exercise, dated February 12, 2020, the Company offered to amend, upon the terms and subject to the conditions set forth therein, outstanding warrants (the “Original Warrants”) to purchase an aggregate of 12,346,631 shares of common stock (the “Offer to Amend and Exercise”). Pursuant to the Offer to Amend and Exercise, the Original Warrants of holders who elected to participate in the Offer to Amend and Exercise were amended to: (i) shorten the exercise period so that they expire on April 29, 2020 and (ii) reduce the exercise price to $0.10. The Offer to Amend and Exercise expired at 5:00 p.m. Eastern time on April 29, 2020. Pursuant to the Offer to Amend and Exercise, an aggregate of 12,230,418 Original Warrants were tendered by their holders and were amended and exercised in connection therewith for gross proceeds to the Company of approximately $1.22 million. Such tendered Original Warrants represent approximately 99% of the Company’s outstanding Original Warrants.
Investor Presentation
May 4, 2020, the Company posted an updated Investor Presentation regarding the business of the combined company after completion of the previously announced proposed merger with RDD to its website at www.9meters.com. A copy of the investor presentation is attached hereto as Exhibit 99.3.
Item 9.01.    Financial Statements and Exhibits.
(a)
Financial statements of businesses acquired.
The financial statements required by this Item 9.01(a) will be filed by amendment to this Current Report on Form 8-K not later than 71 calendar days after the date on which this Current Report on Form 8-K is required to be filed.
(b) Pro forma financial information.
The pro forma financial information required by this Item 9.01(b) will be filed by amendment to this Current Report on Form 8-K not later than 71 calendar days after the date on which this Current Report on Form 8-K is required to be filed.
(d) Exhibits.





 
 
 
Exhibit 
No.
 
Description
 
 
2.1
 
 
 
 
3.1
 
 
 
 
3.2
 
 
 
 
4.1
 
 
 
10.1
 
 
 
10.2
 
 
 
 
10.3
 
 
 
 
10.4
 
 
 
 
10.5
 
 
 
 
10.6
 
 
 
99.1
 
 
 
 
99.2
 
 
99.3
 
 
 
*
Certain confidential portions and the schedules and exhibits to this agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish copies of any such schedules or exhibits to the SEC upon request.
#
The schedules and exhibits of this exhibit have been omitted from this filing pursuant to Item 601(b)(10) of Regulation S-K. The Company will furnish copies of any such schedules or exhibits to the SEC upon request.
  

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.
 
 
 
 
9 Meters Biopharma, Inc.
 
 
 
 
 
 
Date: May 4, 2020
By:
 
/s/ Edward J. Sitar
 
 
 
Edward J. Sitar
 
 
 
Chief Financial Officer


Execution Version




AGREEMENT AND PLAN OF MERGER

among:

INNOVATE BIOPHARMACEUTICALS, INC.
a Delaware corporation;

NAIA MERGER SUB, INC.
a Delaware corporation;

SECOND NAIA MERGER SUB, LLC
a Delaware limited liability company;

NAIA RARE DISEASES, INC.
an exempted company incorporated under the laws of the Cayman Islands;

AND

NAIA LIMITED
an exempted company incorporated under the laws of the Cayman Islands,
as Shareholders’ Agent



Dated as of April 30, 2020









Table of Contents                             Page

1.
The Mergers and Related Transactions                    1
1.1
The Mergers                                1
1.2
Closing Date; Merger Effective Time                    2
1.3
Organizational Documents                        2
1.4
Management of the Surviving Companies                3
1.5
Merger Consideration                            3
1.6
Effect of Merger on Company Shares                    4
1.7
Company Stock Options and Indebtedness                4
1.8
Dissenting Shares                            5
1.9
Earnout Consideration.                        5
1.10
Payment and Exchange Mechanics                    7
1.11
Withholding                                8
1.12
Closing Deliverables                            8
1.13
Closing Payment Certificate; Closing Date Payments        10
2.
Representations and Warranties of the Company                11
2.1
Due Organization; Subsidiaries                    11
2.2
Charter Documents                            11
2.3
Capitalization                                11
2.4
Financial Statements and Related Information            12
2.5
Liabilities                                13
2.6
Absence of Changes                            13
2.7
Title to Assets                                14
2.8
Bank Accounts                            15
2.9
Real Property                                15
2.10
Intellectual Property                            15
2.11
Contracts                                17
2.12
Compliance with Legal Requirements                19
2.13
Tax Matters                                19
2.14
Environmental Matters                        22
2.15
Insurance                                22
2.16
Related Party Transactions                        22
2.17
Legal Proceedings; Orders                        22
2.18
Authority                                23
2.19
Non-Contravention; Consents                        23
2.20
Brokers                                24
2.21
Anti-Corruption                            24
2.22
Regulatory Matters                            25
2.23
Inventory                                27
2.24
Employees.                                27
2.25
Employee Benefits                            28
2.26
Disclosure                                28
3.
Representations and Warranties of Purchaser, Merger Sub I
and Merger Sub II                                28
3.1
Due Organization                            28
3.2
Non-Contravention; Consents                        28
3.3
Authority; Binding Nature of Agreement                29
3.4
Absence of Undisclosed Liabilities                    29
3.5
Legal Proceedings                            29
3.6
Brokers                                29
3.7
Purchaser Stock                            29
3.8
Additional Representations and Warranties                29
3.9
Independent Investigation                        30
4.
Certain Covenants of the Parties                        30
4.1
Conduct of Business of the Company                    30
4.2
Access to Information; Confidentiality                32
4.3
Shareholders Consent                            32
4.4
Notice of Certain Events                        32
4.5
Further Assurances                            33
4.6
Public Announcements                        33
4.7
Indemnification of Officers and Directors                33
4.8
Listing of Purchaser Stock                        34
5.
Conditions to Closing                                34
5.1
Conditions to Obligations of All Parties                34
5.2
Conditions to Obligations of Purchaser and Merger Sub        35
5.3
Conditions to Obligations of the Company                36
6.
Indemnification, etc                                36
6.1
Survival of Representations                        36
6.2
Indemnification                            37
6.3
Limitations                                38
6.4
No Contribution                            39
6.5
Defense of Third-Party Claims                    39
6.6
Claims Procedures                            41
6.7
No Duplication of Recovery                        42
6.8
Other Matters                                42
7.
Tax Covenants                                    42
7.1
Tax-Free Reorganization                        42
7.2
Transfer Taxes                                42
7.3
Tax Returns                                42
7.4
Straddle Period                            43
7.5
Elections                                43
7.6
Pre-Closing Tax Returns                        43
7.7
Continuation of Business on Closing Date                43
7.8
Contests                                43
7.9
Cooperation and Exchange of Information                44
7.10
Survival                                44
8.
Termination                                    44
8.1
Termination                                44
8.2
Effect of Termination                            45
9.
Miscellaneous Provisions                            45
9.1
Shareholders’ Agent                            45
9.2
Fees and Expenses                            47
9.3
Attorneys’ Fees                            47
9.4
Notices                                47
9.5
Headings                                48
9.6
Counterparts and Exchanges by Electronic Transmission
or Facsimile                                48
9.7
Governing Law; Indemnification Claims                49
9.8
Successors and Assigns                        49
9.9
Specific Performance                            49
9.10
Waiver                                    49
9.11
Amendments                                50
9.12
Severability                                50
9.13
Parties in Interest                            50
9.14
Entire Agreement                            50
9.15
Disclosure Schedule                            50
9.16
Construction                                50


LIST OF EXHIBITS AND SCHEDULES

EXHIBITS
Exhibit A    Definitions
Exhibit B    Memorandum and Articles of Association of First-Step Surviving Company
Exhibit C    Certificate of Formation of Surviving Company*
Exhibit D    Limited Liability Company Agreement of Surviving Company*
Exhibit E    Letter of Transmittal
Exhibit F    Joinder Agreement
Exhibit G    Form of Resignation
Exhibit H    Form of Transition Services Agreement
Exhibit I    Form of Non-Competition Agreement
Exhibit K    Disclosure Schedule
Exhibit J-1    NB1001 Description and Product Milestones
Exhibit J-2    NB1002 Description and Product Milestones


*To be attached prior to Closing



SCHEDULES

Schedule A-1        Closing Payment Certificate
Schedule A-2        Securityholder Details
Schedule B-1        Regulatory Authorizations
Schedule 1.12(a)     Requisite Consents
Schedule 1.13        Indebtedness and Payees Requiring Payoff Letters

    


AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of April 30, 2020 by and among: Innovate Biopharmaceuticals, Inc., a Delaware corporation (“Purchaser”); Naia Merger Sub, Inc., a Delaware corporation and an indirect wholly owned Subsidiary of Purchaser (“Merger Sub I”); Second Naia Merger Sub, LLC, a Delaware limited liability company and an indirect wholly owned Subsidiary of Purchaser (“Merger Sub II” and together with Merger Sub I, “Merger Subs”); Naia Rare Diseases, Inc., an exempted company incorporated under the laws of the Cayman Islands (“Company”); and Naia Limited, an exempted company incorporated under the laws of the Cayman Islands, as Shareholders’ Agent. Capitalized terms used in this Agreement are defined or referenced in Exhibit A attached hereto.
RECITALS
WHEREAS, Company, Purchaser and Merger Sub I intend to effect a merger of Merger Sub I with and into the Company pursuant to which Company would become an indirect wholly owned subsidiary of Purchaser (the “First Merger”) in accordance with this Agreement and the General Corporation Law of the State of Delaware (the “DGCL”) and the CICL, and as part of the same overall transaction, the Company would then merge with and into Merger Sub II (the “Second Merger” and, together with the First Merger, the “Mergers”), on the terms and conditions set forth in this Agreement and in accordance with the CICL and the Delaware Limited Liability Company Act, as amended (the “DLLCA”);
WHEREAS, the respective board of directors of Company and Merger Sub I and the sole member of Merger Sub II have each approved, adopted and declared advisable this Agreement and the transactions contemplated hereby, including the Mergers, in accordance with the DGCL, DLLCA and the CICL and upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Purchaser’s willingness to enter into this Agreement, the Persons identified on Part 1.1(a) of the Disclosure Schedule are executing and delivering to Purchaser support agreements; and
WHEREAS, it is intended that for United States federal income tax purposes (i) the Mergers will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, (ii) this Agreement will constitute a plan of reorganization within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3, which plan of reorganization the parties adopt by executing this Agreement, and (iii) Purchaser, Merger Sub I and the Company will each be a “party to the reorganization” under Section 368(b) of the Code.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.THE MERGERS AND RELATED TRANSACTIONS

1.1    The Mergers. At the Effective Time, subject to and upon the terms and conditions of this Agreement and the applicable provisions of the DGCL and the CICL, Merger Sub I will be merged with and into the Company, the separate corporate existence of Merger Sub I will thereupon cease, and the Company will continue as the surviving company and an indirect wholly-owned subsidiary of Purchaser. The Company after the First Merger is sometimes referred to herein as the “First-Step Surviving Company”. At the Second Effective Time, the First-Step Surviving Company shall merge with and into Merger Sub II in accordance with the CICL and the DLLCA, whereupon the separate corporate existence of the First-Step Surviving Company shall cease, and Merger Sub II shall be the surviving company, shall be disregarded as an entity separate from Purchaser for U.S. federal income Tax purposes, and shall continue to be governed by the laws of the State of Delaware and the DLLCA. The surviving company after the Second Merger is sometimes referred to hereinafter as the “Surviving Company”.

1.2    Closing Date; Merger Effective Time.
(a)    The closing of the First Merger (the “Closing”) will take place as soon as practicable (and, in any event, within ten (10) Business Days) after the satisfaction or, to the extent permitted hereunder, waiver of all conditions to the Closing set forth in Article 5 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted hereunder, waiver of all such conditions), unless this Agreement has been terminated pursuant to its terms or unless another time or date is agreed to in writing by the parties hereto prior to Closing (the “Closing Date”). The Closing shall take place at the offices of Purchaser’s counsel, Wyrick Robbins Yates & Ponton LLP at 4101 Lake Boone Trail, Suite 300, Raleigh, NC 27607.
(b)    Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the First-Step Surviving Company shall file with the Secretary of State of the State of Delaware a certificate of merger, executed in accordance with the relevant provisions of the DGCL and the CICL (the “Certificate of Merger”). The First Merger will become effective upon the filing of the Certificate of Merger or at such later time as is agreed to by the Parties and specified in the Certificate of Merger (the time at which the First Merger becomes effective is herein referred to as the “Effective Time”). At the Effective Time, the effect of the First Merger shall be as provided in this Agreement and the applicable provisions of the DGCL and the CICL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all rights and property of Merger Sub I and the Company shall vest in the First-Step Surviving Company, and all debts and liabilities of Merger Sub I and the First-Step Surviving Company shall become debts and liabilities of the First-Step Surviving Company.
(c)    Promptly after the Effective Time, Surviving Company shall cause the Second Merger to be consummated by filing a certificate of merger with the Secretary of State of the State of Delaware, in accordance with the applicable provisions of the CICL and the DLLCA (the time of the filing of such certificate of merger with respect to the Second Merger, or the time of effectiveness thereof that is specified therein, if different, shall be referred to herein as the “Second Effective Time”). At the Second Effective Time, the effect of the Second Merger shall be as provided in this Agreement and the applicable provisions of the CICL and the DLLCA. Without limiting the generality of the foregoing, and subject thereto, at the Second Effective Time, all rights and property of Merger Sub II and the First-Step Surviving Company shall vest in the Surviving Company, and all debts and liabilities of Merger Sub II and the First-Step Surviving Company shall become debts and liabilities of the Surviving Company.

1.3    Organizational Documents. Without any further action on the part of the Company, Merger Sub I, Surviving Company or any other Person:
(a)    At the Effective Time, the memorandum and articles of association of the Company in the form attached here to as Exhibit B will be the memorandum and articles of association of the First-Step Surviving Company until thereafter amended in accordance with the CICL and the DLLCA, and as provided in such memorandum and articles of association.
(b)    At the Second Effective Time, the certificate of formation of Merger Sub II in substantially the form attached here to as Exhibit C shall be the certificate of formation of the Surviving Company, until thereafter amended in accordance with the DLLCA and as provided in such certificate of formation.
(c)    At the Second Effective Time, the limited liability company agreement of Merger Sub II in the form attached hereto as Exhibit D shall be the limited liability company agreement of the Surviving Company, until thereafter amended in accordance with the DLLCA and as provided in such limited liability company agreement.

1.4    Management of the Surviving Companies. Unless otherwise determined by Purchaser prior to the Effective Time, the parties shall take all requisite action so that:
(a)    Board of Directors. The directors of the Company immediately prior to the Effective Time will be the directors of the First-Step Surviving Company immediately following the Effective Time, until their respective successors are duly elected and qualified or their earlier death, resignation or removal in accordance with the Charter Documents of the First-Step Surviving Company.
(b)    Officers. The officers of the Company immediately prior to the Effective Time will be the officers of the First-Step Surviving Company until their respective successors are duly appointed and qualified or their earlier death, resignation or removal in accordance with the Charter Documents of the First-Step Surviving Company.
(c)    Managing Member. Purchaser shall be the managing member (as defined in the limited liability company agreement of the Surviving Company) of the Surviving Company.
(d)    Officers. The officers of Merger Sub II immediately prior to the Effective Time shall be the officers of the Surviving Company immediately after the Second Effective Time, each to hold office in accordance with the provisions of the limited liability company agreement of the Surviving Company.

1.5    Merger Consideration. Subject to the terms and conditions set forth in this Agreement, at the Effective Time, the Securityholders shall be entitled to receive an amount (the aggregate amount described in (a)-(g), the “Merger Consideration”) equal to (without duplication):
(a)    $2,112,000 in immediately available funds; plus
(b)    the Merger Shares; plus
(c)    one-half (1/2) of the Prepaid License Fees; minus
(d)    the Shareholders’ Agent Reserve; minus
(e)    the Company Transaction Expenses; minus
(f)    all Indebtedness outstanding as of or paid in connection with the Closing; minus
(g)    payments made to [**] by Purchaser (on behalf of, or as successor to, Company under the [**] and in accordance with the letter agreement between Company and [**] to be executed following the date hereof (the “[**] Side Letter”)) due to the transactions contemplated by this Agreement, which payments will consist of (i) $[**] to be paid in immediately available funds, and (ii) a number of Merger Shares equal to the quotient of $[**] divided by the Purchaser Stock Price (collectively, the “Initial [**] Payment”).

1.6    Effect of Merger on Company Shares. At the Effective Time, as a result of the Mergers and without any action on the part of Purchaser, Merger Sub I, Merger Sub II, the Company or any Securityholder:
(a)    Capital Stock of Merger Sub I. Each share of capital stock of Merger Sub I issued and outstanding immediately prior to the Effective Time will be converted into and become one validly issued, fully paid and non-assessable share of ordinary stock, par value $1.00 per share, of the First-Step Surviving Company and collectively will constitute the only outstanding shares of capital stock of the First-Step Surviving Company and each stock certificate of Merger Sub I evidencing ownership of any such shares will evidence ownership of such shares of ordinary shares of the First-Step Surviving Company.
(b)    Equity Interests of Merger Sub II. All shares of capital stock of the First-Step Surviving Company issued and outstanding immediately prior to the Effective Time will be converted into and become all of the equity interests of Merger Sub II and collectively will constitute the only outstanding equity interests of the Surviving Company and each stock certificate of First-Step Surviving Company evidencing ownership of any such shares will evidence ownership of such equity interests of the Surviving Company.
(c)    Cancellation of Certain Company Shares. Company Shares that are owned by the Company (as treasury stock or otherwise) or any of its respective direct or indirect wholly owned Subsidiaries shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.
(d)    Effect on Company Shares. Subject to Section 9.1(c), all Company Shares issued and outstanding immediately prior to the Effective Time (other than (i) the Company Shares to be cancelled and retired in accordance with Section 1.6(c) and (ii) any Dissenting Shares) shall cease to be outstanding and shall be converted and exchanged for, at the Effective Time, the right to receive from Purchaser, in accordance with this Agreement and the Closing Payment Certificate: (A) the Merger Consideration, plus (B) the Earnout Consideration for each Earnout Period, if any. The allocation of the Merger Consideration and the Earnout Consideration among the Company Shares will be determined pursuant to the Closing Payment Certificate. The Closing Payment Certificate calculates the portions of the Merger Consideration and Earnout Consideration payable in respect of the Company Shares consistent with the Charter Documents, taking into account the liquidation preferences set forth in the Company’s articles and memorandum of association in effect immediately prior to the Effective Time.

1.7    Company Stock Options and Indebtedness.
(a)    Neither Purchaser nor the Surviving Company will assume or otherwise replace any Company Option (whether vested or unvested) in connection with the transactions contemplated hereby. Effective as of the Effective Time, each Company Option that is then outstanding and unexercised, whether or not then vested or exercisable, shall be, by virtue of the First Merger and without any action on the part of Purchaser, Merger Subs, the Company or any Optionholder, cancelled and each Optionholder shall cease to have any rights with respect thereto. The Company shall, prior to the Effective Time, take all actions reasonably necessary in connection with the treatment of Options contemplated by this Section 1.7, including providing each holder of any Options the opportunity to exercise such Options, whether or not vested or exercisable.
(b)    Prior to the Effective Time, the Company shall payoff and extinguish all Indebtedness of the Company.

1.8    Dissenting Shares. Notwithstanding any provision of this Agreement to the contrary, including Section 1.6, Company Shares issued and outstanding immediately prior to the Effective Time (other than shares cancelled in accordance with Section 1.6(c)) and held by a holder who has not voted in favor of adoption of this Agreement or consented thereto in writing and who has properly exercised applicable appraisal rights of such shares in accordance with Section 262 of the DGCL or applicable dissent rights in accordance with Section 238 of the CICL (such shares being referred to collectively as the “Dissenting Shares” until such time as such holder fails to perfect or otherwise loses such holder’s appraisal rights under the DGCL with respect to such shares or such holder’s dissent rights under the CICL with respect to such shares) shall not be converted into a right to receive a portion of the Merger Consideration or the other amounts contemplated by the Closing Payment Certificate, but instead shall be entitled to only such rights as are granted by Section 262 of the DGCL or Section 238 of the CICL; provided, however, that if, after the Effective Time, such holder fails to perfect, withdraws or loses such holder’s right to appraisal pursuant to Section 262 of the DGCL or rights of dissent pursuant to Section 238 of the CICL or if a court of competent jurisdiction shall determine that such holder is not entitled to any such relief, such shares shall be treated as if they had been converted as of the Effective Time into the right to receive the portion of the Merger Consideration and the other amounts contemplated by the Closing Payment Certificate, if any, to which such holder is entitled pursuant to Section 1.6, without interest thereon, upon delivery of a duly executed and completed Letter of Transmittal.

1.9    Earnout Consideration.
(a)    Sales-Based Payments. Purchaser shall deposit with Shareholders’ Agent, for distribution to the Securityholders in accordance with Section 1.6, during the Royalty Term, on a Product-by-Product, country-by-country, and Calendar Quarterly basis, an amount equal to the Sales-Based Payment. Sales-Based Payments due hereunder shall be deposited and paid within 75 days of the end of each Calendar Quarter during which Net Sales occur. Within 75 days of the end of each Calendar Quarter, whether or not Net Sales occurred during such Calendar Quarter, Purchaser shall provide Shareholders’ Agent with: (i) a statement stating (as applicable) the number, description, and aggregate Net Sales, by country, of each Product sold during the relevant Calendar Quarter by Purchaser, its Affiliates, and Licensees and (ii) the calculation of Sales-Based Payments due for such Calendar Quarter. For clarity, the Parties hereby agree that no sales of any Product in a country following the expiration of the Royalty Term for such Product in such country shall be included in Net Sales for purposes of calculating any amounts due under this Section 1.9(a).
(b)    Milestone Payments.
(i)    NB1001 Milestone Payments. Purchaser shall deposit with Shareholders’ Agent, for distribution to the Securityholders in accordance with Section 1.6, the amounts set forth on Exhibit J-1 within, in each case, (A) 30 days of the first achievement of the indicated milestone with respect to an NB1001 Product (for all milestone payments not triggered by the achievement of a particular Net Sales threshold) or (B) for all milestone payments triggered by the achievement of a particular Net Sales threshold, 90 days of the end of the Calendar Quarter during which such threshold was first achieved with respect to an NB1001 Product;
(ii)    NB1002 Milestone Payments. Purchaser shall deposit with Shareholders’ Agent, for distribution to the Securityholders in accordance with Section 1.6, the amounts set forth on Exhibit J-2 within, in each case, (A) 30 days of the first achievement of the indicated milestone with respect to an NB1002 Product (for all milestone payments not triggered by the achievement of a particular Net Sales threshold) or (B) for all milestone payments triggered by the achievement of a particular Net Sales threshold, 90 days of the end of the Calendar Quarter during which such threshold was first achieved with respect to an NB1002 Product;
(iii)    Purchaser shall deposit with Shareholders’ Agent, for distribution to the Securityholders in accordance with Section 1.6, an amount equal to the amount by which Purchaser’s obligation to pay any amount to [**] under the [**], other than sales-based royalties due under Section 3.4 of the [**] or Section 3.3 of the [**], is decreased due to any credits resulting from the Initial [**] Payment or any Additional [**] Payment (as defined below; collectively, any Additional [**] Payments and $[**] of the Initial [**] Payment, the “[**] Payments”)). Such payments shall be made within 30 days of the use of such credits. Purchaser agrees to use commercially reasonable efforts to utilize such credits as soon as available under the [**], provided that Purchaser shall not use such credits for more than [**]% of any individual payment otherwise due to [**]. The Parties agree that, notwithstanding anything to the contrary, if the numbering of any Section(s) in either [**] differs from that reflected in the drafts thereof provided by Purchaser’s counsel to the Company on April 17, 2020 (each such draft, a “4/17 Draft” of such [**]), then any references in this Agreement to any Section(s) of such [**] shall, for purposes of this Agreement, be deemed to be references to the Section of such [**] corresponding to the referenced Section in such draft (e.g., if this Agreement refers to Section 3.3 of the [**], and Section 3.3 of the 4/17 Draft of such [**] corresponds to Section 3.4 of the [**], such reference in this Agreement shall be deemed to refer to Section 3.4 of the [**]).
(iv)    Purchaser shall provide Shareholders’ Agent written notice of the achievement of each milestone described in Exhibit J-1 and Exhibit J-2 by the applicable due date for payment set forth therein. Each milestone payment in Exhibit J-1 and Exhibit J-2 shall only be paid once under this Agreement, with respect to the initial accomplishment thereof, regardless of the number of Products (or indications therefor or formulations thereof) or the number of times such milestone may be achieved.
(c)    Additional [**] Payments. If (i) any particular payment due under Section 1.9(a), 1.9(b)(i), or 1.9(b)(ii) would, without taking into account the effects of this Section 1.9(c), cause [**] percent ([**]%) of the total aggregate payments under Section 1.9(a), 1.9(b)(i), and 1.9(b)(ii) to exceed the milestone and royalty payments paid or payable to [**] under the [**] following the Effective Time and (ii) Purchaser pays [**] an amount equal to [**] percent ([**]%) of such particular payment due under Section 1.9(a), 1.9(b)(i), or 1.9(b)(ii) pursuant to Section 3 of the [**] Side Letter (each, an “Additional [**] Payment”), Purchaser shall, in lieu of the amount of such particular payment due under Section 1.9(a), 1.9(b)(i), or 1.9(b)(ii) without taking into account the effects of this Section 1.9(c), only be required under Section 1.9(a), 1.9(b)(i), or 1.9(b)(ii) to pay the Shareholders’ Agent [**] percent ([**]%) of such amount. In the event Section 3 of the [**] Side Letter differs from Section 3 of the draft of such letter provided by Purchaser’s counsel to Company on April 13, 2020 in a manner that changes the intended functioning of this Section 1.9(c) (as determined with reference to such draft), the Parties shall, if requested by either Party, use reasonable good faith good faith efforts to amend this Section 1.9(c) in a manner intended to maintain consistency with the economic principles reflected by this Section 1.9(c) in light of such draft.
(d)    Prepaid License Fees. Purchaser shall, within 90 days of the Effective Date, (i) deposit with Shareholders’ Agent, for distribution to the Securityholders in accordance with Section 1.6, an amount equal to one-half (1/2) of the Prepaid License Fees.
(e)    Payment Method. Except for the Purchaser Stock to be issued to Securityholders, all payments due under this Section 1.9 shall be made by bank wire transfer in immediately available funds to the accounts designated by Shareholders’ Agent. All payments hereunder shall be made in the legal currency of the United States of America.
(f)    Tax. In the event any Tax is paid or required to be withheld by Purchaser for the benefit of the Securityholders on account of any payments payable to Securityholders (or to Shareholders’ Agent on Securityholders’ behalf) under this Agreement, the corresponding amounts payable to Securityholders (or to Shareholders’ Agent on Securityholders’ behalf) shall be reduced by the amount of Taxes deducted and withheld, and Purchaser shall pay the amounts of such Taxes to the proper Governmental Authority in a timely manner and promptly transmit to Shareholders’ Agent an official Tax certificate or other evidence of such Tax obligations together with, if reasonably available, proof of payment from the relevant Governmental Authority of all amounts deducted and withheld sufficient to enable Securityholders to claim such payment of Taxes. Any such withholding Taxes required under applicable law to be paid or withheld shall be an expense of, and borne solely by, Securityholders, as applicable. Purchaser will provide Shareholders’ Agent with, at Shareholders’ Agent’s sole expense, reasonable assistance to enable Shareholders’ Agent, on Securityholders’ behalf, to recover such Taxes or amounts otherwise withheld as permitted by law. Notwithstanding anything to the contrary, this Section 1.9(f) shall be subject to, and without limitation of, Section 1.11.
(g)    Records and Audit. Purchaser shall maintain, and shall cause its Affiliates and Licensees to maintain, complete and accurate records of its and their Product development, approval, and sales activities that may be necessary for the purposes of calculating all payments due under this Section 1.9. So long as any payments are accruing under this Section 1.9, and for three (3) years thereafter, Purchaser shall permit, and shall cause its Affiliates to permit, Shareholders’ Agent or an independent certified public accountant selected by Shareholders’ Agent and reasonably acceptable to Purchaser (and which has entered into a non-disclosure agreement reasonably satisfactory to Purchaser) to inspect and audit such records of Purchaser and its Affiliates from time to time, upon at least thirty (30) days’ prior notice, for purposes of verifying the accuracy of reports and payments made under this this Section 1.9. Upon written request of Shareholders’ Agent, Purchaser shall (i) subject to the terms of the agreement pursuant to which any Licensee obtained rights to any Product, exercise its corresponding audit rights thereunder with respect to the above-referenced records and provide a copy of the results thereof to Shareholders’ Agent or (ii) share the results of any audit of any Licensee with respect to any Net Sales of Products that is undertaken by Purchaser independently of a request for such an audit by Shareholders’ Agent. Purchaser shall ensure that all Licensees have agreed in writing to audit provisions materially similar to those set forth herein. Shareholders’ Agent will bear the cost of any audit referenced in this Section 1.9(f) (other than those of any Licensee that are undertaken by Purchaser independently of any request therefor by Shareholders’ Agent) unless such audit discloses a deficiency in Purchaser’s payments of greater than 10% for the period subject to such audit, in which case Purchaser shall bear the reasonable cost of such audit. Notwithstanding anything to the contrary, Shareholders’ Agent shall only be entitled to request one audit of Purchaser and its Affiliates, and one audit of each Licensee, per year.

1.10    Payment and Exchange Mechanics.
(a)    Letter of Transmittal. As soon as commercially practicable, to the extent not previously delivered, the Company shall mail or otherwise deliver to each Securityholder, a letter of transmittal in substantially the form attached hereto as Exhibit E (each, a “Letter of Transmittal”) and a joinder agreement in substantially the form attached hereto as Exhibit F (each, a “Joinder Agreement”). Following the Effective Time, upon proper surrender of a Company Share Certificate for cancellation pursuant to the Letter of Transmittal and delivery of a duly completed and executed Letter of Transmittal and Joinder Agreement, the holder of such Company Share Certificate shall be entitled to receive in exchange therefor, the consideration reflected on the Closing Payment Certificate in accordance with Section 1.6. If payment in respect of any Company Share Certificate is to be made to a Person other than the Person in whose name such Company Share Certificate is registered, it shall be a condition of payment that the Company Share Certificate so surrendered shall be transferable and be properly endorsed or shall otherwise be in proper form for transfer, that the signatures on such Company Share Certificate or any related stock power shall be properly guaranteed and that the Person requesting such payment shall have established that any transfer and other Taxes required by reason of such payment to a Person other than the registered holder of such Company Share Certificate have been paid or are not applicable. Until surrendered as contemplated by this Section 1.10(a), each Company Share Certificate shall be deemed at all times after the Effective Time to represent only the right to receive upon such surrender the applicable portion of the Merger Consideration and the applicable portion of any Earnout Consideration that become payable pursuant to this Agreement in respect of such Company Share Certificate. Holders of Company Share Certificates shall not be entitled to receive any portion of the Merger Consideration to which they would otherwise be entitled until such Company Share Certificates are properly surrendered.
(b)    No Further Rights in the Company Shares. The applicable portion of the Merger Consideration paid or payable in respect of the surrender of the Company Shares in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares. If, after the Effective Time, certificates evidencing capital stock of Company (“Company Share Certificates”) are presented to Purchaser for any reason, they shall be canceled and exchanged as provided in this Section 1.10.
(c)    Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional shares of Purchaser Stock shall be issued in exchange for any Company Share and no holder of any of the foregoing shall be entitled to receive a fractional share of Purchaser Stock. In the event that any holder of Company Shares would otherwise be entitled to receive a fractional share of Purchaser Stock (after aggregating all shares and fractional shares of Purchaser Stock issuable to such holder), then such holder shall receive a number of shares of Purchaser Stock rounded up to the nearest whole share. The parties acknowledge that rounding up the number of shares of Purchaser Stock in lieu of issuing fractional shares of Purchaser Stock was not separately bargained for consideration but represents merely a mechanical rounding off for purposes of simplifying the problems that would otherwise be caused by the issuance of fractional shares of Purchaser Stock.

1.11    Withholding. Purchaser, Merger Subs and the Company, as applicable, will be entitled to deduct and withhold from the amounts payable pursuant to this Agreement to any Person, and to pay over to the applicable Governmental Body (or other applicable Person) such amounts as Purchaser, Merger Subs and the Company, as applicable, are required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or non-U.S. Tax law or under any other applicable Legal Requirement; provided, however, that Purchaser shall use commercially reasonable efforts to consult with Shareholders’ Agent prior to withholding any amounts payable hereunder and to cooperate with Shareholders’ Agent to minimize or eliminate any such withholding. To the extent such amounts are so deducted or withheld and paid to the appropriate Governmental Body, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid. To the extent that Purchaser is required to deduct and withhold any amounts in connection with any payments of Purchaser Stock, Purchaser shall, at its discretion, (a) be entitled to retain a portion of Purchaser Stock equal in value to such required deduction or (b) offset the amounts required to be deducted and withheld against cash payments required to be made by Purchaser to the recipient of the Purchaser Stock.

1.12    Closing Deliverables.
(a)    At or prior to the Closing Date, the Company shall deliver to Purchaser the following:
(i)    the Certificate of Merger executed by the Company;
(ii)    the certificate of merger with respect to the Second Effective Time executed by the First-Step Surviving Company;
(iii)    resignations of the directors and officers of the Company and First-Step Surviving Company, as applicable, in the form attached hereto as Exhibit G;
(iv)    a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of the Company dated the Closing Date certifying that (A) attached thereto are true and complete copies of (1) all resolutions adopted by the Company Board authorizing the execution, delivery and performance of this Agreement and the Transactional Agreements to which the Company is a party and the consummation of the transactions contemplated hereby and thereby and (2) resolutions of the Shareholders approving the First Merger and adopting this Agreement, (B) all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby as of the Closing Date, and (C) the names and signatures of the officers of the Company authorized to sign this Agreement, the Transactional Agreements and the other documents to be delivered hereunder and thereunder (in each case to which the Company is a party);
(v)    a good standing certificate (or its equivalent) from the secretary of state or similar Governmental Body of the jurisdiction under the Legal Requirements in which the Company is organized;
(vi)    the Closing Payment Certificate contemplated in Section 1.13; and attached hereto as Schedule A-1;
(vii)    the consents to assignment and approvals listed in Schedule 1.12(a);
(viii)    the [**] Licenses and [**] License, respectively, duly executed by [**] and [**], respectively, and the Company;
(ix)    the Transition Services Agreement executed by Naia Pharmaceuticals, Inc., in the form attached hereto as Exhibit H;
(x)    the non-competition agreements in the form attached hereto as Exhibit I executed by Daniel Perez, MD and Mark Bagnall (the “Non-Competition Agreements”);
(xi)    a statement from the Company validly executed by a duly authorized officer of the Company that (A) the Company is not, and has not been at any time during the five (5) years preceding the date of such statement, a “United States real property holding corporation”, as defined in Section 897(c)(2) of the Code, and (B) no interest in the Company is a “United States real property interest”, as defined in Section 897(c)(1) of the Code, such statement conforming to the requirements of Treasury Regulations Section 1.1445-2(c)(3) and 1.897-2(h), and a notice of such statement to be delivered by Purchaser to the IRS on behalf of the Company in accordance with the provisions of Treasury Regulations Section 1.897-2(h)(2), each in a form reasonably acceptable to Purchaser;
(xii)    the directors’ declarations required under Section 233 and Section 237 of the CICL;
(xiii)    the [**] Side Letter; and
(xiv)    such other documents or instruments as Purchaser may reasonably request and are reasonably necessary to consummate the transactions contemplated by this Agreement.
(b)    On the Closing Date, Purchaser shall deliver to the Company the following:
(i)    the Certificate of Merger executed by Purchaser or Merger Sub I, as applicable;
(ii)    the certificate of merger with respect to the Second Effective Time executed by Purchaser or Merger Sub II, as applicable;
(iii)    the Transition Services Agreement executed by Purchaser, in the form attached hereto as Exhibit H.
(iv)    a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Purchaser, Merger Sub I and Merger Sub II certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors (or board of managers, as applicable) of Purchaser, Merger Sub I and Merger Sub II authorizing the execution, delivery and performance of this Agreement and the Transactional Agreements and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby;
(v)    a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Purchaser, Merger Sub I and Merger Sub II certifying the names and signatures of the officers of Purchaser, Merger Sub I and Merger Sub II authorized to sign this Agreement, the Transactional Agreements and the other documents to be delivered hereunder and thereunder; and
(vi)    such other documents or instruments as the Company and Shareholders’ Agent reasonably request and are reasonably necessary to consummate the transactions contemplated by this Agreement.

1.13    Closing Payment Certificate; Closing Date Payments.
(a)    No later than three (3) Business Days prior to the Closing Date, the Company shall deliver to Purchaser: (A) the Closing Payment Certificate; and (B) a pay-off letter duly executed by each Person to whom any Indebtedness will remain unpaid or otherwise be owed, as of immediately prior to the Effective Time, by the Company, the Surviving Company or any Subsidiary of the Company (each of which Persons are set forth on Schedule 1.13), which pay-off letter shall include a complete release of the Purchaser, the Company, the Surviving Company and each Subsidiary from all Encumbrances, liabilities and other obligations with respect to such Indebtedness, effective upon the discharge of such Indebtedness at the Closing. The parties agree that Purchaser, Merger Subs and Shareholders’ Agent shall be entitled to rely on the Closing Payment Certificate in making payments under this Agreement and shall not be responsible for the calculations or the determinations regarding such calculations in such Closing Payment Certificate.
(b)    Purchaser shall make the following payments, in each case in the respective amounts set forth in the Closing Payment Certificate:
(i)    To each Securityholder, on the later of the Closing Date or the date each Securityholder provides a duly completed and executed Letter of Transmittal and Joinder Agreement as described in Section 1.10(a), the Merger Consideration payable by wire transfer of immediately available funds and shares of Purchaser Stock to the Securityholders as set forth in the Closing Payment Certificate; and
(ii)    on the Closing Date, to each Person specified in the Closing Payment Certificate as a recipient of payments in respect of the Indebtedness or Company Transaction Expenses that remains unpaid as of immediately prior to the Effective Time, by wire transfer of immediately available funds, the amount payable to such Person as specified in the Closing Payment Certificate.

2.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule prepared pursuant to Section 9.15, the Company represents and warrants to Purchaser that the statements contained in this Article 2 are true and correct as of the date of this Agreement and will be true and correct as of the Closing as though made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties will be true and correct as of such date).

2.1    Due Organization; Subsidiaries. The Company has been duly incorporated, and is validly existing and in good standing (to the extent that the laws of the jurisdiction of its formation recognize the concept of good standing), under the laws of the jurisdiction of its incorporation. The Company has full power and authority: (i) to conduct its business in the manner in which its business is currently being conducted and is presently proposed to be conducted; (ii) to own and use its assets in the manner in which its assets are currently owned and used and are presently proposed to be owned and used; and (iii) to perform its obligations under all Contracts to which it is a party or by which it is bound. The Company is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased, or operated by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified and, to the extent applicable, in corporate good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has no Subsidiaries and does not own or control and has never owned or controlled, directly or indirectly, any interest in any corporation, partnership, limited liability company, association or other Entity. There is no direct or indirect obligation, contingent or otherwise, of the Company to provide funds to, or make any investment in (in the form of a loan, capital contribution or otherwise), or provide any guarantee with respect to the obligations of, any other Person.

2.2    Charter Documents. The Company has made available to Purchaser accurate and complete copies of its articles and memorandum of association, including all amendments thereto (the “Charter Documents”). All actions taken and all transactions entered into by the Company have been duly approved by all necessary action of the board of directors and shareholders of the Company as required by the Charter Documents or the laws of the jurisdiction of the Company’s formation or incorporation. There has been no violation of any of the provisions of the Charter Documents, and the Company has not taken any action that is inconsistent with any resolution adopted by the Company’s shareholders, board of directors or any committee of the board of directors. The stock records, minute books and other corporate records of the Company are accurate and up-to-date and complete in all respects, and have been maintained in accordance with reasonable business practices and all applicable Legal Requirements.

2.3    Capitalization.
(a)    Outstanding Securities. The authorized share capital of the Company is $54,750 divided into 30,000,000 Ordinary Shares of $0.001 par value each and 24,750,000 Preference Shares of $0.001 par value each, 15,250,000 of which are classified as Series 1 Preference Shares, 2,500,000 of which are classified as Series A Preference Shares and 7,000,000 of which are classified as Series B Preference Shares. Schedule A-2 sets forth (i) the names, last known address, email address and tax ID numbers of the Securityholders, (ii) each Securityholder’s Pro Rata Share, and (iii) the class and number of Company Shares owned of record by each of the Securityholders. All of the outstanding Company Shares have been duly authorized and validly issued, and are fully paid and non-assessable. None of the outstanding Company Shares are subject to any repurchase option, forfeiture provision, or restriction on transfer (other than restrictions on transfer imposed by virtue of applicable federal and state securities laws) except as set forth on Part 2.3(a) of the Disclosure Schedule. No Company Shares will be issued on or prior to the Closing Date except as set forth on Schedule A-2. There is no Liability for dividends or other distributions to any holder of Company equity interests that is accrued and unpaid by the Company. No outstanding securities, including the Company Shares, of the Company are subject to vesting, rights of forfeiture, or repurchase rights that will lapse, in whole or in part, as a result of this Agreement and the transactions contemplated hereby.
(b)    Stock Options. Except as set forth in Schedule A-2, there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other Contracts or commitments that could require Company to issue, sell, or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Company.
(c)    No Other Securities. Except as set forth in Schedule A-2 there is no: (i) outstanding subscription, option, call, convertible note, warrant or right (whether or not currently exercisable) to acquire any Company Shares or other securities or equity interest of or in the Company or any derivative of any of the foregoing; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any Company Shares (or cash based on the value of such shares) or other securities of the Company or any derivative of any of the foregoing; (iii) Contract under which the Company is or may become obligated to sell or otherwise issue any Company Shares or any other securities or equity interest, including any promise or commitment to grant any securities of the Company to any Person; or (iv) any condition or circumstance that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any Company Shares or other securities of the Company.
(d)    Legal Issuance. All outstanding Company Shares, securities and other equity interests that have ever been issued or granted by the Company (i) are listed on Schedule A-2 and (ii) have been issued and granted in material compliance with: (1) all applicable securities laws and other applicable Legal Requirements; and (2) all requirements set forth in all applicable Contracts. Except as set forth on Part 2.3(d) of the Disclosure Schedules, none of the outstanding Company Shares, securities and other equity interests that have ever been issued or granted by the Company were issued in violation of any preemptive rights or other rights to subscribe for or purchase securities of the Company as required by the Charter Documents or any Legal Requirement.

2.4    Financial Statements and Related Information.
(a)    Delivery of Financial Statements. Part 2.4(a) of the Disclosure Schedule contains a true and correct copy of the following unaudited financial statements of the Company (collectively the “Financial Statements”): compiled balance sheet as of December 31, 2018; statement of income for the fiscal year ended December 31, 2018; the unaudited balance sheet of the Company as of December 31, 2019 (the “Balance Sheet Date”); statement of income for the two months ended February 29, 2020; and the unaudited balance sheet of the Company as of February 29, 2020. The unaudited balance sheet of the Company as of December 31, 2019 is hereinafter referred to as the “Balance Sheet.”
(b)    Fair Presentation. The Financial Statements (i) are derived from and are in accordance with the books and records of the Company, and (ii) are complete and accurate in all material respects and present fairly in all material respects the financial position of the Company as of the respective dates thereof and the results of operations and cash flows of the Company for the periods covered thereby. The Company does not have any off-balance sheet arrangements within the meaning of Item 303 of Regulation S-K promulgated by the SEC. The Company has established and maintains a system of internal accounting controls reasonably designed to provide reasonable assurances that transactions, receipts and expenditures of the Company are being executed and made only in accordance with appropriate authorizations. Neither the Company nor, to the Knowledge of the Company, any representative of the Company has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim regarding the accounting or auditing practices, procedures, methodologies, or methods of the Company or its internal accounting controls. There are no significant weaknesses in the design or operation of the Company’s internal financial controls. There have been no instances of fraud with respect to the conduct of the operations of the Company during any period covered by the Financial Statements.
(c)    Schedule 1.13 includes all Indebtedness as of the Effective Date.

2.5    Liabilities. The Company does not have any Liabilities except for: (i) Liabilities identified as such in the Balance Sheet; (ii) Liabilities identified in Part 2.5(a) of the Disclosure Schedule; (iii) Liabilities for performance of obligations of the Company apparent on the face of Contracts that have been made available to Purchaser; and (iv) Liabilities incurred in connection with the transactions contemplated hereby. The Company has never guaranteed payment or performance of the Liability of any other Person or pledged any of its assets to secure the Liability of another Person. Except as set forth in Part 2.5(b) of the Disclosure Schedule, the Liabilities referred to in clauses (ii), (iii) and (iv) of this Section 2.5 are not, individually or in the aggregate, material to the Company.

2.6    Absence of Changes. Except as set forth in Part 2.6 of the Disclosure Schedules, since the Balance Sheet Date through the date of this Agreement:
(a)    there has not been any change, event, circumstance or condition to the Knowledge of the Company that, individually or in the aggregate, has had, or would reasonably be expected to have, a Material Adverse Effect;
(b)    there has been no split, combination or reclassification of any of the outstanding share capital of the Company, and the Company has not declared or paid any dividends on or made any other distributions (in either case, in stock or property) on or in respect of the outstanding share capital of the Company;
(c)    the Company has not allotted, reserved, set aside or issued, or authorized or proposed the allotment, reservation, setting aside or issuance of, or purchased or redeemed or proposed the purchase or redemption of, any equity interest, shares in its capital stock or any equity interest or securities convertible or exchangeable into, or rights, warrants or options to acquire, any such equity interest or shares or other convertible or exchangeable securities;
(d)    except as required as a result of a change in applicable law or GAAP, there has not been any material change in any method of accounting or accounting practice by the Company;
(e)    the Company has not (i) acquired or sold, pledged, leased, encumbered or otherwise disposed of any material property or assets or agreed to do any of the foregoing or (ii) incurred or committed to incur capital expenditures, in each case in excess of $25,000, in the aggregate;
(f)    there has been no transfer (by way of a license or otherwise) of, or execution of any agreement to transfer, any Person’s rights to any of the Company IP, other than non-exclusive licenses and sublicenses provided in the ordinary course of business;
(g)    there has been no written notice delivered to the Company of any claim of ownership by a third party of any of the Company IP, or of infringement by the Company of any Intellectual Property Rights of any Person;
(h)    there has not been any: (i) grant of any severance, change-in-control, retention, or termination pay to any employee or other service provider of the Company or any Contract entered or amended providing for the grant of any severance, change-in-control, retention, or termination pay to any employee or other service provider of the Company, in each case, other than as required by law other than any arrangement that does not entail such severance, change-in-control, retention, or termination pay for any employee; (ii) entry into any employment, deferred compensation, severance, equity, pension, post-retirement or other similar plan or agreement (or any amendment to any such existing agreement) with any new or current employee or other service provider of the Company; (iii) hiring or engaging any officer, employee, independent contractor, consultant or other service provider; or (iv) increase in the compensation, bonus or other benefits (including accelerated equity vesting) payable or to become payable to any employee or other service provider of the Company, except, with respect to (ii) and (iii) of this Subsection (h), as required by law, in the ordinary course of business consistent with past practice;
(i)    there has not been any: (i) settlement or compromise of any material Tax claim, audit, or assessment, (ii) making or changing of any material Tax election, changing of any annual Tax accounting period, or adoption or changing of any method of Tax accounting, (iii) amendment of any material Tax Returns or filing of claims for material Tax refunds, (iv) entry into any material closing agreement; (v) surrender in writing of any right to claim a material Tax refund, offset, or other reduction in Tax liability; or (vi) consent to any extension or waiver of the limitation period applicable to any material Tax claim or assessment relating to the Company;
(j)    there has not been any change or amendment to the Charter Documents;
(k)    there has not been any incurrence, creation or assumption by the Company of (i) any Encumbrance on any of its assets or properties (other than Permitted Encumbrances), or (ii) any Liability as a guarantor or surety with respect to the obligations of others;
(l)    there has not been any transaction with a Related Person;
(m)    there has not been any delay or postponement by the Company in the payment of any Liability; and
(n)    there has not been any agreement to do any of the foregoing or any action or omission that would result in any of the foregoing.

2.7    Title to Assets. Except as otherwise provided in Part 2.7 of the Disclosure Schedule, the Company owns, and has good, marketable and valid title to, or a valid right to use, all tangible personal property purported to be owned by it, including: (i) all tangible personal property reflected on the Financial Statements; and (ii) all other tangible personal property reflected in the books and records of the Company as being owned by the Company. All of said assets are owned by the Company free and clear of any liens or other Encumbrances, except for Permitted Liens. The assets owned by the Company are all of the assets necessary for the Company to conduct its business as currently conducted.

2.8    Bank Accounts. Part 2.8 of the Disclosure Schedule provides the following information with respect to each account maintained by or for the benefit of the Company at any bank or other financial institution: (a) the name of the bank or other financial institution at which such account is maintained; (b) the account number; (c) the type and primary use of account; and (d) the names of all Persons who are authorized to sign checks or other documents with respect to such account and the type of access each such signer holds (administrative, view, transactional, etc.); and (e) the approximate amount held in such account as of two (2) Business Days prior to the date of this Agreement. There are no safe deposit boxes or similar arrangements maintained by or for the benefit of the Company.

2.9    Real Property. The Company does not own any real property. The Company does not lease any real property.

2.10    Intellectual Property.
(a)    Subject to Section 2.10(f), the Company exclusively owns, or validly Controls, all Company IP, in each case free and clear of all Liens (other than Permitted Liens). All Company IP will, immediately subsequent to the Effective Time, be transferred to, and Controlled by, Surviving Company on substantially the same terms with which the Company, immediately prior to the Closing, Controlled such Company IP. For the avoidance of doubt, this Section 2.10(a) does not constitute a representation or warranty of the Company relating to infringement, misappropriation or other violation of the Intellectual Property Rights of any Person. Except as set forth in Part 2.10(a) of the Disclosure Schedule, to the Company’s Knowledge, the Company IP constitutes all Intellectual Property Rights necessary to conduct the Company’s Business or manufacture, use, sell, or import Products or Compounds.
(b)    To the Company’s Knowledge, the Company has not infringed, misappropriated or otherwise violated and the Company is not infringing, misappropriating or otherwise violating (including with respect to the discovery, development, clinical testing, manufacture, distribution, advertising, use, Exploitation or sale by the Company of a Product or the Compounds) the rights of any other Person. To the Company’s Knowledge, no other Person or Persons has infringed, misappropriated or otherwise violated or is or are infringing, misappropriating or otherwise violating any Company IP.
(c)    No claims against the Company are pending or, to the Company’s Knowledge, threatened with regard to (i) the Control or use of any Company IP; (ii) any actual or potential infringement, misappropriation or unauthorized use of Company IP; (iii) any actual or potential infringement, misappropriation or unauthorized use of any third party’s Intellectual Property Rights; or (iv) the validity or enforceability of any Company IP. The Company has the right to bring actions for infringement, including all rights to recover damages for past infringement (to the extent permitted by applicable Law), of all Company IP.
(d)    Part 2.10(d) of the Disclosure Schedule sets forth, as of the date hereof, a complete and accurate list of all patents and applications therefor, trademarks, registrations thereof (if any), and applications therefor (if any), domain name registrations (if any), copyright registrations (if any) and all invention disclosures, that, in each case, are owned, licensed, or otherwise Controlled by the Company. The patent applications listed in Part 2.10(d) of the Disclosure Schedule that are owned by the Company are (and such applications that are licensed or otherwise Controlled by the Company are, to the Company’s Knowledge) pending and have not been abandoned and have been and continue to be timely prosecuted. All patents, registered trademarks and applications for either of the foregoing owned by the Company have been (and all such patents, registered trademarks and applications licensed or otherwise Controlled by the Company have been, to the Company’s Knowledge) duly registered or filed with or issued by each appropriate Governmental Authority in the jurisdiction indicated in Part 2.10(d) of the Disclosure Schedule, all related necessary affidavits of continuing use have been (or, with respect to Intellectual Property Rights licensed to the Company, to the Company’s Knowledge have been) timely filed, and all related necessary maintenance fees have been (or, with respect to licenses, to the Company’s Knowledge have been) timely paid to continue all such rights in effect. None of the patents listed in Part 2.10(d) of the Disclosure Schedule that are owned by the Company have (and no such patents that are licensed or otherwise Controlled by the Company have, to the Company’s Knowledge) expired, been disclaimed, in whole or in part, been declared invalid, in whole or in part, or held to be unenforceable by any Governmental Authority. None of the trademarks or trademark applications listed in Part 2.10(d) of the Disclosure Schedule that are owned by the Company are (and no such trademarks or trademark applications that are licensed or otherwise Controlled by the Company are, to the Company’s Knowledge) involved in or the subject of any ongoing oppositions, cancellations or other proceedings. None of the patents or patent applications listed in Part 2.10(d) of the Disclosure Schedule that are owned by the Company are (and no such patents or patent applications that are licensed or otherwise Controlled by the Company are, to the Company’s Knowledge) involved in or the subject of any material ongoing interferences, oppositions, reissues, reexaminations or other proceedings, including ex parte (other than ex parte proceedings in connection with such patent applications) and post-grant proceedings, in the United States Patent and Trademark Office or in any foreign patent office or similar administrative agency. Each of the patents and patent applications listed in Part 2.10(d) of the Disclosure Schedule that are owned by the Company properly identifies (and, to the Company’s Knowledge, such patents and applications licensed or otherwise Controlled by the Company properly identify) each and every inventor of the claims thereof as determined in accordance with the Laws of the jurisdiction in which such patent is issued or such patent application is pending. Each inventor named on the patents and patent applications listed in Part 2.10(d) of the Disclosure Schedule that are owned by the Company has executed (and, to the Company’s Knowledge, such inventors named on such patents and applications that are licensed or otherwise Controlled by the Company have executed) an agreement assigning his, her or its entire right, title and interest in and to such patent or patent application, and the inventions embodied and claimed therein, to the Company, or in the case of licensed Patents, to the appropriate owners. To the Company’s Knowledge, no such inventor has any contractual or other obligation that would preclude any such assignment or otherwise conflict with the obligations of such inventor to the Company under such agreement with the Company.
(e)    No current or former director, officer, employee, contractor or consultant of the Company owns any rights in or to any Company IP. All current and former directors, officers, employees, contractors and consultants of the Company who contributed to the discovery, creation or development of any Company IP did so (i) within the scope of his or her employment such that it constituted a work made for hire under applicable Law and all Company IP arising therefrom became the exclusive property of the Company or (ii) pursuant to a written agreement, assigned all of his or her rights in Company IP to the Company. No current or former directors, officers, employees, contractors or consultants of the Company has made or, to the Company’s Knowledge, threatened to make any claim or challenge against the Company or any Affiliates of the Company in connection with their contribution to the discovery, creation or development of Company IP.
(f)    Part 2.10(f) of the Disclosure Schedule sets forth a complete and accurate list as of the date hereof of all options, rights, licenses or interests of any kind relating to any Company IP (i) granted to the Company by any other Person (other than software licenses for commercially available off the shelf software and except pursuant to employee proprietary inventions agreements (or similar employee agreements) that have been made available to the Purchaser), or (ii) granted by the Company to any other Person (including any obligations of such other Person to make any fixed or contingent payments, including royalty payments). All obligations for payment of monies currently due and payable by the Company and other material non-payment-related obligations in connection with such options, rights, licenses or interests have been satisfied in a timely manner. The Company is not in material breach of, and, to Company’s Knowledge, no counterparty to any such options, rights, or licenses is in breach of, any such options, rights, or licenses.
(g)    Company has used reasonable efforts to make all filings with Governmental Authorities and obtain all grants and registrations as may be reasonably necessary or appropriate to preserve and protect the Company IP, and, to Company’s Knowledge, all third party licensors of the Company with respect to any Company IP have used such reasonable efforts.
(h)    Company has used reasonable efforts and taken commercially reasonable steps designed to maintain in confidence its Trade Secrets and other confidential information acquired, conceived, developed, collected, compiled, generated, reduced to practice or otherwise made or used in connection with the Business or related to a Product or the Compounds, including through the development of a policy for the protection of intellectual property; requiring all independent contractors with access to confidential information and employees (if any) of the Company to execute confidentiality agreements with respect to intellectual property developed for or obtained from the Company; and entering into licenses and Contracts that generally require licensees, contractors and other Third Parties with access to the Trade Secrets or other confidential information to keep such Trade Secrets or other confidential information confidential.
(i)    The execution and delivery of this Agreement by the Company does not, and the consummation of the transactions contemplated hereby and compliance by the Company with the provisions of this Agreement will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any right or obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon or the transfer of, any Company IP.

2.11    Contracts.
(a)    List of Contracts. Part 2.11(a) of the Disclosure Schedule accurately lists, as of the date of this Agreement:
(i)    (A) each Company Contract relating to the employment of, or the performance of services by, any Person that provides for annual, aggregate compensation in excess of $25,000 per year (excluding, to the extent otherwise set forth on the Disclosure Schedule, option grants and option notices); (B) any Company Contract pursuant to which the Company will as a result of the consummation of the transactions under this Agreement become obligated to make any payment or other severance, termination or similar payment to any Company Employee; and (C) any Company Contract pursuant to which the Company is or will, as a result of the consummation of the transactions under this Agreement, become obligated to make any bonus or similar payment (other than payment in respect of salary) to any Company Employee;
(ii)    each Company Contract which provides for indemnification of any officer, director, employee or agent of the Company (other than a Company Employee Plan or indemnification provisions in the Company’s standard form of consulting agreement (that has been provided to Purchaser) where the indemnification provision is included in the ordinary course of business consistent with past practice);
(iii)    each Company Contract imposing any restriction on the Company: (A) to compete with any other Person or engage in any aspect of its business in any other geography or market; or (B) to acquire any product or other asset or any services from any other Person, to sell any product or other asset to or perform any services for any other Person or to transact business with any other Person; or (C) to develop, distribute or make available any Technology or Intellectual Property Rights; or (D) to solicit potential employees, consultants, contractors or other suppliers or customers;
(iv)    each Contract: (A) granting the Company a license or permission to use, or other rights to license, manufacture, market, sell, support, make available or deliver, any Product (other than non-exclusive licenses to commercially available third-party software and/or software-as-a-service offerings with a replacement cost and/or annual license fee of less than $5,000 per annum); (B) contemplating an exclusive relationship between the Company and any other Person; or (C) granting another Person a right of first refusal; or (D) in which the Company grants any Person a license or permission to use Intellectual Property Rights or to license, market, sell, support, make available or deliver any Product or Company IP;
(v)    each Company Contract that includes a “most favored customer” or similar clause by Company to any other Person;
(vi)    each Company Contract creating or involving any partnership, joint venture, joint marketing, joint development, agency relationship, sales representative, channel partner, distribution or reseller arrangement or franchise relationship with any other Person;
(vii)    each Company Contract regarding the acquisition, issuance or transfer of any securities or other equity interest and each Company Contract relating to any securities of the Company including any restricted share agreements or securities escrow agreements (other than option notices and option grants in the forms made available to Purchaser);
(viii)    each Company Contract involving any Indebtedness;
(ix)    any Company Contract (A) imposing any confidentiality obligation on Company or on any other Person (other than routine, reasonable, and customary nondisclosure agreements that individually or in the aggregate would not reasonably be expected to adversely impact the ability of Purchaser to operate the Business, develop, manufacture, commercialize, or enter into exclusive licenses or other strategic transactions with respect to Products or Compounds, or prosecute, protect, or enforce any Intellectual Property Rights with respect to Products or Compounds, the Company Contracts with routine, reasonable, and customary confidentiality provisions, in each case entered into by Company in the ordinary course of business or confidentiality agreements entered into in connection with a strategic process with a party other than Purchaser), (B) containing “standstill” or similar provisions, or (C) providing any right of first negotiation, right of first refusal or similar right to any Person;
(x)    any Company Contract under which any of the transactions contemplated by this Agreement would trigger more favorable terms for any other Person with respect to price or any extension of the term of the Company Contract;
(xi)    any Company Contract with any Person with whom the Company does not deal at arm’s length;
(xii)    any Company Contract that involves the sharing of profits with other Persons or the payment of royalties or referral fees to any other Person;
(xiii)    any Contract that involves or is reasonably expected to involve payments to or by the Company in an amount in excess of $30,000 annually; or the performance of services having a value in excess of $30,000 annually, and in each case, is not cancelable without penalty within 30 days;
(xiv)    any other Company Contract entered into outside of the Company’s ordinary course of business;
(xv)    any Company contract containing an earn out or other contingent payment or obligation; and
(xvi)    any other Company Contract that is not otherwise disclosed in another Part of the Disclosure Schedule which is material to the Company or its business, operations, financial conditions, properties or assets.
Contracts in the respective categories described in clauses “(i)” through “(xii)” above and all Contracts identified, or required to be identified, in Part 2.10 of the Disclosure Schedule are referred to in this Agreement as the “Listed Contracts.”
(b)    Delivery of Contracts. The Company has made available to Purchaser accurate and complete copies of all written Listed Contracts, including all amendments thereto. Each Listed Contract is valid and in full force and effect, and is enforceable by the Company in accordance with its terms, subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.
(c)    No Breach. The Company has not materially violated or breached, or committed any default under any material term or provision of, any Listed Contract which remains uncured, and to the Company’s Knowledge no other Person has violated or breached, or committed any default under, any material term or provision of any Listed Contract which remains uncured.

2.12    Compliance with Legal Requirements. The Company is, and has been in the last four (4) years, in compliance in all material respects with each Legal Requirement that is applicable to it or to the conduct of its business or the ownership or use of its assets. The Company has not received any written notice or, to the Company’s Knowledge, oral notice or other communication from any Person regarding any actual, alleged, possible or potential violation of, or failure by the Company to comply with, any Legal Requirement.

2.13    Tax Matters. Except as set forth in the applicable Subsection of Part 2.13 of the Disclosure Schedule:
(a)    Taxes and Tax Returns; Liens. The Company has filed all Tax Returns that it was required file under applicable Legal Requirements, and all such Tax Returns were true, correct, and complete in all material respects. The Company has paid all Taxes due and payable by it (whether or not shown on any Tax Return). The Company is not currently the beneficiary of any extension of time within which to file any Tax Return. No written claim has ever been made by a Governmental Authority (i) in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction, or (ii) in any jurisdiction where the Company does file Tax Returns that the Company is or may be subject to any type of Taxes by that jurisdiction for which it has not filed all required Tax Returns. There are no Encumbrances (other than Permitted Liens) for Taxes on any assets of the Company.
(b)    Audits. No federal, state, local or non-U.S. Tax audits, Tax assessments or other administrative or judicial proceedings involving Taxes are pending with respect to the Company. The Company has not received from any Governmental Authority any (a) notice indicating an intent to open an audit or other review, (b) request for information related to Tax matters or (c) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any Governmental Authority against the Company.
(c)    Statutes of Limitations. The Company has not waived (or been requested to waive) any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.
(d)    Liability for Third-Party Taxes. The Company is not and has never been a member of any “affiliated group” within the meaning of Section 1504(a) of the Code. The Company has no potential liability for Taxes of any Person (other than the Company) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or non-U.S. Legal Requirements), as a result of transferee or successor liability, by Contract, or pursuant to applicable Legal Requirements. The Company is not a party to or bound by any Tax allocation, Tax sharing, Tax indemnification, or similar agreement (including any advance pricing agreement, closing agreement, or other agreement relating to Taxes with any Governmental Authority).
(e)    Post-Closing Tax Items. None of Purchaser, Merger Subs, the Company, or any of their Affiliates will be required to include any amount in taxable income or exclude any item of deduction or loss from taxable income for any taxable period (or portion of any taxable period) ending after the Closing Date as a result of (i) any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or non-U.S. income Tax Legal Requirements) executed by the Company on or prior to the Closing Date, (ii) any installment sale or open transaction disposition made by the Company on or prior to the Closing Date, (iii) any change in method of accounting, including the application of Sections 481 or Section 263A of the Code (or any corresponding or similar provisions of state, local or non-U.S. Legal Requirements) to transactions, events, or accounting methods employed prior to the Closing, or use of an improper method of accounting by the Company for a taxable period ending on or prior to the Closing Date, (iv) any prepaid amount received by the Company on or prior to the Closing Date, (v) any “intercompany transaction” involving the Company or any “excess loss account” of the Company (within the meaning of Treasury Regulations Sections 1.1502-13 and 1502-19, respectively) (or any corresponding or similar provisions of state, local or non-U.S. Legal Requirements), or (vi) any election made by the Company under Section 108(i) of the Code.
(f)    Unpaid Taxes. The unpaid Taxes of the Company (i) did not, as of the date of the Balance Sheet, exceed the reserve for Tax Liability (excluding than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Balance Sheet (rather than in any notes thereto), and (ii) do not exceed such reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company in filing its Tax Returns. Since the date of the Balance Sheet, the Company has not incurred any Liability for Taxes outside the ordinary course of business.
(g)    Reportable Transactions. The Company has never participated in any “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4.
(h)    Partnership Interests. The Company is not a party to any joint venture, contract or other arrangement that could be treated as a partnership for federal income Tax purposes.
(i)    Withholding. No payment made pursuant to the Transactional Agreements will be subject to withholding pursuant to Cayman Islands Legal Requirements.
(j)    U.S. Source Income. No payment made pursuant to the Transactional Agreements will give rise to income that is effectively connected with the conduct of a trade or business in the United States or that is treated as U.S. source income under Part I of Subchapter N of Chapter 1 of the Code.
(k)    Income Tax Classification. The Company is, and has been at all times since its formation, classified as a corporation for U.S. federal income tax purposes.
(l)    Pre-Merger Dispositions. No shareholder of the Company has disposed of Company stock, or received any distribution from the Company, in a manner that would cause the transactions contemplated by this Agreement to violate the continuity of shareholder interest requirement set forth in Treasury Regulations Section 1.368-1(e). The Company has not acquired, sold, transferred, or otherwise disposed of any assets in a manner that would prevent Purchaser (or a member of Purchaser’s “qualified group” as such term is defined in Treasury Regulations Section 1.368-1(d)(4)(ii) or a partnership as described in Treasury Regulations Section 1.368-1(d)(4)(iii)) from continuing the Company’s historic business or using a significant portion of the Company’s historic business assets in a business following the Mergers.
(m)    Parachute Payments. Except as set forth on Part 2.13(m) of the Disclosure Schedule, neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby (either alone or upon the occurrence of any additional or subsequent events) will (i) result in any payment becoming due to any current or former employee, consultant, officer, director, manager, trustee or independent contractor of the Company or its subsidiaries, or entitle any of the forgoing Persons to severance pay, unemployment compensation or any other payment, (ii) accelerate the time of payment or vesting, or increase the amount of payments or compensation due any such Person, (iii) increase any amount or benefits otherwise payable or result in any other obligation under any Contract (including this Agreement), Company Employee Agreement or Company Employee Plan, (iv) result in the acceleration of payment or vesting of any such amounts or benefits under such Contract, Company Employee Agreement or Company Employee Plan, or (v) result, or would reasonably be expected to result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Section 280G(b) of the Code (or any corresponding provisions of state, local or foreign Tax Legal Requirements). No Person is entitled to receive any additional payment (including any tax gross-up or other payment) as a result of the imposition of Taxes under Section 4999 of the Code.
(n)    Non-U.S. Taxes. The Company is not subject to Tax in any country other than its country of incorporation, organization, or formation, including by virtue of engaging in business in such jurisdiction or having employees, a permanent establishment or any other place of business in such jurisdiction. Part 2.13(n) of the Disclosure Schedule sets forth (i) all jurisdictions in which the Company is subject to Tax, required to file Tax Returns, has filed Tax Returns, or has paid any Taxes, and (ii) with respect to each jurisdiction described in clause (i), the type(s) of Taxes the Company is subject to, is required to file Tax Returns with respect to, has filed Tax Returns with respect to, or has paid any Taxes with respect to. The Company has in its possession official foreign government receipts for any Taxes paid by it to any foreign Tax authorities.
(o)    Withholding. The Company has complied with all applicable Legal Requirements relating to the payment, reporting and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the Code or similar provisions under any foreign Legal Requirements), has, within the time and in the manner prescribed by law, withheld from employee wages or consulting compensation and timely paid over to the proper Governmental Bodies (or is properly holding for such timely payment) all amounts required to be so withheld and paid over under all applicable Legal Requirements, including federal and state income Taxes (or similar Taxes under any foreign Legal Requirements), Federal Insurance Contribution Act, Medicare, relevant state or local income and employment Tax withholding Legal Requirements, and has timely filed all withholding Tax Returns, for all periods.
(p)    409A or 457A(d)(3) Compliance. Each Contract (including this Agreement), Company Employee Plan or Company Employee Agreement which is a “nonqualified deferred compensation plan” (as defined in Sections 409A(d)(1) or 457(d)(3) of the Code) subject to Sections 409A or 457A of the Code complies in all material respects with Sections 409A or 457A of the Code and the Treasury Regulations and other guidance promulgated thereunder. No payment to be made under any Company Employee Plan or Company Employee Agreement is, or to the Company’s Knowledge, will be, subject to the penalties of Section 409A(a)(1) or 457A(c) of the Code. No Company Employee Plan or Company Employee Agreement provides for a gross up of Taxes imposed by Sections 409A or 457A of the Code.
(q)    Distribution of Stock and Securities. Within the past three (3) years, the Company has not distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or 361 of the Code.

2.14    Environmental Matters. To the Company’s Knowledge, the Company is in compliance in all material respects with all applicable Environmental Laws.

2.15    Insurance. Part 2.15 of the Disclosure Schedule identifies each insurance policy maintained by, at the expense of or for the benefit of the Company as of the Closing Date and identifies any material claims made thereunder as of the Closing Date. The Company has made available to Purchaser accurate and complete copies of the insurance policies identified on Part 2.15 of the Disclosure Schedule. Each of the insurance policies identified in Part 2.15 of the Disclosure Schedule is in full force and effect. The Company has not received any notice or other communication from an insurance company regarding any actual or possible: (i) cancellation or invalidation of any insurance policy; (ii) refusal of any coverage or rejection of any claim under any insurance policy; or (iii) material adjustment in the amount of the premiums payable with respect to any insurance policy.

2.16    Related Party Transactions. Except as set forth in Part 2.16 of the Disclosure Schedule: (a) no Related Party has any interest in any material asset used in or otherwise relating to the Business, except for the Related Party’s indirect interest therein as the owner of the Company Share; (b) no Related Party is indebted to the Company (other than for advances for ordinary travel and other business expenses); (c) no Related Party is a party to, or has any financial interest in, any material Company Contract, transaction or business dealing or involving the Company; (d) no Related Party is competing with the Company; and (e) to the Company’s Knowledge, no Related Party has any claim or right against the Company, in each case, other than (i) for payment of salaries and bonuses for services rendered; (ii) reimbursement of customary and reasonable expenses incurred on behalf of the Company; (iii) benefits due under Company Employee Plans, if any, and fringe benefits not required to be listed on the Disclosure Schedule; (iv) agreements relating to outstanding Company Shares or Options; and (v) as provided in the Charter Documents.

2.17    Legal Proceedings; Orders.
(a)    Legal Proceedings. Except as set forth in Part 2.17(a) of the Disclosure Schedule, there are no existing or pending Legal Proceedings involving the Company and, to the Company’s Knowledge, there are no threatened Legal Proceeding against the Company. No event has occurred, and no claim, dispute or other condition or circumstance exists, that will or could reasonably be expected to, give rise to or serve as a basis for the commencement of any such Legal Proceeding. Except as set forth in Part 2.17(a) of the Disclosure Schedule, no Legal Proceeding or claims for equitable relief has ever been commenced by, and no Legal Proceeding or claims for equitable relief has ever been pending against, the Company.
(b)    Orders. There is no order, writ, injunction, judgment, ruling, subpoena, or decree (“Order”) to which the Company, or any of the assets owned or used by the Company, is subject. No officer or other employee of the Company is subject to any Order that prohibits such officer or other employee from engaging in or continuing any conduct, activity or practice relating to Company’s business, and, to the Knowledge of the Company, no event has occurred or circumstance exists that could reasonably be expected to subject the Company or any of its officers or directors to such an Order.

2.18    Authority.
(a)    Authority; Binding Nature of Agreement. The Company has all requisite corporate power and authority to enter into and to perform its obligations under this Agreement and under each other Transactional Agreement to which the Company is a party and, subject to, in the case of the consummation of the First Merger, adoption of this Agreement by the affirmative vote or consent of the Requisite Shareholders, to consummate the transactions contemplated hereby and thereby; and the execution, delivery and performance by the Company of this Agreement and of each such other Transactional Agreement to which the Company is a party have been duly authorized by all necessary action on the part of the Company and its board of directors. This Agreement and each other Transactional Agreement to which the Company is a party constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by: (i) laws of general application relating to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Legal Requirements affecting the enforcement of creditors’ rights generally; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies (whether considered at law or in equity).
(b)    Board Approval. The Company Board, at a meeting duly called and held or by a unanimous written consent, has unanimously (i) approved the First Merger and the terms thereof set forth in Article 1 of this Agreement, (ii) determined that the First Merger is advisable and fair and in the best interests of the Company and the Securityholders, (iii) directed that the “agreement of merger” set forth in this Agreement be submitted to the Securityholders for adoption, and (iv) resolved to recommend that the Securityholders adopt the “agreement of merger” set forth in this Agreement (collectively, the “Company Board Recommendation”) and directed that such matter be submitted for consideration of the Securityholders.

2.19    Non-Contravention; Consents. Except as set forth in Part 2.19 of the Disclosure Schedule, neither: (1) the execution, delivery or performance by the Company of this Agreement or any of the other Transactional Agreements to which the Company is a party; nor (2) the consummation of the First Merger, or, to the Company’s Knowledge, the Second Merger, will (with or without notice or lapse of time):
(a)    contravene, conflict with or result in a violation of: (i) any of the provisions of any Charter Documents of the Company; or (ii) any resolution adopted by the Shareholders or the Company Board;
(b)    contravene, conflict with or result in a violation of, or give any Governmental Body the valid right to challenge any of the transactions contemplated by this Agreement or to exercise any remedy or obtain any relief under, any Legal Requirement or any order, writ, injunction, judgment or decree to which the Company or any assets owned by the Company, is subject;
(c)    contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by the Company or that otherwise relates to the Company’s business or to any of the assets owned or used by the Company;
(d)    contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any Company Contract that is or would constitute a Listed Contract, or give any Person the valid right to: (i) declare a default or exercise any remedy under any such Listed Contract; (ii) accelerate the maturity or performance of any such Listed Contract; or (iii) cancel, terminate or modify any such Listed Contract; or
(e)    result in the imposition or creation of any lien or other Encumbrance upon any asset owned by the Company except for Permitted Liens.
Except as set forth in Part 2.19 of the Disclosure Schedule, the Company is not and will not be required to make any filing with or give any notice to, or to obtain any consent from, any Person in connection with: (x) the execution, delivery or performance of this Agreement or any of the other Transactional Agreements; or (y) the consummation of the transactions contemplated hereby and thereby. Part 2.19 of the Disclosure Schedule lists each Company Contract that is terminated or amended as a result of the Mergers.

2.20    Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Mergers based upon arrangements made by or on behalf of the Company, any Affiliate thereof, or any Securityholder.

2.21    Anti-Corruption.
(a)    Neither the Company, nor any of its Affiliates, any of their respective directors, officers, managers or employees or, to the Company’s Knowledge, any of their other respective Representatives, in any way relating to the Company: (i) has taken any action in violation of any applicable anticorruption Law, including the U.S. Foreign Corrupt Practices Act (“FCPA”) (15 U.S.C. § 78 dd-1 et seq.); or (ii) has corruptly, offered, paid, given, promised to pay or give, or authorized the payment or gift of anything of value, directly or indirectly, to any “Public Official”, as defined in this Section 2.21, for purposes of (A) influencing any act or decision of any Public Official in his official capacity; (B) inducing such Public Official to do or omit to do any act in violation of his lawful duty; (C) securing any improper advantage; or (D) inducing such Public Official to use his or her influence with a government, Governmental Authority, or commercial enterprise owned or controlled by any Governmental Authority (including state-owned or controlled veterinary or medical facilities), in order to assist the Company or any Affiliates of the Company, related in any way to the Purchased Assets or the Business, in obtaining or retaining business.
(b)    No officers, directors or employees of the Company, or agents acting on behalf of the Company, are themselves Public Officials.
(c)    For purposes of this Section 2.21, “Public Official” means: (i) any officer, employee or representative of any regional, Federal, state, provincial, county or municipal government or government department, agency, or other division; (ii) any officer, employee or representative of any commercial enterprise that is owned or controlled by a government, including any state-owned or controlled veterinary or medical facility; (iii) any officer, employee or representative of any public international organization, such as the African Union, the International Monetary Fund, the United Nations or the World Bank; (iv) any person acting in an official capacity for any government or Governmental Authority, enterprise, or organization identified above; and (v) any official of a political party or candidate for political office.
(d)    There are no pending proceedings against the Company, its Affiliates, any of their respective directors, officers, managers or employees or, to the Company’s Knowledge, any of their other respective Representatives, with respect to the violation of any applicable anticorruption Law, including the FCPA, relating to the Company.
(e)    Company and its Affiliates have been subject to an anticorruption compliance policy with respect to the Company reasonably appropriate to ensure compliance with applicable anticorruption Laws, including the FCPA.

2.22    Regulatory Matters.
(a)    Except as set forth on Part 2.22(a) of the Disclosure Schedule, Company has provided to Purchaser copies of (i) all Regulatory Authorizations held by Company or under which Company conducts business, or that have been submitted by or on behalf of Company or in relation to the Business, any Product, or any Compound and (ii) all applications or notifications or submissions for Regulatory Authorizations pending in relation thereto. Company possesses all material Regulatory Authorizations that are required for or relate to the Business, the Compounds, and the Products. Company is the sole and exclusive owner of the Regulatory Authorizations and none of the Regulatory Authorizations has been sold, conveyed, delivered, transferred or assigned to another party. Each such Regulatory Authorization has, to Company’s Knowledge, been validly issued or acknowledged by the appropriate Regulatory Authority and is in full force and effect. The Company holds all Permits and has made all filings with all Governmental Bodies that are required to be held or filed to conduct the Company’s business in compliance with all Legal Requirements and all Company Contracts, and all such Permits and filings are valid and in full force and effect.
(b)    Except as set forth on Part 2.22(b) of the Disclosure Schedule, all pre-clinical and clinical studies, trials and investigations conducted or sponsored by or on behalf of the Company are being, and at all times have been, conducted in compliance in all material respects with all applicable clinical protocols, informed consents and applicable Laws administered or issued by applicable Regulatory Authorities, including (to the extent applicable) (i) the U.S. Food and Drug Administration (“FDA”) or other health authority standards for conducting non-clinical laboratory studies contained in Title 21 part 58 of the Code of Federal Regulations and associated regulatory guidance, (ii) investigational new drug requirements and associated regulatory guidance, (iii) FDA or other health authority standards for the design, conduct, performance, monitoring, auditing, recording, analysis and reporting of clinical trials contained in Title 21 parts 50, 54, 56, 312, 314, and 320 of the Code of Federal Regulations and associated regulatory guidance, (iv) federal and state laws or other regulatory authority standards for restricting the use and disclosure of individually identifiable health information, (v) the International Council for Harmonisation Guideline on Good Clinical Practice (ICH Topic E6) and associated regulatory guidance and (vi) communications or notices from Regulatory Authorities regarding the conduct of such studies, trials and investigations. Except as set forth on Part 2.22(b) of the Disclosure Schedule, there has been no drug-related adverse event with respect to a patient in a clinical trial conducted or sponsored by or on behalf of the Company or in relation to the Business, any Product, or any Compound, the effect of which would reasonably be expected to (x) prevent Purchaser from obtaining approval from a Regulatory Authority to market any Product or (y) delay such approval to such an extent that the delay (taking into account the expected length of such delay and the basis or reasons therefor) would materially impair the aggregate financial value to be derived by Purchaser from any Product or any Compound. All clinical trial adverse events in patients in a clinical trial conducted or sponsored by or on behalf of the Company or in relation to the Business, any Product, or any Compound within the Knowledge of Company have been disclosed to Purchaser and all associated correspondence, including actual or potential claims for recompense, have been made available to Purchaser.
(c)    No Regulatory Authority has commenced, or, to Company’s Knowledge, threatened to initiate, any Action to place a clinical hold order on, or otherwise terminate, delay or suspend any proposed or ongoing pre-clinical or clinical studies, trials, investigational new drug application or investigations conducted or proposed to be conducted in connection with the Business.
(d)    Part 2.22(d) of the Disclosure Schedule sets forth a complete and accurate listing and description of all pre-clinical and clinical investigations regarding Compounds or Products, or otherwise conducted by or on behalf of the Company, including animal and laboratory studies. Company has provided to Purchaser all information and data known to Company relating to safety, efficacy, and toxicity of all of the Compounds and Products. Company is not aware of any negative data, adverse event or toxicity data produced by the use of any Compound or any Product in any animal or human studies that would: (i) have a Material Adverse Effect or (ii) materially compromise (A) any pre-clinical or clinical trials presently being undertaken (or proposed to be undertaken) by or on behalf of Company or any third party with respect to any Compound or Product or (B) the development or commercialization of any Compound or Product.
(e)    Company has not directly or indirectly received any written communication (including any warning letter, untitled letter, Form 483 or similar notice) from any Regulatory Authority, and to Company’s Knowledge there are no material Actions pending or threatened (including any prosecution, injunction, seizure, civil fine, suspension or recall), in each case (i) relating to, arising under or alleging that Company or any of its officers, employees or agents is not currently in compliance with, any Law administered or issued by any Regulatory Authority or (ii) regarding any debarment action or investigation in respect of Company or any of its officers, employees or agents undertaken pursuant to 21 U.S.C. Sections 335(a), (b) and (c), or any similar regulation of a Regulatory Authority. There are no pending voluntary or involuntary destruction orders, seizures or other regulatory enforcement actions related to the Business, any Compound, or any Product, and, to Company’s Knowledge, no Data relating to a Product or Compound that has been made public is the subject of any regulatory or other Action, either pending or threatened, by any Regulatory Authority relating to the truthfulness or scientific adequacy of such Data.
(f)    Neither Company nor, to Company’s Knowledge, any officer, employee, agent or distributor of Company, has made an untrue statement of a material fact or fraudulent statement to the FDA or any other Governmental Authority, failed to disclose a material fact required to be disclosed to the FDA or any other Governmental Authority, or committed an act, made a statement, or failed to make a statement that, at the time such disclosure was made, would reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities”, set forth in 56 Fed. Reg. 46191 (September 10, 1991) or for any other Governmental Authority to invoke any similar policy. Neither Company nor, to Company’s Knowledge, any officer, employee or agent of Company has been convicted of any crime or engaged in any conduct for which debarment is mandated by or authorized by 21 U.S.C. Sections 335(a), (b) and (c) or any similar Laws. Neither Company nor, to Company’s Knowledge, any officer, employee or agent of Company has been convicted of any crime or engaged in any conduct for which such Person would be excluded from participating in the Federal health care programs under Section 1128 of the Social Security Act of 1935, as amended, or any similar Laws.
(g)    Company is, and has been, in compliance with: (i) laws, regulations and guidance pertaining to state and federal Anti-Kickback Statutes (42 U.S.C. §§ 1320a-7b(b), et seq. and their implementing regulations) and the related Safe Harbor Statutes; (ii) laws, regulations and guidance pertaining to submission of false claims to governmental or private health care payors (31 U.S.C. §§ 3729, et seq. and its implementing regulations); and (iii) state laws and federal laws and regulations relating to providing and reporting of payments to health care professionals or health care entities.
(h)    Company is not a “covered entity” or a “business associate” pursuant to the Health Insurance Portability and Accountability Act of 1996 (as those terms are defined in 45 §160.103), and Company has complied in all material respects with all other applicable Laws relating to the privacy and security of individually identifiable information, including the Federal Trade Commission Act, the Children’s Online Privacy Protection Act (COPPA), and similar applicable Laws in any foreign jurisdiction in which Company does business.

2.23    Inventory. Part 2.23 of the Disclosure Schedule sets forth a complete and accurate description of all Inventory, with a description of each such item of Inventory that includes, as applicable, the amount, the identity of the manufacturer, location of manufacture, date(s) of manufacture and expiration date(s). All Inventory was manufactured, and has been shipped, stored, and otherwise maintained in accordance with (a) the agreements listed on Part 2.23 of the Disclosure Schedule (if any) pursuant to which it was manufactured, (b) all applicable laws, rules, regulations, and guidelines, including, with respect to any Inventory intended for human use or administration, and (c) the current good manufacturing practice regulations promulgated by the FDA. Company owns all right, title, and interest to all Inventory, and no Inventory is subject to any Liens, claims, encumbrances, or other interests of any third party.

2.24    Employees.
(a)    The Company does not have and has never had any employees.  Accordingly, the Company owes no wages, salaries, severance, or other payments or liabilities, including but not limited to Taxes, unemployment compensation benefits, or social security, with respect to any current or former employees, and there are no Legal Proceedings pending or threatened against the Company by or on behalf of any current or former employees.  The Company is in full compliance with all applicable Legal Requirements regarding the terms and conditions of employment.
(b)    Set forth on Part 2.24(b) of the Disclosure Schedule is a complete list of independent contractors that are presently engaged by the Company or have been engaged by the Company since January 1, 2019 (the “Independent Contractors”) and an indication of which, if any, of the Independent Contractors cannot be terminated by the Company on thirty (30) days’ notice or less or at any time without liability.  The Company is in full compliance with all applicable laws concerning the classification of employees and independent contractors and has in all respects properly classified all of its Independent Contractors for all purposes.
(c)    No Independent Contractor has been or is in violation of any Contract between such Independent Contractor and the Company, except for such violations as have been cured prior to the date hereof.  As of the date hereof, no Independent Contractor has given notice to the Company of an intent to terminate such Independent Contractor’s relationship with the Company.
(d)    No work stoppage or labor strike against the Company is pending, threatened, or reasonably anticipated.  The Company is not involved in or threatened with any labor dispute, grievance, or litigation relating to labor, safety or discrimination matters.  The Company has not at any time engaged in any unfair labor practices within the meaning set forth in the National Labor Relations Act.  The Company is not and has not been in the past a party to or bound by any collective bargaining agreement or union contract, and no such agreement or contract is being negotiated.  The Company has not incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act or any similar state or local law.
(e)    The Company is not a party to or otherwise bound by any consent decree with or citation by any Governmental or Regulatory Authority relating to employees or employment practices.  Neither the Company nor any of its directors or officers has received any notice of any intent by any Governmental or Regulatory Authority responsible for enforcement of labor or employment laws to conduct an investigation relating to the Company, and no such investigation is in progress.

2.25    Employee Benefits.
(a)    Except as set forth on Part 2.25(a) of the Disclosure Schedule, neither the Company nor any ERISA Affiliate of the Company has at any time sponsored, maintained, contributed to, or participated in and Company Employee Plan.
(b)    To the Company’s Knowledge, there are no actions, suits or claims pending, or to the Knowledge of the Company threatened, involving any Company Employee Plans.
(c)    Neither the Company nor any ERISA Affiliate thereof has at any time incurred any material penalty or Tax with respect to any Company Employee Plan under any applicable Law.

2.26    Disclosure. No representation or warranty or other statement made by the Company in this Agreement, the Disclosure Schedule, the certificates delivered pursuant to this Agreement or the Transactional Agreements contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which such statements were made, not misleading. The Company has made available true, correct, complete and, where applicable, executed copies of each document that has been requested by Purchaser and that is in the Company’s possession or control or that is listed (or required to be listed) in the Disclosure Schedule.

3.    REPRESENTATIONS AND WARRANTIES OF PURCHASER, MERGER SUB I AND MERGER SUB II
Purchaser, Merger Sub I and Merger Sub II jointly and severally represent and warrant to the Securityholders that the statements contained in this Article 3 are true and correct as of the date of this Agreement and will be true and correct as of the Closing as though made as of the Closing, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties will be true and correct as of such date.

3.1    Due Organization. Each of Purchaser, Merger Sub I and Merger Sub II is a corporation or a limited liability company, as applicable, duly organized, validly existing and in good standing under the laws of the State of Delaware, and has full power and authority (a) to conduct its business in the manner in which its business is currently being conducted; (b) to own and use its assets in the manner in which its assets are currently owned and used; and (c) to perform its obligations under all Transactional Agreements to which it is a party or by which it is bound. Each Merger Sub was recently formed for the purpose of participating in the Mergers as provided in this Agreement and is an indirect wholly owned Subsidiary of Purchaser.

3.2    Non-Contravention; Consents.
(a)    Non-Contravention. Neither: (i) the execution, delivery or performance of this Agreement or any of the other Transactional Agreements; nor (ii) the consummation of the transactions contemplated by this Agreement and the Transactional Agreements, will contravene, conflict with or result in a violation of: (A) any of the provisions of the certificate of incorporation (or formation) or bylaws (or operating agreement), including all amendments thereto, of Purchaser, Merger Sub I or Merger Sub II; (B) any resolution adopted by the shareholder (or member), the board of directors (or board of managers) or any committee of the board of directors (or board of managers) of Purchaser, Merger Sub I or Merger Sub II; (C) any provision of any material Contract to which Purchaser, Merger Sub I or Merger Sub II is bound, which will not be cured by notice by Purchaser; (D) any Legal Requirement or any order, writ, injunction, judgment or decree to which Purchaser, Merger Sub I or Merger Sub II or any material assets owned by Purchaser, Merger Sub I or Merger Sub II, is subject; or (E) any material Governmental Authorization that is held by Purchaser, Merger Sub I or Merger Sub II or that otherwise relates to the business of Purchaser, Merger Sub I or Merger Sub II or to any material assets owned by Purchaser, Merger Sub I or Merger Sub II.
(b)    Consents. Except for any applicable filings required to be made by Purchaser, notices required to be given by Purchaser or consents required to be obtained by Purchaser, in each case from any lender with respect to Purchaser’s outstanding credit facilities or any Governmental Body in connection with the Mergers, Purchaser is not and will not be required to make any filing with or give any notice to, or to obtain any consent from, any Person in connection with: (i) the execution, delivery or performance of this Agreement or any of the other Transactional Agreements; or (ii) the consummation of the Mergers.

3.3    Authority; Binding Nature of Agreement. Purchaser and each Merger Sub has all requisite corporate power and authority to enter into and perform its obligations under this Agreement and under each other Transactional Agreement to which Purchaser or Merger Sub is a party; and the execution, delivery and performance by Purchaser, Merger Sub I and Merger Sub II of this Agreement and of each other Transactional Agreement have been duly authorized by all necessary action on the part of their respective boards of directors (or managers) and shareholders (or members). This Agreement and each other Transactional Agreement to which Purchaser, Merger Sub I or Merger Sub II is a party constitutes the legal, valid and binding obligation of Purchaser, Merger Sub I or Merger Sub II, respectively, enforceable against each of them in accordance with its terms, except as they may be limited by: (i) laws of general application relating to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Legal Requirements affecting the enforcement of creditors’ rights generally; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies (whether considered at law or in equity).

3.4    Absence of Undisclosed Liabilities. As of the date of this Agreement, neither Purchaser nor any consolidated subsidiary of Purchaser has any material Liability, individually or in the aggregate, except for: (a) Liabilities identified in the Purchaser SEC Reports and (b) Liabilities that have been incurred in the ordinary course of business.

3.5    Legal Proceedings. There is no pending Legal Proceeding and, to the Knowledge of Purchaser, no Person has threatened to commence any Legal Proceeding, that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Mergers.

3.6    Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Mergers based upon arrangements made by or on behalf of Purchaser, Merger Sub I or Merger Sub II.

3.7    Purchaser Stock. The shares of Purchaser Stock issued as a portion of the Merger Consideration will, when issued in accordance with the terms of this Agreement, be validly issued, fully paid and nonassessable, free and clear of any Encumbrances (other than any Encumbrances imposed on such shares by applicable securities laws or by the Securityholders). Except as set forth in the Purchaser SEC Reports, the Purchaser has not taken, and does not have any intention to take, any action to delist the Purchaser Stock from the Nasdaq Stock Market and, to the Purchaser’s knowledge, Nasdaq has not taken, and has not expressed any intention to take, any action to delist the Purchaser Stock.

3.8    Additional Representations and Warranties. The RDD Representations are true and correct on the date of this Agreement, and as of the Closing Date, as if made at and as of such date (except to the extent expressly made as of an earlier date, in which case as of such date). Purchaser has provided the Company with the Innovate Schedule of Exceptions and all exhibits and schedules to the RDD Merger Agreement.

3.9    Independent Investigation. Purchaser has conducted its own independent investigation, review and analysis of the Company and acknowledges that it has been provided access to the personnel, properties, assets, premises, books and records, and other documents and data of the Company for such purpose. Purchaser acknowledges and represents that in making its decision to enter into this Agreement and consummate the transactions contemplated hereby, each of Purchaser, Merger Sub I and Merger Sub II has relied solely on Purchaser’s own investigation and the express representations, warranties and covenants of Company set forth in this Agreement (including the Disclosure Schedule) and Purchaser is not relying on any representation or warranty, written or oral, statutory, express or implied, at common law or otherwise, with respect to the Company, the Company IP, the Business or the transactions contemplated by this Agreement not expressly set forth in Article 2 (including any information, data or other materials (written or oral) heretofore furnished to Purchaser, Merger Subs and their Representatives by or on behalf of the Company and any information, documents or material made available to Purchaser, management presentations or in any other form in expectation of the transactions contemplated by this Agreement, other than to the extent any such information, data or material is itself the subject of a representation or warranty contained in Article 2).

4.    CERTAIN COVENANTS OF THE PARTIES

4.1    Conduct of Business of the Company. During the period from the date of this Agreement until the earlier of the Closing or the termination of this Agreement in accordance with the terms set forth in Article 8 (the “Pre-Closing Period”), the Company shall, except as expressly contemplated by this Agreement, as required by applicable law, or with the prior written consent of Purchaser (which consent shall not be unreasonably withheld, conditioned, or delayed), conduct its business in the ordinary course of business consistent with past practice. To the extent consistent therewith, the Company shall use its commercially reasonable efforts to preserve substantially intact its business organization, to keep available the services of its current officers and employees, to preserve its present relationships with customers, suppliers, distributors, licensors, licensees, and other Persons having significant business relationships with it. Without limiting the generality of the foregoing, during the Pre-Closing Period, except as otherwise expressly contemplated by this Agreement, as set forth in Part 4.1 of the Disclosure Schedule, or as required by applicable law, the Company shall not, without the prior written consent of Purchaser (which consent shall not be unreasonably withheld, conditioned, or delayed):
(a)    amend or propose to amend its Charter Documents;
(b)    (i) split, combine, or reclassify any capital stock of the Company, (ii) repurchase, redeem, or otherwise acquire, or offer to repurchase, redeem, or otherwise acquire, any capital stock of the Company, or (iii) declare, set aside, or pay any dividend or distribution (whether in cash, stock, property, or otherwise) in respect of, or enter into any Contract with respect to the voting of, any shares of its capital stock;
(c)    issue, sell, pledge, dispose of, or encumber any equity interest of the Company, other than the issuance of shares of Company Ordinary Shares upon the exercise of any Option outstanding as of the date of this Agreement in accordance with its terms; provided, the Company shall provide the Purchaser with prompt written notice of any such exercise;
(d)    (i) transfer, license, sell, lease, or otherwise dispose of (whether by way of merger, consolidation, sale of stock or assets, or otherwise) or pledge, encumber, or otherwise subject to any lien (other than a Permitted Lien), any assets, including the capital stock or other equity interests in the Company; provided, that the foregoing shall not prohibit the Company from (x) transferring, selling, leasing, or disposing of obsolete equipment or assets being replaced, or granting of non-exclusive licenses under the Company IP, in each case in the ordinary course of business consistent with past practice or (y) other than pursuant to non-exclusive licenses entered into in the ordinary course of business consistent with past practice, or (ii) adopt or effect a plan of complete or partial liquidation, dissolution, restructuring, recapitalization, or other reorganization;
(e)    repurchase, prepay, or incur any Indebtedness for borrowed money or guarantee any such Indebtedness of another Person, issue or sell any debt securities or options, warrants, calls, or other rights to acquire any debt securities of the Company, guarantee any debt securities of another Person, enter into any “keep well” or other Contract to maintain any financial statement condition of any other Person or enter into any arrangement having the economic effect of any of the foregoing, other than in connection with the financing of ordinary course trade payables consistent with past practice;
(f)    enter into or amend or modify in any material respect, or consent to the termination of (other than at its stated expiry date), any material Contract of the Company or any Lease with respect to material Leased Real Property or any other Contract or Lease that, if in effect as of the date hereof would constitute a material Contract of the Company or a Lease with respect to material Leased Real Property hereunder, other than pursuant to non-exclusive licenses entered into in the ordinary course of business consistent with past practice;
(g)    institute, settle, or compromise any Legal Proceeding involving the payment of monetary damages by the Company or any of its Subsidiaries of any amount exceeding $50,000 in the aggregate, other than (i) any Legal Proceeding brought against Purchaser or Merger Sub arising out of a breach or alleged breach of this Agreement by Purchaser or Merger Sub, and (ii) the settlement of claims, liabilities, or obligations reserved against on the Balance Sheet; provided, that the Company shall not settle or agree to settle any Legal Proceeding which settlement involves a conduct remedy or injunctive or similar relief or has a restrictive impact on the Company’s business;
(h)    make any material change in any method of financial accounting principles or practices, in each case except for any such change required by a change in GAAP or applicable law;
(i)    (i) settle or compromise any material Tax claim, audit, or assessment for an amount materially in excess of the amount reserved or accrued on the Balance Sheet, (ii) make or change any material Tax election, change any annual Tax accounting period, or adopt or change any method of Tax accounting, (iii) amend any material Tax Returns or file claims for material Tax refunds, or (iv) enter into any material closing agreement, surrender in writing any right to claim a material Tax refund, offset or other reduction in Tax liability or consent to any extension or waiver of the limitation period applicable to any material Tax claim or assessment relating to the Company;
(j)    enter into any material agreement, agreement in principle, letter of intent, memorandum of understanding, or similar Contract with respect to any joint venture, strategic partnership, or alliance;
(k)    take any action to exempt any Person from, or make any acquisition of securities of the Company by any Person not subject to, any state takeover statute or similar statute or regulation that applies to the Company with respect to a proposed Alternative Transaction or otherwise, including the restrictions on “business combinations” set forth in Section 203 of the DGCL, except for Purchaser, Merger Subs or any of their respective Subsidiaries or Affiliates, or the transactions contemplated by this Agreement;
(l)    abandon, allow to lapse, sell, assign, transfer, grant any security interest in otherwise encumber or dispose of any Company IP, or grant any right or license to any Company IP;
(m)    terminate or modify in any material respect, or fail to exercise renewal rights with respect to, any material insurance policy;
(n)    except to the extent expressly permitted by Article 8, take any action that is intended or that would reasonably be expected to, individually or in the aggregate, prevent, materially delay, or materially impede the consummation of the Mergers, or the other transactions contemplated by this Agreement; or
(o)    agree or commit to do any of the foregoing.

4.2    Access to Information; Confidentiality. Access to Information. During the Pre-Closing Period, the Company shall afford to Purchaser and Purchaser’s representatives reasonable access, at reasonable times and in a manner as shall not unreasonably interfere with the business or operations of the Company, to the officers, employees, accountants, agents, properties, offices, and other facilities and to all books, records, contracts, and other assets of the Company, and the Company shall furnish promptly to Purchaser such other information concerning the business and properties of the Company as Purchaser may reasonably request from time to time. The Company shall not be required to provide access to or disclose information where such access or disclosure would jeopardize the protection of attorney-client privilege or contravene any law (it being agreed that the parties shall use their reasonable best efforts to cause such information to be provided in a manner that would not result in such jeopardy or contravention). No investigation shall affect the Company’s representations, warranties, covenants, or agreements contained herein, or limit or otherwise affect the remedies available to Purchaser, Merger Sub I or Merger Sub II pursuant to this Agreement.
(a)    Confidentiality. Purchaser and the Company shall comply with, and shall cause their respective representatives to comply with, all of their respective obligations under the Non-Disclosure Agreement, dated March 5, 2019, between RDD Pharma Ltd. (on behalf of Purchaser) and the Company (the “Mutual Non-Disclosure Agreement”), which shall survive the termination of this Agreement in accordance with the terms set forth therein.

4.3    Shareholders Consent. The Company shall hold an extraordinary general meeting of the Shareholders (the “EGM”) prior to the execution and delivery of this Agreement to obtain the approval of this Agreement and consent to the First Merger by the affirmative vote or consent of the Requisite Shareholders. The materials submitted to the Shareholders in connection with the EGM shall include the Company Board Recommendation. Promptly following receipt of the minutes of the EGM, the Company shall deliver a copy of the minutes of the EGM to Purchaser.

4.4    Notice of Certain Events. From the date hereof until the Closing, the Company shall promptly notify Purchaser in writing of:
(i)    any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or warranty made by the Company hereunder not being true and correct or (C) has resulted in, or could reasonably be expected to result in, the failure of any of the conditions set forth in Section 5.2 to be satisfied;
(ii)    any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;
(iii)    any notice or other communication from any Governmental Body in connection with the transactions contemplated by this Agreement; and
(iv)    any Legal Proceeding commenced or, to the Company’s Knowledge, threatened against, relating to or involving or otherwise affecting the Company that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 2.17 or that relates to the consummation of the transactions contemplated by this Agreement.
(b)    Purchaser’s receipt of information pursuant to this Section 4.4 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by the Company in this Agreement and shall not be deemed to amend or supplement the Disclosure Schedules.

4.5    Further Assurances, Filings. Each party shall use commercially reasonable efforts to file, at Purchaser’s expense, as soon as practicable after the Closing Date, all notices, reports and other documents required to be filed by such party with any Governmental Body with respect to the Mergers, and to submit promptly any additional information requested by any such Governmental Body. The Company and Purchaser shall respond as promptly as practicable to any inquiries or requests received from any state attorney general, antitrust authority or other Governmental Body in connection with antitrust or related matters. The Securityholders shall, at Purchaser’s expense, cooperate with Purchaser and/or the Merger Subs with respect to any filings with any Governmental Body made by Purchaser in connection with the Mergers and the transactions contemplated by this Agreement. Except where prohibited by applicable Legal Requirements or any Governmental Body, Purchaser shall cooperate with Shareholders’ Agent with respect to any filings with any Governmental Body made by Company.
(a)    Efforts. Purchaser, Merger Subs, the Company and the Securityholders shall use commercially reasonable efforts after the Effective Time to take, or cause to be taken, all further actions that may be necessary to consummate the Mergers and the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, each party to this Agreement: (i) shall make all filings (if any) and give all notices (if any) required to be made and given by such party in connection with the Mergers and the transactions contemplated by this Agreement; and (ii) shall use commercially reasonable efforts to obtain each Consent (if any) listed on Schedule 1.12(a) required to be obtained (pursuant to any applicable Legal Requirement or Contract, or otherwise) by such party in connection with the Mergers and the transactions contemplated by this Agreement.

4.6    Public Announcements. Each Party shall not (and shall ensure that none of its representatives) issue any press release or make any public statement regarding (or otherwise disclose to any Person, who is not bound by confidentiality obligations, the existence or terms of) this Agreement or the transactions contemplated hereby, without the prior written consent of the other Parties, except to the extent such public statements are required by applicable law or stock market or exchange rule, in which case the party issuing the press release or making the public statement shall so advise the other party and, upon request, provide an opportunity to comment.

4.7    Indemnification of Officers and Directors.
(a)    All rights to indemnification by Company existing in favor of those Persons who are or were directors and officers of the Company as of the date of this Agreement (the “D&O Indemnified Persons”) for their acts and omissions occurring prior to the Effective Time, as provided in the Charter Documents (as in effect as of the date of this Agreement) and as provided in the indemnification agreements between the Company and such D&O Indemnified Persons listed in Part 2.11(a)(ii) of the Disclosure Schedule, shall survive the Mergers and shall not be amended, repealed or otherwise modified, and shall be observed by the Surviving Company from the Effective Time until the sixth anniversary of the date on which the Effective Time occurs, and any claim made prior to such anniversary requesting indemnification pursuant to such indemnification rights shall continue to be subject to this Section 4.7 and the indemnification rights provided under this Section 4.7 until disposition of such claim. Prior to the Effective Time, the Company shall purchase and fully pay the premium for a six-year “tail” policy for the existing policy (the “D&O Tail Policy”).
(b)    In the event that Purchaser, the Company or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or Entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, Purchaser shall ensure that the successors and assigns of Purchaser, the Company or the Surviving Company, as the case may be, assume the obligations set forth in this Section 4.7.
(c)    The provisions of this Section 4.7 shall survive the consummation of the Mergers and are (i) intended to be for the benefit of, and will be enforceable by, each of the D&O Indemnified Persons and their successors, assigns and heirs and (ii) in addition to, and not in substitution for, any other rights to indemnification or contribution that any such D&O Indemnified Person may have by contract or otherwise. This Section 4.7 may not be amended, altered or repealed in a manner adversely affecting a D&O Indemnified Person after the Effective Time without the prior written consent of such D&O Indemnified Person.

4.8    Listing of Purchaser Stock. Promptly following the Closing Date, but no later than sixty (60) days after the Closing Date, Purchaser shall prepare and file with the United States Securities and Exchange Commission a registration statement under the Securities Act of 1933, as amended (the “1933 Act”), covering the resale of all of the Merger Shares (the “Registration Statement”), and shall use commercially reasonable efforts to cause such Registration Statement to become effective as promptly as practicable thereafter.  Purchaser shall use commercially reasonable efforts to cause such Registration Statement to remain continuously effective for a period that will terminate upon the earlier of (i) the date on which all Merger Shares covered by such Registration Statement, as amended from time to time, have been sold, and (ii) the date on which all Merger Shares covered by such Registration Statement may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act.  Purchaser shall use commercially reasonable efforts to ensure that the Merger Shares will be approved for listing (subject to official notice of issuance) on each securities exchange, interdealer quotation system or other market on which similar securities issued by Purchaser are then listed, prior to the expiration of any lockup period.

5.    CONDITIONS TO CLOSING

5.1    Conditions to Obligations of All Parties. The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:
(a)    The adoption of this Agreement shall have been duly approved by the Requisite Shareholders.
(b)    No Governmental Body shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.

5.2    Conditions to Obligations of Purchaser and Merger Sub. The obligations of Purchaser, Merger Sub I and Merger Sub II to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Purchaser’s waiver, at or prior to the Closing, of each of the following conditions:
(a)    Other than the representations and warranties of the Company contained in Section 2.1, Section 2.2, Section 2.3, Section 2.18(a) and Section 2.20, the representations and warranties of the Company contained in this Agreement, the Transactional Agreements and any certificate delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of the Company contained in Section 2.1, Section 2.2, Section 2.3, Section 2.18(a) and Section 2.20 shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects).
(b)    The Company shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the Transactional Agreements to be performed or complied with by it prior to or on the Closing Date; provided, that, with respect to agreements, covenants and conditions that are qualified by materiality, the Company shall have performed such agreements, covenants and conditions, as so qualified, in all respects.
(c)    No Legal Proceeding shall have been commenced against Purchaser, Merger Subs or the Company, which would prevent the Closing. No injunction or restraining order shall have been issued by any Governmental Body, and be in effect, which restrains or prohibits any transaction contemplated hereby.
(d)    All approvals, consents and waivers that are listed on Schedule 1.12(a) shall have been received, and executed counterparts thereof shall have been delivered to Purchaser at or prior to the Closing.
(e)    From the date of this Agreement, there shall not have occurred any Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Material Adverse Effect.
(f)    The Company shall have delivered each of the closing deliverables set forth in Section 1.12(a).
(g)    Holders of no more than 5% of the outstanding Company Shares (on an as-converted to Company Ordinary Shares basis) as of immediately prior to the Effective Time, in the aggregate, shall have exercised statutory appraisal rights pursuant to Section 238 of the CICL.
(h)    Purchaser shall have received a counterpart signature to the Letters of Transmittal and Joinder Agreement executed by Securityholders who collectively hold, as of immediately prior to the Effective Time, at least 70% of the outstanding Company Shares (on an as-converted to Company Ordinary Shares basis).
(i)    That certain Company Shareholders’ Agreement dated July 7, 2016 shall have been terminated.

5.3    Conditions to Obligations of the Company. The obligations of the Company to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or the Company’s waiver, at or prior to the Closing, of each of the following conditions:
(a)    Other than the representations and warranties of Purchaser, Merger Sub I and Merger Sub II contained in Section 3.1, Section 3.3 and Section 3.6, the representations and warranties of Purchaser and Merger Sub contained in this Agreement and any certificate delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of Purchaser, Merger Sub I and Merger Sub II contained in Section 3.1, Section 3.3 and Section 3.6 shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date.
(b)    Purchaser and Merger Subs shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the Transactional Agreements to be performed or complied with by them prior to or on the Closing Date; provided, that, with respect to agreements, covenants and conditions that are qualified by materiality, Purchaser, Merger Sub I and Merger Sub II shall have performed such agreements, covenants and conditions, as so qualified, in all respects.
(c)    No injunction or restraining order shall have been issued by any Governmental Body, and be in effect, which restrains or prohibits any material transaction contemplated hereby.
(d)    Purchaser shall have delivered each of the closing deliverables set forth in Section 1.12(b).

6.    INDEMNIFICATION, ETC.

6.1    Survival of Representations.
(a)    General Survival. Except as provided in Section 6.1(b), the representations, warranties, covenants and obligations of the Company, other than the Fundamental Representations, shall survive the Closing (and any later sale, transfer or other disposition of any or all of the equity or assets of the Surviving Company or the Surviving Company) and shall expire on the six (6) month anniversary of the Closing Date (the “Termination Date”); provided, however, that if at any time prior to the Termination Date any Purchaser Indemnitee delivers to Shareholders’ Agent a written notice pursuant to Section 6.6 asserting a claim for recovery under Section 6.2 (a “Claim Notice”), then the claim asserted in such Claim Notice will survive the Termination Date until such time as such Claim Notice is fully and finally resolved pursuant to this Article 6. Covenants made by the Company herein to be performed prior to the Closing shall survive until the Termination Date and covenants made by the Company herein to be performed following the Closing shall survive until satisfied.
(b)    Fundamental Representations. Notwithstanding anything to the contrary contained in Section 6.1(a), the Fundamental Representations shall survive the Closing (and any later sale, transfer or other disposition of any or all of the equity or assets of the Surviving Company or the Surviving Company) for 24 months following the Closing provided, however, that if, at any time prior to the second anniversary of the Closing Date any Purchaser Indemnitee delivers to Shareholders’ Agent a Claim Notice, then the claim asserted in such notice shall survive the Termination Date until such time as such claim is fully and finally resolved pursuant to this Article 6.
(c)    Purchaser Representations. The representations and warranties made by Purchaser, Merger Sub I and Merger Sub II shall survive the Closing and shall expire on the Termination Date; provided, however, that if, at any time prior to the Termination Date any Securityholder Indemnitee delivers to Purchaser a Claim Notice, then the claim asserted in such notice shall survive the Termination Date until such time as such claim is fully and finally resolved pursuant to this Article 6. Covenants made by Purchaser, Merger Sub I or Merger Sub II herein to be performed prior to the Closing shall survive until the Termination Date and covenants made by Purchaser, Merger Sub I or Merger Sub II herein to be performed following the Closing shall survive until satisfied.
(d)    Representations Not Limited. The representations, warranties, covenants and obligations of the parties, and the rights and remedies that may be exercised by the Indemnitees, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of, any of the Indemnitees or any of their representatives.
(e)    Fraud. Notwithstanding anything to the contrary contained in this Section 6.1, the expirations set forth in Section 6.1(a), 6.1(b), and 6.1(c) shall not apply in the case of claims based upon Fraud (i) by or on behalf of the Company in making the representations and warranties of the Company in Article 2 of this Agreement or (ii) by or on behalf of Purchaser, Merger Sub I or Merger Sub II in making the representations of Purchaser, Merger Sub I and Merger Sub II in Article 3 of this Agreement.

6.2    Indemnification
(a)    Securityholder Indemnification. From and after the Effective Time (but subject to the limitations in this Article 6), the Securityholder Indemnitors shall, in accordance with each Securityholder Indemnitor’s Pro Rata Share, hold harmless and indemnify the Purchaser Indemnitees, from and against, and shall compensate and reimburse the Purchaser Indemnitees for any Loss suffered or incurred by any of the Purchaser Indemnitees or to which any of the Purchaser Indemnitees may otherwise become subject (regardless of whether or not such Loss relates to any Third-Party Claim) and that arises from or as a result of:
(i)    any inaccuracy in or breach of any representation or warranty made by the Company in this Agreement (without giving effect to any materiality thresholds, qualifiers and/or similar qualifications contained therein, including in the definition of Material Adverse Effect);
(ii)    any breach of any covenant or obligation, or any failure to comply therewith, of the Company in this Agreement prior to the Effective Time;
(iii)    any Indebtedness and any Company Transaction Expenses, in each case to the extent not included in the Closing Payment Certificate or not paid by the Company prior to the Closing;
(iv)    any claim by a Shareholder or former Shareholder of the Company or current or former holder of Options, or any other Person, seeking to assert, or based upon (but for the avoidance of doubt, excluding any disputes with respect to exchange procedures described in Section 1.10): (i) the ownership or rights to ownership of any shares of stock of the Company; (ii) any rights of a Shareholder or holder of Options (other than the right to receive the consideration pursuant to this Agreement), including any option, preemptive rights or rights to notice or to vote; (iii) any rights under the Charter Documents; or (iv) any claim for appraisal or dissenters rights, including any payment in respect of Dissenting Shares in excess of the amount of payments otherwise payable to such holder of Dissenting Shares pursuant to the Closing Payment Certificate;
(v)    any inaccuracy in the Closing Payment Certificate, as in effect from time to time;
(vi)    any Pre-Closing Taxes; or
(vii)    any Fraud committed by or on behalf of the Company in making the representations, warranties or covenants in this Agreement.
(b)    Purchaser Indemnification. From and after the Effective Time (but subject to the limitations in this Article 6), each of Purchaser, Surviving Company, Merger Sub I, Merger Sub II, and their Affiliates (the “Purchaser Indemnitors”) shall hold harmless and indemnify the Securityholders and their Affiliates (the “Securityholder Indemnitees”), from and against, and shall compensate and reimburse the Securityholder Indemnitees for any Loss which is suffered or incurred by any of the Securityholder Indemnitees or to which any of the Securityholder Indemnitees may otherwise become subject (regardless of whether or not such Loss relates to any Third-Party Claim) and that arises from or as a result of:
(i)    any inaccuracy in or breach of any representation or warranty made by Purchaser, Merger Sub I or Merger Sub II in Article 3 this Agreement (without giving effect to any materiality threshold and/or qualifier contained therein, including in the definition of Material Adverse Effect);
(ii)    any breach of any covenant or obligation, or any failure to comply therewith, of Purchaser, Merger Sub I or Merger Sub II in this Agreement;
(iii)    Purchaser’s or Merger Sub’s operation of the Surviving Company after the Effective Time; or
(iv)    any Fraud committed by or on behalf of Purchaser, Merger Sub I or Merger Sub II, in each case, in making the representations, warranties or covenants in this Agreement.

6.3    Limitations.
(a)    Basket. Subject to Section 6.3(c), the Securityholder Indemnitors, on the one hand, or the Purchaser Indemnitors, on the other hand (each, an “Indemnitor”) shall not be required to make any indemnification payment pursuant to Section 6.2(a)(i) or 6.2(b)(i) until such time as the total amount of all Losses (including the Losses arising from such inaccuracy or breach and all other Losses arising from any other inaccuracies or breaches of any representations or warranties) that have been directly or indirectly suffered or incurred by any one or more of the Purchaser Indemnitees, on the one hand, or the Securityholder Indemnitees, on the other (each, an “Indemnitee”), exceeds $50,000 in the aggregate (the “Threshold”) in which event only the amount of Losses that exceed the Threshold shall be recoverable. No Indemnitee shall be entitled to recover any individual Losses (or series of related Losses arising from a common set of facts) for which they would otherwise be entitled to indemnification pursuant to Section 6.2(a)(i) or 6.2(b)(i), as applicable, unless and until such individual Losses (or series of related Losses arising from a common set of facts) exceed $5,000 (the “Mini-Basket”), and any such individual Losses (or series of related Losses arising from a common set of facts) not in excess of the Mini-Basket will not be aggregated for purposes of calculating whether the Threshold has been met.
(b)    Liability Cap. Subject to Section 6.3(c), the maximum amount that the Purchaser Indemnitees are entitled to recover from the Securityholder Indemnitors under Section 6.2(a) for breaches of representations and warranties other than the Fundamental Representations is an amount equal to 15% of the sum of (i) the Merger Consideration plus (ii) payments for Indebtedness pursuant to Section 1.5(f) that are paid at the Closing and received by Securityholders and/or their Affiliates.
(c)    Applicability of Basket and Liability Cap. The limitations set forth in Sections 6.3(a) and 6.3(b) shall not apply: (i) in the case of Fraud committed by the Company in making the representations, warranties or covenants in this Agreement; (ii) to the matters referred to in Section 6.2(a)(i) in the case of breach of any Fundamental Representations; (iii) with respect to Pre-Closing Taxes; and (iv) unpaid Indebtedness. In the case of a breach of any Fundamental Representations or Fraud not committed by the applicable Securityholder Indemnitor, the maximum aggregate amount that the Purchaser Indemnitees are entitled to recover from each Securityholder Indemnitor under Section 6.2(a)(i) is the amount of the Merger Consideration and Earnout Consideration paid and payable to such Securityholder Indemnitor.
(d)    Exclusive Remedy. Except in the case of claims of Fraud asserted against the Person who committed such Fraud, claims for indemnification, compensation and reimbursement brought in accordance with and subject to this Article 6 shall be the sole and exclusive remedy of any Indemnitee for monetary Losses from and after the Closing Date with respect to breaches of this Agreement by the applicable party. Without limiting the generality of the foregoing, nothing contained in this Agreement shall limit the rights of any Indemnitee to seek or obtain injunctive relief, including specific performance, or any other equitable remedy to which such Indemnitee is otherwise entitled and attorney’s fees and costs pursuant to Section 9.3 of this Agreement. The parties acknowledge that, other than as expressly provided in this Agreement or any other agreement entered into in connection with the Mergers, (i) no current or former shareholder, stockholder, director, officer, employee, Affiliate or advisor of the Company has made or is making any representations or warranties whatsoever regarding the Company or the subject matter of this Agreement, express or implied, and (ii) except as expressly provided in Article 2, the Company has not made and is not making, and Purchaser is not relying upon, any representations or warranties whatsoever regarding the Company or the subject matter of this Agreement, express or implied.
(e)    Limitation. Any indemnity for Taxes resulting from a breach of a representation shall be limited to Pre-Closing Taxes.

6.4    No Contribution. Each Securityholder Indemnitor waives, and acknowledges and agrees that he, she, or it shall not have and shall not exercise or assert (or attempt to exercise or assert), any right of contribution, right of indemnity or other right or remedy against the Company in connection with any indemnification obligation or any other liability to which he may become subject under or in connection with this Agreement or any other Transactional Agreement.

6.5    Defense of Third-Party Claims.
(a)    Third-Party Claims. If any Indemnitee receives notice of the assertion or commencement of any Legal Proceeding made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a representative of the foregoing (a “Third-Party Claim”) against such Indemnitee with respect to which the Indemnitor is obligated to provide indemnification under this Agreement, the Indemnitee shall give the Indemnitor reasonably prompt written notice thereof, but in any event not later than 30 calendar days after receipt of such notice of such Third-Party Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnitor of its indemnification obligations, except and only to the extent that the Indemnitor forfeits rights or defenses by reason of such failure. Such notice by the Indemnitee shall describe the Third-Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnitee. The Indemnitor shall have the right to participate in, or by giving written notice to the Indemnitee (which notice shall irrevocably acknowledge the Indemnitor’s responsibility for such Third-Party Claim without reservation of any rights but subject to the limitations contained in this Article 6), to assume the defense of any Third-Party Claim at the Indemnitor’s expense and by the Indemnitor’s own counsel, and the Indemnitee shall cooperate in good faith in such defense; provided, however, that if the Indemnitor is a Securityholder Indemnitor, such Indemnitor shall not have the right to defend or direct the defense of any such Third-Party Claim that (i) is asserted directly by or on behalf of a Person that is a customer of the Company, (ii) seeks an injunction or other equitable relief against the Indemnitee, (iii) involves any criminal or quasi-criminal action, suit or proceeding, (iv) alleges the Company IP infringes the Intellectual Property Rights of a third party, or (v) as to which the Indemnitee believes an adverse determination would result in Losses that would exceed the limitations on the right of the Indemnitee to indemnification contained in Section 6.3, as the case may be. In the event that the Indemnitor assumes the defense of any Third-Party Claim, subject to Section 6.5(b), it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third-Party Claim in the name and on behalf of the Indemnitee. The Indemnitee shall have the right to participate in the defense of any Third-Party Claim with counsel selected by it subject to the Indemnitor’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnitee, provided, however, that if in the reasonable opinion of counsel to the Indemnitee, (A) there are legal defenses available to an Indemnitee that are different from or additional to those available to the Indemnitor; or (B) there exists a conflict of interest between the Indemnitor and the Indemnitee that cannot be waived, the Indemnitor shall be liable for the reasonable fees and expenses of a single counsel to all Indemnitees in each jurisdiction for which the Indemnitee determines counsel is required. If the Indemnitor elects not to compromise or defend such Third-Party Claim, fails to promptly notify the Indemnitee in writing of its election to defend as provided in this Agreement, or fails to diligently prosecute the defense of such Third-Party Claim, the Indemnitee may, subject to Section 6.5(b), pay, compromise, defend such Third-Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third-Party Claim. Shareholders’ Agent and Purchaser shall cooperate with each other in all reasonable respects in connection with the defense of any Third-Party Claim, including keeping the party not controlling the defense of such Third-Party Claim advised of the status of such Third-Party Claim and the defense thereof, making available (subject to the provisions of any confidentiality agreement) records relating to such Third-Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third-Party Claim. If the Indemnitor is not handling the defense, it shall be entitled to participate in the defense at its own cost and expense.
(b)    Settlement of Third-Party Claims. Notwithstanding any other provision of this Agreement, the Indemnitor shall not enter into settlement of any Third-Party Claim without the prior written consent of the Indemnitee, except as provided in this Section 6.5(b). If a firm offer is made to settle a Third-Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee and provides, in customary form, for the unconditional release of each Indemnitee from all liabilities and obligations in connection with such Third-Party Claim and the Indemnitor desires to accept and agree to such offer, the Indemnitor shall give written notice to that effect to the Indemnitee. If the Indemnitee fails to consent to such firm offer within ten days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third-Party Claim and in such event, the maximum liability of the Indemnitor as to such Third-Party Claim shall not exceed the amount of such settlement offer. If the Indemnitee fails to consent to such firm offer and also fails to assume defense of such Third-Party Claim, the Indemnitor may settle the Third-Party Claim upon the terms set forth in such firm offer to settle such Third-Party Claim. If the Indemnitee has assumed the defense pursuant to Section 6.5(a), it shall not agree to any settlement without the written consent of the Indemnitor (which consent shall not be unreasonably withheld or delayed).

6.6    Claims Procedures. Subject to the provisions of Sections 6.3 and 9.7(c), any claim for indemnification, compensation or reimbursement pursuant to this Article 6 shall be made as follows:
(a)    If any Indemnitee has or claims in good faith to have incurred or suffered Losses for which it is or may be entitled to indemnification, compensation or reimbursement under this Article 6, such Indemnitee may deliver a Claim Notice to Indemnitor, as applicable. Each Claim Notice shall: (i) state that the Indemnitee believes in good faith that the Indemnitee is entitled to indemnification, compensation or reimbursement under this Article 6; (ii) contain a brief description of the facts and circumstances supporting the Indemnitee’s claim; and (iii) if practicable, contain a non-binding, preliminary, good faith estimate of the amount to which the Indemnitee claims to be entitled (the aggregate amount of such estimate, as it may be modified by the Indemnitee in good faith from time to time, being referred to as the “Claimed Amount”).
(b)    During the 20-Business Day period commencing upon receipt by Shareholders’ Agent or Purchaser, as applicable, of a Claim Notice from an Indemnitee (the “Dispute Period”), the Indemnitor may deliver to the Indemnitee a written response (the “Claims Response Notice”) in which the Indemnitor: (i) agrees that the full Claimed Amount is owed to the Indemnitee; (ii) agrees that part, but not all, of the Claimed Amount is owed to the Indemnitee; or (iii) indicates that no part of the Claimed Amount is owed to the Indemnitee. If the Claims Response Notice is delivered in accordance with clause “(ii)” or “(iii)” of the preceding sentence, the Claims Response Notice shall also contain a brief description of the facts and circumstances supporting the Indemnitor’s claim that only a portion or no part of the Claimed Amount is owed to the Indemnitee, as the case may be (any part of the Claimed Amount that is not agreed to be owed to the Indemnitee pursuant to the Indemnitee’s Claim Notice being referred to as the “Contested Amount”). If a Claims Response Notice is not received by the Indemnitee from the Indemnitor prior to the expiration of the Dispute Period, then the Indemnitor shall be conclusively deemed to have agreed that an amount equal to the full Claimed Amount is owed to the Indemnitee.
(c)    If no Claims Response Notice is received by the Indemnitee from the Indemnitor prior to the expiration of the Dispute Period, then the Indemnitor shall make the applicable payment to such Indemnitee, subject to Section 6.3.
(d)    If the Indemnitee in the Claims Response Notice agrees that part, but not all, of the Claimed Amount is owed to the Indemnitee (the “Agreed Amount”), then the Indemnitor may, at its option, pay the Agreed Amount to the Indemnitee.
(e)    If any Claims Response Notice expressly indicates that there is a Contested Amount, the Indemnitor and the Indemnitee shall attempt in good faith to resolve the dispute related to the Contested Amount. If the Indemnitor and the Indemnitee resolve such dispute, such resolution shall be binding on the Indemnitor and the Indemnitee and a settlement agreement stipulating the amount owed to such Indemnitee (the “Stipulated Amount”) shall be signed by the Indemnitee and the Indemnitor.
(f)    In the event that there is a dispute relating to any Claim Notice or Contested Amount (whether it is a matter between the Indemnitee, on the one hand, and the Indemnitor, on the other hand, or it is a matter that is subject to a claim or Legal Proceeding asserted or commenced by a third party brought against the Indemnitee or the Company in a litigation or arbitration), a Legal Proceeding to resolve such dispute may be brought in accordance with Section 9.7(b).

6.7    No Duplication of Recovery. Any Losses for which any Indemnitee is entitled to indemnification hereunder shall be determined without duplication of recovery by reason of the state of facts giving rise to such Losses constituting a breach of more than one representation, warranty, covenant or agreement. Furthermore, no Indemnitee shall have any indemnification obligations hereunder for any Losses arising out of a breach of or inaccuracy of any representation, warranty, covenant, or agreement set forth in this Agreement (and the amount of any such Losses incurred in respect of such breach or inaccuracy shall not be included in the calculation of any limitations on indemnification set forth herein) solely to the extent Losses arising from such matter giving rise to such breach or inaccuracy were included in the determination of the Company Transaction Expenses, or Indebtedness of the Company for purposes of determining adjustments to the Merger Consideration.

6.8    Other Matters. Notwithstanding anything in this Agreement to the contrary, no party will be entitled to indemnification or reimbursement under any provision of this Agreement for any amount to the extent such party or its Affiliate has been indemnified or reimbursed for such amount under any other provision of this Agreement, or any other document executed in connection with this Agreement or otherwise.

7.    TAX COVENANTS

7.1    Tax-Free Reorganization. The Parties (i) intend for the Mergers to be treated as integrated steps in a single transaction and together to qualify as a tax-free reorganization pursuant to Section 368(a)(1)(A) of the Code and (ii) shall file all Tax Returns and take all Tax positions consistent with the foregoing, unless otherwise required by a “determination” within the meaning of Section 1313(a) of the Code (or similar final resolution under comparable provisions Legal Requirements of other jurisdictions). None of the Parties will take any action (or allow any action to be taken), or fail to take any action, that would reasonably be expected to disqualify the transactions contemplated by this Agreement as a tax-free reorganization pursuant to and within the meaning of Section 368 of the Code. Notwithstanding any provision of this Agreement, the allocation of Merger Consideration as among cash and Merger Shares allocable to Securityholders may be adjusted, as mutually agreed upon by Purchaser and Shareholders’ Agent, by decreasing the cash portion and correspondingly increasing the portion of Merger Consideration paid in Merger Shares, if and to the extent necessary to assure that the Securityholders receive sufficient Merger Shares such that the amount of Merger Shares is not less than the minimum amount of Merger Shares necessary to satisfy the requirements for qualification as a reorganization under Section 368(a)(1)(A) of the Code.

7.2    Transfer Taxes. All transfer, documentary, sales, use, stamp, registration, value added, and other similar Taxes incurred in connection with this Agreement and the Transactional Agreements (including any real property transfer Tax and any other similar Tax) shall be borne and paid when due in equal proportions by Purchaser, on the one hand, and Securityholders on the other hand. Purchaser and Shareholders’ Agent shall reasonably cooperate to timely file any Tax Return or other document with respect to such Taxes or fees.

7.3    Tax Returns. Purchaser shall prepare and file, or cause to be prepared and filed, all Tax Returns required to be filed by the Company after the Closing Date for any taxable period ending on or before the Closing Date and for any Straddle Period. Any such Tax Return shall be prepared in a manner consistent with past practice, if any (unless otherwise required by Legal Requirement). Any such Tax Returns shall be submitted by Purchaser to Shareholders’ Agent (together with schedules, statements and, to the extent reasonably requested by Shareholders’ Agent, supporting documentation) at least 30 days prior to the due date (including extensions) of such Tax Return (in the case of an income Tax Return) and at least 10 days prior to the due date (including extensions) of such Tax Return (in the case of any other Tax Return) for Shareholders’ Agent review and approval, which approval shall not be unreasonably withheld, conditioned, or delayed. To the extent the Parties cannot resolve any disputes, the dispute shall be referred to a nationally recognized accounting firm mutually agreeable to the Purchaser and Shareholders’ Agent, whose determination will be final. The costs of the accounting firm shall be borne by the Party that loses the dispute (or in the case of multiple issues or amounts in issue, the majority of the total dollar amounts in issue).

7.4    Straddle Period. In the case of Taxes that are payable with respect to a taxable period that begins on or before and ends after the Closing Date (each such period, a “Straddle Period”), the portion of any such Taxes that are treated as Pre-Closing Taxes for purposes of this Agreement shall be:
(a)    in the case of Taxes (i) based upon, or related to, income, receipts, profits, wages, capital or net worth, (ii) imposed in connection with the sale, transfer or assignment of property, or (iii) required to be withheld, deemed equal to the amount which would be payable if the taxable year ended at the close of the Closing Date provided, however, that exemptions, allowances or deductions that are calculated on an annual basis (such as the deductions for depreciation and ad valorem taxes) will be apportioned between the Pre-Closing Tax Period and the post-Closing Tax period in a manner consistent with the methodology described in clause (b) below; and
(b)    in the case of other Taxes, deemed to be the amount of such Taxes for the entire period multiplied by a fraction the numerator of which is the number of days in the period ending on (and including) the Closing Date and the denominator of which is the number of days in the entire period.

7.5    Elections. Neither Purchaser nor any of its Affiliates shall make an election under Sections 338 or 336(e) of the Code (or any comparable provision of non-U.S., state or local Legal Requirements) in respect of the transactions contemplated by this Agreement.

7.6    Pre-Closing Tax Returns. Without the prior written consent (not to be unreasonably withheld, conditioned or delayed) of Shareholders’ Agent, neither Purchaser nor its Affiliates (including the Surviving Company) shall file any amended Tax Return or surrender any right to claim a refund of Taxes with respect to any Pre-Closing Tax Period of the Company if such amendment, surrender, or action could reasonably be expected to have the effect of decreasing any amounts payable to the Securityholders under this Agreement or increasing an amount for which the Securityholders are required to indemnify under this Agreement.

7.7    Continuation of Business on Closing Date. For the portion of the Closing Date after the Closing, other than the transactions expressly contemplated by the Transactional Agreements, Purchaser shall cause the Company to carry on its business only in the ordinary course in the same manner as heretofore conducted.

7.8    Contests. Purchaser agrees to give prompt written notice to Shareholders’ Agent of the receipt of any written notice by Purchaser, Merger Sub I, Merger Sub II, the Surviving Company or any of Purchaser’s Affiliates which involves the assertion of any claim, or the commencement of any action, claim or Legal Proceeding in respect of a Tax for a Pre-Closing Tax Period of the Company (a “Tax Claim”); provided, however, that failure to comply with this provision shall not affect Purchaser’s right to indemnification hereunder unless the indemnifying party is materially adversely prejudiced due to such failure to comply. Shareholders’ Agent shall have the right to control the contest or resolution of any Tax Claim, the fees and expenses of which shall be borne solely by the Securityholders or Shareholders’ Agent; provided, however, that Shareholders’ Agent shall obtain the prior written consent of Purchaser (which consent shall not be unreasonably withheld, conditioned or delayed) before entering into any settlement of any such Tax Claim; and, provided further, that Purchaser shall be entitled to participate in the defense of such claim and to employ counsel of its choice for such purpose, the fees and expenses of which separate counsel shall be borne solely by Purchaser. Notwithstanding anything to the contrary in Section 6.5, the procedures of this Section 7.8 and not the procedures set forth in Section 6.5 shall apply with respect to the conduct of such Tax Claim.

7.9    Cooperation and Exchange of Information. Shareholders’ Agent, the Company and Purchaser shall provide each other with such cooperation and information as either of them reasonably may request of the others in filing any Tax Return pursuant to this Section 7 or in connection with any audit or other proceeding in respect of Taxes of the Company. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by Tax authorities. Each of Shareholders’ Agent, the Company and Purchaser shall retain all Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Company for any taxable period beginning before the Closing Date until the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate, without regard to extensions except to the extent notified by any of the other parties in writing of such extensions for the respective Tax periods. Prior to transferring, destroying or discarding any Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Company for any taxable period beginning before the Closing Date, Shareholders’ Agent, the Company or Purchaser (as the case may be) shall provide the other parties with reasonable written notice and offer the other parties the opportunity to take custody of such materials.

7.10    Survival. Notwithstanding anything in this Agreement to the contrary, the provisions of this Section 7 shall survive for the full period of all applicable statues of limitations (giving effect to any waiver, mitigation or extension thereof) plus 60 days.

8.    TERMINATION

8.1    Termination. This Agreement may be terminated at any time prior to the Closing:
(a)    by the mutual written consent of the Company and Purchaser;
(b)    by Purchaser by written notice to the Company if:
(i)    none of Purchaser, Merger Sub I or Merger Sub II is then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by the Company pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article 5 and such breach, inaccuracy or failure has not been cured by the Company within ten days of the Company’s receipt of written notice of such breach from Purchaser; or
(ii)    any of the conditions set forth in Section 5.1 or Section 5.2 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by May 30, 2020, unless such failure shall be due to the failure of Purchaser to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;
(c)    by the Company by written notice to Purchaser if:
(i)    the Company is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Purchaser, Merger Sub I or Merger Sub II pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article 5 and such breach, inaccuracy or failure has not been cured by Purchaser, Merger Sub I or Merger Sub II within ten days of such party’s receipt of written notice of such breach from the Company; or
(ii)    any of the conditions set forth in Section 5.1 or Section 5.3 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by May 30, 2020, unless such failure shall be due to the failure of the Company to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; or
(d)    by Purchaser or the Company if there shall be any law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited or any Governmental Body shall have issued an Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable.

8.2    Effect of Termination. In the event of the termination of this Agreement in accordance with this Article 8, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except:
(a)    as set forth in this Article 8 and Sections  4.2(b), 9.2, 9.3, 9.7(a), 9.7(b), 9.9, 9.12 and 9.16 hereof; and
(b)    that nothing herein shall relieve any party hereto from liability for any willful breach of any provision hereof.

9.    MISCELLANEOUS PROVISIONS

9.1    Shareholders’ Agent
(a)    Appointment. By virtue of their adoption of this Agreement, acceptance of consideration under this Agreement and delivery of the Letters of Transmittal, each Securityholder irrevocably nominates, constitutes and appoints Naia Limited as the exclusive agent and true and lawful attorney-in-fact of the Securityholders (the “Shareholders’ Agent”), with full power in his, her or its name and on his, her or its behalf to act according to the terms of this Agreement and the Shareholders’ Agent Engagement Agreement, and in general to do all things and to perform all acts including executing and delivering any agreements, amendments, certificates, receipts, instructions, notices or instruments contemplated by, or deemed advisable in connection with this Agreement and the agreements ancillary thereto, and the Shareholders’ Agent hereby accepts its appointment as Shareholders’ Agent.
(b)    By their adoption of this Agreement, acceptance of consideration under this Agreement, or the delivery of the Letter of Transmittal, the Securityholders shall be deemed to have agreed to the following, in addition to the foregoing:
(i)    Authority. The Securityholders grant to Shareholders’ Agent full authority to (1) execute, deliver, acknowledge, certify and file on behalf of such Securityholders (in the name of any or all of the Securityholders or otherwise) any and all documents that Shareholders’ Agent may, in his sole discretion, determine to be necessary, desirable or appropriate, in such forms and containing such provisions as Shareholders’ Agent may, in its sole discretion, determine to be appropriate, in performing its duties as contemplated by Section 9.1(a), (B) give and receive notices and other communications relating to this Agreement and the transactions contemplated hereby (except to the extent that this Agreement contemplates that such notice or communication shall be given or received by a Securityholder individually), (C) take or refrain from taking any actions (whether by negotiation, settlement, litigation or otherwise) to resolve or settle all matters and disputes arising out of or related to this Agreement or the transactions contemplated hereby, and (D) engaging attorneys, accountants, financial and other advisors, paying agents and other Persons necessary or appropriate in the judgment of the Shareholders’ Agent for the accomplishment of the foregoing; provided that the Shareholders’ Agent shall have no obligation to act on behalf of the Securityholders except as expressly provided herein or in the Shareholders’ Agent Engagement Agreement, and for purposes of clarity, there are no obligations of the Shareholders’ Agent in any ancillary agreement, schedule, exhibit or the Disclosure Schedule. Notwithstanding anything to the contrary contained herein or in any other agreement executed in connection with the Mergers and the transactions contemplated by this Agreement: (i) each Purchaser Indemnitee shall be entitled to deal exclusively with Shareholders’ Agent on all matters relating to any claim for indemnification, compensation or reimbursement under Article 6; and (ii) each Purchaser Indemnitee shall be entitled to rely conclusively (without further evidence of any kind whatsoever) on any document executed or purported to be executed on behalf of any Securityholder by Shareholders’ Agent, and on any other action taken or purported to be taken on behalf of any Securityholder by Shareholders’ Agent, as fully binding upon such Securityholder.
(ii)    Liability of Shareholders’ Agent. All actions, decisions and instructions of the Shareholders’ Agent shall be conclusive and binding upon each of the Securityholders. No Securityholder shall have any cause of action against the Shareholders’ Agent for any action taken or omitted, decision made or instruction given by the Shareholders’ Agent in connection with this Agreement, the Shareholders’ Agent Engagement Agreement or the agreements ancillary hereto, except for fraud, willful misconduct or gross negligence on the part of the Shareholders’ Agent, and all defenses which may be available to any Securityholder to contest, negate or disaffirm the action of the Shareholders’ Agent taken in good faith under this Agreement or the Shareholders’ Agent Engagement Agreement are waived.
(iii)    the Shareholders’ Agent shall be entitled to: (A) rely upon the Closing Payment Certificate, (B) rely upon any signature believed by it to be genuine, and (C) reasonably assume that a signatory has proper authorization to sign on behalf of the applicable Company Securityholder or other party.
(c)    At the Closing, Purchaser shall cause to be deposited, in an account designated by the Shareholders’ Agent, (i) $[**] of the cash Merger Consideration (the “Shareholders’ Agent Reserve”). Each Securityholder will contribute to the Shareholders’ Agent Reserve out of the cash portion of their Merger Consideration in accordance with their Pro Rata Share. The Shareholders’ Agent Reserve may be applied as the Shareholders’ Agent, in its sole discretion, determines to be appropriate to defray, offset, or pay any charges, fees, costs, liabilities, charges, losses, fines, damages, claims, forfeitures, actions, judgments, amounts paid in settlement, or expenses (including fees, disbursements and costs of counsel and other skilled professionals and in connection with seeking recovery from insurers) that the Shareholders’ Agent incurred in connection with the transactions contemplated by this Agreement and the Shareholders’ Agent Engagement Agreement, including in connection with the evaluation or defense of any claim for indemnification under this Agreement, (the “Shareholders’ Agent Expenses”). The Shareholders’ Agent will hold these funds in a non-interest bearing account separate from its corporate funds, will not use these funds for its operating expenses or any other corporate purposes and will not voluntarily make these funds available to its creditors in the event of bankruptcy. The Shareholders’ Agent is not providing any investment supervision, recommendations or advice and shall have no responsibility or liability for any loss of principal of the Shareholders’ Agent Reserve other than as a result of its gross negligence or willful misconduct. The Shareholders’ Agent is not acting as a withholding agent or in any similar capacity in connection with the Shareholders’ Agent Reserve, and has no Tax reporting or income distribution obligations. The Shareholders’ Agent may contribute funds to the Shareholders’ Agent Reserve from any consideration otherwise distributable to the Securityholders. The balance of the Shareholders’ Agent Reserve held pursuant to this Section 9.1(c), if any, shall, at the sole discretion of the Shareholders’ Agent and at such time to be determined in the sole discretion of the Shareholders’ Agent, be distributed, which shall be distributed by the Shareholders’ Agent to the Securityholders. Prior to any such distribution of the Shareholders’ Agent Reserve, the Shareholders’ Agent shall deliver to Purchaser an updated Closing Payment Certificate (which need not be certified) setting forth the portion of the Shareholders’ Agent Reserve payable to each Securityholder and Purchaser may rely on such updated Closing Payment Certificate for purposes of completing Purchaser’s payment obligations pursuant to this Agreement.
(d)    Replacement. If Shareholders’ Agent shall resign, dissolve, liquidate or otherwise be unable to fulfill its responsibilities hereunder, the Securityholders shall (by consent of those Persons entitled to at least a majority of the Pro Rata Shares) be authorized to appoint a successor to Shareholders’ Agent. Any such successor shall succeed Shareholders’ Agent as Shareholders’ Agent hereunder. If for any reason there is no Shareholders’ Agent at any time, all references herein to Shareholders’ Agent shall be deemed to refer to the Securityholders.

9.2    Fees and Expenses. Subject to Article 6 and as otherwise set forth in this Agreement, each party to this Agreement shall bear and pay all fees, costs and expenses that have been incurred or that are incurred in the future by such party in connection with the Mergers and the transactions contemplated by this Agreement, including all fees, costs and expenses incurred by such party in connection with or by virtue of: (a) the negotiation, preparation and review of this Agreement (including the Disclosure Schedule) and all agreements, certificates and other instruments and documents delivered or to be delivered in connection with the Mergers; (b) the preparation and submission of any filing or notice required to be made or given in connection with any of the Mergers and the transactions contemplated by this Agreement, and the obtaining of any consent required to be obtained in connection with any of the Mergers and the transactions contemplated by this Agreement; and (c) the consummation of the Mergers.

9.3    Attorneys’ Fees. Subject to Articles 6 and 7, if any Legal Proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party or parties shall be entitled to recover from the non-prevailing party or parties reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing party or parties may be entitled).

9.4    Notices. Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received: (a) if delivered by hand, when delivered; (b) if sent via facsimile with confirmation of receipt, when transmitted and receipt is confirmed; (c) if sent by electronic mail, telegram, cablegram or other electronic transmission, upon delivery; (d) if sent by registered, certified or first class mail, the third Business Day after being sent; and (e) if sent by overnight delivery via a national courier service, one Business Day after being sent, in each case to the address, email address or facsimile telephone number set forth beneath the name of such party below (or to such other address, email address or facsimile telephone number as such party shall have specified in a written notice given to the other parties hereto); provided that with respect to notices delivered to the Shareholders’ Agent, such notices must be delivered solely via facsimile or via email:
If to Purchaser or Merger Subs:


c/o RDD Pharma Ltd.
3 Columbus Circle, 15th Floor
New York, NY 10019
Attention: John Temperato, CEO
Email: jtemperato@rddpharma.com

With a copy to:

Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607
Attention: Donald R. Reynolds
Email: dreynolds@wyrick.com

If to the Company (prior to the Closing):

Naia Rare Diseases, Inc.
2600 Hilltop Drive
Richmond, CA 94806
Attention:
Email:

with a copy (which shall not constitute notice) to:

Dorsey & Whitney LLP
305 Lytton Avenue
Palo Alto, CA 94301
Attention: Evan Ng
Email copy: ng.evan@dorsey.com

If to the Securityholders or Shareholders’ Agent:
Naia Limited
2600 Hilltop Drive
Richmond, CA 94806
Attention :
Email:


9.5    Headings. The bold-faced headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

9.6    Counterparts and Exchanges by Electronic Transmission or Facsimile. This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement. The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in PDF format or by facsimile shall be sufficient to bind the parties to the terms and conditions of this Agreement.

9.7    Governing Law; Indemnification Claims.
(a)    Governing Law. This Agreement shall be construed in accordance with, and governed in all respects by, the internal laws of the State of Delaware (without giving effect to principles of conflicts of laws).
(b)    Venue. Except as otherwise provided in Section 9.7(c), any Legal Proceeding relating to this Agreement or the enforcement of any provision of this Agreement (including a Legal Proceeding based upon fraud) may be brought or otherwise commenced in any state or federal court located in the State of Delaware. Each party to this Agreement: (i) expressly and irrevocably consents and submits to the jurisdiction of each state and federal court located in the State of Delaware (and each appellate court located in the State of Delaware) in connection with any such Legal Proceeding; (ii) agrees that each state and federal court located in the State of Delaware shall be deemed to be a convenient forum; and (iii) agrees not to assert (by way of motion, as a defense or otherwise), in any such Legal Proceeding commenced in any state or federal court located in the State of Delaware, any claim that such party is not subject personally to the jurisdiction of such court, that such Legal Proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the subject matter of this Agreement may not be enforced in or by such court. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient.
(c)    Indemnification Claims. Any claim for indemnification, compensation or reimbursement pursuant to Article 6 shall be made in accordance with Section 6.6 (it being understood that, for the avoidance of doubt and without limiting any portion of Section 9.7(b), nothing in this Section 9.7(c) shall prevent the Indemnitees from seeking preliminary injunctive relief from a court of competent jurisdiction).

9.8    Successors and Assigns. This Agreement shall be binding upon: (a) Company and its successors and assigns (if any); and (b) Purchaser, Merger Sub I and Merger Sub II and their respective successors and assigns (if any). This Agreement shall inure to the benefit of: (i) Company; (ii) the Securityholders; (iii) Purchaser; (iv) Merger Subs; (v) the Surviving Company; and (vi) the respective personal representatives, executors, administrators, estates, heirs, successors and assigns (if any) of the foregoing.

9.9    Specific Performance. Subject to the terms of Section 6.3(d), the rights and remedies of the parties hereto shall be cumulative (and not alternative). The parties to this Agreement agree that, in the event of any breach or threatened breach by any party to this Agreement of any covenant, obligation or other provision set forth in this Agreement, for the benefit of any other party to this Agreement: (a) such other party shall be entitled (in addition to any other remedy that may be available to it) to: (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision; and (ii) an injunction restraining such breach or threatened breach; and (b) such other party shall not be required to provide any bond or other security in connection with any such decree, order or injunction or in connection with any related action or Legal Proceeding.

9.10    Waiver. No failure on the part of any Person to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Person in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No Person shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Person; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

9.11    Amendments. This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered by Purchaser and Shareholders’ Agent; provided that after any such adoption of this Agreement by the Requisite Shareholders, no amendment shall be made which by Legal Requirements requires further approval of the Shareholders without the further approval of such Shareholders.

9.12    Severability. In the event that any provision of this Agreement, or the application of any such provision to any Person or set of circumstances, shall be determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the application of such provision to Persons or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall not be impaired or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by law.

9.13    Parties in Interest. Except for the provisions of Article 6, none of the provisions of this Agreement is intended to provide any rights or remedies to any Person other than the parties hereto and their respective successors and assigns (if any).

9.14    Entire Agreement. This Agreement and the other agreements referred to herein, including the Mutual Non-Disclosure Agreement, set forth the entire understanding of the parties hereto relating to the subject matter hereof and thereof and supersede all prior agreements and understandings among or between any of the parties relating to the subject matter hereof and thereof.

9.15    Disclosure Schedule. The Disclosure Schedule shall be arranged in separate parts corresponding to the numbered and lettered sections contained herein permitting such disclosure, and the information disclosed in any numbered or lettered part shall be deemed to relate to and to qualify (a) the particular representation or warranty set forth in the corresponding numbered or lettered Section herein permitting such disclosure and (b) any other representation or warranty that is contained in this Agreement to the extent the relevance of that reference as an exception to (or a disclosure for purposes of) such representation or warranty is reasonably apparent on the face of such reference.

9.16    Construction.
(a)    Currency. All references in this Agreement and in any Transactional Agreements to “$” and “Dollars” are to U.S. dollars.
(b)    Ambiguities. The parties hereto agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.
(c)    Including. As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”
(d)    References. Except as otherwise indicated, all references in this Agreement to “Sections,” “Schedules” and “Exhibits” are intended to refer to Sections of this Agreement and Schedules and Exhibits to this Agreement.
(e)    Language. To the extent that this Agreement, any Transactional Agreement or any other agreements related to the transactions contemplated hereby are translated into a language other than English, and a conflict arises between the English language version and the translated version, the English version will control in all cases.
[Remainder of page intentionally left blank]



-1-



The parties hereto have caused this Agreement to be executed and delivered as of the date first written above.

INNOVATE BIOPHARMACEUTICALS, INC.
a Delaware corporation

By: /s/ John Temperato    
Name: John Temperato
Title: Chief Executive Officer

NAIA MERGER SUB, INC,
a Delaware corporation

By: /s/ John Temperato    
Name: John Temperato
Title: President

SECOND NAIA MERGER SUB, LLC,
a Delaware limited liability company

By: /s/ John Temperato    
Name: John Temperato
Title: Chief Executive Officer and President


NAIA RARE DISEASES, INC.,
an exempted company incorporated under the laws of the Cayman Islands

By: /s/ H. Daniel Perez    
Name: H. Daniel Perez
Title: Director and Chief Executive Officer

NAIA LIMITED
AS SHAREHOLDERS’ AGENT

By: /s/ H. Daniel Perez    
Name: H. Daniel Perez
Title: Chief Executive Officer


1




EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquired Patents” means the [**] Patents and [**] Patents.
Act” means the United States Federal Food, Drug, and Cosmetic Act, as amended, and the rules, regulations, guidelines, guidance documents and requirements promulgated thereunder, as may be in effect from time to time.
Action” means any claim, action, suit, arbitration, inquiry, audit, proceeding or investigation.
Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. With respect to Purchaser, Merger Subs and the Surviving Company are each Affiliates.
Agreed Amount” is defined in Section 6.6(d).
Agreement” is defined in the Preamble.
[**]” means [**]
[**] Licenses” means the [**] and the [**].
[**]” means the Second Amended and Restated License Agreement by and between [**] and the Company to be executed following the date hereof. For clarity, any modifications or amendments to such agreement after Closing will be disregarded when determining amounts due and/or payable under the [**] for purposes of this Agreement.
[**]” that the Amended and Restated License Agreement by and between [**] and the Company to be executed following the date hereof. For clarity, any modifications or amendments to such agreement after Closing will be disregarded when determining amounts due and/or payable under the [**] License for purposes of this Agreement.
[**]” means any Patents to which rights are granted by [**] under the [**].
API” means active pharmaceutical ingredient.
Balance Sheet” is defined in Section 2.4(a).

A-2



Balance Sheet Date” is defined in Section 2.4(a).
BLA” means a biologics license application (as defined in Title 21 of the United Stated Code of Federal Regulations) submitted to the FDA seeking regulatory approval to market and sell the Product in the United States.
Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in the United States of America are authorized or required by law to be closed for business.
Business” means the gastrointestinal focused business, as presently conducted by the Company.
Calendar Quarter” means each of those three (3) calendar month periods of each Calendar Year ending March 31, June 30, September 30 and December 31, provided, that (a) the initial Calendar Quarter shall begin on the Effective Time and end June 30, 2020 and (b) the Calendar Quarter in which this Agreement expires or is terminated shall extend from the first calendar day of such Calendar Quarter until the effective date of such expiration or termination.
Calendar Year” means (a) for the first Calendar Year, the period commencing on the Effective Time and ending on December 31 of the same year, (b) for the Calendar Year in which this Agreement expires or is terminated, the period beginning on January 1 of such Calendar Year and ending on the effective date of such expiration or termination, and (c) for all other years, each successive twelve (12) consecutive month period beginning on January 1 and ending December 31.
CICL” means Part XVI of the Companies Law (2020 Revision) of the Cayman Islands.
Certificate of Merger” is defined in Section 1.2.
Charter Documents” is defined in Section 2.2.
Claim Notice” is defined in Section 6.1(a).
Claimed Amount” is defined in Section 6.6(a).
Claims Response Notice” is defined in Section 6.6(b).
Closing Date” is defined in Section 1.2.
Closing Payment Certificate” means a certificate, signed by an executive officer of the Company on behalf of the Company, which sets forth (i) a calculation of the payments to be made by Purchaser in accordance with Section 1.13(b), (ii) the identity of each Person entitled to a payment pursuant to Section 1.13(b), (iii) the calculation of amount due to each such Person (before withholding Taxes, if any), (iv) the applicable wire instructions for the account or accounts of such Person and (v) each Securityholder’s pro rata percentage of the Earnout Consideration.

A-3



Closing” is defined in Section 1.2.
Code” means the Internal Revenue Code of 1986, as amended.
Company Board Recommendation” is defined in Section 2.18(b).
Company Board” means the Board of Directors of the Company.
Company Contract” means any Contract to which the Company is a party.
Company Employee Agreement” means each management, employment, severance, consulting, relocation, repatriation or expatriation agreement or other Contract between the Company and any current Company Employee, other than any such management, employment, severance, consulting, relocation, repatriation or expatriation agreement or other Contract with a Company Employee which is terminable “at will” without any obligation on the part of the Company to make any payments or provide any benefits in connection with such termination or in connection with the transactions contemplated by this Agreement, any employee proprietary information and inventions agreement or any form option notices and notices made in such form or form option grants and grants made in such form.
Company Employee Plan” means any plan, program, policy, practice, Contract or other arrangement providing for compensation, bonus, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, change in control pay, retention pay, material fringe benefits or other employee benefit plan (within the meaning of Section 3(3) of ERISA) or that provides material remuneration of any kind to any Company Employee, whether written, unwritten or otherwise, funded or unfunded, in each case, that is or has been maintained, contributed to, or required to be contributed to, by the Company or an ERISA Affiliate thereof for the benefit of any Company Employee, or with respect to which the Company or any ERISA Affiliate has or may have any liability, including any Company Employee Agreement.
Company Employee” means any current or former employee, independent contractor, consultant or director of any of the Company.
Company IP Contract” means any Contract to which the Company is bound, that contains any assignment or license of, or any covenant not to assert or enforce, or any other right to use or exploit, any Company IP or that otherwise relates to any transfer, license or assignment of Company IP or any Intellectual Property Right developed by, with or for the Company.
Company IP” means all Intellectual Property Rights which the Company owns (or purports to own), or to which it has an exclusive license or similar exclusive right, including for clarity, but not limited to, the [**] Patents and [**] Patents.
Company Ordinary Shares” means the shares of the Company’s ordinary shares, par value $0.001 per share.

A-4



Company Preference Shares” means the shares of the Company Series B Preference Shares, the Company Series A Preference Shares and the Company Series 1 Preference Shares, collectively.
Company Series 1 Preference Shares” means the shares of the Company’s Series 1 Preference Shares, par value $0.001.
Company Series A Preference Shares” means the shares of the Company’s Series A Preference Shares, par value $0.001.
Company Series B Preference Shares” means the shares of the Company’s Series B Preference Shares, par value $0.001.
Company Share Certificates” is defined in Section 1.17(c).
Company Share” means the Company Ordinary Shares and the Company Preference Shares, collectively.
Company Transaction Expenses” means all of the following amounts, without duplication: all outstanding legal, financial advisory, accounting and other fees and expenses incurred by the Company and Shareholders’ Agent in connection with the negotiation and consummation of the transactions contemplated hereby (but excluding any such fees and expenses attributable to actions by the Company or its Affiliates following the Closing Date).
Company” is defined in the Preamble.
Compounds” means NB1001 and NB1002.
Contested Amount” is defined in Section 6.6(b).
Contract” means any written, oral or other agreement, contract, subcontract, Lease, license, covenant, understanding, arrangement, instrument, note, warranty, insurance policy, benefit plan or legally binding commitment or undertaking of any nature.
Control” including its various tenses and derivatives (such as “controlled” and “controlling”) means (a) when used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities, by Contract or otherwise, (b) when used with respect to any security, the possession, directly or indirectly, of the power to vote, or to direct the voting of, such security or the power to dispose of, or to direct the disposition of, such security and (c) when used with respect to any Intellectual Property Rights, possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise, to assign or grant a license, sublicense or other right to or under such Intellectual Property Rights or to compel another to do so.

A-5



Copyrights” means registered and unregistered copyrights, works of authorship, copyrightable works (published or unpublished) and all applications, registrations and renewals therefor.
Cover” (in all its verb and adjectival forms, such as “Covered” and “Covers”) means (a) with respect to Valid Patent Claims in an issued patent, that, in the absence of a license, the use, sale, import, or manufacture of the product in question would directly or indirectly (e.g., by inducement or contributory infringement) infringe such Valid Patent Claim or (b) with respect to a Valid Patent Claim in a pending application, that, in the absence of a license, the use, offer for sale, sale, importation or manufacture of the product in question would directly or indirectly infringe such Valid Patent Claim, should such claims issue substantially as pending.
CSMC License” means that certain Amended and Restated Exclusive License Agreement by and between Cedars-Sinai Medical Center (“CSMC”) and the Company, dated February 10, 2020, as it may be amended from time to time. For clarity, any modifications or amendments to such agreement after Closing will be disregarded when determining amounts due and/or payable under the CSMC License for purposes of this Agreement.
CSMC Patents” means any Patents to which rights are granted by CSMC under the CSMC License.
D&O Indemnified Person” is defined in Section 4.7.
D&O Tail Policy” is defined in Section 4.7.
Disclosure Schedule” means the schedule (dated as of the date of the Agreement) attached as Exhibit K delivered to Purchaser on behalf of the Company and prepared in accordance with Section 9.15 of the Agreement.
Dispute Period” is defined in Section 6.6(b).
Dissenting Shares” is defined in Section 1.8.
Earnout Consideration” means the sum of all Sales-Based Payments, Milestone Payments and the portion of the Prepaid License Fees to be paid pursuant to Section 1.9(c).
Earnout Period” means, (i) with respect to Sales-Based Payments, any Calendar Quarter in which the Sales-Based Payment is greater than zero, and (ii) with respect to Milestone Payments, any time period ending with the achievement of a milestone, as described in Section 1.9(b)(i) or Section 1.9(b)(ii).
Effective Time” is defined in Section 1.2.
EGM” is defined in Section 4.3.
EMEA” means the European Medicines Agency or any successor agency thereof.

A-6



Encumbrance” means any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim or restriction of any nature (but excluding licenses).
Entity” means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.
Environment” includes: (a) any and all buildings, structures, fixtures, fittings, appurtenances, pipes, conduits, valves, tanks, vessels and containers whether above or below ground level; and (b) ambient air, land surface, sub-surface strata, soil, surface water, ground water, river sediment, marshes, wet lands, flora and fauna.
Environmental Law” means: (a) the common law; and (b) all Legal Requirements, by-laws, orders, instruments, directives, decisions, injunctions and judgments of any government, local government, international, supranational, executive, administrative, judicial or regulatory authority or agency and all approved codes of practice (whether voluntary or compulsory) relating to the protection of the Environment or of human health or safety or welfare or to the manufacture, formulation, processing, treatment, storage, containment, labeling, handling, transportation, distribution, recycling, reuse, release, disposal, removal, remediation, abatement or clean-up of any contaminant and any amendment thereto and any and all regulations, orders and notices made or served thereunder or pursuant thereto).
ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and the regulations promulgated thereunder.
ERISA Affiliate” means any entity (whether or not incorporated) other than the Company that would be considered, together with the Company to be a single employer under Code Section 414.
Exploit”, including its various tenses and derivatives (such as “Exploiting” and “Exploited”), means to make, have made, import, use, sell, offer for sale, and otherwise dispose of, including to research, develop, register, modify, enhance, improve, manufacture, have manufactured, store, formulate, optimize, export, transport, distribute, commercialize, promote, market, have sold and otherwise dispose of. “Exploitation” means the act of Exploiting a compound, product or process.
FCPA” has the meaning set forth in Section 3.17(a).
FDA” has the meaning set forth in Section 3.10(b).
Financial Statements” is defined in Section 2.4(a).
First Commercial Sale” means, with respect to a particular jurisdiction, the first sale of a Product to a third party by Purchaser, any Affiliate thereof, or any Licensee in such jurisdiction following Marketing Authorization (or the foreign equivalent thereof) for such Product in such jurisdiction.
First Merger” is defined in the Recitals.

A-7



First-Step Surviving Company” has the meaning set forth in Section 1.1.
Fraud” means (i) a false representation by a Person, (ii) made either with knowledge or belief as to its falsity, (iii) with an intent to induce the other Person to act or refrain from acting, (iv) such other Person acted or refrained from acting in reliance on such representation and (v) such reliance resulted in Losses to such other Person.
Fundamental Representations” means the representations and warranties set forth in Section 2.1 (Due Organization), Section 2.18 (Authority) and Section 2.19 (Non-Contravention; Consents).
GAAP” means the United States generally accepted accounting principles in effect from time to time.
Governmental Authority” means any Federal, state, local or foreign government, any court, tribunal, administrative, regulatory or other governmental agency, department, commission or authority or any non-governmental self-regulatory agency, commission or authority.
Governmental Authorization” means any: (a) permit, license, certificate, franchise, permission, clearance, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement; or (b) right under any Contract with any Governmental Body.
Governmental Body” mans any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; or (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or Entity and any court or other tribunal).
Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Body.
Indebtedness” means, without duplication, as of any time: (i) any indebtedness of the Company for borrowed money and accrued but unpaid interest, premiums and penalties relating thereto; (ii) any indebtedness of the Company evidenced by a note, bond, debenture or other similar security and accrued but unpaid interest, premiums and penalties relating thereto; (iii) any Liability of the Company with respect to any letter of credit, banker’s acceptance, performance bond or similar credit transaction; (iv) any lease that has been, or should be, accounted for as a capital lease on the balance sheet of the Company; (v) without duplication of any Taxes included in Company Transaction Expenses, any unpaid Tax Liabilities of the Company attributable to a taxable period ending on or before the Closing Date; (vi) all Company obligations issued or assumed as the deferred purchase price of property, goods, services or assets; (vii) all deferred revenues or payments of the Company; (viii) any obligations or indebtedness of a Person of a type that is referred to in clauses (i) through (vii) above and which is either directly or indirectly guaranteed by, or secured by an Encumbrance upon any property or asset owned by, the Company; (ix) any obligations of the

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Company under any interest rate derivative securities or interest rate cap, swap, collar or similar agreements, or financial, currency or commodity hedge, exchange or similar agreements or transactions; and (x) all interest, prepayment premiums or penalties, and fees and expenses related to any of the foregoing (including any prepayment premiums payable as a result of the consummation of the transactions); provided, however, that for the avoidance of doubt, Indebtedness shall exclude any Company Transaction Expenses.
Indemnitee” is defined in Section 6.3(a).
Indemnitor” is defined in Section 6.3(a).
Innovate Schedule of Exceptions” means the Innovate Schedule of Exceptions as defined in the RDD Merger Agreement, as may be further annotated and updated by Innovate or Purchaser on the date of this Agreement or the Closing Date.
Intellectual Property Rights” means any (a) Patents; (b) Trademarks; (c) Copyrights; (d) domain names; (e) software, computer programs and applications (whether in source code, object code or other form) algorithms, databases, documentation and technology supporting the foregoing (excluding off the shelf software); and (f) Trade Secrets, other proprietary information and other proprietary intellectual property rights, and all copies and tangible embodiments of the foregoing in whatever form or medium.
Inventory” means all inventories of any Product or Compound, any cell lines expressing either of the foregoing, or any vectors encoding or expressing Product or Compound, including all drug substances, drug product, clinical lots, reference standards, reserve samples, patient samples, reagents, vectors, DNA constructs, working and/or master cell banks, inventories of active pharmaceutical ingredients, consumables, finished goods, and supplies (including rights and interests in goods in transit, consigned inventory, inventory sold on approval and rental inventory).
Joinder Agreement” is defined in Section 1.10(a).
Knowledge” An individual shall be deemed to have “Knowledge” of a particular fact or other matter if: (a) such individual is actually aware of such fact or other matter; or (b) an individual should have known such fact or other matter after reasonable inquiry. The Company shall be deemed to have “Knowledge” of a particular fact or other matter if Daniel Perez, MD or Mark Bagnall has Knowledge of such fact or other matter.
Labeling” shall be as defined in Section 201(m) of the Act (21 U.S.C. § 321(m)) and other comparable foreign Law relating to the subject matter thereof, including a Product’s label, packaging and instructions for use accompanying a Product, and any other written, printed, or graphic materials accompanying a Product, including patient instructions or patient indication guides.
Leased Real Property” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures, or other interest in real property held by the Company.

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Leases” means all leases, subleases, licenses, concessions and other agreements (written or oral), including all amendments, extensions, renewals, guaranties, and other agreements with respect thereto, pursuant to which the Company holds any Leased Real Property, including the right to all security deposits and other amounts and instruments held by or on behalf of the Company thereunder.
Legal Proceeding” means any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.
Legal Requirement” means any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, Order, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body.
Letter of Transmittal” is defined in Section 1.10(a).
Liability” means any debt, obligation, duty or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability), regardless of whether such debt, obligation, duty or liability would be required to be disclosed on a balance sheet prepared in accordance with GAAP and regardless of whether such debt, obligation, duty or liability is immediately due and payable.
Licensee” means a Person, other than Purchaser and its Affiliates, that is granted or otherwise obtains, directly from Purchaser, any of its Affiliates, or any previous Licensee, a license or sublicense (at any tier) to any rights under the Company IP, [**] Patents, or [**] Patents or any future assignee of the [**], the [**], or the [**]. For clarity, if an Affiliate of Purchaser ceases to be an Affiliate of Purchaser (by divestiture or otherwise), and such former Affiliate of Purchaser is granted or retains any license or sublicense rights under any Company IP, [**], or [**], then such former Affiliate will be considered a Licensee.
Listed Contracts” is defined in Section 2.11(a).
Loss” means losses, damages, liabilities, deficiencies, actions, judgments, interest, awards, penalties, fines, reasonable costs or reasonable expenses of whatever kind, including reasonable attorneys’ fees and the reasonable cost of enforcing any right to indemnification hereunder and the cost of pursuing any insurance providers; but excluding, in each case, any exemplary, punitive or unforeseeable consequential damages, except to the extent such damages are finally awarded and actually paid by an Indemnitor to an unaffiliated third party in connection with a Legal Proceeding against such Indemnitor.
Marketing Authorization” means the receipt of all approvals from the relevant Regulatory Authority necessary to market and sell a Product in the United States (including all applicable approvals or determinations by a Regulatory Authority for the pricing or pricing reimbursement for a pharmaceutical product even if not legally required to sell the Product in the United States).

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Material Adverse Effect” means any change, event, effect, claim, circumstance or matter (each, an “Effect”) that (considered together with all other Effects) is or would or would reasonably be expected to become, materially adverse to: (a) the business, condition (financial or otherwise) or operations of the Company taken as a whole; (b) Purchaser’s right to own the membership interests of the Surviving Company following the Mergers; or (c) the ability of the Company to perform any of its material covenants or obligations under this Agreement or under any other Contract or instrument executed, delivered or entered into in connection with any of the transactions contemplated by this Agreement; provided, however, that Effects directly resulting from any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) any changes (after the date hereof) in GAAP or Legal Requirements to the extent that such changes do not disproportionately affect the Company as compared to similarly situated companies in the industries in which the Company operates; (ii) any change in general economic, political or market conditions, including, without limitation, securities market conditions, in the industries or markets in which the Company operates or affecting United States or foreign economies in general to the extent that such change does not disproportionately affect the Company as compared to similarly situated companies in the industries in which the Company operates; (iii) acts of war (whether or not declared), armed hostilities, or terrorism, or the escalation or worsening thereof to the extent that such conditions do not disproportionately affect the Company as compared to similarly situated companies in the industries in which the Company operates; and (iv) any effect of the announcement of this Agreement or the Transactional Agreements, or the transactions contemplated hereby or thereby, shall not be deemed to have or constitute a Material Adverse Effect provided that such adverse changes or conditions do not disproportionately affect the Company.
Merger Consideration” is defined in Section 1.5.
Merger Shares” means the shares of Purchaser Stock, issued as part of the Merger Consideration to the Securityholders and [**], equal to the quotient of $2,850,000 divided by the Purchaser Stock Price.
Merger Sub I” is defined in the Preamble.
Merger Sub II” is defined in the Preamble.
Merger Subs” is defined in the Preamble.
Mergers” is defined in the Recitals.
Milestone Payments” means the payments to be deposited with the Shareholders’ Agent for distribution to the Securityholders pursuant to Section 1.9(b).
Mini-Basket” is defined in Section 6.3(a).
Mutual Non-Disclosure Agreement” is defined in Section 4.2(b).
NB1001 Product” means a product that incorporates or comprises NB1001 (alone or in combination with other APIs, peptides, proteins, or biologics).

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NB1001” means the biologic having the amino acid sequence set forth on Exhibit J-1 or, if applicable, any other compound that is deemed to be (or that otherwise causes a product containing such compound to be) a “Licensed Product” for purposes of, and as set forth in, the [**].
NB1002 Product” means a product that incorporates or comprises NB1002 (alone or in combination with other APIs, peptides, proteins, or biologics).
NB1002” means the biologic having the amino acid sequence set forth on Exhibit J-2 or, if applicable, any other compound that is deemed to be (or that otherwise causes a product containing such compound to be) a “Licensed Product” for purposes of, and as set forth in, the [**].
NDA” means a new drug application (as defined in Title 21 of the United States Code of Federal Regulations, as amended from time to time) submitted to the FDA seeking regulatory approval to market and sell the Product in the United States (including a new drug application submitted under Section 505(b)(2) of the Act).
Net Sales” means in the case of Products, gross amounts invoiced or otherwise received for Purchaser’s, its Affiliates’, and Licensees’ sales of Products in the Territory, less the sum of the following, to the extent commercially reasonable and directly and solely related to the sale of such Products: (1) discounts to customers in amounts customary in the trade; (2) reasonable rebates, credits, and chargeback payments granted to federal, state/provincial, local and other governments or managed health care organizations, including their agencies, purchasers, and/or reimbursers, under programs available or required by law, or reasonably entered into to sustain and/or increase market share for Products; (3) sales, value added, and/or use Taxes directly imposed and with reference to particular sales and that are paid by Purchaser, its Affiliates, or Licensees; (4) amounts allowed or credited on returns for defective Products; (5) shipping and insurance charges with respect to Products that are itemized on the relevant invoice and paid by the customer; and (6) import or export duties, tariffs, or similar charges incurred with respect to the import or export of Products into or out of any country. Such amounts shall be determined from the books and records of Purchaser, its Affiliates, and Licensees maintained in accordance with GAAP, consistently applied. Furthermore, for purposes of calculating Net Sales hereunder, any discounts, allowances, credits, or rebates described above shall not be deducted hereunder to the extent they are offered as an enticement or in exchange for purchasing other products of Purchaser, its Affiliates, or Licensees, such that the Product bears a disproportionate portion of such deductions as related to such other products (for example, where the Product is offered as a “loss leader”).
Notwithstanding anything to the contrary, in the event that any Product includes, in addition to NB1001 or NB1002, one or more other APIs (a “Combination Product”), the Net Sales of such Combination Product in a particular country, for the purposes of determining Earnout Consideration under Section 1.9 (as they may be adjusted under this Agreement) shall be determined by multiplying the Net Sales of the Combination Product in such country by the fraction, “A / (A+B)” where “A” is the weighted average sale price of the Product including NB1001 or NB1002, as applicable (and not any other APIs (other than NB1001 or NB1002)), included in the Combination Product (the “Basic Product”) when sold separately in finished

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form in such country (provided that if (i) the Product incorporates both NB1001 and NB1002, but there is no separately sold Product incorporating both NB1001 and NB1002 and no other APIs, “A” shall equal the sum of the weighted average sale prices in such country of a Product incorporating just NB1001 and a Product incorporating just NB1002), and “B” is the weighted average sale price(s) of product(s) including just the API(s) other than NB1001 or NB1002 (such products, “Other Products”) sold separately in finished form in such country (if there is more than one Other Product, “B” shall equal the sum of all such Other Products’ weighted average sale prices in such country).
In the event that, with respect to any Combination Product sold in a particular country, the weighted average sale price of the Basic Product(s) in such country can be determined but the weighted average sale price(s) of the Other Product(s) in such country cannot be determined, Net Sales for purposes of determining Sales-Based Payments for such Combination Product in such country shall be calculated by multiplying the Net Sales of the Combination Product in such country by the fraction “A / C” where “A” is the weighted average sale price(s) of the Basic Product(s) when sold separately in finished form in such country and “C” is the weighted average sale price of the Combination Product in such country.
In the event that, with respect to any Combination Product sold in a particular country, the weighted average sale price(s) of the Other Product(s) in such country can be determined but the weighted average sale price(s) of the Basic Product(s) cannot be determined, Net Sales for purposes of determining Sales-Based Payments shall be calculated by multiplying the Net Sales of the Combination Product by the following formula: “one (1) minus B / C” where “B” is the weighted average sale price(s) of the Other Product(s) when sold separately in finished form in such country and “C” is the weighted average sale price of the Combination Product in such country (if there is more than one Other Product, “B” shall equal the sum of all such Other Products’ weighted average sale prices in such country).
In the event that, with respect to any Combination Product sold in a particular country, the weighted average sale price(s) in such country of neither the Basic Product(s) nor the Other Product(s) in the Combination Product can be determined, the Net Sales of the Combination Product shall, for the purposes of determining Sales-Based Payments with respect to such Combination Product, be commercially reasonable and determined by good faith negotiation between Purchaser and the Shareholders’ Agent consistent with the ratios and related principles referenced above and based on the relative value of NB1001 and/or NB1002, as applicable and the other API(s) to such Combination Product.
No deductions from the amounts defined above may be made for commissions paid to individuals whether those individuals are associated with independent sales agencies or regularly employed by Purchaser, its Affiliates, or Licensees, nor may deductions be made for cost of collections. Products are considered “sold” when billed out or invoiced or, in the event such Products are not billed out or invoiced, when the consideration for sale or provision of the Products is received. Notwithstanding the foregoing, Net Sales shall not include, and shall be deemed zero with respect to, (i) Products used by Purchaser for its own internal use, (ii) the no-charge distribution of reasonable quantities of promotional samples of Products, or (iii) Products provided, prior to Regulatory Approval, for clinical trials or research purposes, or (iv) Products

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provided to an Affiliate or Licensee for purposes of any resale, provided such Products’ resale is subject to Earnout Consideration under Section 1.9 of this Agreement.
The weighted average sale price for a Basic Product, Other Product(s), or Combination Product in a particular country shall be calculated once for each Calendar Year and such price shall be used during all applicable Sales-Based Payments reporting periods for such Calendar Year. When determining the weighted average sale price of a Basic Product, Other Product(s), or Combination Product in a particular country, the weighted average sale price shall be calculated by dividing the sales dollars (translated into U.S. dollars) by the units of Basic Product, Combination Product, or Other Product sold in such country during the twelve (12) months (or the number of months sold in a partial Calendar Year) of that Calendar Year for the respective Basic Product, Other Product(s), or Combination Product. For each Calendar Year, a reasonably forecasted weighted average sale price will be used for the Basic Product, Other Product(s), or Combination Product, which forecasted weighted average sale price will be, for each year other than the initial Calendar Year (or portion thereof) during which the Combination Product is sold, no less than the weighted average sale price for the Basic Product, Other Product(s), or Combination Product in a particular country calculated for the preceding Calendar Year. Any over- or under-payment due to a difference between forecasted and actual weighted average sale prices will be paid or credited in the first Sales-Based Payments of the following Calendar Year. For the avoidance of doubt, excipients shall not be considered APIs for the purpose of this definition of Net Sales.
Non-Competition Agreements” is defined in Section 1.12(a)(ix).
Option” means any option (whether vested or unvested) to purchase Company Ordinary Shares outstanding immediately prior to the Effective Time, including all warrants.
Optionholder” means a holder of an Option.
Order” is defined in Section 2.17(b).
Parties” means, prior to the Effective Time, Purchaser, Merger Sub, the Company, and Shareholders’ Agent, and following the Effective Time, means Purchaser and Shareholders’ Agent.
Patent(s)” means any granted patents and pending patent applications, together with all additions, divisionals, continuations, continuations-in-part, substitutions, reissues, re-examinations, extensions, registrations, patent term extensions, revalidations, supplementary protection certificates, and renewals of any of the foregoing, and all foreign applications and patents corresponding to or claiming priority from any of the foregoing.
Permit(s)” means all permits, licenses, registrations, approvals, certificates, accreditations, clearances orders and other authorizations from Governmental Authorities which are required in order for the Company to operate the Business.

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Permitted Liens” means (a) any lien for current Taxes not yet due and payable in the ordinary course of business or that may thereafter be paid without penalty or that are being contested in good faith by appropriate proceedings and as to which adequate reserves have been made with respect thereto on the Company Financial Statements; (b) those Encumbrances set forth in the Financial Statements or securing debt reflected as a liability in the Financial Statements; (c) landlords’, mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the ordinary course of business; (d) Encumbrances arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business; (e) easements, covenants, rights-of-way and other similar restrictions of record; (f) other Encumbrances, if any, that have arisen in the ordinary course of business and that do not (in any case or in the aggregate) materially detract from the value of the assets subject thereto or materially impair the operations of the Company; and (g) Encumbrances imposed by Purchaser or its Affiliates.
Person” mans any individual, Entity or Governmental Body.
Phase 1 Trial” means a human clinical trial of a Product, the principal purpose of which is preliminary determination of safety in healthy individuals or patients that would otherwise satisfy the requirements of 21 C.F.R § 312.21(a) in the U.S. or its foreign equivalent.
Phase 2 Trial” means a human clinical trial of a Product, including possibly pharmacokinetic studies, the principal purpose of which is to make a preliminary determination that such Product is safe in patients for its intended use and to obtain sufficient information about such Product’s efficacy to permit the design of further clinical trials, and which is generally consistent with 21 CFR § 312.21(b) or its foreign equivalent.
Phase 3 Trial” means a human clinical trial that is designed to: (a) establish that a Product is safe and efficacious for its intended use; (b) define warnings, precautions and adverse reactions that are associated with the Product in the dosage range to be prescribed; (c) support Regulatory Approval of such Product; and (d) be generally consistent with 21 CFR § 312.21(c) or its foreign equivalent.
PMDA” means the Japanese Pharmaceuticals and Medical Devices Agency, or any successor agency thereto.
Pre-Closing Period” is defined in Section 4.1.
Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and, with respect to any Straddle Period, the portion of such Straddle Period ending on and including the Closing Date.
Pre-Closing Tax Return” means any Tax Return for a Pre-Closing Tax Period.
Pre-Closing Taxes means (a) all Taxes of the Company for any Pre-Closing Tax Period, including Taxes allocable to the portion of any Straddle Period ending on the Closing Date, (b) any and all Taxes of any Person imposed on the Company as a transferee or successor, by Contract, or pursuant to any applicable

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Legal Requirement, which Taxes relate to an event or transaction occurring before the Closing, (c) any and all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company (or any predecessor of the Company) is or was a member on or prior to the Closing Date by reason of a liability under Treasury Regulation Sections 1.1502-6 or any comparable provisions of non-U.S., state or local Legal Requirements, (d) all Taxes (including the portion of the transfer Taxes which are the Liability of the Securityholders pursuant to Section 7.2) of any Securityholder for any taxable period, (e) all Taxes of the Company arising in connection with the transactions contemplated by the Transactional Agreements, other than any transfer Taxes which are the Liability of Purchaser pursuant to Section 7.2 (except to the extent taken into account in the calculation of Indebtedness or as a Company Transaction Expense in the calculation of the Merger Consideration).
Prepaid License Fees” means certain fees paid by the Company under the [**] (or the predecessor agreements thereto) in the amount of $140,000.
Pro Rata Share” means, at any given time, a Securityholder’s pro rata percentage, based on the Merger Consideration and Earnout Consideration received (or receivable) by such Securityholder at such time, divided by the aggregate Merger Consideration and Earnout Consideration received (or receivable) by all Securityholders at such time.
Product” means any product containing one or more of the Compounds.
Proof of Concept Study” means an open label, repeat dose, dose escalation clinical study of a Product in adult humans with short bowel syndrome.
Purchase Price” means the Merger Consideration and any Earnout Consideration actually paid or payable.
Purchaser Indemnitees” means the following Persons: (a) Purchaser; (b) Merger Sub I, (c) Merger Sub II and, following the Closing, the Surviving Company; (c) the respective representatives of the Persons referred to in clauses “(a)” and “(b)” above; and (d) the respective successors and assigns of the Persons referred to in clauses “(a)”, “(b)” and “(c)” above; provided, however, that the Securityholders shall not be deemed to be “Purchaser Indemnitees.”
Purchaser Indemnitors” is defined in Section 6.2(b).
Purchaser SEC Reports” means the forms, statements, reports and documents filed or furnished by Purchaser with the SEC under the Securities Exchange Act of 1934, as amended or the Securities Act, since January 1, 2018.
Purchaser Stock Price” means the lowest of (a) the volume weighted average price (“VWAP”) of Purchaser Stock during the 10 trading days ending on the last trading date immediately prior to the date of this Agreement, (b) the VWAP of Purchaser Stock during the 10 calendar day trading period ending on the last trading date of the trading day immediately prior to the Effective Time, and (c) the VWAP of

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Purchaser’s Stock over the 10 trading days immediately prior to November 12, 2019. If at any time during the period between the date of this Agreement and up to and including the Effective Time, any change in the number or type of outstanding shares of Purchaser Stock shall occur as a result of a reclassification, recapitalization, exchange, stock split (including a reverse stock split), combination or readjustment of shares or any stock dividend or stock distribution with a record date during such period, the Purchaser Price and any other similarly dependent items, as the case may be, shall be appropriately adjusted to provide the Securityholders the same economic effect as contemplated by this Agreement prior to such event.
Purchaser Stock” means the common stock, par value $0.0001 per share, of Innovate Biopharmaceuticals, Inc.
Purchaser” is defined in the Preamble.
RDD Merger Agreement” means the Agreement and Plan of Merger and Reorganization dated as of October 6, 2019, by and among Purchaser, Innt Merger Sub 1 Ltd., Rdd Pharma Ltd., with Orbimed Israel Partners, Limited Partnership as the shareholder representative.
RDD Representations” means the representations and warranties of Purchaser set forth in Section 3 of the RDD Merger Agreement, as qualified by the Innovate Schedule of Exceptions.
Registered IP” means all Intellectual Property Rights that are registered, filed or issued under the authority of, with or by any Governmental Body, including all patents, registered copyrights, registered trademarks, domain names and all applications for any of the foregoing.
Regulatory Approval” means any and all approvals, licenses, registrations, clearances, or authorizations of any national, supra-national (e.g., the European Commission or the Council of the European Union), regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity, that are necessary for the manufacture, distribution, use or sale of a Product for human therapeutic, prophylactic, or diagnostic use in a particular jurisdiction, including, in the U.S., an NDA or BLA.
Regulatory Authority” means any applicable Governmental Authority with responsibility for granting licenses or approvals, including Marketing Authorizations, necessary for the marketing and sale of a Product in any jurisdiction, or that is concerned with the research, development, marketing, sale, use, handling and control, safety, efficacy, reliability or manufacturing of drug or biological products.
Regulatory Authorization(s)” means (a) all licenses, permits, certificates, clearances, exemptions, approvals, consents and other authorizations that the Company owns, holds or possesses, including those prepared for submission to or issued by any Regulatory Authority or research ethics committee (including pre-market notification clearances, pre-market approvals, investigational device exemptions, non-clinical and clinical study authorizations, product re- certifications, manufacturing approvals and authorizations, CE Mark certifications, pricing and reimbursement approvals, Labeling approvals, registration notifications or their foreign equivalent), that are required for or relate to the Purchased Assets or the Exploitation of the

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Purchased Assets, including those set forth on Schedule B-1; and (b) all applications, supporting files, writings, data, studies and reports, and all correspondence to, with, or from the FDA or any other Regulatory Authority or research ethics committee, relating to any license, permit, certificate, clearance, exemption, approval, consent or other authorization described in clause (a).
Related Party” means (a) each Securityholder; (b) each individual who is, or who has at any time since inception been, an officer or director of the Company; (c) each, to the Company’s Knowledge, member of the immediate family of each of the individuals referred to in clauses “(a),” and “(b)” above; and (d) any trust or other Entity (other than the Company) in which any one of the Persons referred to in clauses “(a),” “(b)” and “(c)” above, to the Company’s Knowledge, holds (or in which more than one of such Persons collectively hold), beneficially or otherwise, a material voting, proprietary or equity interest.
Requisite Shareholders” means the holders of a majority of the outstanding Company Shares and the holders of a majority of the outstanding Company Preferred Shares.
Royalty Term” shall be determined on a country-by-country and Product-by-Product basis, beginning upon First Commercial Sale of a particular Product in such country and continuing until the latest to occur of: (i) the [**] ([**]) anniversary of the First Commercial Sale of such Product in such country or (ii) if such Product is Covered in such country by a Patent within the Company IP, the expiration of the last-to-expire Valid Patent Claim of such Patents Covering the Product in such country.
Sales-Based Payment” means, with respect to a particular Calendar Quarter, the difference between (a) the Total Sales Payment Burden with respect to Net Sales in the Territory during such Calendar Quarter and (b) the total, aggregate, combined running royalties due and payable under Section 3.4 of the [**], Section 3.3 of the NB1002 License, and Section 4.3(a) of the [**] on Net Sales in the Territory during such Calendar Quarter, which shall, in any event and notwithstanding anything to the contrary, be calculated for purposes of this clause (b) taking into account any credits against such royalties due under Section 3.4 of the [**] or Section 3.3 of the NB1002 License resulting from the [**] Payments, but without taking into account (1) any reduction in such royalties due to [**] or [**] as a result of the effects or application of (i) Section 3.4(b) or 3.7 of the [**], (ii) Section 3.3(b) or 3.6 of the [**], (iii) Section 4.3(g) of the [**], (iv) Section 4.3(h) of the [**] with respect to any adjustments thereunder not resulting from payments due under the [**], or (v) Section 4.3(h) of the [**] with respect to [**] percent ([**]%) of any adjustments thereunder resulting from payments due under the [**] or (2) any expiration or termination of any obligation to pay running royalties with respect to any Product or country as a result of the expiration of the Royalty Term (as defined in the [**] or [**], as applicable) under either of the [**] or any expiration of the obligation to pay royalties to [**] pursuant to Section 4.3(d) of the [**] (for example[**]). Notwithstanding anything to the contrary, (x) if clause (b) exceeds clause (a) for any particular Calendar Quarter, the Sales-Based Payment for such Calendar Quarter shall be zero and (y) for purposes of calculating the Sales-Based Payment and Total Sales Payment Burden, Net Sales shall only include gross amounts invoiced or otherwise received for Purchaser’s, its Affiliates’, and Licensees’ sales of Products in the Territory during, on a country-by-country and Product-by-Product basis, the Royalty Term applicable to each Product in each country.

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Second Effective Time” has the meaning set forth in Section 1.2(c).
Second Merger” has the meaning set forth in the Recitals.
Securities Act” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect from time to time.
Securityholder Indemnitees” is defined in Section 6.2(b).
Securityholder Indemnitors” means the Securityholders, severally and not jointly (in accordance with their respective Pro Rata Share).
Securityholder” means a Shareholder and/or an Optionholder of Vested Options and/or a Warrantholder.
Stipulated Amount” is defined in Section 6.6(e).
Shareholder” means a holder of Company Shares.
Shareholders’ Agent Engagement Agreement” means the engagement agreement by and among the Shareholders’ Agent and certain Securityholders to provide direction to the Shareholders’ Agent in connection with its services under this Agreement.
Shareholders’ Agent Expenses” is defined in Section 9.1(c).
Shareholders’ Agent Reserve” is defined in Section 9.1(c).
Shareholders’ Agent” is defined in Section 9.1(a).
Specified Asian Territories” means [**].
Straddle Period” is defined in Section 7.4.
Subsidiary”: An Entity shall be deemed to be a “Subsidiary” of another Person if such Person directly or indirectly owns or purports to own, beneficially or of record: (a) an amount of voting securities of or other interests in such Entity that is sufficient to enable such Person to elect at least a majority of the members of such Entity’s board of directors or other governing body; or (b) at least 50% of the outstanding equity, voting, beneficial or financial interests in such Entity.
Surviving Company” is defined in Section 1.1.
Tax” or “Taxes” means (i) any and all U.S. federal, state, local, and non-U.S. taxes, assessments and other governmental charges, duties, impositions and liabilities, including (without limitation) taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value-added, ad valorem, transfer, stamp, registration, environmental, windfall profits, alternative or add-on minimum, franchise,

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withholding, payroll, recapture, employment (including social security), escheat, estimated, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts, (ii) any liability for the payment of any amounts of the type described in clause (i) as a result of being (or having been) a member of an affiliated, consolidated, combined, unitary or similar group for any period (including any arrangement for group or consortium relief or similar arrangement), including pursuant to Treasury Regulations Section 1.1502-6, and (iii) any liability for the payment of any amounts of the type described in clauses (i) or (ii) as a result of any express or implied obligation to indemnify any other person or as a result of any obligations under any agreements or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor or transferor or otherwise by operation of law.
Tax Claim” is defined in Section 7.8.
Tax Return” means any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information (including any schedule or attachment thereto and any amendment thereof) filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.
Technology” means technical, scientific, engineering, sales and other business methodologies and processes, training protocols and similar methods and processes, algorithms, APIs, apparatus, circuit designs and assemblies, gate arrays, net lists, test vectors, design rules, models, data, analyses, reports, databases, data collections, diagrams, formulae, inventions (whether or not patentable), know-how, logos, marks (including brand names, product names, logos, and slogans), methods, network configurations and architectures, processes, proprietary information, protocols, schematics, specifications, software, software code (in any form, including Source Code), subroutines, techniques, user interfaces, URLs, web sites, works of authorship and other forms of technology (whether or not embodied in any tangible form such as instruction manuals, laboratory notebooks, prototypes, samples, studies and summaries).
Termination Date” is defined in Section 6.1(a).
Territory” means the entire world.
Third-Party Claim” is defined in Section 6.5(a).
Threshold” is defined in Section 6.3(a).
Total Sales Payment Burden” means an amount equal to the Net Sales of a Product sold in a country during any Calendar Quarter, multiplied by the applicable Rate for such country and applicable Calendar Quarter, as set forth in the table below:

A-20



“Rate” for countries within the Specified Asian Territories
“Rate” for all other countries
Applicable Time Period
[**]%
[**]%
[**]
[**]%
[**]%
[**]
[**]%
[**]%
[**]

Trade Secrets” means trade secrets, know-how, inventions (whether or not patentable), discoveries, improvements, technology, business and technical information, databases, data compilations and collections, tools, methods, processes, techniques, and other confidential and proprietary information and all rights therein.
Trademarks” means registered and unregistered trademarks, trade dress, trade names, logos, design rights, service marks, together with the goodwill pertaining to the foregoing, and all applications, registrations and renewals therefor.
Transactional Agreements” means: (a) this Agreement, (b) the Certificate of Merger, (c) Letters of Transmittal, and (d) the Non-Competition Agreements.
Treasury Regulations” means the final and temporary regulations promulgated under the Code by the United States Department of the Treasury.
Unvested Option” means each Option that is outstanding and unvested and not exercisable as of immediately prior to the Effective Time (after giving effect to acceleration that would result solely from the consummation of the Mergers).
Valid Patent Claim” means a claim of a Patent, which claim is pending and has not been finally abandoned or finally rejected or is issued and unexpired and has not been found to be unpatentable, invalid or unenforceable by a court or other authority having jurisdiction, from which decision no appeal is taken, shall be taken or can be taken.



A-21



EXHIBIT J-1
NB1001 Amino Acid Sequence and Product Milestones
[**]
Product Milestones
NB1001 Product Milestones
Aggregate Payment due
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 








EXHIBIT J-2
NB1002 Compound Definition and Product Milestone
[**]
Product Milestones

NB1002 Product Milestones
Aggregate Payment due
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 
[**]
$[**]
 



Exhibit 3.1

INNOVATE BIOPHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS OF
SERIES A CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
April 29, 2020
The undersigned, Sandeep Laumas, M.D. and Edward J. Sitar, do hereby certify that:
1.    They are the Executive Chairman and Corporate Secretary, respectively, of Innovate Biopharmaceuticals, Inc., a Delaware corporation (the “Corporation”).
2.    The Corporation is authorized to issue 10,000,000 shares of preferred stock, par value $0.0001 per share, of which no shares have been issued and are outstanding.
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 10,000,000 shares, $0.0001 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 600,000 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:
TERMS OF 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 of 1933, as amended.
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 Raleigh, North Carolina are authorized or required by law or other governmental action to close.
Common Stock” means the Corporation’s common stock, par value $0.0001 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 any of its subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt,

 
1
 
 
 
 


Exhibit 3.1

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 Shares” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Series A Preferred Stock in accordance with the terms hereof.
Holder” means a holder of shares of Series A Preferred Stock.
Parties” means the Corporation, Merger Sub, the Target, the Shareholder Representative and each of their Affiliates, directors and officers.
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 Agreementmeans the Securities Purchase Agreement, dated as of [●], 2020 among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.
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, or the New York Stock Exchange (or any successors to any of the foregoing).
Section 2.    Designation, Amount and Par Value. The series of preferred stock shall be designated as the Corporation’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and the number of shares so designated shall be [●]. Each share of Series A Preferred Stock shall have a par value of $0.0001 per share. The shares of Series A Preferred Stock shall initially be issued and maintained in the form of securities held in book-entry form and the Depository Trust Company or its nominee shall initially be the sole registered holder of the shares of Series A Preferred Stock.
 
Section 3.    Dividends. Except for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Series A Preferred Stock.
Section 4.    Voting Rights. Except as otherwise provided herein or as otherwise required by law, the Series A Preferred Stock shall have no voting rights. However, as long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock (including by the designation, authorization, or issuance of any shares of preferred stock of the Corporation that purports to be pari passu with, or senior in rights or preferences to, the Series A Preferred Stock, (b) alter or amend this Certificate of Designation, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (d) increase the number of authorized shares of Series A Preferred Stock, (e) except for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, pay dividends on any shares of capital stock of the Corporation or (f) enter into any agreement with respect to any of the foregoing. Holders of shares of Common Stock acquired upon the conversion of shares of Series A Preferred Stock shall be entitled to the same voting rights as each other holder of Common Stock except that such holders may not vote upon the proposal in accordance with Rule 5635 of the listing rules of The NASDAQ Stock Market LLC for Stockholder Approval.

 
2
 
 
 
 


Exhibit 3.1

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 the same amount that a holder of Common Stock would receive if the Preferred Stock were fully converted (disregarding for such purpose any conversion limitations hereunder) to Common Stock which amounts shall be paid pari passu with all holders of Common Stock. For the avoidance of any doubt, a Fundamental Transaction shall not be deemed a Liquidation. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder.
Section 6.    Conversion.
(a)    Conversion Ratio. Each share of Series A Preferred Stock shall be convertible (“Conversion”) without the payment of additional consideration by the Holder thereof into one hundred (100) shares of fully paid and non-assessable shares of Common Stock, subject to the terms and conditions set forth in this Section 6.
(b)    Mandatory Conversion. Each issued and outstanding share of Series A Preferred Stock shall be automatically converted (the “Mandatory Conversion”) without the payment of additional consideration by the Holders thereof into one hundred (100) shares of fully paid and non-assessable shares of Common Stock immediately at 5:00 p.m. Eastern time on the date that the Corporation’s stockholders approve the conversion of the Series A Preferred Stock into shares of Common Stock in accordance with the Nasdaq Stock Market Rules, as set forth in the Purchase Agreement (the “Stockholder Approval”), without any further action by the Holder thereof or the Corporation (the “Stockholder Approval Conversion Date”).
(c) Conversion at the Option of the Holder. Notwithstanding Section 6(b), a holder may opt out of the Mandatory Conversion of their shares of Series A Preferred Stock, only to the extent such holder would beneficially own more than 4.99% of the outstanding shares of Common Stock at the time of stockholder approval (the “Optional Conversion”), and provided further that Conversion is a precondition to any sale of such shares of Series A Preferred Stock. In order to opt out of the Mandatory Conversion, a holder should send a notice to the Corporation pursuant to Section 8(a) below, which notice should be received by the Corporation prior to the Stockholder Approval Conversion Date. A Holder who has opted for Optional Conversion, shall effect a Conversion by providing the Corporation with the form of conversion notice (via overnight courier, facsimile or email) attached hereto as Annex A (a “Notice of Conversion”), duly completed and executed.
(d)    Consequences of Conversion. Immediately following the Mandatory Conversion or Optional Conversion, as applicable, the rights of such Holder of converted Series A Preferred Stock shall cease and the persons entitled to receive Common Stock upon the conversion of Series A Preferred Stock shall be treated for all purposes as having become the owners of such Common Stock. Shares of Series A Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued. In no event shall the Series A Preferred Stock convert into shares of Common Stock prior to the Stockholder Approval.
 
(e)    Mechanics of Conversion.

(i)
Delivery of Conversion Shares Upon Conversion. Not later than two (2) Trading Days following the Mandatory Conversion, or in the case of Optional Conversion, the date the Notice of Conversion is delivered to the Corporation, (the “Share Delivery Date”), the Corporation shall deliver, or cause to be delivered, to the converting Holder (A) the number of Conversion Shares being acquired upon the conversion of the Series A Preferred Stock, which Conversion Shares shall, until such time that such shares are not so restricted under the Securities Act, bear a restrictive legend as required pursuant to the Securities Act indicating that such shares have not been registered and may not be offered, sold, transferred, assigned, pledged or hypothecated unless registered under the Securities Act or unless an exemption from such registration is available (together with any other legend or legends required by applicable state securities law or otherwise, if any), and (B) a bank check in the amount of accrued and unpaid dividends, if any. The Corporation shall use its

 
3
 
 
 
 


Exhibit 3.1

best efforts to 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. Notwithstanding anything herein to the contrary, with respect to any shares of Series A Preferred Stock issuable upon exercise of Warrants, a Holder who has opted for Optional Conversion shall have the right to tender a Notice of Conversion as to Preferred Stock to be received upon such exercise immediately following the delivery of the Notice of Exercise and the Share Delivery Date shall be determined from the date that such Notice of Conversion is delivered to the Corporation.

(ii)
Failure to Deliver Conversion Shares. If, in the case of any Optional 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 A 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 A 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 its Series A 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 A Preferred Stock of such Holder shall have been sought and obtained. 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 A Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day on the tenth Trading Day and increasing to $200 per Trading Day on the twentieth 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. 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.

 
4
 
 
 
 


Exhibit 3.1


(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(d)(iv), 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) 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 A 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 A 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 A 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 A 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 A Preferred Stock. 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)
Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Series A 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. The Corporation shall pay all transfer agent fees required for same-day processing 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. 

 
5
 
 
 
 


Exhibit 3.1


Section 7.    Certain Adjustments.
(a)    Stock Dividends and Stock Splits. If the Corporation, at any time while this Series A Preferred Stock is 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 A 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 number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock shall be appropriately adjusted in order to avoid enlargement or dilution of the rights of the shares of Series A Preferred Stock. 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 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 A Preferred Stock (without regard to any limitations on exercise hereof) 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.
(c)    Pro Rata Distributions. During such time as this Series A Preferred Stock is 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 A 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 A Preferred Stock (without regard to any limitations on conversion hereof) 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.
 
(d)    Fundamental Transaction. If, at any time while this Series A Preferred Stock is 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, 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,

 
6
 
 
 
 


Exhibit 3.1

such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then each Holder shall automatically receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same consideration receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Series A Preferred Stock is convertible immediately prior to such Fundamental Transaction.
(e)    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.
Section 8.    Miscellaneous.
(a)    Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder shall be in writing and delivered personally, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at the address set forth above Attention: Executive Chairman or such other address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 8. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, by email, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (ii) upon actual receipt by the party to whom such notice is required to be given.
 
(b)    Lost or Mutilated Preferred Stock Certificate. If a Holder’s Series A 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 A 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.
(c)    Governing Law. This Certificate of Designation shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws. In any action or proceeding between any of the Parties arising out of or relating to this Certificate of Designation or any of the transactions contemplated by this Certificate of Designation, 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 clause (a) of this Section 8(c); (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 8(a) of this Certificate of Designation; and (f) irrevocably and unconditionally waives the right to trial by jury. In any action at law or suit in equity to enforce this Certificate of Designation or the rights of any of the Parties, the prevailing party in such action or suit (as determined by a court of competent jurisdiction) shall be entitled to recover its reasonable out-of-pocket attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.
(d)    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

 
7
 
 
 
 


Exhibit 3.1

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.
(e)    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.
 
(f)    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.
(g)    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.
(h)    Status of Converted or Redeemed Preferred Stock. If any shares of Series A Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series A Preferred Stock.
*********************
RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file this 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 as of the date first set forth above.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
 
/s/ Sandeep Laumas
 
 
 
By:
 
/s/ Edward J. Sitar
 
 
Name:   Sandeep Laumas, M.D.
 
 
 
 
 
Name:   Edward J. Sitar
 
 
 
 
 
 
 
Title:   Chairman of the Board
 
 
 
 
 
Title:   Chief Financial Officer
 


 
8
 
 
 
 


Exhibit 3.1


ANNEX A
 
NOTICE OF CONVERSION
 
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO
CONVERT SHARES OF SERIES A PREFERRED STOCK)
 
The undersigned Holder hereby irrevocably elects to convert the number of shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”) indicated below, represented by stock certificate No(s). __________, into shares of common stock, par value $0.0001 per share (the “Common Stock”), of Innovate Biopharmaceuticals, Inc., a Delaware corporation (the “Corporation”), as of the date written below. If securities 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. Capitalized terms utilized but not defined herein shall have the meaning ascribed to such terms in that certain Certificate of Designation of Series A Convertible Preferred filed by the Corporation on [●], 2020.
  
CONVERSION CALCULATIONS:
 
Date to Effect Conversion:
 
 

Number of shares of Series A Preferred Stock owned prior to Conversion:
 
 

Number of shares of Series A Preferred Stock to be Converted:
 
 


Number of shares of Common Stock to be Issued:
 
 
 
Address for delivery of physical certificates: 
 
 
For DWAC Delivery, please provide the following:
Broker no: 
 
Account no: 
 
 
 
[HOLDER]
 
 
 
By:
 
 
 
 
 
Name:
 
 
 
 
 
Title:
 
 
 
 
 
Date:
 


 
9
 
 
 
 

Exhibit 3.2

CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
INNOVATE BIOPHARMACEUTICALS, INC.
 
(Pursuant to Section 242 of the General Corporation Law of the State of Delaware)
 
Innovate Biopharmaceuticals, Inc. (the “Corporation”), a corporation duly organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that:
 
1.      The Amended and Restated Certificate of Incorporation of the Corporation is hereby amended solely to reflect a change in the name of the Corporation by replacing Article I thereof with the following:
 
“The name of the Corporation is 9 Meters Biopharma, Inc.”
 
2.      The Board of Directors of the Corporation has adopted a resolution approving and declaring advisable the amendment described herein in accordance with the provisions of Section 242(b)(1) of the General Corporation Law of the State of Delaware.
 
3.      The amendment described herein has been duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware.
 
4.      This Certificate of Amendment shall become effective on May 1, 2020.
 



Exhibit 3.2




 
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its duly authorized officer on this 30th day of April, 2020.
 
 
 
/s/ Edward J. Sitar
 
Name: Edward J. Sitar
Title: Corporate Secretary



Exhibit 4.1

NEITHER THIS SECURITY NOR THE SECURITIES INTO 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
PREFERRED STOCK PURCHASE WARRANT
9 METERS BIOPHARMA, INC.

Void after 5:00 p.m. (New York time) on the 4th day of May, 2025.
Number of Warrants: [●]    Warrant Certificate No. [●]          
THIS PREFERRED STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, [●] (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, including without limitation Section 2(c), at any time on or after the date hereof, and on or prior to 5:00 p.m. (New York time) on May 4, 2025, which is the five year anniversary of the date hereof, (the “Expiry Time”) but not thereafter, to subscribe for and purchase from 9 Meters Biopharma, Inc., a Delaware corporation (the “Company”), up to [●] shares (the “Warrant Preferred Shares”) of Series A Convertible Preferred Stock, par value $0.0001 per share, of the Company (the “Preferred Stock”), subject to adjustment as provided herein. The purchase price of one share of Preferred Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1.    Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Securities Purchase Agreement”), dated April 29, 2020, among the Company and the purchasers signatory thereto.
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 date of issuance of this Warrant and on or before the Expiry Time by delivery to the Company in accordance with the notice provisions of Section 5(h) hereof of a duly executed copy of the Notice of Exercise Form annexed hereto. Within two (2) Trading Days following the date of delivery of the Notice of Exercise, the Holder shall remit to the Company payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank (the date of receipt of the Notice of Exercise, the “Exercise Date”); provided, however, if this Warrant is exercised in full, the Holder shall have surrendered this Warrant to the Company within two (2) Trading Days of the date the Notice of Exercise is delivered to the Company. 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 upon exercise by the registered holder hereof. 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 (as defined below) available hereunder and the Warrant has been exercised in full. Partial exercises of this Warrant resulting in purchases of a portion of




Exhibit 4.1

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 Form within two (2) Trading Days 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. Following the Stockholder Approval Date (as defined in the Series A Convertible Preferred Stock Certificate of Designation) and upon exercise of this Warrant, the Warrant Preferred Shares shall automatically and immediately convert into shares of Common Stock (the “Conversion”, and such shares, the “Warrant Common Shares”, together with the Warrant Preferred Shares, the “Warrant Shares”), in accordance with the terms of the Series A Convertible Preferred Stock Certificate of Designation.
(b)    Exercise Price. The exercise price of Preferred Stock under this Warrant shall be $58.94 per share, subject to adjustment hereunder (the “Exercise Price”).
(c)     Percentage Limitation. Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by the Holder and its affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), of the 1934 Act and the rules and regulations promulgated thereunder, including any “group” of which the Holder is a member, does not exceed [4.9999%/9.999%] of the total number of then issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise), it being acknowledged by the Holder that the Company is not representing to such Holder that such calculation is in compliance with Section 13(d) of the 1934 Act and such 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(c) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder) and of which a portion of this Warrant is exercisable shall be in the sole discretion of a 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 such Holder) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination under this Section 2(c) as to any group status shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(c), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other more recent notice by the Company or the transfer agent of the Company setting forth the number of shares of Common Stock outstanding. Upon the written request of the Holder, the Company shall within two (2) Trading Days confirm in writing to such Holder the number of shares of Common Stock then outstanding. Notwithstanding the foregoing, by written notice to the Company, which will not be effective until the sixty-first (61st) day after such notice is delivered to the Company, the Holder may waive the provisions of this Section 2(c) (but such waiver will not affect any other holder) to change the beneficial ownership limitation such percentage 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, as the Holder shall determine, in its sole discretion, subject to Section 2(d), and the provisions of this Section 2(c) shall

2



Exhibit 4.1

continue to apply. Upon such a change by a Holder of the beneficial ownership limitation from such [4.999%/9.999%] limitation to such other percentage limitation, the beneficial ownership limitation may not be further waived by such Holder without first providing the minimum 61-day notice required by this Section 2(c).
(d)    Notwithstanding anything to the contrary contained herein, including Section 2(c), until the date that the Company obtains Stockholder Approval, the Company shall not effect any exercise of this Warrant, and the Holder shall not be entitled to exercise this Warrant for a number of Warrant Shares in excess of that number of Warrant Shares which, upon giving effect to such exercise, would cause (i) the aggregate number of shares of Common Stock beneficially owned by the Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder, including any “group” of which the Holder is a member, to exceed 19.99% of the total number of issued and outstanding shares of Common Stock of the Company following such exercise, or (ii) the combined voting power of the securities of the Company beneficially owned by the Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act to exceed 19.99% of the combined voting power of all of the securities of the Company then outstanding following such exercise. For purposes of this Section 2(d), the aggregate number of shares of Common Stock or voting securities beneficially owned by the Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act shall include the shares of Common Stock issuable upon the 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 (x) exercise of the remaining unexercised and non-cancelled portion of this Warrant by the Holder and (y) exercise or conversion of the unexercised, non-converted or non-cancelled portion of any other securities of the Company that do not have voting power (including without limitation any securities of the Company 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), is subject to a limitation on conversion or exercise analogous to the limitation contained herein and is beneficially owned by the Holder or any of its Affiliates and other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the 1934 Act
(e) Mechanics of Exercise.
(i)    Authorization of Warrant Shares. 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 to the Company of the purchase price therefor, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
(ii)    Delivery of Certificates Upon Exercise. Certificates for Warrant Common Shares purchased hereunder shall be transmitted to the Holder in electronic book entry form to the account of such Holder or, upon request of the Holder or in the case of Warrant Preferred Shares, by physical delivery to the address specified by the Holder in the Notice of Exercise within two (2) Trading Days following the applicable Exercise Date (the “Warrant Share Delivery Date”), provided, however, in the case of physical delivery of certificates representing the Warrant Shares or if the Holder shall fail to remit payment for the Warrant Shares within two (2) Trading Days following the date of delivery of the Notice of Exercise pursuant to Section 2(a), there shall be no requirement to deliver such certificates on or prior to the Warrant Share

3



Exhibit 4.1

Delivery Date. This Warrant shall be deemed to have been exercised on the date the Exercise Price and the Notice of Exercise is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder shall be deemed to have become a holder of record of such shares for all purposes, as of such date irrespective of the date such Warrant Shares are credited to the Holder’s account. If the Company fails to effect delivery of the applicable Warrant Common Shares to Holder pursuant to an exercise on or before the applicable Warrant Share Delivery Date, if required, and if after such date, due to the Company’s continuing failure to deliver the applicable Warrant Common Shares, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Common Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall, within two (2) Trading Days after the Holder’s request and in the Holder’s sole discretion, either (1) pay in cash to the Holder an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased, at which point the Company’s obligation to deliver such certificate (and to issue such Warrant Common Shares) shall terminate or (2) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Warrant Common Shares and pay cash to the Holder in an amount equal to the excess (if any) of Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased in the Buy-In over the product of (A) the number of shares of Common Stock purchased in the Buy-In, times (B) the VWAP on the Exercise Date. For the avoidance of doubt, the Buy-In right in this Section 2(e)(ii) shall apply only to Warrant Common Shares, and not to Warrant Preferred Shares. Additionally, 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 Common 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 “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 as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board or (c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board 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 a good faith determination of the Company’s Board of Directors.
(iii)    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, deliver to Holder a new Warrant evidencing the rights of 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.
(iv)    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 that Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.
(v)    Charges, Taxes and Expenses. The issuance of Warrant Shares in book entry form shall be made without charge to the Holder for any issue or transfer tax or other incidental expense

4



Exhibit 4.1

in respect of such issuance, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in book entry form 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.
(h)    Obligations of the Company. The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the 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 the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. 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 the Warrant Shares upon exercise of the Warrant as required pursuant to the terms hereof.
(i)    Cashless Exercise. If, following the six month anniversary of the Closing Date, 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 Common Shares to the Holder upon conversion of the Warrant Shares, 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 Common 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 the Warrant Shares, as adjusted hereunder; and
(X) = the number of Warrant Common Shares that would be issuable upon exercise of this Warrant and conversion of the Warrant Shares in accordance with the terms of this Warrant and the Warrant Shares, as applicable, if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Common 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 Common Shares shall take on the characteristics of the Warrants being exercised, and the holding period of the Warrant Common

5



Exhibit 4.1

Shares being issued may be tacked on to the holding period of this Warrant. The Company agrees not to take any position contrary to this Section 2(c).
Bid Price” means the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Principal 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 4:00 p.m. (New York City time)).
Section 3.    Certain Adjustments.
(a)    Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other Common Stock Equivalents (as defined below), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) 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 in an inverse manner (e.g., an increase in the Exercise Price shall result in a decrease in the number of Warrant Shares). 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. For the avoidance of doubt, prior to the Conversion, this Warrant will be subject to the adjustment provisions as provided in this Section 3(a) and not as provided in the Series A Convertible Preferred Stock Certificate of Designation.
Common Stock Equivalents” means any securities of the Company or any of its 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. For avoidance of doubt, Common Stock Equivalents shall not include any shares of Common Stock issued by the Company pursuant to this Warrant.
(b)    Pro Rata Distributions. If the Company, at any time prior to the Expiry Time, shall declare, or distribute any dividend or other distribution to all holders of Common Stock (and not to Holders of the Warrants) of assets or evidence of its indebtedness (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction, of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors of the Company in good faith. The adjustment shall be described in a statement provided to the Holder. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. For the avoidance of doubt, prior to the Conversion, this Warrant will be subject to the pro rata distribution provisions

6



Exhibit 4.1

as provided in this Section 3(b) and not as provided in the Convertible Preferred Stock Certificate of Designation.
(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 conversion of such Holder’s Series A Preferred Stock (without regard to any limitations on exercise hereof) 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. For the avoidance of doubt, prior to the Conversion, this Warrant will be subject to the rights offering adjustment provisions as provided in this Section 3(c) and not as provided in the Series A Convertible Preferred Stock Certificate of Designation.
(d)    Fundamental Transaction. If, at any time while this Warrant is outstanding, the Company effects (A) any merger or consolidation of the Company with or into another Person, (B) any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) pursuant to which holders of Common Stock are permitted to 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 or (D) any reclassification 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 (in any such case, 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, 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. 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. Upon the occurrence of any such Fundamental Transaction in which the Company is not the survivor, the successor entity (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.
(e)    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

7



Exhibit 4.1

of shares of Common Stock and Series A Convertible Preferred Stock (excluding treasury shares, if any) issued and outstanding.
(f)    Notice to Holders.
(i)    Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to this Section 3, the Company shall promptly mail to each Holder a notice setting forth the Exercise Price after such adjustment 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) 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 Company has entered into a binding agreement in connection with any Fundamental Transaction, whether or not the approval of any stockholders of the Company is required; (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 mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least ten (10) calendar days prior to the applicable record date 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 Fundamental Transaction is expected to become effective or close; provided, in each case that such information shall be made known to the public through a press release, filing with the Commission, or other public announcement prior to or in conjunction with such notice being provided to the Holder, and provided further that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the ten (10)-day period commencing on the date of such notice to the effective date of the event triggering such notice (the “Notice Period”).
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, 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 and subject to compliance with all applicable Federal and state securities laws. 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 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. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. The Holder represents that by accepting this Warrant it understands that this Warrant and any securities obtainable upon exercise of this Warrant have not been registered for sale under Federal or state securities laws and are being offered and sold to the Holder pursuant to one or more exemptions from the registration requirements of such securities laws. The Holder understands that it must bear the economic risk of its investment in this Warrant and any securities obtainable upon exercise of this Warrant for an indefinite period of time, as this Warrant and such securities have not been registered under Federal or state securities laws and therefore

8



Exhibit 4.1

cannot be sold unless subsequently registered under such laws, unless an exemption from such registration is available.
(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.
(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. 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. This Warrant does not entitle the Holder to any voting rights or other rights as a stockholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.
(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 be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
(d)    Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will maintain a reserve, free from preemption rights, from its duly authorized shares of Preferred Stock, and the underlying Common Stock, for issuance upon exercise of 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 executing stock certificates (or book entry shares following the Conversion) to execute and issue the necessary certificates (or book entry shares following the Conversion) for the Warrant Shares upon the exercise of the purchase rights under this Warrant. If at any time prior to the Expiry Time the number of authorized but unissued shares of Preferred Stock or Common Stock, as applicable, shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Preferred Stock or Common Stock, as applicable, to such number of shares as shall be sufficient for such purposes.

9



Exhibit 4.1

Except and to the extent waived or consented to by the Holder, the Company hereby covenants to not, by any action, including, without limitation, amending its certificate of incorporation, by-laws 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, and 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 (a) not increase the par value of any Warrant Shares above the Exercise Price then in effect and (b) 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.
(e)    Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Securities Purchase Agreement.
(f)    Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will contain a legend to that effect.
(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 Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Expiry Time. 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 Holder such amounts as shall be sufficient to cover any costs and expenses incurred by 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 Securities Purchase Agreement.
(i)    Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Preferred Stock, 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 remedies provided in this Warrant shall be cumulative and in addition to all other remedies available or granted by law, including recovery of damages. Each of the parties hereto will be entitled to specific performance of its rights under this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach or threatened breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate including making a showing of economic loss and the posting of a bond or other security.
(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 of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

10



Exhibit 4.1

(l)    Amendment. This Warrant may be modified or amended or the provisions hereof waived only 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.



11



Exhibit 4.1

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
Dated: May 4, 2020
9 METERS BIOPHARMA, INC.
By: /s/ Edward J. Sitar
Name: Edward J. Sitar
Title: Chief Financial Officer





Exhibit 4.1

NOTICE OF EXERCISE
TO:    9 METERS BIOPHARMA, 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 lawful money of the United States.
(3)    Please cause the Warrant Shares to be issued in the name of the undersigned or in such other name as is specified below:
____________________________________________________
The Warrant Shares shall be delivered to the following:
____________________________________________________
____________________________________________________
____________________________________________________
(4)    Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
Name of Investing Entity: _______________________________________________________
Signature of Authorized Signatory of Investing Entity: ________________________________
Name of Authorized Signatory: ___________________________________________________
Title of Authorized Signatory: ____________________________________________________
Date: ________________________________________________________________________





Exhibit 4.1

ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to:
____________________________________________________
whose address is:
____________________________________________________
____________________________________________________
Dated: ___________________, ______________
Holder’s Signature: ____________________________________________________
Holder’s Address: ____________________________________________________
____________________________________________________
Signature Guaranteed: ____________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.






Exhibit 10.1

SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of April 29, 2020 by and among Innovate Biopharmaceuticals, Inc., to be renamed 9 Meters Biopharma, Inc., a Delaware corporation (the “Company”), and the Investors identified on Exhibit A attached hereto (each an “Investor” and collectively the “Investors”).
RECITALS
A.The Company and the Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D (“Regulation D”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”).
B.    The Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors, upon the terms and subject to the conditions stated in this Agreement, (A) shares of the Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Preferred Shares”), each such Preferred Share shall be convertible into, pending Stockholder Approval, 100 shares of common stock of the Company, par value $0.0001 per share (the “Common Stock”), and (B) warrants in the form attached hereto as Exhibit B to purchase Preferred Shares (the “Warrants”).
C.    Contemporaneously with the execution and delivery of this Agreement, the Company is filing a Certificate of Designation of the Series A Convertible Preferred Stock (the “Certificate of Designation”), substantially in the form attached hereto as Exhibit C, with the Secretary of State of the State of Delaware.
D.    Contemporaneously with the execution and delivery of this Agreement, the parties hereto will execute and deliver a Registration Rights Agreement, in the form attached hereto as Exhibit D (the “Registration Rights Agreement”), pursuant to which the Company will agree to provide certain registration rights under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws with respect to: (i) the Common Stock issuable upon conversion of the Preferred Shares (the “Conversion Shares”), and (ii) the Conversion Shares issuable upon conversion of the Preferred Shares issuable upon exercise of the Warrants (the “Conversion Warrant Shares”).
In consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.Definitions. For the purposes of this Agreement, the following terms shall have the meanings set forth below:
Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common Control with, such Person.
Board” means the Company’s Board of Directors.
Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.



Exhibit 10.1

Buy-In Price” has the meaning set forth in Section 7(d).
Certificate of Designation” has the meaning set forth in the recitals to this Agreement.
Closing” has the meaning set forth in Section 3.1.
Closing Date” has the meaning set forth in Section 3.1.
Closing Securities” means the Preferred Shares and the Warrants.
Common Stock Equivalents” means any securities of the Company 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 exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
Company Intellectual Property” has the meaning set forth in Section 4.14.
Company’s Knowledge” means the actual knowledge of the executive officers (as defined in Rule 405 under the 1933 Act) of the Company.
Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
Conversion Shares” has the meaning set forth in the recitals to this Agreement.
Conversion Warrant Shares” has the meaning set forth in the recitals to this Agreement.
Disclosure Schedules” has the meaning set forth in Section 4.
Disclosure Time” means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York City time) and before midnight (New York City time) on any Trading Day, 9:01 a.m. (New York City time) on the Trading Day immediately following the date hereof and (ii) if this Agreement is signed between midnight (New York City time) and 9:00 a.m. (New York City time) on any Trading Day, no later than 9:01 a.m. (New York City time) on the date hereof.
EDGAR System” has the meaning set forth in Section 4.9.
Environmental Laws” has the meaning set forth in Section 4.15.
FDA” has the meaning set forth in Section 4.30.
GAAP” has the meaning set forth in Section 4.17.
Investor Questionnaire” has the meaning set forth in 5.7.
Legend Removal Date” has the meaning set forth in Section 7(c).
Losses” has the meaning set forth in Section 8.2.

2


Exhibit 10.1

Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities, results of operations, financial condition or business of the Company, (ii) the legality or enforceability of any of the Transaction Documents or Closing Securities or (iii) the ability of the Company to perform its obligations under the Transaction Documents.
Material Contract” means any contract, instrument or other agreement to which the Company is a party or by which it is bound that has been filed or was required to have been filed as an exhibit to the SEC Filings pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K.
Nasdaq” means The Nasdaq Stock Market LLC.
Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.
Placement Agent” means the party or parties acting as placement agent in the offering of Securities pursuant to this Agreement.
Preferred Shares” has the meaning set forth in the recitals to this Agreement.
Press Release” has the meaning set forth in Section 9.7.
Principal Trading Market” means the Trading Market on which the Common Stock is primarily listed on and quoted for trading, which, as of the date of this Agreement and the Closing Date, shall be The Nasdaq Capital Market.
Purchase Price” has the meaning set forth in Section 2.1.
Registration Rights Agreement” has the meaning set forth in the recitals to this Agreement.
Required Investors” has the meaning set forth in the Registration Rights Agreement.
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 Conversion Shares issuable upon exercise and conversion in full of all Warrants or conversion in full of all shares of Preferred Stock, ignoring any conversion or exercise limits set forth therein.
Rule 144” means Rule 144 promulgated under the 1933 Act.
SEC Filings” means (i) all documents and reports filed by the Company with the SEC pursuant to the 1934 Act, including pursuant to Section 13(a) or 15(d) thereof, since March 1, 2020.
Securities” means the Preferred Shares, the Warrants and the Warrant Shares.
Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the 1934 Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
Stockholder Approval” has the meaning set forth in Section 7.8.

3


Exhibit 10.1

Stockholder Meeting” has the meaning set forth in Section 7.8.
Stockholder Meeting Deadline” has the meaning set forth in Section 7.8.
Subscription Amount” means, as to an Investor, the aggregate amount to be paid for the Closing Securities purchased hereunder as specified opposite such Investor’s name on Exhibit A attached hereto, under the column entitled “Aggregate Purchase Price of Closing Securities,” in U.S. Dollars and in immediately available funds.
Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on its Principal Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported in the “pink sheets” by Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.
Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT (formerly the NYSE American), the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.
Transfer Agent” means Corporate Stock Transfer, Inc.
Transaction Documents” means this Agreement, the Warrant, and the Registration Rights Agreement.
VWAP” means, for any date, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the then Principal 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 4:00 p.m. (New York City time)) 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 Investors holding 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” has the meaning set forth in the recitals to this Agreement.
Warrant Shares” means the Preferred Shares issuable upon exercise of the Warrants, and following the conversion of the Preferred Shares, and the Conversion Warrant Shares.
8-K Filing” has the meaning set forth in Section 9.7.
1933 Act” has the meaning set forth in the recitals to this Agreement.
1934 Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

4


Exhibit 10.1

2.    Purchase and Sale.
2.1.    On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company will issue and sell, and the Investors will purchase, severally and not jointly, (i) (A) the number of Preferred Shares set forth opposite the name of such Investor under the heading “Number of Preferred Shares Purchased” on Exhibit A attached hereto and (B) a Warrant to purchase one share of Series A Convertible Preferred Stock for every one Preferred Share purchased at Closing. The purchase price per Preferred Share and associated Warrant shall be $58.94 (the “Purchase Price”).
2.2.    The Warrants shall have an exercise price equal to $58.94 per Warrant Share (subject to adjustment as provided therein). The Warrants will be excisable immediately and will expire on the five-year anniversary of the Closing Date.
3.    Closing.
3.1.    Upon the satisfaction of the conditions set forth in Section 6, the completion of the purchase and sale of the Closing Securities (the “Closing”) shall occur remotely via exchange of executed documents and funds on May 4, 2020 (the “Closing Date”).
3.2.    On or prior to the Closing Date, each Investor shall deliver or cause to be delivered to the escrow agent, Delaware Trust Company, the Subscription Amount via wire transfer of immediately available funds pursuant to the wire instructions delivered to such Investor by a Placement Agent on or prior to the Closing Date.
3.3.    At or before the Closing, the Company shall deliver or cause to be delivered to each Investor purchasing Preferred Shares the following:
(a)    a number of Preferred Shares, in the form of a certificate registered in the name of the Investor equal to the number of Preferred Shares set forth opposite the name of such Investor under the heading “Number of Preferred Shares Purchased” on Exhibit A attached hereto; and
(b)    a Warrant, registered in the name of such Investor, to purchase up to the number of Preferred Shares set forth opposite the name of such Investor under the heading “Number of Preferred Shares Underlying Warrant Purchased” on Exhibit A attached hereto.
4.    Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors that, except (a) as set forth in the schedules delivered herewith (collectively, the “Disclosure Schedules”) and arranged in numbered and lettered sections corresponding to the numbered and lettered sections contained in this Section 4 or (b) disclosed in the SEC Filings (excluding exhibits and information incorporated therein):
4.1.    Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and to own or lease its properties. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary unless the failure to so qualify has not had and would not reasonably be expected to have a Material Adverse Effect.

5


Exhibit 10.1

4.2.    Authorization. The Company has the requisite corporate power and authority and has taken all requisite corporate action necessary for, and no further action on the part of the Company, its officers, directors and stockholders is necessary for, (i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Closing Securities. The Transaction Documents constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally and to general equitable principles.
4.3.    Capitalization. The Company is authorized under its Certificate of Incorporation to issue 350,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par value $0.0001 per share. The Company’s disclosure of its issued and outstanding capital stock in its most recent SEC Filing containing such disclosure was accurate in all material respects as of the date indicated in such SEC Filing. All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid and nonassessable; none of such shares were issued in violation of any pre-emptive rights; and such shares were issued in compliance in all material respects with applicable state and federal securities law and any rights of third parties. No Person is entitled to pre-emptive or similar statutory or contractual rights with respect to the issuance by the Company of any securities of the Company. There are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company is or may be obligated to issue any equity securities of any kind and except as contemplated by this Agreement. Except for the Registration Rights Agreement, there are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among the Company and any of the securityholders of the Company relating to the securities of the Company held by them. Except as provided in the Registration Rights Agreement, no Person has the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person.
The issuance and sale of the Closing Securities hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person (other than the Investors) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security.
The Company does not have outstanding stockholder purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events.
4.4.    Valid Issuance. The Preferred Shares have been duly and validly authorized and, when issued and paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other than those created by the Investors), except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws. The Company shall, so long as any of the Preferred Shares are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued capital stock, solely for the purpose of effecting the Conversion Shares, 100% of the number of shares of Common Stock issuable upon conversion of the Preferred Shares (subject to reduction from time to time for the issuance of the Conversion Shares). Upon conversion of the Preferred Shares, when issued, the Conversion Shares will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other than those created by the Investors), except for restrictions on transfer set forth in the

6


Exhibit 10.1

Transaction Documents or imposed by applicable securities laws. The Warrant Shares have been duly and validly authorized and reserved for issuance and, upon exercise of the Warrants in accordance with their terms, including the payment of any exercise price therefor, will be validly issued, fully paid and nonassessable and will be free and clear of all encumbrances and restrictions (other than those created by the Investors), except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws.
4.5.    Consents. Subject to the accuracy of the representations and warranties of each Investor set forth in Section 5 hereof, the execution, delivery and performance by the Company of the Transaction Documents and the offer, issuance and sale of the Closing Securities require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official other than filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws and the rules and regulations of Nasdaq which the Company undertakes to file within the applicable time periods and other than the registration statement required to be filed by the Registration Rights Agreement. The Company has taken all action necessary to exempt (i) the issuance and sale of the Closing Securities and (ii) the other transactions contemplated by the Transaction Documents from the provisions of any stockholder rights plan or other “poison pill” arrangement, any anti-takeover, business combination or control share law or statute binding on the Company, including Section 203 of the General Corporation Law of the State of Delaware, or to which the Company or any of its assets and properties is subject that is or could reasonably be expected to become applicable to the Investors as a result of the transactions contemplated hereby, including without limitation, the issuance, ownership, acquisition, disposition or voting of the Closing Securities by the Investors or the exercise of any right granted to the Investors pursuant to this Agreement or the other Transaction Documents.
4.6.    Use of Proceeds. The net proceeds of the sale of the Closing Securities hereunder shall be used by the Company for the acquisition of Naia Rare Diseases, Inc. and for working capital and general corporate purposes.
4.7.    No Material Adverse Change. Since December 31, 2019, except as identified and described in the SEC Filings, there has not been:
(i)    any change in the assets, liabilities, financial condition or operating results of the Company, except for changes in the ordinary course of business which have not had and would not reasonably be expected to have a Material Adverse Effect, individually or in the aggregate;
(ii)    any declaration or payment by the Company of any dividend, or any authorization or payment by the Company of any distribution, on any of the capital stock of the Company, or any redemption or repurchase by the Company of any securities of the Company;
(iii)    any material damage, destruction or loss, whether or not covered by insurance, to any assets or properties of the Company;
(iv)    any waiver, not in the ordinary course of business, by the Company of a material right or of a material debt owed to it;
(v)    any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and which is not

7


Exhibit 10.1

material to the assets, properties, financial condition, operating results or business of the Company (as such business is presently conducted);
(vi)    any change or amendment to the Company’s Certificate of Incorporation or Bylaws, or material change to any material contract or arrangement by which the Company or is bound or to which any of its assets or properties is subject;
(vii)    any material labor difficulties or, to the Company’s Knowledge, labor union organizing activities with respect to employees of the Company;
(viii)    any material transaction entered into by the Company other than in the ordinary course of business;
(ix)    the loss of the services of any key employee, or material change in the composition or duties of the senior management of the Company;
(x)    any transaction disclosable under Item 404 of Regulation S-K;
(xi)    any other event or condition of any character that has had or would reasonably be expected to have a Material Adverse Effect.
4.8.    SEC Filings.
(a)    The Company has filed all reports, schedules, certifications, forms, statements and other documents (including all exhibits, amended and supplements thereto) required to be filed or furnished by the Company under the 1934 Act, including pursuant to Section 13(a) or 15(d) thereof, for the one year preceding the date hereof. As of their respective dates, or, if amended or supplemented, as of the date of the last such amendment or supplement filed prior to date hereof, each of the SEC Filings complied in all material respects with the applicable requirements of the 1933 Act, the 1934 Act and the Sarbanes-Oxley Act of 2002, and the applicable rules and regulations promulgated thereunder, as the case may be, each as in effect on the date so filed.
4.9.    No Conflict, Breach, Violation or Default. The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Closing Securities in accordance with the provisions thereof will not, (i) conflict with or result in a breach or violation of (a) any of the terms and provisions of, or constitute a default under, the Company’s Certificate of Incorporation or the Company’s Bylaws, both as in effect on the date hereof (true and complete copies of which have been made available to the Investors through the Electronic Data Gathering, Analysis, and Retrieval system (the “EDGAR system”)), or (b) assuming the accuracy of the representations and warranties in Section 5, any applicable statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any of its assets or properties, or (ii) except for such violations, conflicts or defaults as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, 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, encumbrance or other adverse claim upon any of the properties or assets of the Company or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any Material Contract. This Section does not relate to matters with respect to tax status, which are the subject of Section 4.10, employee relations

8


Exhibit 10.1

and labor matters, which are the subject of Section 4.13, and environmental laws, which are the subject of Section 4.15.
4.10.    Tax Matters. The Company has timely prepared and filed all tax returns required to have been filed by it with all appropriate governmental agencies and timely paid all taxes shown thereon or otherwise owed by the Company. The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid assessments against the Company nor, to the Company’s Knowledge, any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority except for any assessment which is not material to the Company. All taxes and other assessments and levies that the Company is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due. There are no tax liens or claims pending or, to the Company’s Knowledge, threatened against the Company or any of its assets or property. There are no outstanding tax sharing agreements or other such arrangements between the Company and any other corporation or entity.
4.11.    Title to Properties. The Company has good and marketable title to all real properties and all other properties and assets owned by it, in each case free from liens, encumbrances and defects, except such as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and the Company holds any leased real or personal property under valid and enforceable leases with no exceptions, except such as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
4.12.    Certificates, Authorities and Permits. The Company possesses adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, except where failure to so possess would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. The Company has not received any written notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that would reasonably be expected to have a Material Adverse Effect, individually or in the aggregate, on the Company.
4.13.    Labor Matters.
(a)    The Company is not party to or bound by any collective bargaining agreements or other agreements with labor organizations. To the Company’s knowledge, Company has not violated in any material respect any laws, regulations, orders or contract terms, affecting the collective bargaining rights of employees, labor organizations or any laws, regulations or orders affecting employment discrimination, equal opportunity employment, or employees’ health, safety, welfare, wages and hours.
(b)    No material labor dispute with the employees of the Company, or with the employees of any principal supplier, manufacturer, customer or contractor of the Company, exists or, to the knowledge of the Company, is threatened or imminent.
4.14.    Intellectual Property. Except as expressly contemplated by the SEC Filings, the Company owns, possesses, licenses or has other rights to use, the patents and patent applications, copyrights, trademarks, service marks, trade names, service names and trade secrets described in the SEC Filings as necessary or material for use in connection with its business and which the failure to so have would have or reasonably be expected to result in a Material Adverse Effect (collectively, the “Company Intellectual Property”). There is no pending or, to the Company’s Knowledge, threatened action, suit,

9


Exhibit 10.1

proceeding or claim by any Person that the Company’s business as now conducted infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of another. To the Company’s Knowledge, there is no existing infringement by another Person of any of the Intellectual Property Rights that would have or would reasonably be expected to have a Material Adverse Effect. The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its Intellectual Property Rights, except where failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
4.15.    Environmental Matters. The Company is not in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), has not released any hazardous substances regulated by Environmental Law on to any real property that it owns or operates, has not received any written notice or claim it is liable for any off-site disposal or contamination pursuant to any Environmental Laws, which violation, release, notice, claim, or liability would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and to the Company’s Knowledge, there is no pending or threatened investigation that would reasonably be expected to lead to such a claim.
4.16.    Legal Proceedings. There are no legal, governmental or regulatory investigations, actions, suits or proceedings pending to which the Company is or may reasonably be expected to become a party or to which any property of the Company is or may reasonably be expected to become the subject that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
4.17.    Financial Statements. The financial statements included in each SEC Filing filed prior to the date hereof comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing and present fairly, in all material respects, the financial position of the Company as of the dates shown and its results of operations and cash flows for the periods shown, subject in the case of unaudited financial statements to normal, immaterial year-end audit adjustments, and such financial statements have been prepared in conformity with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except as may be disclosed therein or in the notes thereto, and except that the unaudited financial statements may not contain all footnotes required by GAAP, and, in the case of quarterly financial statements, as permitted by Form 10-Q under the 1934 Act). Except as set forth in the financial statements of the Company included in the SEC Filings filed prior to the date hereof, the Company has not incurred any liabilities, contingent or otherwise, except those incurred in the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements, none of which, individually or in the aggregate, have had or would reasonably be expected to have a Material Adverse Effect.
4.18.    Insurance Coverage. The Company maintains in full force and effect insurance coverage that is customary for comparably situated companies for the business being conducted and properties owned or leased by the Company, and the Company reasonably believes such insurance coverage to be adequate against all liabilities, claims and risks against which it is customary for comparably situated companies to insure.
4.19.    Compliance with Nasdaq Continued Listing Requirements. The Company is in compliance with applicable Nasdaq continued listing requirements and the execution, delivery and

10


Exhibit 10.1

performance by the Company of the Transaction Documents and the offer, issuance and delivery of the Closing Securities will not violate applicable Nasdaq continued listing requirements. There are no proceedings pending or, to the Company’s Knowledge, threatened against the Company relating to the continued listing of the Common Stock on Nasdaq and the Company has not received any notice of, nor to the Company’s Knowledge is there any reasonable basis for, the delisting of the Common Stock from Nasdaq.
4.20.    Brokers and Finders. Other than the Placement Agent, no Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company. No Investor shall have any obligation with respect to any fees, or with respect to any claims made by or on behalf of other Persons for fees, in each case of the type contemplated by this Section 4.20 that may be due in connection with the transactions contemplated by this Agreement or the Transaction Documents.
4.21.    No Directed Selling Efforts or General Solicitation. Neither the Company nor any Person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of any of the Closing Securities.
4.22.    No Integrated Offering. Neither the Company nor any Person acting on its behalf has, directly or indirectly, made any offers or sales of any Company security or solicited any offers to buy any Company security, under circumstances that would adversely affect reliance by the Company on Section 4(2) for the exemption from registration for the transactions contemplated hereby or would require registration of the Closing Securities under the 1933 Act.
4.23.    Private Placement. Assuming the accuracy of the representations and warranties of the Investors set forth in Section 5, the offer and sale of the Closing Securities to the Investors as contemplated hereby is exempt from the registration requirements of the 1933 Act. The issuance and sale of the Closing Securities does not contravene the rules and regulations of Nasdaq.
4.24.    Questionable Payments. Neither the Company nor, to the Company’s Knowledge, any of its current or former directors, officers, employees, agents or other Persons acting on behalf of the Company, has on behalf of the Company in connection with its business: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets which is in violation of law; (d) made any false or fictitious entries on the books and records of the Company; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature.
4.25.    Transactions with Affiliates. None of the executive officers or directors of the Company and, to the Company’s Knowledge, none of the employees of the Company is presently a party to any transaction with the Company (other than as holders of stock options and/or warrants, and 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, or otherwise requiring payments to or from any officer, director or such employee or, to the Company’s Knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

11


Exhibit 10.1

4.26.    Internal Controls. The Company has established and maintains disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the 1934 Act), which are designed to ensure that material information relating to the Company is made known to the Company’s principal executive officer and its principal financial officer by others within those entities. Since the end of the Company’s most recent audited fiscal year, there have been no significant deficiencies or material weakness in the Company’s internal control over financial reporting (whether or not remediated) and no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company is not aware of any change in its internal controls over financial reporting that has occurred during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
4.27.    Disclosures. Neither the Company nor any Person acting on its behalf has provided the Investors or their agents or counsel with any information that constitutes or would reasonably be expected to constitute material, non-public information which according to applicable law, rule or regulation was required to have been disclosed publicly by the Company, but which has not been so disclosed, other than with respect to the transactions contemplated hereby and except as will be disclosed in the Press Release (as defined below). The SEC Filings do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. The Company understands and confirms that the Investors will rely on the foregoing representations in effecting transactions in securities of the Company. 
4.28.    Required Filings. Since December 31, 2019, no event or circumstance has occurred or information exists with respect to the Company or its business, properties, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which have not been so publicly announced or disclosed (assuming for this purpose that the SEC Filings are being incorporated by reference into an effective registration statement filed by the Company under the 1933 Act).
4.29.    Investment Company. The Company is not required to be registered as, and is not an Affiliate of, and immediately following the Closing will not be required to register as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
4.30.    Tests and Preclinical and Clinical Trials. The studies, tests and preclinical and clinical trials conducted by or, to the Company’s Knowledge, on behalf of the Company that are described in the SEC Filings were and, if still pending, are being, conducted in all material respects in accordance with the protocols submitted to the U.S. Food and Drug Administration (the “FDA”) or any foreign governmental body exercising comparable authority, procedures and controls pursuant to, where applicable, accepted professional and scientific standards, and all applicable laws and regulations; the descriptions of the studies, tests and preclinical and clinical trials conducted by or, to the Company’s Knowledge, on behalf of the Company, and the results thereof, contained in the SEC Filings are accurate and complete in all material respects; the Company is not aware of any other studies, tests or preclinical and clinical trials, the results of which call into question the results described in the SEC Filings; and the Company has not received any notices or correspondence from the FDA, any foreign, state or local governmental body exercising comparable authority or any Institutional Review Board requiring the termination, suspension, material modification or clinical hold of any studies, tests or preclinical or clinical trials conducted by or on behalf of the Company.

12


Exhibit 10.1

4.31.    Manipulation of Price.  The Company has not, and, to the Company’s Knowledge, no Person acting on its behalf has taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities.
4.32.    Anti-Bribery and Anti-Money Laundering Laws. Each of the Company and any of its officers, directors, supervisors, managers, agents, or employees, are and have at all times been in compliance with and its participation in the offering will not violate: (A) anti-bribery laws, including but not limited to, any applicable law, rule, or regulation of any locality, including but not limited to any law, rule, or regulation promulgated to implement the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed December 17, 1997, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act 2010, or any other law, rule or regulation of similar purposes and scope or (B) anti-money laundering laws, including but not limited to, applicable federal, state, international, foreign or other laws, regulations or government guidance regarding anti-money laundering, including, without limitation, Title 18 US. Code section 1956 and 1957, the Patriot Act, the Bank Secrecy Act, and international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force on Money Laundering, of which the United States is a member and with which designation the United States representative to the group or organization continues to concur, all as amended, and any Executive order, directive, or regulation pursuant to the authority of any of the foregoing, or any orders or licenses issued thereunder.
4.33.    Shell Company Status. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).
5.    Representations and Warranties of the Investors. Each of the Investors hereby severally, and not jointly, represents and warrants to the Company that:
5.1.    Organization and Existence. If an Investor is an entity, such Investor is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to enter into and consummate the transactions contemplated by the Transaction Documents and to carry out its obligations hereunder and thereunder, and to invest in the Securities pursuant to this Agreement.
5.2.    Authorization. The execution, delivery and performance by such Investor of the Transaction Documents to which such Investor is a party have been duly authorized and each has been duly executed and when delivered will constitute the valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.
5.3.    Purchase Entirely for Own Account. The Securities to be received by such Investor hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by such Investor

13


Exhibit 10.1

to hold the Securities for any period of time. Such Investor is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in a business that would require it to be so registered.
5.4.    Investment Experience. Such Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby.
5.5.    Disclosure of Information. Such Investor has had an opportunity to receive, review and understand all information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities, and has conducted and completed its own independent due diligence. Such Investor acknowledges that copies of the SEC Filings are available on the EDGAR system. Based on the information such Investor has deemed appropriate, and without reliance upon any Placement Agent, it has independently made its own analysis and decision to enter into the Transaction Documents. Such Investor is relying exclusively on its own sources of information, investment analysis and due diligence (including professional advice it deems appropriate) with respect to the execution, delivery and performance of the Transaction Documents, the Securities and the business, condition (financial and otherwise), management, operations, properties and prospects of the Company, including but not limited to all business, legal, regulatory, accounting, credit and tax matters. Neither such inquiries nor any other due diligence investigation conducted by such Investor shall modify, limit or otherwise affect such Investor’s right to rely on the Company’s representations and warranties contained in this Agreement.
5.6.    Restricted Securities. Such Investor understands that the Securities are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances.
5.7.    Accredited Investor. Such Investor is (a) an “accredited investor” within the meaning of Rule 501 under the 1933 Act and has executed and delivered to the Company a questionnaire in substantially the form attached hereto as Exhibit E (the “Investor Questionnaire”), which such Investor represents and warrants is true, correct and complete. Such investor has sufficient knowledge and experience in investing in private equity transactions to properly evaluate the risks and merits of its purchase of the Securities. Such Investor has determined based on its own independent review and such professional advice as it deems appropriate that its purchase of the Securities and participation in the transactions contemplated by the Transaction Documents (i) are fully consistent with its financial needs, objectives and condition, (ii) comply and are fully consistent with all investment policies, guidelines and other restrictions applicable to such Investor, (iii) have been duly authorized and approved by all necessary action, (iv) do not and will not violate or constitute a default under such Investor’s charter, bylaws or other constituent document, if any, or under any law, rule, regulation, agreement or other obligation by which such Investor is bound and (v) are a fit, proper and suitable investment for such Investor, notwithstanding the substantial risks inherent in investing in or holding the Securities.
5.8.    Placement Agent. Such Investor hereby acknowledges and agrees that the Placement Agent is acting solely as the placement agent in connection with the execution, delivery and performance of the Transaction Documents and is not acting as an underwriter or in any other capacity and is not and shall not be construed as a fiduciary for such Investor, the Company or any other person or entity in connection with the execution, delivery and performance of the Transaction Documents, (b) the

14


Exhibit 10.1

Placement Agent has not made and will not make any representation or warranty, whether express or implied, of any kind or character and has not provided any advice or recommendation in connection with the execution, delivery and performance of the Transaction Documents, (c) the Placement Agent will not have any responsibility with respect to (i) any representations, warranties or agreements made by any person or entity under or in connection with the execution, delivery and performance of the Transaction Documents, or the execution, legality, validity or enforceability (with respect to any person) thereof, or (ii) the business, affairs, financial condition, operations, properties or prospects of, or any other matter concerning the Company, and (d) the Placement Agent will not have any liability or obligation (including without limitation, for or with respect to any losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses or disbursements incurred by such Investor, the Company or any other person or entity), whether in contract, tort or otherwise, to such Investor, or to any person claiming through it, in respect of the execution, delivery and performance of the Transaction Documents.
5.9.    No General Solicitation. Such Investor did not learn of the investment in the Securities as a result of any general solicitation or general advertising.
5.10.    Brokers and Finders. No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor.
5.12    Short Sales and Confidentiality Prior to the Date Hereof.  Other than consummating the transactions contemplated hereunder, such Investor has not, nor has any Person acting on behalf of or pursuant to any understanding with such Investor, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Investor was first contacted by the Company, a Placement Agent or any other Person regarding the transactions contemplated hereby and ending immediately prior to the date hereof.  Notwithstanding the foregoing, in the case of an Investor that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Investor’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Investor’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.  Other than to other Persons party to this Agreement and their representatives, such Investor has maintained the confidentiality of all non-public disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.
    5.13    No Government Recommendation or Approval. Such Investor understands that no United States federal or state agency, or similar agency of any other country, has reviewed, approved, passed upon, or made any recommendation or endorsement of the Company or the purchase of the Securities.
5.15    No Rule 506 Disqualifying Activities. Such Investor has not taken any of the actions set forth in, and is not subject to, the disqualification provisions of Rule 506(d)(1) of the 1933 Act.
5.16    Residency. Such Investor is a resident of the jurisdiction specified below its address on the Schedule of Investors.

15


Exhibit 10.1

6.    Conditions to Closing.
6.1.    Conditions to the Investors’ Obligations. The obligation of each Investor to purchase Closing Securities at the Closing is subject to the fulfillment to such Investor’s satisfaction, on or prior to the Closing Date, of the following conditions, any of which may be waived by such Investor (as to itself only):
(a)    The representations and warranties made by the Company in Section 4 hereof shall be true and correct in all material respects as of the date hereof and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date. The Company shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Closing Date.
(b)    The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary for consummation of the purchase and sale of the Closing Securities and the consummation of the other transactions contemplated by the Transaction Documents, all of which shall be in full force and effect.
(c)    The Company shall have executed and delivered the Registration Rights Agreement.
(d)    The Company shall have filed with Nasdaq a Notification Form: Listing of Additional Shares for the listing of the Preferred Shares, Conversion Shares and the Warrant Shares.
(e)    No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents.
(f)    The Company shall have delivered a Certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in subsections (a), (b), (d), and (e) of this Section 6.1.
(g)    The Company shall have delivered a Certificate, executed on behalf of the Company by its Secretary, dated as of the Closing Date, certifying the resolutions adopted by the Board approving the transactions contemplated by this Agreement and the other Transaction Documents and the issuance of the Closing Securities, certifying the current versions of the Certificate of Incorporation and Bylaws of the Company and certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company.
(h)    The Investors shall have received an opinion from Sheppard, Mullin, Richter & Hampton LLP, the Company’s counsel, dated as of the Closing Date, in form and substance reasonably acceptable to the Placement Agent and addressing such legal matters as the Investors may reasonably request.

16


Exhibit 10.1

(i)    No stop order or suspension of trading shall have been imposed by Nasdaq, the SEC or any other governmental or regulatory body with respect to public trading in the Common Stock.
6.2.    Conditions to Obligations of the Company. The Company’s obligation to sell and issue Closing Securities at the Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any of which may be waived by the Company:
(a)    The representations and warranties made by the Investors in Section 5 hereof shall be true and correct in all material respects as of the date hereof, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date. The Investors shall have performed in all material respects all obligations and covenants herein required to be performed by them on or prior to the Closing Date.
(b)    The Investors shall have executed and delivered the Registration Rights Agreement and each Investor Questionnaire.
(c)    Each Investor shall have paid in full its Subscription Amount to the Company.
6.3.    Termination of Obligations to Effect Closing; Effects.
(a)    The obligations of the Company, on the one hand, and the Investors, on the other hand, to effect the Closing shall terminate as follows:
(i)    Upon the mutual written consent of the Company and Investors that agreed to purchase a majority of the Closing Securities to be issued and sold pursuant to this Agreement;
(ii)    By the Company if any of the conditions set forth in Section 6.2 shall have become incapable of fulfillment, and shall not have been waived by the Company;
(iii)    By an Investor (with respect to itself only) if any of the conditions set forth in Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by the Investor; or
(iv)    By either the Company or any Investor (with respect to itself only) if the Closing has not occurred on or prior to fifth Trading Day following the date of this Agreement;
provided, however, that, except in the case of clause (i) above, the party seeking to terminate its obligation to effect the Closing shall not then be in breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate its obligation to effect the Closing.
(b)    In the event of termination by the Company or any Investor of its obligations to effect the Closing pursuant to this Section 6.3, written notice thereof shall be given to the other Investors by the Company and the other Investors shall have the right to terminate their obligations to effect the Closing upon written notice to the Company and the other Investors. Nothing in this Section 6.3 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific

17


Exhibit 10.1

performance by any other party of its obligations under this Agreement or the other Transaction Documents.
7.    Covenants and Agreements of the Company.
7.1.    No Conflicting Agreements. The Company will not take any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with the Company’s obligations to the Investors under the Transaction Documents.
7.2.    Nasdaq Listing; Depository Trust Company. The Company will use commercially reasonable efforts to continue the listing and trading of its Common Stock on Nasdaq and, in accordance, therewith, will use commercially reasonable efforts to comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of such market or exchange, as applicable. The Company will use commercially reasonable efforts to maintain the eligibility of its Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation.
7.3.    Termination of Covenants. The provisions of Sections 7.1 and 7.2 shall terminate and be of no further force and effect on the date on which the Company’s obligations under the Registration Rights Agreement to register or maintain the effectiveness of any registration covering the Registrable Securities (as such term is defined in the Registration Rights Agreement) shall terminate.
7.4.    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 an Investor or in connection with a pledge as contemplated in Section 7.4(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 1933 Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and the Registration Rights Agreement and shall have the rights and obligations of an Investor under this Agreement and the Registration Rights Agreement.
(b)    The Investors understands that, unless provided otherwise in this Agreement or Warrant, any of the Preferred Shares, Conversion Shares and Warrant Shares, whether certificated or in book-entry form, will be endorsed with the following legend:
THIS SECURITY 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 MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A

18


Exhibit 10.1

FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
An Investor 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 1933 Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, such Investor may transfer pledged or secured Securities to the pledgees or secured parties in compliance with applicable law. 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 applicable Investor’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.
(c)    Notwithstanding Section 7.4(b), upon the written request of an Investor, any legend (including the legend set forth in Section 7.4(b) hereof) on the Conversion Shares or Warrant Shares held by such Investor may be removed (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the 1933 Act, (ii) following any sale of such Conversion Shares or Warrant Shares pursuant to Rule 144, (iii) if such Conversion Shares or Warrant Shares are eligible for sale under Rule 144 without the requirement to be in compliance with Rule 144(c)(1), or (iv) if such legend is not required under applicable requirements of the 1933 Act (including judicial interpretations and pronouncements issued by the staff of the SEC), subject in the case of clauses (ii), (iii) and (iv) to receipt from the Investor by the Company and the Transfer Agent of customary representations reasonably acceptable to the Company and the Transfer Agent in connection with such request. Upon such request, the Company shall (A) deliver to the Transfer Agent irrevocable instructions to the Transfer Agent to remove the legend, and (B) cause its counsel to deliver to the Transfer Agent one or more legal opinions to the effect that the removal of such legend in such circumstances may be effected under the 1933 Act if required by the Transfer Agent to effect the removal of the legend in accordance with the provisions of this Agreement. If all or any portion of a Warrant is exercised and (i) a registration statement (including the Registration Statement) covering the resale of such security is then effective under the 1933 Act, (ii) the Warrant Shares issuable upon such exercise are then eligible for sale under Rule 144 and without the requirement to be in compliance with Rule 144(c)(1), or (iii) if a legend is not required under applicable requirements of the 1933 Act (including judicial interpretations and pronouncements issued by the staff of the SEC), then such Warrant Shares shall be issued free of all legends, subject in the case of clauses (ii) and (iii) to receipt from the Investor by the Company and the Transfer Agent of customary representations reasonably acceptable to the Company and the Transfer Agent in connection therewith. The Company agrees that following the effective date of a registration statement covering the resale of the Conversion Shares and Warrant Shares or at such time as such legend is no longer required under this Section 7.4(c), it will, no later than two Trading Days following the delivery by an Investor to the Company or the Transfer Agent of a request for legend removal and in the case of Conversion Shares or Warrant Shares evidenced by a physical certificate, the delivery of the physical certificate, and if relying on Rule 144, receipt from the Investor by the Company and the Transfer Agent of customary representations reasonably acceptable to the Company and the Transfer Agent in connection therewith (such second Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Investor, as may be requested by the Investor, a certificate or book-entry position evidencing such Conversion Shares and Warrant Shares that is free from all restrictive and other legends or by crediting the account of the Investor’s or its designee’s account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system if the Company is then a participant in

19


Exhibit 10.1

such system. 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 Section 7.4(b).
(d)    In addition to such Investor’s other available remedies, the Company shall pay to Investor, in cash, (i) as partial liquidated damages and not as a penalty, for each $1,000 of Conversion 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 ten (10) 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 deliver any such Conversion Shares or Warrant Shares free from all restrictive legends on or before the applicable Legend Removal Date and if after the Legend Removal Date, due to the Company’s continuing failure to deliver such Conversion Shares or Warrant Shares, such Investor purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Investor of all or any portion of the Conversion Shares or Warrant Shares anticipated receiving from the Company without any restrictive legend, then the Company shall pay in cash to the Investor in an amount equal to the excess of such Investor’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”) over the product of (A) such number of shares of Common Stock the Company was required to deliver to such Investor by the Legend Removal Date multiplied by (B) 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 Investor to the Company such shares of Common Stock and ending on the date of such delivery and payment under this Section 7(d).
(e)    Each Investor, severally and not jointly with the other Investors, agrees with the Company (i) that such Investor will sell any Conversion Shares or Warrant Shares pursuant to either the registration requirements of the 1933 Act, including any applicable prospectus delivery requirements, or an exemption therefrom, (ii) that if Conversion Shares or Warrant Shares are sold pursuant to the Registration Statement, they will be sold in compliance with the plan of distribution set forth therein, (iii) that if, after the effective date of the Registration Statement covering the resale of the Conversion Shares and the Warrant Shares, such registration statement ceases to be effective and the Company has provided notice to such Investor to that effect, such Investor will sell Conversion Shares and the Warrant Shares only in compliance with an exemption from the registration requirements of the 1933 Act; and acknowledges that the removal of the restrictive legend from the Conversion Shares and Warrant Shares due to the effectiveness of a registration statement as set forth in Section 7.4(c) is predicated upon the Company’s reliance upon this Agreement.
7.5.    Subsequent Debt and Equity Sales.
(a)    Upon Closing, the Company agrees not to raise additional debt or equity capital at an effective price per share that is less than the Purchase Price (subject to adjustment for reverse and forward stock splits and the like), for 360 days without consent from each equity holder who represents 7% or greater of the fully diluted stock capital of the Company immediately following the Closing. This consent right only applies if this financing is in the aggregate amount of less than $20 million.
(b)    The Company shall not, and shall use its commercially reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the 1933 Act) that will be integrated with the offer or sale of the Securities in a manner that would require the registration under the 1933 Act of the sale of the Securities to the Investors, or that will be integrated with the offer or sale of the Securities for

20


Exhibit 10.1

purposes of the rules and regulations of any trading market such that it would require stockholder approval prior to the closing of such other transaction unless stockholder approval is obtained before the closing of such subsequent transaction.
7.6.    Short Sales and Confidentiality After the Date Hereof. Each Investor covenants that neither it nor any Affiliates acting on its behalf or pursuant to any understanding with it will execute any Short Sales during the period from the date hereof until the earlier of such time as (i) the transactions contemplated by this Agreement are first publicly announced or (ii) this Agreement is terminated in full. Each Investor covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company, such Investor will maintain the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).
7.7.    Public Information. At any time during the period commencing from the six (6) month anniversary of the Closing Date and ending at such time that all of the Conversion Shares and Warrant Shares of an Investor, if a registration statement is not available for the resale of all of the Conversion Shares and Warrant Shares of an Investor, may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1), the Company covenants to timely file on the applicable deadline all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and will take all reasonable action under its control to ensure that adequate public information with respect to the Company, as required in accordance with Rule 144 of the 1933 Act, is publicly available, and will not terminate its status as an issuer required to file reports under the 1934 Act, even if the 1934 Act or the rules and regulations thereunder would permit such termination. At any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to such Investor’s other available remedies, the Company shall pay to each Investor, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to one and a half percent (1.5%) of the aggregate Purchase Price of such Investor’s Securities on the day of a Public Information Failure and on every thirtieth (30th) day (pro-rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required for the Investors to transfer the Underlying Shares pursuant to Rule 144. The payments to which a Investor shall be entitled pursuant to this Section 7.7 are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of one and a half percent (1.5%) per month (prorated for partial months) until paid in full. Nothing herein shall limit such Investor’s right to pursue actual damages for the Public Information Failure, and such Investor shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
7.8.    Stockholder Approval. The Company shall provide each stockholder entitled to vote at a special or annual meeting of shareholders of the Company (a “Stockholder Meeting”), which shall be promptly called and held not later than July 3, 2020 (the “Stockholder Meeting Deadline”), a proxy statement soliciting each such stockholder’s approval of the conversion of the Series A Convertible Preferred Stock into shares of Common Stock in accordance with the Nasdaq Stock Market Rules (the

21


Exhibit 10.1

Stockholder Approval”). The Company shall use its reasonable best efforts to solicit its stockholders’ approval of such resolution and to cause the Board of Directors of the Company to recommend to the stockholders that they approve such resolution. If, despite the Company’s reasonable best efforts, the Stockholder Approval is not obtained on or prior to the Stockholder Meeting Deadline, the Company shall cause an additional Stockholder Meeting to be held on or prior to October 3, 2020. If, despite the Company’s reasonable best efforts, the Stockholder Approval is not obtained after such subsequent stockholder meeting, the Company shall cause an additional Stockholder Meeting to be held semi-annually thereafter until such Stockholder Approval is obtained.
7.9.    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 Investors in order to exercise the Warrants or convert the 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 for the registered holder thereof to exercise the Warrants or convert the Preferred Stock. No additional legal opinion, other information or instructions shall be required of the Investors to exercise their Warrants or convert their Preferred Stock. The Company shall honor exercises of the Warrants and conversions of the Preferred Stock and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.
7.10.    Indemnification of Investors. Subject to the provisions of this Section 7.10, the Company will indemnify and hold each Investor 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 Investor (within the meaning of Section 15 of the 1933 Act and Section 20 of the 1934 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 “Investor 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 Investor 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 Investor 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 Investor Party, with respect to any of the transactions contemplated by the Transaction Documents (except to the extent such action is based upon a material breach of such Investor Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Investor Party may have with any such stockholder or any material violations by such Investor Party of state or federal securities laws or any conduct by such Investor Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct). If any action shall be brought against any Investor Party in respect of which indemnity may be sought pursuant to this Agreement, such Investor Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Investor Party. Any Investor 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 Investor 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

22


Exhibit 10.1

conflict on any material issue between the position of the Company and the position of such Investor Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel for all Investors. The Company will not be liable to any Investor Party under this Agreement (y) for any settlement by a Investor 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 Investor Party’s breach of any of the representations, warranties, covenants or agreements made by such Investor Party in this Agreement or in the other Transaction Documents or any material violations by such Investor Party of state or federal securities laws or any conduct by such Investor Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct. The indemnification required by this Section 7.10 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 Investor Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
7.11.    Reservation and Listing 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 100% 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.
(c)    The Company shall, if applicable: (i) in the time and manner required by the Principal Trading Market, prepare and file with such Principal Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Principal Trading Market as soon as possible thereafter, (iii) provide to the Investors evidence of such listing or quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on such date on such Principal Trading Market or another Principal Trading Market. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.
7.12.    Equal Treatment of Investors. 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 Investor by the Company and negotiated separately by each Investor, and is

23


Exhibit 10.1

intended for the Company to treat the Investors as a class and shall not in any way be construed as the Investors acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.
8.    Survival and Indemnification.
8.1.    Survival. The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing of the transactions contemplated by this Agreement for the applicable statute of limitations.
8.2.    Indemnification. The Company agrees to indemnify and hold harmless each Investor and its Affiliates and their respective directors, officers, trustees, members, managers, employees and agents, and their respective successors and assigns, from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorney fees and disbursements and other expenses reasonably incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, “Losses”) to which such Person may become subject (i) as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Transaction Documents or (ii) arising from the Company’s fraud, gross negligence and willful misconduct in connection with the execution, delivery and performance by the Company of the Transaction Documents and the offer, issuance and sale of the Closing Securities, and will reimburse any such Person for all such amounts as they are incurred by such Person.
8.3.    Conduct of Indemnification Proceedings. Any person entitled to indemnification hereunder shall (i) give prompt notice to the Company of any claim with respect to which it seeks indemnification and (ii) permit the Company to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the Company has agreed to pay such fees or expenses, (b) the Company shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the Company with respect to such claims (in which case, if the person notifies the Company in writing that such person elects to employ separate counsel at the expense of the Company, the Company shall not have the right to assume the defense of such claim on behalf of such person); and provided, further, that the failure of any indemnified party to give notice as provided herein shall not relieve the Company of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the Company in the defense of any such claim or litigation. It is understood that the Company shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. The Company will not, except with the consent of the indemnified party, which consent shall not be unreasonably withheld, conditioned or delayed, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. No indemnified party will, except with the consent of the Company, consent to entry of any judgment or enter into any settlement.

24


Exhibit 10.1

9.    Miscellaneous.
9.1.    Successors and Assigns. This Agreement may not be assigned by a party hereto without the prior written consent of the Company or each of the Investors, as applicable, provided, however, that an Investor may assign its rights and delegate its duties hereunder in whole or in part to an Affiliate or to a third party acquiring some or all of its Securities in a transaction complying with applicable securities laws without the prior written consent of the Company or the other Investors, provided such assignee agrees in writing to be bound by the provisions hereof that apply to Investors. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Without limiting the generality of the foregoing, in the event that the Company is a party to a merger, consolidation, share exchange or similar business combination transaction in which the Common Stock is converted into the equity securities of another Person, from and after the effective time of such transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, the term “Company” shall be deemed to refer to such Person and the term “Securities” shall be deemed to refer to the securities received by the Investors in connection with such transaction. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
9.2.    Counterparts; Faxes; E-mail. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile or e-mail, which shall be deemed an original.
9.3.    Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
9.4.    Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) upon delivery, if given by facsimile, so long as the sender receives a machine generated notice of delivery, (iii) upon delivery, if delivered by e-mail so long as the send does not receive an automatically generated notice of delivery failure, (iv) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (v) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one Business Day after delivery to such carrier. All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party:
If to the Company:
Innovate Biopharmaceuticals, Inc.
to be renamed 9 Meters Biopharma, Inc.
8480 Honeycutt Rd. Suite 120

Raleigh, North Carolina 27615
Attention: Edward J. Sitar
Email: esitar@innovatebiopharma.com


25


Exhibit 10.1

With a copy to:
Sheppard, Mullin, Richter & Hampton LLP
30 Rockefeller Plaza, 38
th Floor
New York, NY 10112
Attention: Jeffrey Fessler, Esq.
Email: JFessler@sheppardmullin.com
Wyrick Robbins Yates and Ponton LLP
4101 Lake Boone Trail
Raleigh, North Carolina 27607
Attention: Donald R. Reynolds, Esq.
Email: Dreynolds@wyrick.com
If to the Investors:
to the addresses set forth on the signature pages hereto.
9.5.    Expenses. The parties hereto shall pay their own costs and expenses in connection herewith regardless of whether the transactions contemplated hereby are consummated; it being understood that each of the Company and each Investor has relied on the advice of its own respective counsel.
9.6.    Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and (a) prior to the Closing, Investors that agreed to purchase a majority of the Preferred Shares to be issued and sold pursuant to this Agreement and (b) following the Closing, the Required Investors. Notwithstanding the foregoing, this Agreement may not be amended and the observance of any term of this Agreement may not be waived with respect to any Investor without the written consent of such Investor unless such amendment or waiver applies to all Investors in the same fashion. Any amendment or waiver effected in accordance with this paragraph shall be binding upon (i) prior to Closing, each Investor and (ii) following the Closing, each holder of any Securities purchased under this Agreement at the time outstanding, and in each case, each future holder of all such Securities and the Company.
9.7.    Publicity. Except as set forth below, no public release or announcement concerning the transactions contemplated hereby shall be issued by the Investors without the prior consent of the Company (which consent shall not be unreasonably withheld), except for such disclosure to Affiliates or limited partners on a non-public basis consistent with public disclosure by the Company and as such release or announcement may be required by law or the applicable rules or regulations of any securities exchange or securities market, in which case the Investors shall allow the Company, to the extent reasonably practicable in the circumstances, reasonable time to comment on such release or announcement in advance of such issuance. The Company shall not include the name of any Investor in any press release or public announcement (which, for the avoidance of doubt, shall not include any SEC Filing) without the prior written consent of such Investor. By the Disclosure Time, the Company shall issue a press release disclosing all material terms of transactions contemplated by this Agreement (the “Press Release”). No later than 5:30 p.m. (New York City time) on the first Business Day following the date this Agreement is executed, the Company will file a Current Report on Form 8-K (the “8-K Filing”) attaching the press release described in the foregoing sentence as well as copies of the Transaction Documents. In addition, the Company will make such other filings and notices in the manner and time required by the SEC or Nasdaq. The parties acknowledge that from and after the issuance of the Press

26


Exhibit 10.1

Release, no Investor shall be in possession of any material, nonpublic information received from the Company or any of its respective officers, directors, employees or agents, with respect to the transactions contemplated hereby that is not disclosed in the Press Release. The Company shall not, and shall cause each of its officers, directors, employees and agents, not to, provide any Investor with any such material, nonpublic information regarding the Company from and after the filing of the Press Release without the express prior written consent of such Investor.
9.8.    Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.
9.9.    Entire Agreement. This Agreement, including the signature pages, Exhibits and the Disclosure Schedules, and the other Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.
9.10.    Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.
9.11.    Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
9.12.    Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. The decision of each Investor to purchase Closing Securities pursuant to the Transaction Documents has been made by such Investor independently of any other Investor. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a

27


Exhibit 10.1

joint venture or any other kind of entity, or create a presumption that the Investors 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 Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents. Each Investor 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 Investor to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that each of the Investors has been provided with the same Transaction Documents for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.
9.13.    Limitation of Liability. Notwithstanding anything herein to the contrary, the Company acknowledges and agrees that the liability of an Investor arising directly or indirectly under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of the assets of such Investor and that no trustee, officer, other investment vehicle or any other Affiliate of such Investor or any investor, shareholder or holder of shares of beneficial interest of such Investor shall be personally liable for any liabilities of such Investor.
9.14.    Third Party Beneficiary. The Placement Agent shall be a third-party beneficiary of the Investor representations and warranties.

[remainder of page intentionally left blank]


28


Exhibit 10.1


IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

COMPANY:
INNOVATE BIOPHARMACEUTICALS, INC.

 
By:
 
 
 
Name: Edward J. Sitar
 
 
Title: Chief Financial Officer



Company Signature Page to the Innovate Biopharmaceuticals, Inc. Securities Purchase Agreement


Exhibit 10.1

INVESTOR:
 

By:
 
 
 
Name:
Title:

 
 
 


Investor Information
Entity Name:
 
Contact Person:
 
Address:
 
City:
 
State:
 
Zip Code:
 
Telephone:
 
Facsimile:
 
Email:
 
Tax ID # or Social Security #:
 
Name in which Securities should be issued:
 

    
    
    
    
    
    
    
    
    

Investor Signature Page to the Innovate Biopharmaceuticals, Inc. Securities Purchase Agreement


Exhibit 10.1


EXHIBIT A

Schedule of Investors

Investor Name and Address
Number of Preferred Shares Purchased
Number of Preferred Shares Underlying Warrants Purchased
Aggregate Purchase Price of Closing Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL
 
 
 






Exhibit 10.1

EXHIBIT B

Form of Preferred Warrant




Exhibit 10.1

EXHIBIT C

Certificate of Designation



Exhibit 10.1


EXHIBIT D

Registration Rights Agreement






Exhibit 10.1

EXHIBIT E

Investor Questionnaire



Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of April 29, 2020 by and among Innovate Biopharmaceuticals, Inc., a Delaware corporation (the “Company”), and the “Investors” named in that certain Securities Purchase Agreement by and among the Company and the Investors (the “Purchase Agreement”). Capitalized terms used herein have the respective meanings ascribed thereto in the Purchase Agreement unless otherwise defined herein.
The parties hereby agree as follows:
1.Certain Definitions.
As used in this Agreement, the following terms shall have the following meanings:
Investors” means the Investors identified in the Purchase Agreement and any Affiliate or permitted transferee of any Investor who is a subsequent holder of Registrable Securities.
Prospectus” means (i) the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus, and (ii) any “free writing prospectus” as defined in Rule 405 under the 1933 Act.
Register,” “registered” and “registration” refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the 1933 Act (as defined below), and the declaration or ordering of effectiveness of such Registration Statement or document.
Registrable Securities” means the (i) Conversion Shares, (ii) the Conversion Warrant Shares, and (iii) any other securities issued or issuable with respect to or in exchange for Conversion Shares or the Conversion Warrant Shares, whether by merger, charter amendment or otherwise and (v) any other securities issued or issuable with respect to or in exchange for such shares of Common Stock, whether by merger, charter amendment or otherwise; provided, that, a security shall cease to be a Registrable Security upon (A) sale pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale without restriction or limitation by such Investor (and any of its Affiliates whose shares must be aggregated with those of such Investor under Rule 144) pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act.
Registration Statement” means any registration statement of the Company under the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statement, including post-




Exhibit 10.2

effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.
Required Investors” means the Investors holding a majority of the Registrable Securities outstanding from time to time.
SEC” means the U.S. Securities and Exchange Commission.
2.    Registration.
(a)    Registration Statements.
(i)    Promptly following the Closing Date but no later than thirty (30) days after the Closing Date (the “Filing Deadline”), the Company shall prepare and file with the SEC one Registration Statement covering the resale of all of the Registrable Securities. Subject to any SEC comments, such Registration Statement shall include the plan of distribution attached hereto as Exhibit A; provided, however, that no Investor shall be named as an “underwriter” in such Registration Statement without the Investor’s prior written consent. Such Registration Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities. Such Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided in accordance with Section 3(c) to the Investors prior to its filing or other submission.
(ii)    So long as Registrable Securities remain outstanding, promptly following the date (the “Qualification Date”) upon which the Company becomes eligible to use a registration statement on Form S-3 to register the Registrable Securities for resale, but in no event more than thirty (30) days after the Qualification Date, the Company shall file a registration statement on Form S-3 covering all of the Registrable Securities (or a post-effective amendment on Form S-3 to a registration statement on Form S-1) (a “Shelf Registration Statement”) and shall use commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective as promptly as practicable thereafter. Subject to any SEC comments, such Shelf Registration Statement shall include the plan of distribution attached hereto as Exhibit A; provided, however, that no Investor shall be named as an “underwriter” in such Shelf Registration Statement without the Investor’s prior written consent. Such Shelf Registration Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities.
(b)    Expenses. The Company will pay all expenses associated with each Registration Statement, including filing and printing fees, the Company’s counsel and accounting fees and expenses, costs associated with clearing the Registrable Securities for sale under applicable state securities laws and listing fees, but excluding discounts, commissions, fees of


2

Exhibit 10.2

underwriters, selling brokers, dealer managers or similar securities industry professionals with respect to the Registrable Securities being sold.
(c)    Effectiveness.
(i)    The Company shall use commercially reasonable efforts to have a Registration Statement declared effective no later than the 60th day after the Closing Date (or the 90th day if the SEC reviews such Registration Statement) (the “Effectiveness Deadline”). The Company shall notify the Investors by facsimile or e-mail as promptly as practicable, and in any event, within twenty-four (24) hours, after any Registration Statement is declared effective and shall simultaneously provide the Investors with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby.
(ii)    For not more than ten (10) consecutive days or for a total of not more than fifteen (15) days in any twelve (12) month period (“Grace Period”), the Company may suspend the use of any Prospectus included in any Registration Statement contemplated by this Section in the event that the Company determines in good faith that such suspension is necessary to (A) delay the disclosure of material non-public information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company or (B) amend or supplement the affected Registration Statement or the related Prospectus so that such Registration Statement or Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus in light of the circumstances under which they were made, not misleading (an “Allowed Delay”); provided, that the Company shall promptly (a) notify each Investor in writing of the commencement of an Allowed Delay, but shall not (without the prior written consent of an Investor) disclose to such Investor any material non-public information giving rise to an Allowed Delay, (b) advise the Investors in writing to cease all sales under such Registration Statement until the end of the Allowed Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay as promptly as practicable.
(d)    Liquidated Damages. If: (i) the Registration Statement is not filed on or prior to the Filing Deadline, or (ii) the Company fails to file with the SEC a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the SEC pursuant to the 1933 Act, within five Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the SEC in respect of such Registration Statement within ten (10) calendar days after the receipt of comments by or notice from the SEC that such amendment is required in order for such Registration Statement to be declared effective, or (iv) a Registration Statement registering for resale all of the Registrable Securities is not declared effective by the SEC by the Effectiveness Deadline, or (v) after the Qualification Date, the applicable Grace Periods are exceeded (any such failure or breach being referred to as an “Event”, and for purposes of clauses (i) and (iv), the date on which such Event occurs, and for


3

Exhibit 10.2

purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded, and for purpose of clause (iii) the date which such ten (10) calendar day period is exceeded, and for purpose of clause (v) the date on which the Grace Periods, as applicable, is exceeded being referred to as “Event Date”), then, in addition to any other rights the Investors may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Investor an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 1.5% multiplied by the aggregate Subscription Amount paid by such Investor pursuant to the Purchase Agreement. If the Company fails to pay any partial liquidated damages pursuant to this Section 2(d) in full within seven days after the date payable, the Company will pay interest thereon at a rate of 15% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Investor, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event.
(e)    Rule 415; Cutback. If at any time the SEC takes the position that the offering of some or all of the Registrable Securities in a Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the 1933 Act or requires any Investor to be named as an “underwriter,” the Company shall use commercially reasonable efforts to persuade the SEC that the offering contemplated by such Registration Statement is a valid secondary offering and not an offering “by or on behalf of the issuer” as defined in Rule 415 and that none of the Investors is an “underwriter.” The Investors shall have the right to select one legal counsel to review and oversee any registration or matters pursuant to this Section 2(e), including participation in any meetings or discussions with the SEC regarding the SEC’s position and to comment on any written submission made to the SEC with respect thereto, which counsel shall be designated by the holders of a majority of the Registrable Securities. No such written submission with respect to this matter shall be made to the SEC to which the Investors’ counsel reasonably objects. In the event that, despite the Company’s commercially reasonable efforts and compliance with the terms of this Section 2(e), the SEC refuses to alter its position, the Company shall (i) subject to the payment of liquidated damages hereunder, remove from such Registration Statement such portion of the Registrable Securities (the “Cut Back Shares”) and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the SEC may require to assure the Company’s compliance with the requirements of Rule 415 (collectively, the “SEC Restrictions”); provided, however, that the Company shall not agree to name any Investor as an “underwriter” in such Registration Statement without the prior written consent of such Investor. Subject to the payment of liquidated damages, any cut-back imposed on the Investors pursuant to this Section 2(e) shall be allocated as follows, unless the SEC Restrictions otherwise require or provide or the Investors otherwise agree:
(i)    First, the Company shall reduce or eliminate any securities to be included other than Registrable Securities;


4

Exhibit 10.2

(ii)    Second, the Company shall reduce Registrable Securities represented by Conversion Warrant Shares (applied, in the case that some Conversion Warrant Shares may be registered, to the Investors on a pro rata basis based on the total number of unregistered Conversion Warrant Shares held by such Investors); and
(iii)    Third, the Company shall reduce Registrable Securities represented by Conversion Shares (applied, in the case that some Conversion Shares may be registered, to the Investors on a pro rata basis based on the total number of unregistered Conversion Shares held by such Investors).
In the event of a cutback hereunder, the Company shall give the Investor at least five (5) Trading Days prior written notice along with the calculations as to such Investor’s allotment. If the Company has not effected the registration of all of the Cut Back Shares as of the first anniversary of the Closing Date, the Company will remove from any Registration Statement that has been filed but not yet declared effective any Cut Back Shares that have ceased to be Registrable Securities and thereafter only file Registration Statements that cover Cut Back Shares that are Registrable Securities.
3.    Company Obligations. The Company will use commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible:
(a)    use commercially reasonable efforts to cause such Registration Statement to become effective and to remain continuously effective for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities covered by such Registration Statement as amended from time to time, have been sold, and (ii) the date on which all Registrable Securities covered by such Registration Statement may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act (the “Effectiveness Period”) and advise the Investors promptly in writing when the Effectiveness Period has expired;
(b)    prepare and file with the SEC such amendments and post-effective amendments to such Registration Statement and the related Prospectus as may be necessary to keep such Registration Statement effective for the Effectiveness Period and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all of the Registrable Securities covered thereby;
(c)    provide copies to and permit any counsel designated by the Investors to review each Registration Statement and all amendments and supplements thereto no fewer than three (3) Business Days prior to their filing with the SEC and not file any document to which such counsel reasonably objects;
(d)    furnish to each Investor whose Registrable Securities are included in any Registration Statement (i) promptly after the same is prepared and filed with the SEC, if requested by the Investor, one (1) copy of any Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto,


5

Exhibit 10.2

and each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as each Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor that are covered by such Registration Statement;
(e)    use commercially reasonable efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such order at the earliest practical moment;
(f)    prior to any public offering of Registrable Securities, use commercially reasonable efforts to register or qualify or cooperate with the Investors and their counsel in connection with the registration or qualification of such Registrable Securities for the offer and sale under the securities or blue sky laws of such jurisdictions requested by the Investors and do any and all other commercially reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(f), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 3(f), or (iii) file a general consent to service of process in any such jurisdiction;
(g)    use commercially reasonable efforts to cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed;
(h)    use its commercially reasonable efforts to facilitate an underwritten block trade if a Major Investor notifies the Company in writing of such underwritten block trade at least five Business Days prior to the date that such block trade is to commence;
(i)    promptly notify the Investors, at any time prior to the end of the Effectiveness Period, upon discovery that, or upon the happening of any event as a result of which, the Prospectus includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare, file with the SEC and furnish to such holder a supplement to or an amendment of such Prospectus as may be necessary so that such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;
(j)    otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, including,


6

Exhibit 10.2

without limitation, Rule 172 under the 1933 Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC pursuant to Rule 424 under the 1933 Act, promptly inform the Investors in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Investors are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder; and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the purpose of this subsection 3(i), “Availability Date” means the 45th day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the 90th day after the end of such fourth fiscal quarter); and
(k)    with a view to making available to the Investors the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the SEC that may at any time permit the Investors to sell shares of Common Stock to the public without registration, the Company covenants and agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) six months after such date as all of the Registrable Securities may be sold without restriction by the holders thereof pursuant to Rule 144 or any other rule of similar effect or (B) such date as all of the Registrable Securities shall have been resold; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act; and (iii) furnish to each Investor upon request, as long as such Investor owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in order to avail such Investor of any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration.
4.    Due Diligence Review; Information. The Company shall, upon reasonable prior notice, make available, during normal business hours, for inspection and review by the Investors, advisors to and representatives of the Investors (who may or may not be affiliated with the Investors and who are reasonably acceptable to the Company) (collectively, the “Inspectors”), all pertinent financial and other records, and all other corporate documents and properties of the Company (collectively, the “Records”) as may be reasonably necessary for the purpose of such review, and cause the Company’s officers, directors and employees, within a reasonable time period, to supply all such information reasonably requested by the Inspectors (including, without limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to time after the filing and effectiveness of such Registration Statement for the sole purpose of enabling the Investors and their accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company and the accuracy of such Registration Statement; provided, however, that each Inspector shall agree to


7

Exhibit 10.2

hold in strict confidence and shall not make any disclosure (except to such Investor) or use of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this Section 4 or any other Transaction Document.
Notwithstanding the foregoing, the Company shall not disclose material nonpublic information to the Investors, or to advisors to or representatives of the Investors, unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides the Investors, such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic information for review and any Investor wishing to obtain such information enters into an appropriate confidentiality agreement with the Company with respect thereto.
5.    Obligations of the Investors.
(a)    Each Investor shall furnish in writing to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. At least ten (10) Business Days prior to the first anticipated filing date of any Registration Statement, the Company shall notify each Investor of the information the Company requires from such Investor if such Investor elects to have any of the Registrable Securities included in such Registration Statement. An Investor shall provide such information to the Company at least two (2) Business Days prior to the first anticipated filing date of such Registration Statement if such Investor elects to have any of the Registrable Securities included in such Registration Statement.
(b)    Each Investor, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Investor has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement.
(c)    Each Investor agrees that, upon receipt of any notice from the Company of either (i) the commencement of an Allowed Delay pursuant to Section 2(c)(i) or (ii) the happening of an event pursuant to Section 3(h) hereof, such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement covering such Registrable Securities, until the Investor is advised by the Company that such dispositions may again be made.


8

Exhibit 10.2

(d)    Each Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with sales of Registrable Securities pursuant to any Registration Statement.
6.    Indemnification.
(a)    Indemnification by the Company. The Company will indemnify and hold harmless each Investor and its officers, directors, members, employees and agents, successors and assigns, and each other person, if any, who controls such Investor within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement or omission or alleged omission of any material fact contained in any Registration Statement, any preliminary Prospectus or final Prospectus, or any amendment or supplement thereof; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a “Blue Sky Application”); (iii) the omission or alleged omission to state in a Blue Sky Application a material fact required to be stated therein or necessary to make the statements therein not misleading; (iv) any violation by the Company or its agents of any rule or regulation promulgated under the 1933 Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration; or (v) any failure to register or qualify the Registrable Securities included in any such Registration Statement in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company will undertake such registration or qualification on an Investor’s behalf and will reimburse such Investor, and each such officer, director or member and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Investor or any such controlling person in writing specifically for use in such Registration Statement or Prospectus, (ii) the use by an Investor of an outdated or defective Prospectus after the Company has notified such Investor in writing that such Prospectus is outdated or defective or (iii) an Investor’s failure to send or give a copy of the Prospectus or supplement (as then amended or supplemented), if required (and not exempted) to the Persons asserting an untrue statement or omission or alleged untrue statement or omission at or prior to the written confirmation of the sale of Registrable Securities.
(b)    Indemnification by the Investors. Each Investor agrees, severally but not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from any untrue statement of a material fact or any


9

Exhibit 10.2

omission of a material fact required to be stated in any Registration Statement or Prospectus or preliminary Prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent that such untrue statement or omission is contained in any information furnished in writing by such Investor to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto. In no event shall the liability of an Investor be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Investor in connection with any claim relating to this Section 6 and the amount of any damages such Investor has otherwise been required to pay by reason of such untrue statement or omission) received by such Investor upon the sale of the Registrable Securities included in such Registration Statement giving rise to such indemnification obligation.
(c)    Conduct of Indemnification Proceedings. Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses, (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided, further, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying party will, except with the consent of the indemnified party, which shall not be unreasonably withheld or conditioned, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.
(d)    Contribution. If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation. In no


10

Exhibit 10.2

event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim relating to this Section 6 and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.
7.    Miscellaneous.
(a)    Effective Date. This Agreement shall be effective as of the Closing, and if the Closing has not occurred on or prior to fifth Trading Day following the date of the Securities Purchase Agreement, unless otherwise mutually agreed, then this Agreement shall be null and void.
(b)    Amendments and Waivers. This Agreement may be amended only by a writing signed by the Company and the Required Investors. The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Required Investors. Notwithstanding the foregoing, this Agreement may not be amended and the observance of any term of this Agreement may not be waived with respect to any Investor without the written consent of such Investor unless such amendment or waiver applies to all Investors in the same fashion.
(c)    Notices. All notices and other communications provided for or permitted hereunder shall be made as set forth in Section 9.4 of the Purchase Agreement.
(d)    Assignments and Transfers by Investors. The provisions of this Agreement shall be binding upon and inure to the benefit of the Investors and their respective successors and assigns. An Investor may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in connection with the transfer of Registrable Securities by such Investor to such person, provided that such Investor complies with all laws applicable thereto, and the provisions of the Purchase Agreement, and provides written notice of assignment to the Company promptly after such assignment is effected, and such person agrees in writing to be bound by all of the provisions contained herein.
(e)    Assignments and Transfers by the Company. This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of the Required Investors, provided, however, that in the event that the Company is a party to a merger, consolidation, share exchange or similar business combination transaction in which the Common Stock is converted into the equity securities of another Person, from and after the effective time of such transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, the term “Company” shall be deemed to refer to such Person and the term “Registrable Securities” shall be deemed to include the securities received by the Investors in connection with such transaction unless such securities are otherwise freely tradable by the Investors after giving effect to such transaction.


11

Exhibit 10.2

(f)    Benefits of the Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
(g)    Counterparts; Faxes. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original.
(h)    Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
(i)    Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect.
(j)    Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.
(k)    Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.
(l)    Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or


12

Exhibit 10.2

proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

[remainder of page intentionally left blank]



13

Exhibit 10.2


IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

COMPANY:
INNOVATE BIOPHARMACEUTICALS, INC.

 
By:
______________________________
 
 
Name: Edward J. Sitar
 
 
Title: Chief Financial Officer


Company Signature Page to the Innovate Biopharmaceuticals, Inc. Registration Rights Agreement


Exhibit 10.2

INVESTOR:
 

By:
 
 
 
Name:
Title:

 
 
 


Investor Signature Page to the Innovate Biopharmaceuticals, Inc. Registration Rights Agreement

Exhibit 10.2

Exhibit A
Plan of Distribution
The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.
The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
an exchange distribution in accordance with the rules of the applicable exchange;
privately negotiated transactions;
short sales effected after the date the registration statement of which this prospectus is a part is declared effective by the SEC;
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
a combination of any such methods of sale; and
any other method permitted by applicable law.
The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this



Exhibit 10.2

prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering. Upon any exercise of the warrants by payment of cash, however, we will receive the exercise price of the warrants.
The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.
The selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling stockholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.
To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has been registered or



Exhibit 10.2

qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. In addition, to the extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.
We have agreed to indemnify the selling stockholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus.
We have agreed with the selling stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with such registration statement or (2) the date on which all of the shares may be sold without restriction pursuant to Rule 144 of the Securities Act.




Exhibit 10.3

FORM OF STOCKHOLDER SUPPORT AGREEMENT
This Stockholder Support Agreement (this “Agreement”), dated as of April 29, 2020, is by and between Innovate Biopharmaceuticals, Inc., a Delaware corporation (“Parent”), RDD Pharma, Ltd., an Israel corporation (the “Company”) and the undersigned (“Stockholder”).
A.
Parent, the Company and Innovate MergerSub, Inc., a company organized under the laws of Israel and a direct, wholly-owned subsidiary of Parent (“Merger Sub”) are have entered into an Agreement and Plan of Merger and Reorganization (as may be amended from time to time, the “Merger Agreement”), dated as of October 6, 2019, as amended on December 17, 2020, pursuant to which, among other things, the Merger Sub is to merge with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent (the “Merger”).

B.
Pursuant to the Merger Agreement closing condition of financing commitments of at least $10,000,000 (the “Financing”), Innovate is entering into Securities Purchase Agreements (the “Purchase Agreements”) with investors to sell shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Preferred Stock”), each share convertible into shares of Parent common stock, par value $0.0001 per share (the “Parent Common Stock”), and warrants to purchase Preferred Stock.

C.
As of the date hereof, Stockholder is the Beneficial Owner (as defined below) of and has the sole power to vote (or to direct the voting of) that number of Parent Common Stock as set forth beside Stockholder’s name on Schedule A hereto.

D.
Pursuant to the Purchase Agreements, the Parent has also agreed to seek approval by its stockholders of the conversion into Common Stock of the Company of all the outstanding shares of Preferred Stock (the “Preferred Conversion”).

E.
In order to facilitate the Preferred Conversion and the consummation of the Merger, the Stockholder, solely in Securityholder’s capacity as Beneficial Owner of the Subject Shares (as defined below), has entered into this Agreement and agrees to be bound hereby.

Accordingly, and in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
VOTING AGREEMENT
1.1
Agreement to Vote.

(a) From the date of this Agreement until the Expiration Date (as defined below), Stockholder will appear at any meeting of stockholders, or otherwise cause any Subject Shares to be counted as present thereat for purposes of calculating a quorum, and vote (or direct the vote of) all of its Subject Shares to [(i)] approve the issuance of shares of Parent Common Stock to the stockholders of the Company upon conversion of the Parent Preferred Stock Payment Shares in accordance with the terms of the Series A Certificate of Designation[; and (ii) approve an amendment to Parent’s 2012 Omnibus Incentive Plan to increase the shares reserved for issuance thereunder]. The matters contemplated by the Sections 1.1(a)[(i) – (ii)] are referred to as the “Parent Stockholder Matters.”
 
(b) Stockholder will not enter into any agreement with any Person (other than Parent) prior to the Expiration Date directly or indirectly to vote, grant any proxy or give instructions with respect to the voting of, the Subject Shares, the effect of which would be inconsistent with or violate any provision contained in this Section 1.1.

 
1
 
 
 
 


Exhibit 10.3

Any vote (or withholding of a vote or otherwise abstaining from voting) by Stockholder that is not in accordance with this Section 1.1 will be considered null and void.

(c) Notwithstanding anything in this Section 1 to the contrary, (i) Stockholder shall not be required to vote (or cause to be voted) any of its Subject Shares to amend the terms of the Parent Convertible Preferred Stock (an “Adverse Amendment”) and (ii) Stockholder shall remain free to vote (or execute proxies with respect to) the Subject Shares with respect to any matter not covered by this Section 1.1 in any manner Stockholder deems appropriate.
1.2 Revocation of Proxies. Stockholder hereby represents and warrants that any proxies heretofore given in respect of the Subject Shares are not irrevocable, and Stockholder hereby revokes any and all prior proxies with respect to the Subject Shares. Prior to the Expiration Date, Stockholder will not directly or indirectly grant any proxies or powers of attorney (other than to Parent), deposit any of the Subject Shares into a voting trust or enter into a voting agreement (other than this Agreement) with respect to any of the Subject Shares.
ARTICLE 2
DEFINITIONS
Capitalized terms used for purposes of this Agreement:
Affiliate” means, with respect to any specified Person, a Person who, at the time of determination, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person. For purposes of this Agreement, with respect to Stockholder, “Affiliate” does not include Parent and the Persons that directly or indirectly through one or more intermediaries are controlled by Parent.

Beneficially Owned” or “Beneficial Ownership” with respect to any securities means having beneficial ownership of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act of 1934, as amended, disregarding the phrase “within 60 days” in paragraph (d)(1)(i) thereof), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities, securities Beneficially Owned by a Person include securities Beneficially Owned by (i) all Affiliates of such Person, and (ii) all other Persons with whom such Person would constitute a “group” within the meaning of Section 13(d) of the Exchange Act and the rules promulgated thereunder.
Beneficial Owner” with respect to any securities means a Person that has Beneficial Ownership of such securities.
Series A Certificate of Designation” means Parent’s Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, in substantially the same form as attached hereto as Exhibit B.
Subject Shares” means, with respect to Stockholder, the shares of Parent Common Stock Beneficially Owned by the Stockholder on the date of any Parent Stockholders’ Meeting (as defined herein), which as of the date hereof, are reflected on Exhibit A and entitled to vote on the date of any Parent Stockholders’ Meeting.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF STOCKHOLDER
The Stockholder represents, warrants and covenants to Parent that:
3.1 Ownership. Stockholder is the sole Beneficial Owner and the record and legal owner of the Parent Common Stock identified on Exhibit A (subject, in the case of exercised options and warrants, to Parent’s valid issuance thereof) and such shares constitute all of the capital stock of Parent that are Beneficially Owned by

 
2
 
 
 
 


Exhibit 10.3

Stockholder. Subject, in the case of exercised options and warrants, to Parent’s valid issuance thereof, Stockholder has good and valid title to all of the Parent Common Stock, free and clear of all liens, claims, options, proxies, voting agreements and security interests and has the sole right to such Parent Common Stock and there are no restrictions on rights of disposition or other liens or encumbrances pertaining to such Parent Common Stock (other than pursuant to this Agreement and compliance with applicable securities laws) that could adversely affect the exercise or fulfillment of the rights and obligations of Stockholder under this Agreement. None of the Parent Common Stock is subject to any voting trust or other contract with respect to the voting thereof, and no proxy, power of attorney or other authorization has been granted with respect to any of such Parent Common Stock
3.2 Authority and Non-Contravention.
(a) Stockholder is a natural person, corporation, limited partnership or limited liability company, duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, organized or constituted. Stockholder has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Stockholder and the consummation by Stockholder of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, if any, and no other corporate proceedings on the part of Stockholder are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by Stockholder and constitutes the legal, valid and binding obligation of Stockholder, enforceable against Stockholder in accordance with its terms except (i) to the extent limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(c) Stockholder is not, nor will it be, required to make any filing with or give any notice to, or to obtain any consent from, any Person in connection with the execution, delivery or performance of this Agreement or obtain any permit or approval from any government authority for any of the transactions contemplated hereby, except to the extent required by Section 13 or Section 16 of the Exchange Act and the rules promulgated thereunder.
(d) Neither the execution and delivery of this Agreement by Stockholder nor the consummation of the transactions contemplated hereby will directly or indirectly (whether with notice or lapse of time or both) (i) conflict with, result in any violation of or constitute a default by Stockholder under any mortgage, bond, indenture, agreement, instrument or obligation to which Stockholder is a party or by which it or any of the Parent Common Stock are bound, or violate any permit of any government authority, or any applicable law or order to which Stockholder, or any of the Parent Common Stock, may be subject, or (ii) result in the imposition or creation of any lien or encumbrance upon or with respect to any of the Parent Common Stock; except, in each case, for conflicts, violations, defaults or liens or encumbrances that would not individually or in the aggregate be reasonably expected to prevent or materially impair or delay the performance by the Stockholder of its obligations hereunder.
(e) Stockholder has requisite voting power and requisite power to issue instructions with respect to the matters set forth in Article 1 hereof and requisite power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Parent Common Stock, with no limitations, qualifications or restrictions on such rights, in each case, to the extent permitted by applicable law.
3.3 Total Shares. Except as set forth on Exhibit A, Stockholder is not the Beneficial Owner of, and does not have (whether currently, upon lapse of time, following the satisfaction of any conditions, upon the occurrence of any event or any combination of the foregoing) any right to acquire, and has no other interest in or voting rights with respect to, any Parent Common Stock or any securities convertible into or exchangeable or exercisable for Parent Common Stock.
3.4 No Litigation. As of the date of this Agreement, there is no Legal Proceeding pending or, to the knowledge of the Stockholder, threatened against the Stockholder that would reasonably be expected to impair the ability of the Stockholder to perform its obligations hereunder or consummate the transactions contemplated hereby
ARTICLE 4

 
3
 
 
 
 


Exhibit 10.3

REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT
4.1 Certain Representations, Warranties and Covenants of Parent
Parent represents, warrants and covenants to Stockholder that this Agreement constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) to the extent limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. Parent has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Parent of this Agreement and the consummation by Parent of the transactions contemplated hereby have been duly and validly authorized by Parent and no other corporate proceedings on the part of Parent are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent.
4.2 Parent Stockholders’ Meeting
(a) As promptly as practicable following the date hereof, Parent shall take all action necessary under applicable Law to call and give notice of a meeting of the holders of Parent Common Stock for the purpose of seeking approval of the Parent Stockholder Matters (the “Parent Stockholders’ Meeting”).
(b) Parent agrees to use reasonable best efforts to call and hold the Parent Stockholders’ Meeting in accordance with the deadline as set forth in Section 7.8 of the Purchase Agreement. If, despite the Company’s reasonable best efforts, the Stockholder Approval is not obtained after such stockholder meeting, the Company shall cause an additional Stockholder Meeting to be held semi-annually thereafter until such Stockholder Approval is obtained.
ARTICLE 5
TERM AND TERMINATION
This Agreement will become effective as of the date hereof. This Agreement will terminate upon the earlier to occur of (i) the approval of the Parent Stockholder Matters, (ii)  the date of termination or closing of the Financing, or (iii) the mutual agreement of Parent, Company and Stockholder to terminate this Agreement (any such date under clauses (i) through (ii) being referred to herein as the “Expiration Date”). The parties acknowledge that upon termination of this Agreement as permitted under and in accordance with the terms of this Article 5, no party to this Agreement shall have the right to recover any claim with respect to any losses suffered by such party in connection with such termination, except that the termination of this Agreement will not relieve Stockholder from any liability for any inaccuracy in or breach of any representation, warranty or covenant contained in this Agreement. Notwithstanding anything to the contrary herein, Article 6 of this Agreement will survive any termination of this Agreement.
ARTICLE 6
GENERAL PROVISIONS
6.1 Action in Stockholder Capacity Only. Stockholder is entering into this Agreement solely in Stockholder’s capacity as a record holder and Beneficial Owner, as applicable, of the Parent Common Stock and not in Stockholder’s capacity as a director or officer of the Company. Nothing herein will limit or affect Stockholder’s ability to act as an officer or director of the Company.
6.2 No Ownership Interest. Nothing contained in this Agreement will be deemed to vest in Parent or any of its Affiliates any direct or indirect ownership or incidents of ownership of or with respect to the Subject Shares.

6.3 Notices. All notices and other communications hereunder must be in writing and will be deemed given if delivered personally or by commercial messenger or courier service, or mailed by registered or certified mail (return receipt requested) or sent via facsimile (with acknowledgment of complete transmission) or e-mail to the parties at

 
4
 
 
 
 


Exhibit 10.3

the following addresses (or at such other address for a party as specified by like notice or, if specifically provided for elsewhere in this Agreement, by email); providedhowever, that notices sent by mail will not be deemed given until as follows:
if to Parent or Merger Sub, to
 
Innovate Biopharmaceuticals, Inc.
8480 Honeycutt Road, Suite 120
Raleigh, NC 27615
Attention: Ed Sitar, Chief Financial Officer
Email: esitar@innovatebiopharma.com
with a copy to (which shall not constitute notice) to:
 
Sheppard Mullin Richter & Hampton LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: Jeffrey Fessler, Esq.
Email: jfessler@sheppardmullin.com

if to the Company:
RDD Pharma LTD.
31 Habarzel St.
Tel Aviv 69710 Israel
Telephone: (919) 522-6092
Attention: John Temperato
Email: jtemperato@rddpharma.com
with copies (which shall not constitute notice) to:
Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail, Suite 300
Raleigh, NC 27607
Telephone: 919-781-4000
Attention: Donald R. Reynolds, Esq.
Email: Dreynolds@wyrick.com

If to Stockholder, to Stockholder’s address set forth on Exhibit A.
6.4 Publicity. Unless required by applicable law or permitted by the Merger Agreement, Stockholder will not, and will not authorize or direct any of its Affiliates or representatives to, make any press release or public announcement with respect to this Agreement or the Merger Agreement or the transactions contemplated hereby or thereby, without the prior written consent of Parent in each instance.
6.5 Further Actions. Upon the request of any party to this Agreement, the other party will (a) furnish to the requesting party any additional information, (b) execute and deliver, at their own expense, any other documents and (c) take any other actions as the requesting party may reasonably require to more effectively carry out the intent of this Agreement. Stockholder hereby agrees that Parent may publish and disclose in any filing made by Parent with the SEC, the Nasdaq Stock Market or other applicable regulatory authority, the Stockholder’s identity and ownership

 
5
 
 
 
 


Exhibit 10.3

of any Parent Common Stock and the nature of such Stockholder’s commitments, arrangements, and understandings under this Agreement and may further file this Agreement as an exhibit to any other filing made by Parent with the SEC. Stockholder agrees to (x) provide any information reasonably requested by Parent for any such regulatory application or filing and (y) notify Parent promptly of any additional shares of capital stock of Parent of which Stockholder becomes the record holder or Beneficial Owner after the date of this Agreement.
6.6 Entire Agreement and Modification. This Agreement, and any other documents delivered by the parties in connection herewith constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, between the parties with respect to its subject matter and constitute (along with the documents delivered pursuant to this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended, supplemented or otherwise modified except by a written document executed by the party against whose interest the modification will operate. The parties will not enter into any other agreement inconsistent with the terms and conditions of this Agreement, or that addresses any of the subject matters addressed in this Agreement.

6.7 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without affecting the validity or enforceability of the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision will be interpreted to be only so broad as is enforceable.
6.8 No Third-Party Rights. Stockholder may not assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of Parent. This Agreement will apply to, be binding in all respects upon, and inure to the benefit of each of the respective successors, personal or legal representatives, heirs, distributes, devisees, legatees, executors, administrators and permitted assigns of Stockholder and the successors and permitted assigns of Parent. Nothing expressed or referred to in this Agreement will be construed to give any Person, other than the parties to this Agreement, any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement except such rights as may inure to a successor or permitted assignee under this Section 6.8.
6.9 Enforcement of Agreement. Stockholder acknowledges and agrees that Parent could be damaged irreparably if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by Stockholder could not be adequately compensated by monetary damages. Accordingly, Stockholder agrees that, (a) it will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (b) in addition to any other right or remedy to which Parent may be entitled, at law or in equity, Parent will be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.
6.10 Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither any failure nor any delay by a party in exercising any right, power or privilege under this Agreement, or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement, or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in a written document signed by the other party, (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement, or the documents referred to in this Agreement.

6.11 Governing Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of

 
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Exhibit 10.3

conflicts of laws. In any action or proceeding between any of the parties arising out of or relating to this Agreement, the Merger or any of the Contemplated Transactions, 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 clause (a) of this Section 6.11; (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 6.3 of this Agreement; and (f) irrevocably and unconditionally waives the right to trial by jury.
6.12 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which, taken together, will constitute one and the same instrument. This Agreement may be executed by facsimile signature (including signatures in Adobe PDF or similar format).
6.13 Expenses. Except as otherwise provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such expenses.
6.14 Interpretation and Construction. When a reference is made in this Agreement to a Section, such reference is to a Section of this Agreement, unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” and “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation.” The words “hereof, “herein” and “hereunder” and words of similar import when used in this Agreement will refer to this Agreement as a whole and not to any particular provision of this Agreement. The word “will” shall be construed to have the same meaning as the word “shall.” The words “dates hereof” will refer to the date of this Agreement. The word “or” is used in the inclusive sense of “and/or.” The terms “or,” “any” and “either” are not exclusive. When used herein, the words “to the extent” shall be deemed to be followed by the words “but only to the extent.” The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms. Any agreement, instrument, law, rule or statute defined or referred to herein means, unless otherwise indicated, such agreement, instrument, law, rule or statute as from time to time amended, modified or supplemented. Each of the parties hereto acknowledges that it has been represented by counsel of its choice throughout all negotiations that have preceded the execution of this Agreement, and that it has executed the same with the advice of said independent counsel. Each party cooperated and participated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto exchanged among the parties will be deemed the work product of all of the parties and may not be construed against any party by reason of its drafting or preparation. Accordingly, any rule of law or any legal decision that would require interpretation of any ambiguities in this Agreement against any party that drafted or prepared it is of no application and is hereby expressly waived by each of the parties hereto, and any controversy over interpretations of this Agreement will be decided without regards to events of drafting or preparation.

 
7
 
 
 
 


Exhibit 10.3




IN WITNESS WHEREOF, the parties hereto have caused this Stockholder Support Agreement to be duly executed as of the day and year first above written.
 
 
 
 
 
PARENT:
 
INNOVATE BIOPHARMACEUTICALS, INC.
 
 
 
 
 
By:
 
 
 
 
Name:
 
 
 
Title:
 
 
COMPANY:
 
RDD PHARMA, LTD.
 
 
 
 
 
By:
 
 
 
 
Name:
 
 
 
Title:


 
8
 
 
 
 


Exhibit 10.3



 
 
 
 
 
STOCKHOLDER:
 
[ENTITY NAME]
 
 
 
 
 
By:
 
 
 
 
 
 
Name:
Title:
 
 
 
 
[NATURAL PERSON NAME]
 
 
 
 
 
 
 
 
 
Additional Signature (if held jointly):
 
 
 
 
 
 
 
(If held jointly)
 
 
 
 
 
 
 
(Printed Full Name)


 
9
 
 
 
 


Exhibit 10.3


EXHIBIT A
 
 
 
 
NAME AND
 
PARENT COMMON STOCK
ADDRESS OF STOCKHOLDER
 
BENEFICIALLY OWNED
[Name]
 
[•] shares of common stock
[Address 1]
 
 
[Address 2]
 
 
[E-mail]
 
 


 
10
 
 
 
 


Exhibit 10.3


EXHIBIT B

Series A Convertible Preferred Stock Certificate of Designation

 
11
 
 
 
 

Sandeep Laumas, MD         Exhibit 10.4
Execution Copy

SEPARATION AND GENERAL RELEASE AGREEMENT

This SEPARATION AND GENERAL RELEASE AGREEMENT (the “Agreement”) is made and entered into this 30th day of April, 2020, between Innovate Biopharmaceuticals, Inc. (name to change to 9 Meters Biopharma, Inc., immediately after the Closing (as defined below)), a Delaware corporation (the “Company”), and Sandeep Laumas, MD (“Executive”). Throughout the remainder of the Agreement, the Company and Executive may be collectively referred to as “the parties.”

Executive was employed as the Chief Executive Officer of the Company pursuant to an Amended and Restated Employment Agreement, dated March 11, 2018, as amended on February 18, 2019 (collectively, the “Employment Agreement”). Executive is also a party to a Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement with the Company, dated March 11, 2018 (the “Proprietary Information Agreement”).

The Company entered into a Plan of Merger and Reorganization with RDD Pharma Ltd., a company organized under the laws of Israel (“RDD”), among others (as amended on December 17, 2019, the “Merger Agreement”). The transaction contemplated by the Merger Agreement (the “Merger”) is anticipated to close in the near future (the “Closing”), with the Company being the surviving entity.  

Executive wishes to resign from his employment, effective on the Closing, under the terms set forth in this Agreement. The parties wish to provide for the payment of severance benefits to Executive under his Employment Agreement as set forth in this Agreement.

Executive represents that Executive has carefully read this entire Agreement, understands its consequences, and voluntarily enters into it.
NOW THEREFORE, in consideration of the above and the mutual promises set forth below, Executive and the Company agree as follows:
1.SEPARATION. Executive’s employment with the Company will terminate as of the Closing (the “Separation Date”). Executive will be paid all accrued unused vacation on the first regularly scheduled payroll date which occurs at least five (5) days after the Separation Date. Executive waives any required notice under his Employment Agreement.

2.SEPARATION BENEFITS. In consideration of the release of claims and other promises contained herein, and on the condition that Executive fully complies with Executive’s obligations under this Agreement and the Proprietary Information Agreement, the Company will provide Executive with the following:

(a)    Severance Compensation. Pursuant to Section 5(c)(ii)(1) of the Employment Agreement, the Company shall pay to Executive Two Hundred Seventy Five Thousand and 00/100 Dollars ($275,000) (less applicable withholdings) (“Severance Pay”), payable in equal installments over a twelve (12) month period in accordance with the Company’s current payroll schedule




commencing on the Company’s first regularly scheduled pay date following the Effective Date of this Agreement under Section 8, and subject to Section 16(c).

(b)    Benefits. Pursuant to Section 5(c)(ii)(2) of the Employment Agreement, conditioned on Executive’s eligibility for, and Executive’s proper and timely election to continue health insurance benefits under COBRA, or under any state law equivalent, after the Separation Date, reimbursement of the additional costs actually incurred by Executive for continuing health benefits (which, for purposes of clarity, shall include reimbursement for the employer’s portion of the premium for continuation of continuation of health insurance benefits as well as applicable administrative fee) at the same level in which Executive participated prior to the Separation Date for the shorter of (i) twelve (12) months following the Separation Date or (ii) until Executive obtains reasonably comparable coverage, with such reimbursements to commence on the first regular payroll date following the Effective Date of this Agreement under Section 8, and subject to Section 16(c). Such reimbursements are subject to Executive providing appropriate proof of the costs for such premiums.

(c)    Other Benefits. As of the Separation Date, Executive shall not be entitled to medical, dental, vision, life, disability, accidental death and dismemberment insurance benefits, or any other employee benefits, and shall not be an active participant in the Company’s 401(k) Plan (the “401(k) Plan”) or any other plan of any type. For the avoidance of doubt, Executive will not be eligible to contribute to Executive’s 401(k) plan from any payments received under this Agreement after the Separation Date, except for Executive’s regular salary paid through the Separation Date. Nothing in this Agreement, however, shall be deemed to limit Executive’s continuation coverage rights under COBRA or under any state law equivalent, or Executive’s vested rights, if any, under the 401(k) Plan or any other Company plan and the terms of those plans shall govern. The parties acknowledge that Executive was issued certain options to purchase the Company’s stock pursuant to certain awards under the Company’s 2015 Stock Incentive Plan (the “2015 Plan”) and various award agreements thereunder (the “Award Agreements”), and the terms of those plans and Award Agreements shall govern.

3.PROPRIETARY INFORMATION AGREEMENT. Executive is subject to the Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement, dated March 11, 2018 (the “Proprietary Information Agreement”). Executive acknowledges and agrees that Executive will continue to be bound by and subject to the Proprietary Information Agreement, in accordance with its terms, and that Executive will forfeit all benefits under this Agreement should Executive breach such Proprietary Information Agreement. Pursuant to Section 7 of the Proprietary Information Agreement, Executive acknowledges that he has returned all Company property to the Company as of the Separation Date.

4.COOPERATION. Executive agrees that Executive will assist and cooperate with the Company in connection with the defense or prosecution of any claim that may be made against or by the Company, or in connection with any ongoing or future investigation or dispute or claim of any kind involving the Company, including any proceeding before any arbitral, administrative, judicial, legislative, or other body or agency, including testifying in any proceeding to the extent such claims, investigations or proceedings relating to services performed or required to be performed

2



by Executive, pertinent knowledge possessed by Executive, or any act or omission by Executive. Executive further agrees to perform all acts and execute and deliver any documents that may be reasonably necessary to carry out the provisions of this Section 4. The Company shall reimburse Executive for reasonable expenses incurred in connection with such cooperation.

5.RELEASE. IN CONSIDERATION OF THE BENEFITS CONFERRED BY THIS AGREEMENT, EXECUTIVE (ON BEHALF OF HIMSELF AND HIS FAMILY MEMBERS, HEIRS, ASSIGNS, EXECUTORS AND OTHER REPRESENTATIVES), RELEASES THE COMPANY AND ITS PAST, PRESENT AND FUTURE PARENTS, SUBSIDIARIES, AFFILIATES, AND ITS AND/OR THEIR PREDECESSORS, SUCCESSORS, ASSIGNS, AND ITS AND/OR THEIR PAST, PRESENT AND FUTURE OFFICERS, DIRECTORS, EXECUTIVES, OWNERS, INVESTORS, STOCKHOLDERS, ADMINISTRATORS, BUSINESS UNITS, ENEFIT PLANS (TOGETHER WITH ALL PLAN ADMINISTRATORS, TRUSTEES, FIDUCIARIES AND INSURERS) AND AGENTS (COLLECTIVELY, “RELEASEES”) FROM ALL CLAIMS AND WAIVES ALL RIGHTS, KNOWN OR UNKNOWN, EXECUTIVE MAY HAVE OR CLAIM TO HAVE IN EACH CASE RELATING TO EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, OR EXECUTIVE’S SEPARATION THEREFROM, ARISING BEFORE THE EXECUTION OF THIS AGREEMENT BY EXECUTIVE, INCLUDING BUT NOT LIMITED TO CLAIMS: (I) FOR DISCRIMINATION, HARASSMENT OR RETALIATION ARISING UNDER ANY FEDERAL, state or local laws, or the equivalent applicable laws of a foreign country, prohibiting age (including but not limited to claims under the Age Discrimination in Employment Act of 1967 (ADEA), as amended, and the Older Worker Benefit Protection Act of 1990 (OWBPA)), sex, national origin, race, religion, disability, veteran status or other protected class discrimination, the Family and Medical Leave Act, as amended (FMLA), and/or harassment or retaliation for protected activity; (ii) for compensation, commission payments, bonus payments and/or benefits including but not limited to claims under the Fair Labor Standards Act of 1938 (FLSA), as amended, the Employee Retirement Income Security Act of 1974, as amended (ERISA), the Family and Medical Leave Act, as amended (FMLA), and similar federal, state, and local laws, or the applicable laws of any foreign country; (iii) under federal, state or local law, or the applicable laws of any foreign country, of any nature whatsoever, including but not limited to constitutional, statutory and common law; (iv) under any employment agreement, severance plan or other benefit plan; and (v) for attorneys’ fees. Executive specifically waives Executive’s right to bring or participate in any class or collective action against the Company. Provided, however, that this release does not apply to claims by Executive: (aa) for workers’ compensation benefits or unemployment benefits filed with the applicable state agencies; (bb) for vested pension or retirement benefits including under the Company’s 401(k) plan; (cc) to continuation coverage under COBRA, or equivalent applicable law; (dd) to rights that cannot lawfully be released by a private settlement agreement; or (ee) to enforce, or for a breach of, this Agreement (the “Reserved Claims”). For the purpose of implementing a full and complete release and discharge, Executive expressly acknowledges that this Agreement is intended to include in its effect, without limitation, all claims which Executive does not know or suspect to exist in Executive’s favor at the time of execution hereof, and that this Agreement contemplates the extinguishment of any such claim or claims.


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6.COVENANT NOT TO SUE. In consideration of the benefits offered to Executive, Executive will not sue Releasees on any of the released claims or on any matters relating to Executive’s employment arising before the execution of this Agreement other than with respect to the Reserved Claims, including but not limited to claims under the ADEA, or join as a party with others who may sue Releasees on any such claims; provided, however, this paragraph will not bar a challenge under the OWBPA to the enforceability of the waiver and release of ADEA claims set forth in this Agreement, the Reserved Claims, or where otherwise prohibited by law. If Executive does not abide by this paragraph, then (i) Executive will return all monies received under this Agreement and indemnify Releasees for all expenses incurred in defending the action, and (ii) Releasees will be relieved of their obligations hereunder.

7.RIGHT TO REVIEW. The Company delivered this Agreement, containing the release language set forth in Sections 5 and 6, to Executive on April 30, 2020 (the “Notification Date”), and hereby informs Executive that it desires that Executive have adequate time and opportunity to review and understand the consequences of entering into it. The Company advises Executive as follows: (a) Executive should consult with Executive’s attorney prior to executing this Agreement; and (b) Executive has 45 days from the Notification Date within which to consider it. Executive must return an executed copy of this Agreement to the Company on or before the 46th day following the Notification Date. Executive acknowledges and understands that Executive is not required to use the entire 45-day review period and may execute and return this Agreement at any time before the 46th day following the Notification Date, BUT IN NO EVENT SHALL EXECUTIVE EXECUTE OR RETURN THIS AGREEMENT BEFORE THE SEPARATION DATE. If, however, Executive does not execute and return an executed copy of this Agreement on or before the 46th day following the Notification Date, this Agreement shall become null and void, and Executive’s employment shall terminate as of the Separation Date nevertheless. This executed Agreement shall be returned to: Ed Sitar, Chief Financial Officer, 9 Meters Biopharma, Inc., 8480 Honeycutt Road, Suite 120, Raleigh, NC 27615, or Email at: esitar@innovatebiopharma.com.

8.REVOCATION. Executive may revoke the Agreement during the seven (7) day period immediately following Executive’s execution of it. This Agreement will not become effective or enforceable until the revocation period has expired (the “Effective Date”). To revoke this Agreement, a written notice of revocation must be delivered to: Ed Sitar, Chief Financial Officer, 9 Meters Biopharma, Inc., 8480 Honeycutt Road, Suite 120, Raleigh, NC 27615, or Email at: esitar@innovatebiopharma.com.

9.OLDER WORKER BENEFIT PROTECTION ACT DISCLOSURES. The Company has determined to eliminate several positions in the Raleigh offices previously operated pre-Closing by Innovate Biopharmaceuticals, Inc, following the Closing of the Merger. The positions selected for elimination were based on a combination of factors, including specifically the needs of the Company. To assist Executive in considering the terms of the Agreement, Executive is provided in Exhibit A with the job titles and the ages of all employees located in the in the Raleigh offices operated pre-Closing by Innovate Biopharmaceuticals who are eligible and are not eligible to receive severance benefits as part of this workforce reduction. Executive acknowledges that Employee has been provided with adequate notice and information as required by the Older Worker

4



Benefit Protection Act of 1990 about individuals in Executive’s job class or organizational unit or group covered by the workforce reorganization.

10.AGENCY CHARGES/INVESTIGATIONS. Nothing in this Agreement prohibits or prevents Executive from filing a charge with or participating, testifying, or assisting in any investigation, hearing, whistleblower proceeding or other proceeding before any federal, state, or local government agency (e.g. EEOC, NLRB, SEC., etc.) (each, a “Government Agency”), nor does anything in this Agreement preclude, prohibit, or otherwise limit, in any way, Executive’s rights and abilities to contact, communicate with, report matters to, or otherwise participate in any whistleblower program administered by any such agencies. Executive further understands that this Agreement does not limit Executive’s or the Company’s ability to communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency in connection with reporting a possible securities law violation, or other violation of law, without notice to the Company. Nothing in this Agreement or any other agreement limits Executive’s right to receive an award for information provided to any Government Agency/SEC staff. Notwithstanding the above, Executive acknowledges and agrees that this Agreement fully and finally resolves all monetary matters between Executive and the Company, and the Releasees, and by signing this Agreement, Executive is waiving any right to monetary damages, attorneys’ fees and/or costs related to or arising from any such charge, complaint or lawsuit filed by Executive or on Executive’s behalf, individually or collectively.

11.NONDISPARAGEMENT. Executive agrees that Executive shall not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the Company, or any of its employees or officers, and existing and prospective customers, suppliers, investors and other associated third parties, now or in the future. The foregoing restrictions will not apply to any statements that are made truthfully in response to a subpoena or other compulsory legal process. The Company agrees that none of the members of the Board of Directors will make statements about Executive that are disparaging, defaming or derogatory; provided, however, that nothing in this Section 11 will prevent the Company from providing information requested by subpoena, court order, regulation, law, in response to a request from a government agency, or in response to a request from an insurance company, investor or other business.

12.DISCLAIMER OF LIABILITY. Nothing in this Agreement is to be construed as either an admission of liability or admission of wrongdoing on the part of either party, each of which denies any liabilities or wrongdoing on its part.

13.GOVERNING LAW. This Agreement shall be construed, interpreted, and governed in accordance with and by North Carolina law and the applicable provisions of federal law, including but not limited to the ADEA and the OWBPA (“Applicable Federal Law”). Any and all claims, controversies, and causes of action arising out of or relating to this Agreement, whether sounding in contract, tort, or statute, shall be governed by the laws of the state of North Carolina, including its statutes of limitations, except for Applicable Federal Law, without giving effect to any North Carolina conflict-of-laws rule that would result in the application of the laws of a different jurisdiction. Both Executive and the Company acknowledge and agree that the state or federal courts

5



located in North Carolina have personal jurisdiction over them and over any dispute arising under this Agreement, and both Executive and the Company irrevocably consent to the jurisdiction of such courts.

14.ENTIRE AGREEMENT. Except as expressly provided herein, or in the Proprietary Information Agreement, this Agreement: (i) supersedes and cancels all other understandings and agreements, oral or written, with respect to Executive’s employment with the Company; (ii) supersedes all other understandings and agreements, oral or written, between the parties with respect to the subject matter of this Agreement; and (iii) constitutes the sole agreement between the parties with respect to this subject matter. Each party acknowledges that: (i) no representations, inducements, promises or agreements, oral or written, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement; and (ii) no agreement, statement or promise not contained in this Agreement shall be valid. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties.

15.SEVERABILITY; SEPARATE AND INDEPENDENT COVENANTS. If any portion, provision, or part of this Agreement is held, determined, or adjudicated by any court of competent jurisdiction to be invalid, unenforceable, void, or voidable for any reason whatsoever, each such portion, provision, or part shall be severed from the remaining portions, provisions, or parts of this Agreement, and such determination or adjudication shall not affect the validity or enforceability of such remaining portions, provisions, or parts.

16.SECTION 409A OF THE INTERNAL REVENUE CODE.

(a)Parties’ Intent. The parties intend that all payments or benefits hereunder shall either qualify for an exemption from or comply with the applicable rules governing non-qualified deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder (collectively, “Section 409A”) and all provisions of this Agreement shall be construed in a manner consistent with such intention. If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause Executive to incur any additional tax or interest under Section 409A, the Company shall, upon the specific request of Executive, use its reasonable business efforts to in good faith reform such provision to be exempt from, or comply with, Code Section 409A; provided, that to the maximum extent practicable, the original intent and economic benefit to Executive and the Company of the applicable provision shall be maintained, and the Company shall have no obligation to make any changes that could create any material additional economic cost or loss of material benefit to the Company. Notwithstanding the foregoing, the Company shall have no liability with regard to any failure to comply with Section 409A, provided that the Company acted in good faith and in a prudent manner to comply with Section 409A. If a payment that is deferred compensation subject to Section 409A is subject to satisfaction of a release requirement and the period for satisfying the release requirement begins in one calendar year and ends in the following calendar year (the “Release Satisfaction Period”), then any amount becoming payable during the Release Satisfaction Period shall not be paid until the later calendar year.


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(b)Separation from Service. A termination of employment or separation from service shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that constitute nonqualified deferred compensation within the meaning of Section 409A upon or following a termination of employment or separation from service unless such termination also constitutes a “Separation from Service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment,” “separation from service” or like terms shall mean Separation from Service.

(c)Delayed Distribution to Specified Employees. If the Company determines in accordance with Sections 409A and 416(i) of the Code and the regulations promulgated thereunder, in the Company’s sole discretion, that a delay in benefits provided under this Agreement is necessary to comply with Code Section 409A(A)(2)(B)(i) since Executive is a Specified Employee thereunder, then any post separation payments and any continuation of benefits or reimbursement of benefit costs provided by this Agreement, and not otherwise exempt from Section 409A, shall be delayed for a period of six (6) months following the date of Executive’s separation from service (the “409A Delay Period”). In such event, any post separation payments and the cost of any continuation of benefits provided under this Agreement that would otherwise be due and payable to Executive during the 409A Delay Period shall not commence until, and shall be made to Executive in a lump sum cash amount on the first business day after the date that is six (6) months following Executive’s Separation from Service and in such event the initial payment shall include a catch-up amount covering amounts that would otherwise have been paid during the six-month period following Executive’s Separation from Service.

(d)Installment Payments. All payments made under this Agreement shall be deemed to be series of separate payments, with each installment being treated as a separate payment. The time and form of payment of any compensation may not be deferred or accelerated to the extent it would result in an impermissible acceleration or deferral under Section 409A.  

17.OTHER TAXES. Executive shall have sole responsibility for the payment of any and all income taxes and/or excise taxes arising from or due on account of any payment made or benefit provided by the Company under this Agreement.

18.COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Any party hereto may execute this Agreement by signing any such counterpart.

19.WAIVER OF BREACH. A waiver of any breach of this Agreement shall not constitute a waiver of any other provision of this Agreement or any subsequent breach of this Agreement.


(Signature Page Follows)

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(Signature page to Separation and General Release Agreement)


IN WITNESS WHEREOF, the parties have entered into this Agreement as of the day and year written below.


INNOVATE BIOPHARMACEUTICALS, INC.


By: /s/ Edward J. Sitar                

Name: Edward J. Sitar__________________

Title: Chief Financial Officer             

Date: April 30, 2020             




SANDEEP LAUMAS, MD


/s/ Sandeep Laumas, M.D.            

Date: April 30, 2020                



8



EXHIBIT A
TO GENERAL RELEASE AGREEMENT







9

Jay P. Madan         Exhibit 10.5
Execution Copy

SEPARATION AND GENERAL RELEASE AGREEMENT

This SEPARATION AND GENERAL RELEASE AGREEMENT (the “Agreement”) is made and entered into this 30th day of April, 2020, between Innovate Biopharmaceuticals, Inc. (name to change to 9 Meters Biopharma, Inc., immediately after the Closing (as defined below)), a Delaware corporation (the “Company”), and Jay P. Madan (“Executive”). Throughout the remainder of the Agreement, the Company and Executive may be collectively referred to as “the parties.”

Executive was employed as President and Chief Business Officer of the Company pursuant to an Amended and Restated Employment Agreement, dated March 11, 2018 (the “Employment Agreement”). Executive has also served as the Company’s Interim Principal Financial Officer and Interim Principal Accounting Officer. Executive served as director on the Company’s Board of Directors, until his resignation from such position effective on the Closing. Executive is a party to a Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement with the Company, dated March 11, 2018 (the “Proprietary Information Agreement”).

The Company entered into a Plan of Merger and Reorganization with RDD Pharma Ltd., a company organized under the laws of Israel (“RDD”), among others (as amended on December 17, 2019, the “Merger Agreement”). The transaction contemplated by the Merger Agreement (the “Merger”) is anticipated to close in the near future (the “Closing”), with the Company being the surviving entity.  

Executive shall resign from his employment, effective on the Closing, under the terms set forth in this Agreement. The parties wish to provide for the payment of severance benefits to Executive under his Employment Agreement as set forth in this Agreement.

Executive represents that Executive has carefully read this entire Agreement, understands its consequences, and voluntarily enters into it.
NOW THEREFORE, in consideration of the above and the mutual promises set forth below, Executive and the Company agree as follows:
1.SEPARATION. Executive’s employment with the Company shall terminate on the Closing (the “Separation Date”). Executive waives any required notice under his Employment Agreement. Effective on the Closing, Executive shall resign as a director on the Company’s Board of the Directors. Executive shall provide assistance to the Company as requested by the Company for transition for the one month period following the Separation Date, and will be compensated at $200 per hour for such services upon submission of an invoice detailing such services. Executive will be paid all accrued unused vacation on the first regularly scheduled payroll date which occurs at least five (5) days after the Separation Date.

2.SEPARATION BENEFITS. In consideration of the release of claims and other promises contained herein, and on the condition that Executive fully complies with Executive’s

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obligations under this Agreement and the Proprietary Information Agreement, the Company will provide Executive with the following:

(a)    Severance Compensation. Pursuant to Section 5(c)(ii)(1) of the Employment Agreement, the Company shall pay to Executive Two Hundred Eighty Five Thousand and 00/100 Dollars ($285,000) (less applicable withholdings) (“Severance Pay”), payable in equal installments over a twelve (12) month period in accordance with the Company’s current payroll schedule commencing on the Company’s first regularly scheduled pay date following the Effective Date of this Agreement under Section 8, and subject to Section 16(c).

(b)    Benefits. Pursuant to Section 5(c)(ii)(2) of the Employment Agreement, conditioned on Executive’s eligibility for, and Executive’s proper and timely election to continue health insurance benefits under COBRA, or under any state law equivalent, after the Separation Date, reimbursement of the additional costs actually incurred by Executive for continuing health benefits (which, for purposes of clarity, shall include reimbursement for the employer’s portion of the premium for continuation of continuation of health insurance benefits as well as applicable administrative fee) at the same level in which Executive participated prior to the Separation Date for the shorter of (i) twelve (12) months following the Separation Date or (ii) until Executive obtains reasonably comparable coverage, with such reimbursements to commence on the first regular payroll date following the Effective Date of this Agreement under Section 8, and subject to Section 16(c). Such reimbursements are subject to Executive providing appropriate proof of the costs for such premiums.

(c)    Other Benefits. As of the Separation Date, Executive shall not be entitled to medical, dental, vision, life, disability, accidental death and dismemberment insurance benefits, or any other employee benefits, and shall not be an active participant in the Company’s 401(k) Plan (the “401(k) Plan”) or any other plan of any type. For the avoidance of doubt, Executive will not be eligible to contribute to Executive’s 401(k) plan from any payments received under this Agreement after the Separation Date, except for Executive’s regular salary paid through the Separation Date. Nothing in this Agreement, however, shall be deemed to limit Executive’s continuation coverage rights under COBRA or under any state law equivalent, or Executive’s vested rights, if any, under the 401(k) Plan or any other Company plan and the terms of those plans shall govern. The parties acknowledge that Executive was issued certain options to purchase the Company’s stock pursuant to certain awards under the Company’s 2015 Stock Incentive Plan (the “2015 Plan”) and various award agreements thereunder (the “Award Agreements”), and the terms of those plans and Award Agreements shall govern.

3.PROPRIETARY INFORMATION AGREEMENT. Executive is subject to the Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement, dated March 11, 2018 (the “Proprietary Information Agreement”); provided, however, that the Company and Executive agree to hereby amend the Proprietary Information Agreement as follows: (i) Section 3.2 of the Proprietary Information Agreement shall not prohibit Executive from soliciting for employment any employee of the Company or a Restricted Affiliate, as defined in such Proprietary Information Agreement, whose employment was involuntarily terminated by the Company, and (ii) Section 3.1 of the Proprietary Information Agreement shall not prohibit Executive from working

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for or providing services to an entity who has been licensed by the Company to commercialize, further develop or market a pharmaceutical product that would otherwise fall within the meaning of the Company Business, as defined in such Proprietary Information Agreement. Except as amended specifically in this Section 3, all other terms of such Proprietary Information Agreement will remain in full force and effect. Executive acknowledges and agrees that Executive will continue to be bound by and subject to the Proprietary Information Agreement, in accordance with its terms, and that Executive will forfeit all benefits under this Agreement should Executive breach such Proprietary Information Agreement. Pursuant to Section 7 of the Proprietary Information Agreement, Executive acknowledges that he has returned all Company property to the Company as of the Separation Date.

4.COOPERATION. Executive agrees that Executive will assist and cooperate with the Company in connection with the defense or prosecution of any claim that may be made against or by the Company, or in connection with any ongoing or future investigation or dispute or claim of any kind involving the Company, including any proceeding before any arbitral, administrative, judicial, legislative, or other body or agency, including testifying in any proceeding to the extent such claims, investigations or proceedings relating to services performed or required to be performed by Executive, pertinent knowledge possessed by Executive, or any act or omission by Executive. Executive further agrees to perform all acts and execute and deliver any documents that may be reasonably necessary to carry out the provisions of this Section 4. The Company shall make reasonable efforts to minimize disruption of Executive’s other activities. The Company shall reimburse Executive for reasonable expenses incurred in connection with such cooperation.

5.RELEASE. IN CONSIDERATION OF THE BENEFITS CONFERRED BY THIS AGREEMENT, EXECUTIVE (ON BEHALF OF HIMSELF AND HIS FAMILY MEMBERS, HEIRS, ASSIGNS, EXECUTORS AND OTHER REPRESENTATIVES), RELEASES THE COMPANY AND ITS PAST, PRESENT AND FUTURE PARENTS, SUBSIDIARIES, AFFILIATES, AND ITS AND/OR THEIR PREDECESSORS, SUCCESSORS, ASSIGNS, AND ITS AND/OR THEIR PAST, PRESENT AND FUTURE OFFICERS, DIRECTORS, EXECUTIVES, OWNERS, INVESTORS, STOCKHOLDERS, ADMINISTRATORS, BUSINESS UNITS, ENEFIT PLANS (TOGETHER WITH ALL PLAN ADMINISTRATORS, TRUSTEES, FIDUCIARIES AND INSURERS) AND AGENTS (COLLECTIVELY, “RELEASEES”) FROM ALL CLAIMS AND WAIVES ALL RIGHTS, KNOWN OR UNKNOWN, EXECUTIVE MAY HAVE OR CLAIM TO HAVE IN EACH CASE RELATING TO EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, OR EXECUTIVE’S SEPARATION THEREFROM, ARISING BEFORE THE EXECUTION OF THIS AGREEMENT BY EXECUTIVE, INCLUDING BUT NOT LIMITED TO CLAIMS: (I) FOR DISCRIMINATION, HARASSMENT OR RETALIATION ARISING UNDER ANY FEDERAL, state or local laws, or the equivalent applicable laws of a foreign country, prohibiting age (including but not limited to claims under the Age Discrimination in Employment Act of 1967 (ADEA), as amended, and the Older Worker Benefit Protection Act of 1990 (OWBPA)), sex, national origin, race, religion, disability, veteran status or other protected class discrimination, the Family and Medical Leave Act, as amended (FMLA), and/or harassment or retaliation for protected activity; (ii) for compensation, commission payments, bonus payments and/or benefits, including but not limited to claims under the Fair Labor Standards Act of 1938 (FLSA), as amended, the Employee Retirement Income

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Security Act of 1974, as amended (ERISA), the Family and Medical Leave Act, as amended (FMLA), and similar federal, state, and local laws, or the applicable laws of any foreign country; (iii) under federal, state or local law, or the applicable laws of any foreign country, of any nature whatsoever, including but not limited to constitutional, statutory and common law; (iv) under any employment agreement, severance plan or other benefit plan; and (v) for attorneys’ fees. Executive specifically waives Executive’s right to bring or participate in any class or collective action against the Company. Provided, however, that this release does not apply to claims by Executive: (aa) for workers’ compensation benefits or unemployment benefits filed with the applicable state agencies; (bb) for vested pension or retirement benefits including under the Company’s 401(k) plan; (cc) to continuation coverage under COBRA, or equivalent applicable law; (dd) for a breach of the Award Agreements; (ee) to rights that cannot lawfully be released by a private settlement agreement; or (ff) to enforce, or for a breach of, this Agreement (the “Reserved Claims”). For the purpose of implementing a full and complete release and discharge, Executive expressly acknowledges that this Agreement is intended to include in its effect, without limitation, all claims which Executive does not know or suspect to exist in Executive’s favor at the time of execution hereof, and that this Agreement contemplates the extinguishment of any such claim or claims.

6.COVENANT NOT TO SUE. In consideration of the benefits offered to Executive, Executive will not sue Releasees on any of the released claims or on any matters relating to Executive’s employment arising before the execution of this Agreement other than with respect to the Reserved Claims, including but not limited to claims under the ADEA, or join as a party with others who may sue Releasees on any such claims; provided, however, this paragraph will not bar a challenge under the OWBPA to the enforceability of the waiver and release of ADEA claims set forth in this Agreement, the Reserved Claims, or where otherwise prohibited by law. If Executive does not abide by this paragraph, then (i) Executive will return all monies received under this Agreement and indemnify Releasees for all expenses incurred in defending the action, and (ii) Releasees will be relieved of their obligations hereunder.

7.RIGHT TO REVIEW. The Company delivered this Agreement, containing the release language set forth in Sections 5 and 6, to Executive on April 30, 2020 (the “Notification Date”), and hereby informs Executive that it desires that Executive have adequate time and opportunity to review and understand the consequences of entering into it. The Company advises Executive as follows: (a) Executive should consult with Executive’s attorney prior to executing this Agreement; and (b) Executive has 45 days from the Notification Date within which to consider it. Executive must return an executed copy of this Agreement to the Company on or before the 46th day following the Notification Date. Executive acknowledges and understands that Executive is not required to use the entire 45-day review period and may execute and return this Agreement at any time before the 46th day following the Notification Date, BUT IN NO EVENT SHALL EXECUTIVE EXECUTE OR RETURN THIS AGREEMENT BEFORE THE SEPARATION DATE. If, however, Executive does not execute and return an executed copy of this Agreement on or before the 46th day following the Notification Date, this Agreement shall become null and void, and Executive’s employment shall terminate as of the Separation Date nevertheless. This executed Agreement shall be returned to: Ed Sitar, Chief Financial Officer, 9 Meters Biopharma, Inc., 8480 Honeycutt Road, Suite 120, Raleigh, NC 27615, or Email at: esitar@innovatebiopharma.com.

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8.REVOCATION. Executive may revoke the Agreement during the seven (7) day period immediately following Executive’s execution of it. This Agreement will not become effective or enforceable until the revocation period has expired (the “Effective Date”). To revoke this Agreement, a written notice of revocation must be delivered to: Ed Sitar, Chief Financial Officer, 9 Meters Biopharma, Inc., 8480 Honeycutt Road, Suite 120, Raleigh, NC 27615, or Email at: esitar@innovatebiopharma.com.

9.OLDER WORKER BENEFIT PROTECTION ACT DISCLOSURES. The Company has determined to eliminate several positions in the Raleigh offices previously operated pre-Closing by Innovate Biopharmaceuticals, Inc, following the Closing of the Merger. The positions selected for elimination were based on a combination of factors, including specifically the needs of the Company. To assist Executive in considering the terms of the Agreement, Executive is provided in Exhibit A with the job titles and the ages of all employees located in the in the Raleigh offices operated pre-Closing by Innovate Biopharmaceuticials, Inc., who are eligible and are not eligible to receive severance benefits as part of this workforce reduction. Executive acknowledges that Employee has been provided with adequate notice and information as required by the Older Worker Benefit Protection Act of 1990 about individuals in Executive’s job class or organizational unit or group covered by the workforce reorganization.

10.AGENCY CHARGES/INVESTIGATIONS. Nothing in this Agreement prohibits or prevents Executive from filing a charge with or participating, testifying, or assisting in any investigation, hearing, whistleblower proceeding or other proceeding before any federal, state, or local government agency (e.g. EEOC, NLRB, SEC., etc.) (each, a “Government Agency”), nor does anything in this Agreement preclude, prohibit, or otherwise limit, in any way, Executive’s rights and abilities to contact, communicate with, report matters to, or otherwise participate in any whistleblower program administered by any such agencies. Executive further understands that this Agreement does not limit Executive’s or the Company’s ability to communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency in connection with reporting a possible securities law violation, or other violation of law, without notice to the Company. Nothing in this Agreement or any other agreement limits Executive’s right to receive an award for information provided to any Government Agency/SEC staff. Notwithstanding the above, Executive acknowledges and agrees that this Agreement fully and finally resolves all monetary matters between Executive and the Company, and the Releasees, and by signing this Agreement, Executive is waiving any right to monetary damages, attorneys’ fees and/or costs related to or arising from any such charge, complaint or lawsuit filed by Executive or on Executive’s behalf, individually or collectively.

11.NONDISPARAGEMENT. Executive agrees that Executive shall not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the Company, or any of its employees or officers, and existing and prospective customers, suppliers, investors and other associated third parties, now or in the future. The foregoing restrictions will not apply to any statements that are made truthfully in response to a subpoena or other compulsory legal process. The Company agrees that none of the members of the Board of Directors will make statements about Executive that are

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disparaging, defaming or derogatory; provided, however, that nothing in this Section 11 will prevent the Company from providing information requested by subpoena, court order, regulation, law, in response to a request from a government agency, or in response to a request from an insurance company, investor or other business.

12.DISCLAIMER OF LIABILITY. Nothing in this Agreement is to be construed as either an admission of liability or admission of wrongdoing on the part of either party, each of which denies any liabilities or wrongdoing on its part.

13.GOVERNING LAW. This Agreement shall be construed, interpreted, and governed in accordance with and by North Carolina law and the applicable provisions of federal law, including but not limited to the ADEA and the OWBPA (“Applicable Federal Law”). Any and all claims, controversies, and causes of action arising out of or relating to this Agreement, whether sounding in contract, tort, or statute, shall be governed by the laws of the state of North Carolina, including its statutes of limitations, except for Applicable Federal Law, without giving effect to any North Carolina conflict-of-laws rule that would result in the application of the laws of a different jurisdiction. Both Executive and the Company acknowledge and agree that the state or federal courts located in North Carolina have personal jurisdiction over them and over any dispute arising under this Agreement, and both Executive and the Company irrevocably consent to the jurisdiction of such courts.

14.ENTIRE AGREEMENT. Except as expressly provided herein, or in the Proprietary Information Agreement, as amended herein, this Agreement: (i) supersedes and cancels all other understandings and agreements, oral or written, with respect to Executive’s employment with the Company; (ii) supersedes all other understandings and agreements, oral or written, between the parties with respect to the subject matter of this Agreement; and (iii) constitutes the sole agreement between the parties with respect to this subject matter. Each party acknowledges that: (i) no representations, inducements, promises or agreements, oral or written, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement; and (ii) no agreement, statement or promise not contained in this Agreement shall be valid. No change or modification of this Agreement shall be valid or binding upon the parties unless such change or modification is in writing and is signed by the parties.

15.SEVERABILITY; SEPARATE AND INDEPENDENT COVENANTS. If any portion, provision, or part of this Agreement is held, determined, or adjudicated by any court of competent jurisdiction to be invalid, unenforceable, void, or voidable for any reason whatsoever, each such portion, provision, or part shall be severed from the remaining portions, provisions, or parts of this Agreement, and such determination or adjudication shall not affect the validity or enforceability of such remaining portions, provisions, or parts.

16.SECTION 409A OF THE INTERNAL REVENUE CODE.

(a)Parties’ Intent. The parties intend that all payments or benefits hereunder shall either qualify for an exemption from or comply with the applicable rules governing non-qualified deferred compensation under Section 409A of the Internal Revenue Code of 1986, as

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amended (the “Code”), and the regulations thereunder (collectively, “Section 409A”) and all provisions of this Agreement shall be construed in a manner consistent with such intention. If any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause Executive to incur any additional tax or interest under Section 409A, the Company shall, upon the specific request of Executive, use its reasonable business efforts to in good faith reform such provision to be exempt from, or comply with, Code Section 409A; provided, that to the maximum extent practicable, the original intent and economic benefit to Executive and the Company of the applicable provision shall be maintained, and the Company shall have no obligation to make any changes that could create any material additional economic cost or loss of material benefit to the Company. Notwithstanding the foregoing, the Company shall have no liability with regard to any failure to comply with Section 409A, provided that the Company acted in good faith and in a prudent manner to comply with Section 409A. If a payment that is deferred compensation subject to Section 409A is subject to satisfaction of a release requirement and the period for satisfying the release requirement begins in one calendar year and ends in the following calendar year (the “Release Satisfaction Period”), then any amount becoming payable during the Release Satisfaction Period shall not be paid until the later calendar year.

(b)Separation from Service. A termination of employment or separation from service shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that constitute nonqualified deferred compensation within the meaning of Section 409A upon or following a termination of employment or separation from service unless such termination also constitutes a “Separation from Service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment,” “separation from service” or like terms shall mean Separation from Service.

(c)Delayed Distribution to Specified Employees. If the Company determines in accordance with Sections 409A and 416(i) of the Code and the regulations promulgated thereunder, in the Company’s sole discretion, that a delay in benefits provided under this Agreement is necessary to comply with Code Section 409A(A)(2)(B)(i) since Executive is a Specified Employee thereunder, then any post separation payments and any continuation of benefits or reimbursement of benefit costs provided by this Agreement, and not otherwise exempt from Section 409A, shall be delayed for a period of six (6) months following the date of Executive’s separation from service (the “409A Delay Period”). In such event, any post separation payments and the cost of any continuation of benefits provided under this Agreement that would otherwise be due and payable to Executive during the 409A Delay Period shall not commence until, and shall be made to Executive in a lump sum cash amount on the first business day after the date that is six (6) months following Executive’s Separation from Service and in such event the initial payment shall include a catch-up amount covering amounts that would otherwise have been paid during the six-month period following Executive’s Separation from Service.

(d)Installment Payments. All payments made under this Agreement shall be deemed to be series of separate payments, with each installment being treated as a separate payment. The time and form of payment of any compensation may not be deferred or accelerated to the extent it would result in an impermissible acceleration or deferral under Section 409A.  

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17.OTHER TAXES. Executive shall have sole responsibility for the payment of any and all income taxes and/or excise taxes arising from or due on account of any payment made or benefit provided by the Company under this Agreement.

18.COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Any party hereto may execute this Agreement by signing any such counterpart.

19.WAIVER OF BREACH. A waiver of any breach of this Agreement shall not constitute a waiver of any other provision of this Agreement or any subsequent breach of this Agreement.


(Signature Page Follows)

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(Signature page to Separation and General Release Agreement)


IN WITNESS WHEREOF, the parties have entered into this Agreement as of the day and year written below.


INNOVATE BIOPHARMACEUTICALS, INC.


By: /s/ Edward J. Sitar                

Name: /s/ Edward J. Sitar________________

Title: Chief Financial Officer             

Date: April 30, 2020                 





JAY P. MADAN


/s/ Jay P. Madan                

Date: April 30, 2020                



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EXHIBIT A
TO GENERAL RELEASE AGREEMENT






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EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (“Agreement”) is executed on the 30th day of April, 2020 (the “Effective Date”), by and between Innovate Biopharmaceuticals, Inc., a Delaware corporation (the “Company”), and John Temperato (the “Executive”). The Executive and the Company may be referred to herein as a “Party” or collectively as the “Parties.”
W I T N E S S E T H:
WHEREAS, pursuant to that certain Agreement and Plan of Merger and Reorganization made and entered into as of October 6, 2019, as amended December 17, 2019, by and among the Company, INNT Merger Sub 1 Ltd. (“Merger Sub”), RDD Pharma Ltd. (“RDD”) and OrbiMed Israel Partners, Limited Partnership, as of the Effective Date, Merger Sub merged with and into RDD, with RDD continuing as the surviving corporation and a direct wholly-owned subsidiary of the Company;
WHEREAS, Executive was previously employed by RDD as Chief Executive Officer; and
WHEREAS, the Company wishes to employ the Executive, and the Executive desires to accept employment with the Company, upon the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein, and of other good and valuable consideration, including the employment of the Executive by the Company and the compensation to be received by the Executive from the Company from time to time, and specifically the compensation to be received by the Executive pursuant to Section 4 hereof, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending legally to be bound, hereby agree as follows:
1.Employment. As of the Effective Date, the Company hereby employs the Executive and the Executive hereby accepts employment as the Chief Executive Officer of the Company upon the terms and conditions of this Agreement. The Executive shall report to the Board of Directors of the Company (the “Board”).

2.Duties.


(a)     The Executive shall faithfully perform all duties of the Company related to the position or positions held by the Executive, including but not limited to all duties set forth in this Agreement and/or in the Bylaws of the Company related to the position or positions held by the Executive and all additional duties that are prescribed from time to time by the Board. The Executive shall devote the Executive’s full time and attention to the performance of the Executive’s duties and responsibilities on behalf of the Company and in furtherance of its best interests; provided, however, that the Executive, subject to the Executive’s obligations hereunder, shall also be permitted to make personal investments, perform reasonable volunteer services and, with the

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written prior consent of the Company, serve on outside boards of directors for non-profit or for-profit corporations. The Executive shall comply with all written Company policies, standards, rules and regulations (the “Company Policies”) and all applicable government laws, rules and regulations that are now or hereafter in effect. The Executive acknowledges receipt of copies of all written Company Policies that are in effect as of the date of this Agreement.

(b)    Executive’s base of operations shall be the Company headquarters in Raleigh, North Carolina.


3. Term. The term of this Agreement shall continue until terminated by either party as set forth in Section 5 of this Agreement (the “Term”).

4. Compensation. During the Term, as compensation for the services rendered by the Executive under this Agreement, the Executive shall be entitled to receive the following (all payments are subject to applicable withholdings):

(a)     Base Salary. Executive shall be paid an annual salary in the amount of four hundred fifty thousand dollars ($450,000), less applicable withholdings, which shall be payable in accordance with the then-current payroll schedule of the Company (the “Base Salary”). The Executive’s salary will be reviewed periodically and may be increased from time to time by the Company at its discretion.

(b)     Bonuses. Executive shall be eligible to participate in any bonus or similar incentive plan adopted by the Company as approved by the Board for executives at Executive’s level, based on a target of 40% of Executive’s Base Salary. The amount awarded, if any, to the Executive under any bonus or incentive plan shall be in the discretion of the Board or any committee administering such plan. Executive’s bonus, if any, shall be subject to the terms and conditions of any plan or program adopted or approved by the Board. Any bonus earned hereunder shall be paid no later than 2-1/2 months after the end of the calendar year in which it is earned. For calendar year 2020, Executive’s bonus shall be prorated to reflect the portion of such year that Executive was actually employed by the Company. Executive must be employed as of December 31 of any calendar year to be eligible for a bonus under this Section 4(b).

(c)     Equity. Executive shall be eligible to participate in any equity compensation plan or similar program adopted by the Company, including but not limited to plans under which Executive may be granted Restricted Stock Units (“RSUs”) of the Company. The amount awarded, if any, to the Executive under any such plan shall be in the discretion of the Board or any committee authorized to administer such plan and shall be subject to the terms and conditions of any plan or program adopted or approved by the Board and the applicable award agreement. Subject to the approval of the Board, the Company will make an initial grant to Executive of one million (1,000,000) options to purchase shares of the Company’s common stock of the Company with an exercise price equal to fair market value at the time of grant (the “Options”). The Options shall be granted as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, to the maximum extent permitted under the law and the Company’s equity compensation plan. Such grant will be effective when made, and shall be subject to terms and conditions to be imposed by the Board under its plans or programs, which will be documented in an award agreement,

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which terms the parties anticipate will include, among other things, vesting of twenty-five percent (25%) upon grant, with the remainder vesting in equal monthly installments the following four (4) year period conditioned upon Executive’s continued employment with the Company.

(d)     Benefits. The Executive shall be entitled to receive those benefits provided from time to time to other executive employees of the Company, in accordance with the terms and conditions of the applicable plan documents; provided that the Executive meets the eligibility requirements thereof. All such benefits are subject to amendment or termination from time to time by the Company without the consent of the Executive or any other employee of the Company.

(e)     Paid Time Off. The Executive shall be entitled to four (4) weeks of paid time off per calendar year (“PTO”) to be taken in accordance with the Company’s standard PTO policies.

(f)     Business Expenses. The Company will reimburse Executive for reasonable travel, entertainment, office and other expenses incurred by Executive in the furtherance of the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time. Provided, however, that the Company will make the reimbursement only if the corresponding expense is incurred during the term of this Agreement and the reimbursement is made on or before the last day of the calendar year following the calendar year in which the expense is incurred, the amount of expenses eligible for such reimbursement during a calendar year will not affect the amount of expenses eligible for such reimbursement in another calendar year, and the right to such reimbursement is not subject to liquidation or exchange for another benefit from the Company.

5.Termination. This Agreement and the Executive’s employment by the Company shall or may be terminated, as the case may be, as follows:

(a)     Termination by the Executive. The Executive may terminate this Agreement and Executive’s employment by the Company:

(i)     for “Good Reason” (as defined herein). For purposes of this Agreement, “Good Reason” shall mean, the existence, without the consent of the Executive, of any of the following events: (A) the Executive’s duties and responsibilities are substantially reduced or diminished; (B) the Executive’s base salary is reduced by more than fifteen percent (15%) from the level prior to such reduction, except for an across the board reduction in base salary for all similarly situated executives; (C) the Company materially breaches its obligations under this Agreement; or (D) the Executive’s place of employment is relocated by more than fifty (50) miles. In addition to any requirements set forth above, in order for any of the above events to constitute “Good Reason,” the Executive must (X) inform the Company of the existence of the event within ninety (90) days of the initial existence of the event, after which date the Company shall have no less than thirty (30) days to cure the event which otherwise would constitute “Good Reason” hereunder and (Y) the Executive must terminate employment with the Company for such “Good Reason” no later than thirty (30) days after the initial existence of the event which prompted the Executive’s termination.

(ii)     other than for Good Reason, upon thirty (30) days’ notice to the Company.

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(b)     Termination by the Company. The Company may terminate this Agreement and the Executive’s employment by the Company upon notice to the Executive (or personal representative):

(i) at any time and for any reason;

(ii)     upon the death of the Executive, in which case this Agreement shall terminate immediately; provided that, such termination shall not prejudice any benefits payable to the Executive’s spouse or beneficiaries which are fully vested as of the date of death;

(iii)     if the Executive is “permanently disabled” (as defined herein), in which case this Agreement shall terminate immediately; provided that, such termination shall not prejudice any benefits payable to the Executive, the Executive’s spouse or beneficiaries which are fully vested as of the date of the termination of this Agreement. In any event, the Company will comply fully with the applicable provisions of the Americans with Disabilities Act, as amended, the Family and Medical Leave Act, and any similar applicable law. For purposes of this Agreement, the Executive shall be considered “permanently disabled” when a qualified medical doctor mutually acceptable to the Company and the Executive or the Executive’s personal representative shall have certified in writing that: (A) the Executive is unable, because of a medically determinable physical or mental disability, to perform substantially all of the Executive’s duties, with or without a reasonable accommodation, for more than 180 calendar days measured from the last full day of work; or (B) by reason of mental or physical disability, it is unlikely that the Executive will be able, with or without reasonable accommodation, within 180 calendar days, to resume substantially all business duties and responsibilities in which the Executive was previously engaged and otherwise discharge the Executive’s duties under this Agreement; or

(iv)     for Cause (as defined herein). “Cause” shall be determined by the Company and shall mean:
A. Any material breach of the terms of this Agreement by the Executive, or the material failure of the Executive to diligently perform the Executive’s duties for the Company or the Executive’s material failure to achieve his or her objectives specified by the Board; provided, however, that the Company must first provide Executive with written notice of the grounds under this Section 5(b)(iv)(A) and a period of twenty (20) business days in which to cure such grounds;

B. The Executive’s unauthorized use of the Company’s tangible or intangible property (excluding incidental use) or Executive’s breach of the Proprietary Information Agreement (as defined herein) or any other similar agreement regarding confidentiality, intellectual property rights, non-competition or non-solicitation;

C. Any material failure to comply with material Company Policies, applicable government laws, rules and regulations and/or directives of the Board;


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D. The Executive’s illegal use or abuse of any controlled substance, or the Executive’s use of alcohol in any manner that materially interferes with the performance of the Executive’s duties under this Agreement;

E. Any dishonest or illegal action (including, without limitation, embezzlement) or any other action whether or not dishonest or illegal by the Executive which is materially detrimental to the interest and well-being of the Company, including, without limitation, harm to its reputation;

F. The Executive’s failure to fully disclose any material conflict of interest that the Executive may have with the Company in a transaction between the Company and any third party which is materially detrimental to the interest and well-being of the Company; or

G. Any knowing and intentional adverse action or omission by the Executive which would be required to be disclosed pursuant to public securities laws or which would limit the ability of the Company or any entity affiliated with the Company to sell securities under any Federal or state law or which would disqualify the Company or any affiliated entity from any exemption otherwise available to it.

(c) Obligations of the Company Upon Termination.

(i)     Upon the termination of this Agreement: (A) by the Executive pursuant to paragraph 5(a)(ii); or (B) by the Company pursuant to paragraph 5(b)(ii), (iii), or (iv) the Company shall have no further obligations hereunder other than the payment of all compensation and other benefits payable to the Executive through the date of such termination which shall be paid on or before the Company’s next regularly scheduled payday unless such amount is not then-calculable, in which case payment shall be made on the first regularly scheduled payday after the amount is calculable.

(ii)     Upon termination of this Agreement: (A) by the Executive pursuant to paragraph 5(a)(i); or (B) by the Company pursuant to paragraph 5(b)(i); and provided in either case that the Executive first executes and does not revoke a release agreement in the form acceptable to the Company within the time period then-specified by the Company but in any event no later than sixty (60) days after the date of termination (the “Release”):

A.     the Company shall pay the Executive an amount of severance equal to twelve (12) months of Executive’s then-current Base Salary (less all applicable deductions) over the twelve (12) month period immediately following the termination date in accordance with the then-current generally applicable payroll schedule of the Company commencing on the first regularly scheduled pay date of the Company processed after Executive has executed, delivered to the Company and not revoked the Release (with the first payment to include a catchup for any amounts that would have been paid had the Release been effective on the termination date);

B.     the Company shall pay the Executive a prorated amount of Executive’s target bonus for the year in which such termination occurs, if any, in accordance with and subject to Section 4(b); and

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C.     the Company shall accelerate the vesting of Executive’s unvested Options and RSUs, if any, that were scheduled to vest in the twelve (12) month period immediately following the date of such termination.

6.Proprietary Information Agreement. The terms of the Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement by and between the Company and the Executive, entered into simultaneously herewith (the “Proprietary Information Agreement”) and any other similar agreement regarding confidentiality, intellectual property rights, non-competition or non-solicitation between the Company and the Executive, are hereby incorporated by reference and are a material part of this Agreement.

7. Representations and Warranties.

(a)    The Executive represents and warrants to the Company that the Executive’s performance of this Agreement and as an employee of the Company does not and will not breach any noncompetition agreement or any agreement to keep in confidence proprietary information acquired by the Executive in confidence or in trust prior to the Executive's employment by the Company. The Executive represents and warrants to the Company that the Executive has not entered into, and agrees not to enter into, any agreement that conflicts with or violates this Agreement.

(b)    The Executive represents and warrants to the Company that the Executive has not brought and shall not bring with the Executive to the Company, or use in the performance of the Executive's responsibilities for the Company, any materials or documents of a former employer which are not generally available to the public or which did not belong to the Executive prior to the Executive’s employment with the Company, unless the Executive has obtained written authorization from the former employer or other owner for their possession and use and provided the Company with a copy thereof.

8. Indemnification.

(a)    By the Employee. The Executive shall indemnify and hold harmless the Company, its directors, officers, stockholders, agents, and employees against all claims, costs, expenses, liabilities, and lost profits, including amounts paid in settlement, incurred by any of them as a result of Executive engaging in actions that constitute Cause under Section 5(b)(iv) of this Agreement or the breach by the Executive of any provision of Section 6 and/or 7 of this Agreement.

(b)    By the Company. The Company will indemnify and hold harmless the Executive from any liabilities and expenses arising from Executive’s actions as an officer, director or employee of the Company to the fullest extent permitted by law, excepting any unauthorized acts, intentional or illegal conduct which breaches the terms of this or any other agreement or Company policy, including but not limited to the Proprietary Information Agreement.

9. Notices. All notices, requests, consents, approvals, and other communications to, upon, and between the parties shall be in writing and shall be deemed to have been given, delivered, made, and received when:

6



(a) personally delivered; (b) deposited for next day delivery by Federal Express, or other similar overnight courier services; (c) transmitted via telefacsimile or other similar device to the attention of the Company President with receipt acknowledged; or (d) three days after being sent or mailed by certified mail, postage prepaid and return receipt requested, addressed:

If to the Company:
Innovate Biopharmaceuticals, Inc.
8480 Honeycutt Road, Suite 120
Raleigh, NC 27615
Attn: Chief Financial Officer

If to Executive:
John Temperato
9900 Cape Scott Court
Raleigh, NC 27614
10. Effect. This Agreement may be assigned by the Company to its successors in interests. This Agreement shall be binding on and inure to the respective benefit of the Company and its successors and assigns and the Executive and Executive’s personal representatives.

11. Entire Agreement. This Agreement and the Proprietary Information Agreement and any other similar agreement regarding confidentiality, intellectual property rights, non-competition or non-solicitation constitute the entire agreement between the parties with respect to the matters set forth herein and supersede all prior agreements and understandings between the parties with respect to the same.


12. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision.


13. Amendment and Waiver. A waiver of any breach of this Agreement shall not constitute a waiver of any other provision of this Agreement or any subsequent breach of this Agreement. No provision of this Agreement may be amended, modified, deleted, or waived in any manner except by a written agreement executed by the parties.

14. Section 409A Matters. This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended and the Treasury Regulations and other applicable guidance thereunder (“Section 409A”). To the extent that there is any ambiguity as to whether this Agreement (or any of its provisions) contravenes one or more requirements of Section 409A, such provision shall be interpreted and applied in a matter that does not result in a Section 409A violation. Without limiting the generality of the above:

(a)     For clarity, the severance benefits specified in this Agreement (the “Severance Benefits”) are only payable upon a “separation from service” as defined in Section 409A. The Severance Benefits shall be

7



deemed to be series of separate payments, with each installment being treated as a separate payment. The time and form of payment of any compensation may not be deferred or accelerated to the extent it would result in an impermissible acceleration or deferral under Section 409A.

(b)     To the extent this Agreement contains payments which are subject to Section 409A (as opposed to exempt from Section 409A), the Executive’s rights to such payments are not subject to anticipation, alienation, sale, transfer, pledge, encumbrance, attachment or garnishment and, where applicable, may only be transferred by will or the laws of descent and distribution.

(c)     To the extent the Severance Benefits are intended to be exempt from Section 409A as a result of an “involuntary separation from service” under Section 409A, if all conditions necessary to establish the Executive’s entitlement to such Severance Benefits have been satisfied, all Severance Benefits shall be paid or provided in full no later than December 31st of the second calendar year following the calendar year in which the Executive’s employment terminated unless another time period is applicable. To the extent required by Section 409A, any portion of the severance benefits payable to Executive under Section 5(c)(ii) that are contingent on the Executive’s execution and non- revocation of the Release and that could be paid in the calendar year in which Executive terminates employment or in the immediately following calendar year, depending on when the Release becomes effective shall be paid on the first payroll date in such immediately following calendar year or such later date required by Section 5(c)(ii) (with all remaining payments of such severance benefits to be paid as if no such delay had occurred).

(d)     If the Executive is a “specified employee” (as defined in Section 409A) on the termination date and a delayed payment is required by Section 409A to avoid a prohibited distribution under Section 409A, then no Severance Benefits that constitute “non-qualified deferred compensation” under Section 409A shall be paid until the earlier of (i) the first day of the 7th month following the date of Employee’s “separation from service” as defined in Section 409A, or (ii) the date of Employee’s death. Upon the expiration of the applicable deferral period, all payments deferred under this clause shall be paid in a lump sum and any remaining severance benefits shall be paid per the schedule specified in this Agreement.

(e)     The Company makes no representation that this Agreement will be exempt from or compliant with Section 409A and makes no affirmative undertaking to preclude Section 409A from applying, but does reserve the right to unilaterally amend this Agreement as may be necessary or advisable to permit the Agreement to be in documentary and operational compliance with Section 409A which determination will be made in the sole discretion of the Company.

15. Governing Law. This Agreement shall be construed, interpreted, and governed in accordance with and by North Carolina law and the applicable provisions of federal law (“Applicable Federal Law”). Any and all claims, controversies, and causes of action arising out of or relating to this Agreement, whether sounding in contract, tort, or statute, shall be governed by the laws of the state of North Carolina, including its statutes of limitations, except for Applicable Federal Law, without giving effect to any North Carolina conflict-of-laws rule that would result in the application of the laws of a different jurisdiction. Both Executive and the Company acknowledge and agree that the state or federal courts located in North Carolina have perso

8



nal jurisdiction over them and over any dispute arising under this Agreement, and both Executive and the Company irrevocably consent to the jurisdiction of such courts.

16. Consent to Jurisdiction and Venue. Each of the parties agrees that any suit, action, or proceeding arising out of this Agreement may be instituted against it in the state or federal courts located in Wake County, North Carolina. Each of the parties hereby waives any objection that it may have to the venue of any such suit, action, or proceeding, and each of the parties hereby irrevocably consents to the personal jurisdiction of any such court in any such suit, action, or proceeding.

17. Counterparts. This Agreement may be executed in more than one counterpart, each of which shall be deemed an original, and all of which shall be deemed a single agreement.

18. Headings. The headings herein are for convenience only and shall not affect the interpretation of this Agreement.
[The remainder of this page is intentionally left blank.]
 

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

EXECUTIVE:





/s/ John Temperato
John Temperato

COMPANY:

INNOVATE BIOPHARMACEUTICALS, INC.



By: /s/ Edward J. Sitar      
Name: Edward J. Sitar
Title: Chief Financial Officer




9




9 Meters Biopharma, a Rare, Orphan and Unmet Needs GI-Focused Company, is Created with the Transformative Merger Between Innovate Biopharmaceuticals and RDD Pharma

Completes concurrent financing of ~$22 million led by Orbimed Advisors, LLC

Lead program, a proprietary long-acting GLP-1 receptor agonist, starting Phase 2 trial for
Short Bowel Syndrome (SBS), an underserved, orphan condition

Continued Phase 3 trial of larazotide; first and only drug for celiac disease

Multiple inflection points with the start of a Phase 2 SBS trial in 2H 2020
and top-line results in 2021

Raleigh, NC, April 30, 2020 – Innovate Biopharmaceuticals, Inc. (Nasdaq: INNT), today announced the completion of its previously announced merger with privately-held RDD Pharma, Ltd. Following the completion of the merger, Innovate is changing its name to 9 Meters Biopharma, Inc. (“9 Meters” or the “Company”) and will continue trading on NASDAQ with the ticker symbol NMTR, effective May 4, 2020.

In addition, the Company announced the signing of approximately $22 million in new financing, led by Orbimed Advisors, LLC, and the signing of the previously announced merger with Naia Rare Diseases, a company developing a proprietary long acting GLP-1 for the treatment of Short Bowel Syndrome. In the financing the Company will issue units consisting of preferred stock and warrants, at a price of $0.5894 per unit, on an as converted to common stock basis. The combined Company will be focused on developing urgently needed treatments for patients with rare, orphan diseases and unmet needs in GI. The combined Company will have two late-stage lead assets funded to their next key inflection points, which include the initiation of a Phase 2 trial in short bowel syndrome in 2H 2020 with top-line results expected in 2021, and the receipt of top-line results for an ongoing Phase 3 trial in celiac disease in 2021.

“9 Meters Biopharma plans to deliver meaningful science and treatments for patients and providers which will translate into multiple inflection points for investors. This includes a novel approach with the first and only long-acting GLP-1 receptor agonist for the treatment of short bowel syndrome, and the first-ever drug in a Phase 3 trial for celiac disease,” said John Temperato, President & Chief Executive Officer of 9 Meters.

Mark Pimentel, M.D. FRCPC, Director of the Gastrointestinal Motility Program and Laboratory and Executive Director of the Medically Associated Science and Technology (MAST) program at Cedars-Sinai Medical Center added, "People living with short bowel syndrome have unmet motility needs and this long-acting GLP-1 agonist is one of the only compounds in development to directly address these by potentially allowing for elimination of parenteral nutrition and an improvement in quality of life.”

Benjamin Lebwohl, MD, MS, Louis and Gloria Flanzer Scholar at the Columbia University Medical Center and Director of Clinical Research at The Celiac Disease Center at Columbia University commented, “It has become abundantly clear that there has been a rising incidence of celiac disease and an increasing recognition of the difficulties of strict gluten avoidance with an impact on long-term outcomes in people with this condition, affecting health and quality of life. Though the gluten-free diet is effective, its challenges and limitations pose a significant unmet need in this population.”


 
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The Board of Directors has extensive industry experience and includes Mark Sirgo, PharmD former CEO of BioDelivery Sciences (Nasdaq:BDSI) and board member of Salix Pharmaceuticals, as Chairman of the Board, Nissim Darvish, M.D., Ph.D., Senior Managing Director of OrbiMed Advisors, Lorin Johnson, Ph.D., founder of Salix Pharmaceuticals and Sandeep Laumas, M.D., former Chairman of Innovate.

9 Meters management team is composed of industry veterans who bring an established track record of in-licensing, developing and commercializing multi-billion-dollar assets in gastroenterology. The executive team is led by John Temperato, President & Chief Executive Officer and member of the Board of Directors, and also includes Edward J. Sitar, Chief Financial Officer, Patrick Griffin, M.D. FACP, Chief Medical Officer, Nir Barak M.D., Senior Vice President of Clinical Affairs and Sireesh Appajosyula, PharmD, Senior Vice President of Corporate Development & Operations. The Company will be headquartered in Raleigh, NC.

9 Meters BioPharma will host its first virtual “R&D Day” for analysts and investors from 1:00 pm to 2:30 pm EDT on May 13, 2020. The virtual R&D Day will include presentations from John Temperato, CEO,  Mark Pimentel, M.D. FRCPC and Benjamin Lebwohl, M.D., M.S. with a focus on the Company’s clinical development pipeline. The webcast will be available under “Events & Presentations” in the Investors section of the 9 Meters website www.9meters.com.

William Blair & Company, L.L.C. acted as sole lead placement agent for the concurrent capital raise.
GP Nurmenkari, Inc., National Securities, Westpark Capital, and Wynston Hill Capital acted as co-placement agents in connection with the concurrent financing. Sheppard, Mullin, Richter & Hampton LLP and Agmon & Co. Rosenberg Hacohen & Co. served as legal counsel to Innovate. Wyrick Robbins Yates & Ponton LLP and Shibolet & Co. served as legal counsel to RDD.
Conference Call and Webcast
Management will host a conference call on Monday, May 4
th at 08:30 AM EDT for investors regarding this announcement with details as follows:
Conference Call and Webcast Details:
Date: May 4, 2020

Time: 08:30 AM EDT
Toll-free: 877-407-9716
International: 201-493-6779
Webcast URL:
http://public.viavid.com/index.php?id=139683
The archived webcast will be available on the Investors section of the 9 Meters website.
About 9 Meters Biopharma
9 Meters Biopharma, Inc. is a rare, orphan and unmet needs focused GI company. The Company is advancing NM-002, a proprietary long-acting GLP-1 agonist into Phase 2 trial for Short Bowel Syndrome (SBS), a rare, orphan disease, as well as larazotide, a Phase 3 tight junction regulator being evaluated for patient-reported symptom improvement in non-responsive celiac disease.
For more information, please visit www.9meters.com.

Forward-looking Statements
This press release includes forward-looking statements based upon the Company’s current expectations. Forward-looking statements involve risks and uncertainties, and include, but are not limited to, the potential effects of the ongoing coronavirus outbreak and related mitigation efforts on the Company's clinical, financial and operational activities; the Company's continued listing on Nasdaq; expectations regarding future financings; the future operations of the Company; the nature, strategy and focus of the

 
2
 
 
 
 






Company; the development and commercial potential and potential benefits of any product candidates of the Company; anticipated preclinical and clinical drug development activities and related timelines, including the expected timing for data and other clinical and preclinical results; the Company having sufficient resources to advance its pipeline; and any other statements that are not historical fact. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation: (i) uncertainties associated with the clinical development and regulatory approval of product candidates; (ii) risks related to the inability of the Company to obtain sufficient additional capital to continue to advance these product candidates and its preclinical programs; (iii) uncertainties in obtaining successful clinical results for product candidates and unexpected costs that may result therefrom; (iv) risks related to the failure to realize any value from product candidates and preclinical programs being developed and anticipated to be developed in light of inherent risks and difficulties involved in successfully bringing product candidates to market; (v) the the impact of COVID-19 on our operations, clinical trials or proposed merger and future financings and (vi) risks associated with the possible failure to realize certain anticipated benefits of the proposed Merger and the Naia acquisition, including with respect to future financial and operating results. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties. These and other risks and uncertainties are more fully described in periodic filings with the SEC, including the factors described in the section entitled "Risk Factors" in Innovate Biopharmaeuticals. Inc. Annual Report on Form 10-K for the year ended December 31, 2019 and in other filings that Innovate has made and future filings the Company will make with the SEC. You should not place undue reliance on these forward-looking statements, which are made only as of the date hereof or as of the dates indicated in the forward-looking statements. The company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

Corporate contact
Edward J. Sitar
Chief Financial Officer
9 Meters BioPharma, Inc.
investor-relations@9meters.com
www.9meters.com

Media contact
Amy Jobe, Ph.D.
LifeSci Communications, LLC
ajobe@lifescicomms.com
315-879-8192

Investor contact
Corey Davis, PhD
LifeSci Advisors, LLC
cdavis@lifesciadvisors.com
212-915-2577


# # #


 
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9 Meters Biopharma, Inc Announces the Closing of $22.5 Million Private Placement Funding


Raleigh, NC, May 4 2020 - 9 Meters Biopharma, Inc (Nasdaq: NMTR), today announced today announced that it has closed a private placement with existing and new investors to raise $22.5 million. The funding provides the capital for the soon to be launched Phase 1B/2A study for the first and only long-acting GLP-1 receptor agonist for the treatment of short bowel syndrome, and the top-line readout for the first-ever drug in a Phase 3 trial for celiac disease. The private placement was led Orbimed Advisors, LLC.

The private placement consists of 382,783 units, at a price of $58.94 per unit. Each unit includes (i) one share of non-voting Series A convertible preferred stock, and (ii) one immediately-exercisable warrant to purchase one share of non-voting Series A convertible preferred stock at an exercise price of $58.94 per preferred share. Upon shareholder approval each share of non-voting Series A convertible preferred stock will convert into 100 shares of common stock, provided that a holder may opt out of automatic conversion, only to the extent such holder beneficially owns more than 4.99% of the outstanding shares of common stock of 9 Meters. The $58.94 unit price was determined using a 10-day volume weighted average price (VWAP) of the Company’s shares prior to entering into definitive agreements and pricing the transaction. The conversion is expected to take place within 60 days.

William Blair & Company, L.L.C. acted as lead placement agent. Intuitive Venture Partners acted as a private placement advisor.

The securities to be sold in this private placement have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or applicable state securities laws, and accordingly may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable state securities laws. The Company has agreed to file a registration statement with the Securities and Exchange Commission (the "SEC") registering the resale of the shares of common stock issuable upon the conversion of the Series A convertible preferred stock, and the common stock issuable upon the exercise of the warrants issued in this private placement.

This press release does not constitute an offer to sell or the solicitation of an offer to buy the securities, nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such state. Any offering of the securities under the resale registration statement will only be by means of a prospectus.

About 9 Meters Biopharma
9 Meters Biopharma, Inc. is a rare, orphan and unmet needs focused GI company. The Company is advancing NM-002, a proprietary long-acting GLP-1 agonist into Phase 2 trial for Short Bowel Syndrome (SBS), a rare, orphan disease, as well as larazotide, a Phase 3 tight junction regulator being evaluated for patient-reported symptom improvement in non-responsive celiac disease. For more information, please visit www.9meters.com.

Forward-looking Statements
This press release includes forward-looking statements based upon the Company’s current expectations. Forward-looking statements involve risks and uncertainties, and include, but are not limited to, the potential effects of the ongoing coronavirus outbreak and related mitigation efforts on the Company's








clinical, financial and operational activities; the Company's continued listing on Nasdaq; expectations regarding future financings; the future operations of the Company; the nature, strategy and focus of the Company; the development and commercial potential and potential benefits of any product candidates of the Company; anticipated preclinical and clinical drug development activities and related timelines, including the expected timing for data and other clinical and preclinical results; the Company having sufficient resources to advance its pipeline; and any other statements that are not historical fact. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation: (i) uncertainties associated with the clinical development and regulatory approval of product candidates; (ii) risks related to the inability of the Company to obtain sufficient additional capital to continue to advance these product candidates and its preclinical programs; (iii) uncertainties in obtaining successful clinical results for product candidates and unexpected costs that may result therefrom; (iv) risks related to the failure to realize any value from product candidates and preclinical programs being developed and anticipated to be developed in light of inherent risks and difficulties involved in successfully bringing product candidates to market; (v) the the impact of COVID-19 on our operations, clinical trials or proposed merger and future financings and (vi) risks associated with the possible failure to realize certain anticipated benefits of the proposed Merger, including with respect to future financial and operating results. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties. These and other risks and uncertainties are more fully described in periodic filings with the SEC, including the factors described in the section entitled "Risk Factors" in Innovate Biopharmaceuticals. Inc. Annual Report on Form 10-K for the year ended December 31, 2019 and in other filings that Innovate has made and future filings the Company will make with the SEC. You should not place undue reliance on these forward-looking statements, which are made only as of the date hereof or as of the dates indicated in the forward-looking statements. The company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

Corporate contact
Edward J. Sitar
Chief Financial Officer
9 Meters BioPharma, Inc.
investor-relations@9meters.com
www.9meters.com

Media contact
Amy Jobe, Ph.D.
LifeSci Communications, LLC
ajobe@lifescicomms.com
315-879-8192

Investor contact
Corey Davis, PhD
LifeSci Advisors, LLC
cdavis@lifesciadvisors.com
212-915-2577







A New Champion in GI With A One Tract Mind Focused on Rare, Orphan & Unmet Needs April 2020


 
Forward Looking Statements This presentation includes forward-looking statements including, but not limited to, statements related to our operations and business strategy and the development of drug candidates. The forward-looking statements contained in this press release are based on management’s current expectations and are subject to substantial risks, uncertainty and changes in circumstances. Actual results may differ materially from those expressed by these expectations due to risks and uncertainties, including, among others, those related to our ability to obtain additional capital on favorable terms to us, or at all, the success, timing and cost of our drug development program and our ongoing or future clinical trials, the lengthy and unpredictable nature of the drug approval process, our ability to commercialize our product candidates if approved, statements about the structure, timing and completion of the proposed Merger, the Company’s ability to complete the concurrent capital raise with the merger and the ability of the Company to close the merger and integrate the two companies. These risks and uncertainties include, but may not be limited to, those described in our Form 10-K for the year ended December 31, 2018, our Form 10-Q for the quarter ended September 30, 2019, and in any subsequent filings with the SEC. Forward-looking statements speak only as of the date of this presentation and we undertakenoobligationtoreviewor update any forward-looking statement except as may be required by applicable law. 2


 
Summary of Key Merger Terms • All stock merger between RDD Pharma Ltd. and Innovate Biopharmaceuticals, Inc. • Post merger closing, the company will change its name to 9 Meters Biopharma, Inc. (NMTR) Deal Terms • Acquisition of Naia Rare Diseases for cash and equity consideration soon after • Transactions expected to close in early 2020 Concurrent Private • Orbimed will act as lead investor; term sheet negotiated Placement • Existing investors of RDD & INNT committed for $10 - $12 million, up to $25 million financing • Post-merger Board of Directors: Mark Sirgo, PharmD (Chair), John Temperato (CEO), Corporate Nissim Darvish, M.D., Ph.D., Lorin Johnson, Ph.D. and Steve Laumas, M.D. Organization • Headquarters: Research Triangle Park, NC 3


 
Investment Highlights: A Powerful Combination NASDAQ listed company focused on rare, orphan and unmet needs in gastrointestinal disorders NM-002: Novel therapeutic approach for Short Bowel Syndrome, an underserved, debilitating orphan disease with multiple near-term data read-outs Larazotide: First drug to move to into a Phase 3 trial in Celiac Disease with readout in 2021 Focused on increasing shareholder value by creating solutions for GI diseases with high unmet needs Leading institutional investor support 4


 
Board of Directors* Mark Sirgo, PharmD Chairman John Temperato CEO & Director Nissim Darvish, MD, PhD Director Lorin Johnson, PhD Director Steve Laumas, MD Director * *Ongoing Board after merger close 5


 
Diverse Pipeline Led by Programs in Celiac Disease and Short Bowel Syndrome Program Class (Route) Indication Type R & D Phase 1 Phase 2 Phase 3 Rights Next Update Tight Junction Topline readout Celiac Larazotide Regulator NCEPhase 3 Ongoing Global Phase 3 CeD study Disease (Oral; Gut Restricted)  2H’21 NM-002 Initiate Phase 1b/2a Long-Acting GLP-1 Short Bowel (Formerly NCEPhase 1b/2a Orphan (US) Global SBS Study (Injectable) Syndrome NB-1001)  2H’20 NM-003 Indication selection of Long-Acting GLP-2 TBD Entering (Formerly NCE Global GLP-2 (Injectable) Post Merger Phase 1 NB-1002)  2H’20 NM-004 Global (excludes Indication selection of Immunomodulator TBD Orphan (US) (Formerly NCE Phase 2a Ready Asia; includes Immunomodulator (Oral; Gut Restricted) Post Merger Pediatric UC INN-108) Japan)  2H’20 Fecal NM-005 ⍺1/⍺2 Receptor Incontinence Complex Phase 1 (US)/ Orphan (EU) Phase 1 FI study (Formerly Agonist Global in Spinal 505(b)(2) Entering Phase 2b (EU) Fast Track (US)  1H’20 RDD-0315) (Intra-anal gel) Cord Injury 6


 
Multiple Inflection Points Over Next 24 Months 1H 2020 2H 2020 1H 2021 2H 2021 9 Meters Biopharma, Inc. Initiate Phase 1/2 SBS Top-line results Phase 1/2 Start Phase 3 SBS fully integrated post Study (NM-002) SBS (NM-002) Study (NM-002) mergers with Innovate and Initiate monetization of Interim look: Phase 3 Top-line larazotide Naia Rare Diseases non-core assets larazotide in Celiac Phase 3 readout Celiac R & D Investor Day Disease Disease Indication selection of GLP-2 agonist (NM-003) Initiate RoW partnering Indication selection of process in SBS (NM-002) Immunomodulator Non-dilutive financing for (NM-004) 2nd Celiac Disease Phase 3 7


 
Proforma Cap Structure Post-Merger • Shares outstanding ‒ INNT (incl. all options): ~46M ‒ RDD (newly issued shares): ~44M ‒ INNT warrants (as exercised): ~15M Fully Diluted shares: ~105M* *Does not include concurrent financing; additionally $2.85 M distributed to NAIA as part of the upfront for the acquisition not included 8


 
Short Bowel Syndrome (SBS) Novel approach using a Long-Acting GLP-1 Agonist (NM-002; Orphan Designation)


 
Short Bowel Syndrome (SBS) is a Debilitating Orphan Disease Orphan disease (orphan designation granted) with a large underserved market Affects up to 20,000 people in the U.S. with similar prevalence in Europe1,2 Normal SBS patient Length of gastrointestinal tract Length of gastrointestinal tract5 Severe disease with life changing consequences ~ 9.0 m /~ 30ft < 2.0 m /~ 6.5 ft Impaired intestinal absorption, diarrhea & metabolic complications3 Life-long dependency on Total Parenteral Nutrition (TPN) Complex parenteral support to survive with risk of life-threatening infections & extra-organimpairment4 Takeda/Shire’s GATTEX® TTM sales of $590 million Safety concerns administered under REMS program Shire acquired NPS Pharma for $5.2 billion in 2015 Sold via specialty pharmacy distribution model 1Jeppesen P. Expert Opin Orphan Drugs; 1:515-25; 2Transparency Market Research; Short Bowel Syndrome Market, 2017; 3Amiot A et al. Clin Nutr 2013;32:368–74; Boland E et al. Am J Surg 2010;200:690–3; 4Torres C. Current Paediatr 2006;16:291–7; Bielawska B. Nutrients 2017;9:466–79; Pironi L et al. Clin Nutr 2016;352:247–307; Hofstetter S et al. Curr Med Res Opin 2013;29:495–504 10


 
New Approach to SBS with Long-Acting GLP-1 Agonist Long Acting GLP-1 (exenatide) licensed from Amunix • Developed specifically for SBS patients & gastric effects • Dosing twice monthly; potentially monthly • Different from GLP-1s used in diabetes & pancreatic effects • Potentially lowers drug exposure Companies using Amunix long-acting technology in development: Lilly, Janssen, Roche, Biogen Phase 1b Study: 70 patients with diabetes; Placebo controlled, single dose ascending study – 12.5 mg to 200 mg showed no safety concerns Amunix patent portfolio covers product out to mid 2030s • GLP-1 agonist therapy slowed gut transit • Significantly reduced bowel movements • Some patients discontinued total parenteral nutrition (TPN)1 • Existing treatments including parenteral nutrition, surgical techniques and growth factors (Zorptive® (somatropin); Gattex® (teduglutide)) all have key limitations 1Kunkel, D., Basseri, B., Low, K., Lezcano, S., Soffer, E.E., Conklin, J.L., Mathur, R. and Pimentel, M., 2011. Efficacy of the glucagon-like peptide-1 agonist exenatide in the treatment of short bowel syndrome. Neurogastroenterology & Motility, 23(8), pp.739-e328. 11


 
Key Advantages of GLP-1 vs GLP-2 in SBS Long-acting GLP-1 (NM-002) GLP-2 Analogues Frequency of Dose Twice monthly; potentiallymonthly Daily injection to once-weekly forms GLP-1 class AEs mild and tolerable; potentially Safety REMS: Neoplastic growth warning (trophic) less due to lower exposure • Predicted decrease of TPN volume by > 50% • Decrease TPN volume by > ~20% Efficacy • ≥ 50% discontinuation of TPN • ~5% d/c of TPNper trials Benefits potentially within first week b/c of Onset of Action Benefits in weeks to months (GATTEX® ~ 8 weeks) GLP-1 mechanism NM-002 is a long-acting GLP-1 NCE uniquely designed to take advantage of a gastric effect in SBS patients; other GLP-1 agonists have sequence changes optimized for pancreatic effects in diabetic populations. 12


 
NM-002 GI Safety in Diabetic Patients (P1 Single-Dose Study) Gastrointestinal Side Effect 12.5 mg 25 mg 50 mg 100 mg 150 mg 200 mg PBO Overall Reported (n=8) (n=10) (n=9) (n=8) (n=9) (n=8) (n=18) (n=70) Nausea 0 1 (10%) 1 (11%) 2 (25%) 8 (89%) 5 (63%) 2 (11%) 19 (27%) Dyspepsia 0 0 0 1 (13%) 1 (11%) 1 (13%) 0 3 (4%) Vomiting 0 0 0 1 (13%) 4 (44%) 4 (50%) 1 (6%) 10 (14%) Constipation 0 0 0 0 3 (33%) 0 0 3 (4%) Eructation (Belching) 0 0 0 0 2 (22%) 1 (13%) 0 3 (4%) Diarrhea 0 0 0 0 1 (11%) 0 3 (17%) 4 (6%) Epigastric Discomfort 0 0 0 0 1 (11%) 2 (25%) 0 3 (4%) There were no serious adverse events reported and no patients were withdrawn from the study due to adverse events. The majority of adverse events (173 of 227 [76%]) were mild (Grade 1) in severity. No adverse events of Grade 3 or greater (severe or above) were reported during the study. Source: Cleleand, J et. al. Diabetologia (2012) 55:[Suppl1]S1–S538; Abstract #821. pp. s338-339; Data on file 13


 
Proof-of-Concept of Exenatide (GLP-1 agonist) in SBS Patients • Five patients with SBS based on <90 cm of small bowel and clinical evidence of nutritional deprivation selected • Each patient started on 5µg dose of exenatide BID and continued over the following month, baseline parameters repeated • The subjects consisted of four males and one female, aged 46–69 years • At baseline, all had severe diarrhea (from 6 to 15 bowel movements per day) often within minutes of eating • Post exenatide, all patients had improvement in bowel frequency and form and no longer meal-related • Total parenteral nutrition was stopped successfully in three patients • Antroduodenal manometry revealed continuous low amplitude gastric contractions during fasting which completely normalized with exenatide 14


 
Phase 1b/2a SBS Proposed Clinical Study Design 7 Day Safety 7 Day Safety 7 Day Safety Assessment Assessment Cohort 2 Assessment Cohort 1 (50 mg) (100 mg) n= 2 to 5 n=2 to 5 Cohort 1 (50 mg) Total n = 12 to 30 Screening n= 2 to 5 Cohort 2 (100 mg) n=2 to 5 Cohort 3 Cohort 3 (150 mg) (150 mg) n=2 to 5 n=2 to 5 The primary objectives of the study are: • To assess the safety and tolerability of three doses of NM-002 in patients with SBS • Determine whether there is any change in urine output over two 48-hour periods post-dose (days 2-3, 4-5 and days 16-17, 18-19) compared to baseline 15


 
Comparable Deals/Companies in SBS Two companies have been acquired with GLP-2 analogues for SBS; a third public company, Zealand (NASDAQ:ZEAL), is developing a GLP-2 analogue for SBS October 2015 May 2019 August 2017 Acquires for $340 million upfront+ $470 Approved for SBS in 2012 million CVRs (2019); GLP-2 asset for Raised $78 million by August 2017 SBS in spin-off (VectivBio) Acquired NPS for $5.2 Billion Acquires post $60 million mezzanine Current Market Cap* financing in 2018 led by Novo Ventures ~$1.2 Billion (Apraglutide (GLP-2): Phase 1 complete for SBS) (Glepaglutide (GLP-2)in Phase 3 for SBS) *Mkt cap as of April 30, 2020 16


 
Celiac Disease Larazotide: Oral, Non-Absorbable, Tight-Junction Regulator


 
Celiac Disease: Autoimmune Disorder with a Genetic Link Triggered by dietary gluten • Intestinal epithelia barrier leakiness leads to “Intestinal- Inflammatory Loop” • Eventually, intestinal surface (villi) become atrophied Genetic Link • Worldwide prevalence of around 1% and on the rise1 GI Abdominal Domain Symptoms ‒ Celiac patients have a specific HLA class II gene variant2 . HLA-DQ2 (~95%) or, Abdominal Pain Abdominal Cramps . HLA-DQ8 (5%)2 Bloating Gas • Genome-Wide Assoc. Studies (GWAS) link disease to four genes involved with regulation of tight junctions3 US & EU ~1% Gluten Free Diet (GFD) is the only therapy Prevalence US ~3.2 million • Nutritional imbalances EU ~3.5 million • Cost burden to patients ROW ~15 million 1Schuppan and Dieterich, UpTo Date (2018) 2Fasano, A. Genetics of Celiac Disease ( Nov 2016) https://emedicine.medscape.com/article/1790189-overview 3 Withoff, S., Li, Y., Jonkers, I. and Wijmenga, C., 2016. Trends in Genetics, 32(5), pp.295-308 18


 
Larazotide Normalizes Intestinal Barrier in Celiac Disease Preventing Antigen Trafficking Larazotide is an 8 natural amino acid peptide which normalizes disrupted tight junctions (IFN α, IFN γ, TNF, IL 4, IL 5 and IL 21) Adapted from: Withoff, S., Li, Y., Jonkers, I. and Wijmenga, C., 2016. Understanding celiac disease by genomics. Trends in Genetics, 32(5), pp.295-308 19


 
Lack of Absorption → Unique Pharmacology as Cleaved Fragment Accumulates, it Inhibits Larazotide Brush Border Peptidase Cleaves Larazotide to a Translates to Clinically Relevant Doses 6-mer (Fragment 2) in Clinical Trials Porcine Intestine Ussing Chamber studies showed larazotide normalizes tight junctions while the addition of the 6-mer fragment inhibited larazotide activity 1 μM → 0.25 mg 2 μM → 0.5 mg Rationale For Doses Used in Phase 3 trial Hernandez L, Carlson et al.. Digestive Diseases Week 2018; SA1183 20


 
Phase 2b Celiac Disease Trial Design Inclusion Criteria 14-day 28-day Single- 28-day Single- 84-day (12-week) Screening blind Placebo blind Placebo Double-blind Treatment Phase • 18–75 years old with BMI between 16–45 kg/m2 Period Run-in Phase Run-in Phase • CeD confirmed by intestinal biopsy or capsule endoscopy w/+ serology 12 months before entry Visit 1 Visit 2 Visit 3 Visit 4 Visit 5 Visit 6 Visit 7 • Maintenance of a GFD for ≥12 consecutive months before screening Day 28 Day 0 Day 14 Day 28 Day 56 Day 84 Day 112 • Adherence to current GFD on study In-person visit Telephone visit • If at least one gluten-related symptom (diarrhea, abdominal pain, bloating, nausea) in the month before screening, and at screening, required to have Placebo ( n = 84) a qualifying score of ≥2, reflecting ‘mild discomfort’ on the CeD domains of the Gastrointestinal Symptom Rating Scale (CeD-GSRS) Larazotide Acetate 0.5 mg TID ( n = 86) Exclusion Criteria Placebo Placebo • Refractory CeD or severe CeD complications (e.g., enteropathy-associated Larazotide Acetate 1.0 mg TID ( n = 85) T-cell lymphoma) • Other chronic inflammatory GI disease (e.g., inflammatory bowel disease) Larazotide Acetate 2.0 mg TID ( n = 87) • Diabetes, or autoimmune, psychiatric, or neurological disease that could interfere with assessments • Smoking, pregnancy or breastfeeding The primary endpoint was the difference in average weekly on-treatment CeD-GSRS score • Previous exposure to larazotide acetate for each dose versus placebo, over the 12-week active treatment period. A secondary • Concomitant use of systemic or intestinal immune suppressants objective was to validate the Celiac Disease Patient Reported Outcome (CeD PRO) • Continuous antibiotics, NSAIDs, and medications that alter gastric pH or instrument as a daily measure of therapeutic effects. intestinal permeability Leffler, DA, Kelly, CP, Green, PHR et al. Gastroenterology 2015;148:1311–1319. 21


 
PRO Endpoints Show Robust Treatment Effect CeD-GSRS: CeD PRO1 Responder2 Analysis P2b Trial Primary Endpoint for Phase 2b (‘012) Primary Endpoint for Phase 3 p = 0.022 30.0% 28.6% 20.0% 14.3% ____ Treatment Effect 14.3% 10.0% % Responders* 0.0% Placebo 0.50mg Dose 0.5mg 1mg 2mg n=84 for Placebo and n=84 for 0.5 mg dose CeD GSRS1 p values 0.022 0.900 0.590 Positive Phase 2b with Statistically Significant Treatment effect > than approved IBS brands with Phase 3 PROs p Value at Therapeutic Dose (Xifaxan®, Viberzi®, Linzess®, Amitiza®, and Trulance®) 1CeD PRO Abdominal Domain is the agreed upon endpoint for phase 3 with the FDA. The CeD PRO was pre-specified & an exploratory endpoint in the Phase 2b Study 2Responder ≈Subject has 50% improvement vs. baseline CeD-PRO abdominal score (6/12 weeks) Leffler, DA, Kelly, CP, Green, PHR et al. Gastroenterology 2015;148:1311–1319 FDA Drug Labels for Xifaxan® (Salix/Bausch), Viberzi® (Allergan), Linzess® (Allergan/Ironwood), Amitiza® (Takeda/Sucampo) and Trulance® (Synergy/Salix/Bausch) 22


 
GI Safety of Larazotide in Celiac Patients (Phase 2b Study) Gastrointestinal Side Effect Reported PBO (n=84) 0.5 mg (n=85) 1 mg (n=84) 2 mg (n=87) Overall (n=256) Diarrhea 7 (8.3%) 7 (8.2%) 5 (6.0%) 8 (9.2%) 20 (7.8%) Nausea 9 (10.7%) 4 (4.7%) 7 (8.3%) 7 (8.0%) 18 (7.0%) Constipation 2 (2.4%) 3 (3.5%) 7 (8.3%) 5 (5.7%) 15 (5.9%) Abdominal pain 4 (4.8%) 1 (1.2%) 5 (6.0%) 6 (6.9%) 12 (4.7%) Abdominal pain upper 2 (2.4%) 3 (3.5%) 4 (4.8%) 2 (2.3%) 9 (3.5%) Flatulence 0 2 (2.4%) 4 (4.8%) 3 (3.4%) 9 (3.5%) Gastroesophageal reflux disease 0 2 (2.4%) 1 (1.2%) 6 (6.9%) 9 (3.5%) Abdominal distension 1 (1.2%) 2 (2.4%) 5 (6.0%) 1 (1.1%) 8 (3.1%) Vomiting 6 (7.1%) 2 (2.4%) 2 (2.4%) 3 (3.4%) 7 (2.7%) Dyspepsia 3 (3.6%) 1 (1.2%) 2 (2.4%) 2 (2.3%) 5 (2.0%) Source: Larazotide phase 2b study report; Data on file 23


 
Phase 3 Primary Endpoint: CeD PRO Validated in Phase 2b • CeD PRO Abdominal Domain is the agreed upon primary endpoint for Phase 3 with the FDA • The CeD PRO was pre-specified and an exploratory endpoint in the Phase 2b Study Thinking about your worst experience in the past 24 hours, how severe was each of the following symptoms? On the following screens, please tap a number to indicate how you Constipation felt. Patient chooses on a visual analogue scale 0-10, 10 being worst possible for following: • Abdominal Cramping • Loose Stools • Abdominal Pain • Nausea • Bloating • Vomiting • Gas • Headache • Constipation • Tiredness • Diarrhea Responder ≈Subject has 50% improvement vs. baseline CeD-PRO abdominal score (6/12 weeks) Source: Leffler, DA, Kelly, CP, Green, PHR et al. Gastroenterology 2015;148:1311–1319 24


 
Phase 3 Trial Design in Celiac Disease Screening/Eligibility Period 24-week Double-Blind Treatment Phase Day 35 Day 21 Day 1 Day 28 ± 3 Day 56 ± 3 Day 84 ± 3 Day 112 ± 3 Day 168 ± 3 Week 5 Week 3 Baseline Week 4 Week 8 Week 12 Week 16 Week 24 Visit 1 Visit 2 Visit 3 Visit 4 Visit 5 Visit 6 Visit 7 Visit 8 (End) Placebo (~n = 210) Initiate Double-Blind Study Drug on Day 1 Larazotide 0.25 mg TID (~n = 210) Randomization 1:1:1 Larazotide 0.50 mg TID (~n = 210) 01 Primary Endpoint: CeD Pro 02 Key Inclusion Criteria Similar to 03 Phase 3 De-Risked Based on Phase 2b Abdominal Domain Score Phase 2b Learnings Study sites: >100 US sites currently Gluten free diet for 12 months, but still Exclude subjects likely to be placebo responders recruiting experiencing abdominal symptoms Enriched design via inclusion criteria targets patients with greater severity to increase treatment effect 25


 
Investment Highlights: A Powerful Combination NASDAQ listed company focused on rare, orphan and unmet needs in gastrointestinal disorders NM-002: Novel therapeutic approach for Short Bowel Syndrome, an underserved, debilitating orphan disease with multiple near-term data read-outs Larazotide: First drug to move to into a Phase 3 trial in Celiac Disease with readout in 2021 Focused on increasing shareholder value by creating solutions for GI diseases with high unmet needs Leading institutional investor support 26


 
Thank You John Temperato President & CEO jtemperato@9meters.com Edward Sitar Chief Financial Officer esitar@9meters.com Sireesh Appajosyula, PharmD SVP, Corporate Development & Operations sireesh@9meters.com