|
Delaware
|
| |
2834
|
| |
20-1295171
|
|
|
(State or other jurisdiction
of incorporation or organization) |
| |
(Primary Standard Industrial
Classification Code Number) |
| |
(I.R.S. Employer
Identification Number)
|
|
|
Yvan-Claude Pierre, Esq.
Michael Sanders, Esq. Daniel I. Goldberg, Esq. Reed Smith LLP 599 Lexington Avenue New York, New York 10022 (212) 521-5400 (212) 521-5450 — Facsimile |
| |
Anthony J. Marsico, Esq.
Greenberg Traurig, LLP MetLife Building 200 Park Avenue New York, NY 10166 (212) 801-9200 (212) 801-6400 — Facsimile |
|
|
Large accelerated filer
|
| | ☐ | | | Accelerated filer | | | ☐ | |
| Non-accelerated filer | | | ☐ (Do not check if a smaller reporting company) | | |
Smaller reporting company
|
| | ☒ | |
Title of each class of securities to be registered
|
| |
Proposed Maximum
Aggregate Offering Price (1) |
| |
Amount of
Registration Fee |
| ||||||
Common stock, par value $0.001 per share
(2)
|
| | | $ | 25,116,000 | | | | | $ | 2,918.48 | | |
Representative’s Warrants to Purchase Common Stock
(3)
|
| | | | — | | | | | | — | | |
Common Stock Underlying Representative’s Warrants
(2)(4)
|
| | | $ | 1,092,000 | | | | | $ | 126.89 | | |
Total Registration Fee
|
| | | $ | 26,208,000 | | | | | $ | 3,045.37 (5) | | |
| | | | | | | |
| PRELIMINARY PROSPECTUS | | |
SUBJECT TO COMPLETION
|
| |
DATED MAY 8, 2015
|
|
| | | | | | | | |
| | |
Per Share
|
| |
Total
|
| ||||||
Public offering price
|
| | | $ | | | | | $ | | | ||
Underwriting discounts and commissions
(1)
|
| | | $ | | | | | $ | | | ||
Offering proceeds to us, before expenses
|
| | | $ | | | | | $ | | | |
| Aegis Capital Corp | | |
Chardan Capital Markets, LLC
|
|
| | |
Page
|
||
| | | | 1 | |
| | | | 11 | |
| | | | 42 | |
| | | | 44 | |
| | | | 45 | |
| | | | 46 | |
| | | | 48 | |
| | | | 50 | |
| | | | 70 | |
| | | | 98 | |
| | | | 108 | |
| | | | 127 | |
| | | | 129 | |
| | | | 131 | |
| | | | 134 | |
| | | | 137 | |
| | | | 145 | |
| | | | 145 | |
| | | | 145 | |
| | | | F-1 |
| | |
Three Months Ended
March 31, |
| |
Years ended December 31,
|
| ||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||
| | |
(Unaudited)
|
| | | |||||||||||||||||||
Statement of Operations Data: | | | | | | ||||||||||||||||||||
Operating costs and expenses: | | | | | | ||||||||||||||||||||
Research and development
|
| | | $ | 31,460 | | | | | $ | 5,850 | | | | | $ | 113,931 | | | | | $ | 461,551 | | |
Patent costs
|
| | | | 62,274 | | | | | | 36,782 | | | | | | 197,731 | | | | | | 292,358 | | |
General and administrative
|
| | | | 1,302,565 | | | | | | 243,909 | | | | | | 1,969,960 | | | | | | 1,356,888 | | |
Total operating expenses
|
| | | | 1,396,299 | | | | | | 286,541 | | | | | | 2,281,622 | | | | | | 2,110,797 | | |
Loss from operations
|
| | | | (1,396,299 ) | | | | | | (286,541 ) | | | | | | (2,281,622 ) | | | | | | (2,110,797 ) | | |
Other expense (income): | | | | | | ||||||||||||||||||||
Interest income
|
| | | | (2,204 ) | | | | | | (204 ) | | | | | | (525 ) | | | | | | (1,677 ) | | |
Interest expense
|
| | | | — | | | | | | — | | | | | | 213,516 | | | | | | 6,076 | | |
Other income
|
| | | | (7,091 ) | | | | | | — | | | | | | (21,148 ) | | | | | | (19,365 ) | | |
Total other expense (income)
|
| | | | (9,295 ) | | | | | | (204 ) | | | | | | 191,843 | | | | | | (14,966 ) | | |
Net loss
|
| | | | (1,387,004 ) | | | | | | (286,337 ) | | | | | | (2,473,465 ) | | | | | | (2,095,831 ) | | |
Cumulative preferred stock dividends
|
| | | | 149,283 | | | | | | 147,445 | | | | | | 589,462 | | | | | | 547,303 | | |
Accretion of discount on Series C preferred
stock |
| | | | 31,818 | | | | | | — | | | | | | 8,580 | | | | | | — | | |
Net loss applicable to common stockholders
|
| | | $ | (1,568,105 ) | | | | | $ | (433,782 ) | | | | | $ | (3,071,507 ) | | | | | $ | (2,643,134 ) | | |
Net loss per share, basic and diluted
|
| | | $ | (3.37 ) | | | | | $ | (0.96 ) | | | | | $ | (6.79 ) | | | | | $ | (5.86 ) | | |
Weighted average shares outstanding, basic and diluted
|
| | | | 465,384 | | | | | | 451,398 | | | | | | 452,509 | | | | | | 451,398 | | |
Pro forma information (1) | | | | | | ||||||||||||||||||||
Pro forma net loss
|
| | | $ | (1,387,004 ) | | | | | $ | (286,337 ) | | | | | $ | (2,473,465 ) | | | | | $ | (2,095,831 ) | | |
Pro forma net loss per share, basic and diluted (unaudited)
|
| | | $ | (0.37 ) | | | | | $ | (0.09 ) | | | | | $ | (0.73 ) | | | | | $ | (0.64 ) | | |
Pro forma weighted average shares outstanding, basic and diluted
|
| | | | 3,788,061 | | | | | | 3,355,752 | | | | | | 3,384,952 | | | | | | 3,276,426 | | |
| | |
March 31, 2015
|
||||||||||||||
| | |
Actual
|
| |
Pro Forma
|
| |
Pro Forma
As Adjusted (1) |
||||||||
| | |
(Unaudited)
|
||||||||||||||
Balance Sheet Data: | | | | | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 1,975,313 | | | | | $ | 1,975,313 | | | | | $ | 19,393,713 |
Working Capital
|
| | | | 808,628 | | | | | | 808,628 | | | | | | 18,227,028 |
Total assets
|
| | | | 2,343,729 | | | | | | 2,343,729 | | | | | | 19,762,129 |
Accounts payable, accrued expenses and other liabilities
|
| | | | 1,223,038 | | | | | | 1,223,038 | | | | | | 1,223,038 |
Preferred stock subject to redemption
|
| | | | 16,384,715 | | | | | | — | | | | | | — |
Common stock and preferred stock
|
| | | | 9,353 | | | | | | 3,788 | | | | | | 5,608 |
Additional paid-in capital
|
| | | | 4,199,047 | | | | | | 20,589,327 | | | | | | 38,005,907 |
Accumulated deficit
|
| | | | (19,472,424 ) | | | | | | (19,472,424 ) | | | | | | (19,472,424 ) |
Total stockholders’ equity (deficit)
|
| | | | (15,264,024 ) | | | | | | 1,120,691 | | | | | | 18,539,091 |
| | |
As of March 31, 2015
|
| ||||||||||||||||||
| | |
Actual
|
| |
Pro Forma
|
| |
Pro Forma
As Adjusted (1) |
| ||||||||||||
| | | | | | | | |
(Unaudited)
|
| | | | | | | ||||||
Cash and cash equivalents
|
| | | $ | 1,975,313 | | | | | $ | 1,975,313 | | | | | $ | 19,393,713 | | | |||
Long-term debt (inclusive of current portion)
|
| | | | — | | | | | | — | | | |
|
| ||||||
Preferred stock subject to redemption, $0.001 par value, 16,378,646 shares authorized, 14,869,662 shares issued and outstanding, actual; no shares issued and outstanding, pro forma; and no shares authorized, no shares issued and outstanding, pro forma as adjusted
|
| | | | 16,384,715 | | | | | | — | | | |
|
| ||||||
Preferred stock, $0.001 par value, 50,000,000 shares
authorized, issued and outstanding, actual; 8,887,500 shares authorized, no shares issued and outstanding, pro forma; and 5,000,000 shares authorized, no shares issued and outstanding, pro forma as adjusted |
| | | | 8,888 | | | | | | — | | | |
|
| ||||||
Common stock, $0.001 par value, 50,000,000 shares authorized, 465,384 shares issued and outstanding, actual; 50,000,000 shares authorized, 3,788,060 shares issued and outstanding, pro forma; and 25,000,000 shares authorized, 5,608,060 shares issued and outstanding, pro forma as adjusted
|
| | | | 465 | | | | | | 3,788 | | | | | | 5,608 | | | |||
Additional paid-in capital
|
| | | | 4,199,047 | | | | | | 20,589,327 | | | | | | 38,005,907 | | | |||
Accumulated deficit
|
| | | | (19,472,424 ) | | | | | | (19,472,424 ) | | | | | | (19,472,424 ) | | | |||
Total stockholders’ equity (deficit)
|
| | | | (15,264,024 ) | | | | | | 1,120,691 | | | | | | 18,539,091 | | | |||
Total capitalization
|
| | | $ | 1,120,691 | | | | | $ | 1,120,691 | | | | | $ | 18,539,091 | | | |||
|
|
Assumed initial public offering price per share
|
| | | | | | | | | $ | 11.00 | | | ||
|
Historical net tangible book value per share as of March 31, 2015
|
| | | $ | 2.41 | | | | | | | | | ||
|
Decrease per share due to the conversion of all shares of preferred stock
|
| | | $ | (2.11 ) | | | | | | | | | ||
|
Pro forma net tangible book value per share as of March 31, 2015
|
| | | $ | 0.30 | | | | | | | | | ||
|
Increase per share attributable to new investors
|
| | | $ | 3.01 | | | | | | | | | ||
|
Pro forma net tangible book value per share after this offering
|
| | | | | | | | | | 3.31 | | | ||
|
Dilution per share to new investors
|
| | | | | | | | | $ | 7.69 | | | ||
|
| | |
Shares Purchased
|
| |
Total Consideration
|
| |
Average Price
Per Share |
| ||||||||||||||||||||||||||
| | |
Number
|
| |
Percentage
|
| |
Amount
|
| |
Percentage
|
| |||||||||||||||||||||||
Existing stockholders
|
| | | | 3,788,060 | | | | | | 67.55 % | | | | | $ | 19,562,514 | | | | | | 49.42 % | | | | | $ | 5.16 | | | |||||
New Investors
|
| | | | 1,820,000 | | | | | | 32.45 % | | | | | $ | 20,020,000 | | | | | | 50.58 % | | | | | $ | 11.00 | | | |||||
Total
|
| | | | 5,608,060 | | | | | | 100.00 % | | | | | $ | 39,582,514 | | | | | | 100.00 % | | | | | $ | 7.06 | | | |||||
|
| | |
Three months ended March 31, 2015
|
| |||||||||
| | |
Low
|
| |
High
|
| ||||||
Expected dividend yield
|
| | | | 0.00 % | | | | | | 0.00 % | | |
Expected stock-price volatility
|
| | | | 51.45 % | | | | | | 65.06 % | | |
Risk-free interest rate
|
| | | | 0.77 % | | | | | | 2.00 % | | |
Expected term of options
|
| | | | 5 | | | | | | 10 | | |
Stock price
|
| | | $ | 5.86 | | | | | $ | 5.86 | | |
|
Year
|
| |
Share Class
|
| |
Price per Share
|
|
|
2005
|
| |
Common Stock
(a)
|
| |
$1.79
|
|
|
2006
|
| |
Series A-2 Preferred Stock
(a)(b)
|
| |
$0.40
|
|
|
2008 – 2009
|
| |
Series A-3 Preferred Stock
(b)
|
| |
$0.62
|
|
|
2010 – 2013
|
| |
Series B Preferred Stock
(b)
|
| |
$1.19
|
|
|
2014
|
| |
Series C Preferred Stock
(b)
|
| |
$1.30
|
|
| | |
Valuation Date
|
| |||||||||||||||
| | |
November 7, 2013
|
| |
July 31, 2012
|
| |
December 31, 2010
|
| |||||||||
Risk-free rate
|
| | | | 0.55 % | | | | | | 0.57 % | | | | | | 2.01 % | | |
Maturity (years)
|
| | | | 3.00 | | | | | | 4.00 | | | | | | 5.00 | | |
Volatility
|
| | | | 58.00 % | | | | | | 61.00 % | | | | | | 61.00 % | | |
Grant Date
|
| |
Number of Common
Shares Underlying Options Granted |
| |
Exercise Price
per Common Share |
| |
Estimated Fair Value
per Share of Common Stock |
| |
Intrinsic Value
Option |
| ||||||
2005
|
| | | | 58,321 | | | |
$0.07
|
| | | $ | 1.79 | | | |
$1.72
|
|
2009
|
| | | | 60,559 | | | |
$0.72 – $0.79
|
| | | $ | 4.43 | | | |
$3.71 – $3.64
|
|
2011
|
| | | | 33,846 | | | |
$1.00
|
| | | $ | 1.00 | | | |
$0.00
|
|
2012
|
| | | | 60,019 | | | |
$1.14
|
| | | $ | 1.14 | | | |
$0.00
|
|
2013
|
| | | | 100,000 | | | |
$1.14 – $1.30
|
| | | $ | 1.14 | | | |
$0.00
|
|
2014
|
| | | | 1,626,740 | | | |
$5.86 – $13.23
|
| | | $ | 5.86 | | | |
$0.00
|
|
| | |
Options
|
| |
Weighted Average
Exercise Price |
| ||||||||
Outstanding at December 31, 2014
|
| | | | 1,788,717 | | | | | $ | 7.128 | | | ||
Granted
|
| | | | — | | | | | | — | | | ||
Exercised/Expired/Forfeited
|
| | | | (918 ) | | | | | | (5.863 ) | | | ||
Outstanding at March 31, 2015
|
| | | | 1,787,799 | | | | | $ | 7.131 | | | ||
Exercisable at March 31, 2015
|
| | | | 208,918 | | | | | $ | 4.419 | | | ||
Expected to be vested
|
| | | | 1,578,881 | | | | | $ | 7.490 | | | ||
|
| | |
For the Three Months Ended March 31,
|
| |
Dollar
Change |
| |
Percentage
Change |
| |||||||||||||||||||
| | |
2015
|
| |
2014
|
| ||||||||||||||||||||||
Statement of Operations Data: | | | | | | ||||||||||||||||||||||||
Operating costs and expenses | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Research and development
|
| | | $ | 31,460 | | | | | $ | 5,850 | | | | | $ | 25,610 | | | | | | 438 % | | | ||||
Patent costs
|
| | | | 62,274 | | | | | | 36,782 | | | | | | 25,492 | | | | | | 69 % | | | ||||
General and administrative
|
| | | | 1,302,565 | | | | | | 243,909 | | | | | | 1,058,656 | | | | | | 434 % | | | ||||
Total operating expenses
|
| | | | 1,396,299 | | | | | | 286,541 | | | | | | 1,109,758 | | | | | | 387 % | | | ||||
Loss from operations
|
| | | | (1,396,299 ) | | | | | | (286,541 ) | | | | | | (1,109,758 ) | | | | | | 387 % | | | ||||
Other income: | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Interest income
|
| | | | 2,204 | | | | | | 204 | | | | | | 2,000 | | | | | | 980 % | | | ||||
Other income
|
| | | | 7,091 | | | | | | — | | | | | | 7,091 | | | | | | 100 % | | | ||||
Total other income
|
| | | | 9,295 | | | | | | 204 | | | | | | 9,091 | | | | | | 4,456 % | | | ||||
Net Loss
|
| | | $ | (1,387,004 ) | | | | | $ | (286,337 ) | | | | | $ | (1,100,667 ) | | | | | | 384 % | | | ||||
|
| | |
For the Year Ended December 31,
|
| |
Dollar
Change |
| |
Percentage
Change |
| |||||||||||||||||||
| | |
2014
|
| |
2013
|
| ||||||||||||||||||||||
Statement of Operations Data: | | | | | | ||||||||||||||||||||||||
Operating costs and expenses | | | | ||||||||||||||||||||||||||
Research and development
|
| | | $ | 113,931 | | | | | $ | 461,551 | | | | | $ | (347,620 ) | | | | | | (75 )% | | | ||||
Patent costs
|
| | | | 197,731 | | | | | | 292,358 | | | | | | (94,627 ) | | | | | | (32 )% | | | ||||
General and administrative
|
| | | | 1,969,960 | | | | | | 1,356,888 | | | | | | 613,072 | | | | | | 45 % | | | ||||
Total operating expenses
|
| | | | 2,281,622 | | | | | | 2,110,797 | | | | | | 170,825 | | | | | | 8 % | | | ||||
Loss from operations
|
| | | | (2,281,622 ) | | | | | | (2,110,797 ) | | | | | | (170,825 ) | | | | | | 8 % | | | ||||
Other expense (income): | | | | | | ||||||||||||||||||||||||
Interest income
|
| | | | (525 ) | | | | | | (1,677 ) | | | | | | 1,152 | | | | | | (69 )% | | | ||||
Interest expense
|
| | | | 213,516 | | | | | | 6,076 | | | | | | 207,440 | | | | | | 3,414 % | | | ||||
Other income
|
| | | | (21,148 ) | | | | | | (19,365 ) | | | | | | (1,783 ) | | | | | | 9 % | | | ||||
Total other expense (income)
|
| | | | 191,843 | | | | | | (14,966 ) | | | | | | 206,809 | | | | | | (1,382 )% | | | ||||
Net Loss
|
| | | $ | (2,473,465 ) | | | | | $ | (2,095,831 ) | | | | | $ | (377,634 ) | | | | | | 18 % | | | ||||
|
| | |
For the Three Months Ended March 31,
|
| |
For the Year Ended December 31,
|
| ||||||||||||||||||||||
| | |
2015
|
| |
2014
|
| |
2014
|
| |
2013
|
| ||||||||||||||||
Net cash used in: | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
Operating activities
|
| | | $ | (618,526 ) | | | | | $ | (289,072 ) | | | | | $ | (1,157,385 ) | | | | | $ | (1,956,914 ) | | | ||||
Investing activities
|
| | | | — | | | | | | (1,166 ) | | | | | | (1,166 ) | | | | | | (8,692 ) | | | ||||
Financing activities
|
| | | | (153,409 ) | | | | | | (9,000 ) | | | | | | 3,457,573 | | | | | | 643,995 | | | ||||
Net decrease in cash
|
| | | $ | (771,935 ) | | | | | $ | (299,238 ) | | | | | $ | 2,299,022 | | | | | $ | (1,321,611 ) | | | ||||
|
Name
|
| |
Age
|
| |
Position(s)
|
|
Executive Officers: | | | | ||||
Michael D. Step | | |
55
|
| | Chief Executive Officer and Director | |
Samuel O. Lynn | | |
47
|
| | Chief Financial Officer | |
Andrew J. Ritter | | |
32
|
| | President and Director | |
Ira E. Ritter | | |
65
|
| | Executive Chairman, Chief Strategic Officer and Director | |
Non-Employee Directors: | | | | ||||
Noah Doyle | | |
47
|
| | Director | |
Matthew W. Foehr | | |
42
|
| | Director | |
Paul V. Maier | | |
67
|
| | Director | |
Gerald T. Proehl | | |
56
|
| | Director | |
Name and Principal Position
|
| |
Year
|
| |
Salary
($) |
| |
Bonus
($) |
| |
Option
Awards (1) ($) |
| |
All Other
Compensation ($) |
| |
Total
($) |
| ||||||||||||||||||
Michael D. Step
Chief Executive Officer |
| | | | 2014 | | | | | $ | 90,000 | | | | | $ | — | | | | | $ | 2,332,410 | | | | | $ | — | | | | | $ | 2,422,410 | | |
Andrew J. Ritter
President |
| | | | 2014 | | | | | $ | 204,070 | | | | | $ | — | | | | | $ | 1,253,638 | | | | | $ | 7,428 | | | | | $ | 1,465,136 | | |
Ira E. Ritter
Executive Chairman and Chief Strategic Officer |
| | | | 2014 | | | | | $ | 182,922 | | | | | $ | — | | | | | $ | 1,253,638 | | | | | $ | 13,082 | | | | | $ | 1,449,642 | | |
Name
|
| |
Number of
Securities Underlying Unexercised Options Exercisable |
| |
Number of
Securities Underlying Unexercised Options Unexercisable |
| |
Option
Exercise Price ($) |
| |
Option
Expiration Date |
| ||||||||||||
Michael D. Step
|
| | | | 16,352 (1) | | | | | | 9,811 (1) | | | | | $ | 1.14 | | | | | | 8/16/2022 | | |
| | | 646,537 (2) | | | | | | — | | | | | $ | 5.86 | | | | | | 12/2/2024 | | | ||
| | | 73,377 (3) | | | | | | — | | | | | $ | 5.86 | | | | | | 12/2/2024 | | | ||
| | | — | | | | | | (4) | | | | | $ | 5.86 | | | | | | 12/2/2024 | | | ||
Andrew J. Ritter
|
| | | | 3,370 (5) | | | | | | 45,581 (5) | | | | | $ | 1.27 | | | | | | 9/25/2023 | | |
| | | 20,979 (6) | | | | | | — | | | | | $ | 5.86 | | | | | | 12/2/2024 | | | ||
| | | — | | | | | | 432,434 (7) | | | | | | (7) | | | | | | 12/2/2024 | | | ||
Ira E. Ritter
|
| | | | 3,370 (8) | | | | | | 45,581 (8) | | | | | $ | 1.27 | | | | | | 9/25/2023 | | |
| | | 20,979 (9) | | | | | | — | | | | | $ | 5.86 | | | | | | 12/2/2024 | | | ||
| | | — | | | | | | 432,434 (10) | | | | | | (10) | | | | | | 12/2/2024 | | |
Beneficial Owner
|
| |
Number of Shares
Beneficially Owned |
| |
Percentage of Common Stock
Beneficially Owned |
| ||||||||||||
|
Before Offering
|
| |
After Offering
|
| ||||||||||||||
Five Percent Stockholders | | | | | | | | | | | | | | | |||||
Javelin Venture Partners I SPV I, LLC
(1)(2)(3)
|
| | | | 645,507 | | | | | | 17.0 % | | | | | | 11.5 % | | |
Javelin Venture Partners, L.P.
(1)(2)(3)
|
| | | | 1,331,028 | | | | | | 35.1 % | | | | | | 23.7 % | | |
Stonehenge Partners LLC
(5)(6)(7)
|
| | | | 817,272 | | | | | | 21.6 % | | | | | | 14.6 % | | |
Executive Officers, Directors and Director Nominees | | | | | | | | | | | | | | | |||||
Michael D. Step
(8)
|
| | | | 738,991 | | | | | | 16.3 % | | | | | | 11.6 % | | |
Andrew J. Ritter
(6)(9)
|
| | | | 24,776 | | | | | | * | | | | | | * | | |
Ira E. Ritter
(7)(10)
|
| | | | 24,776 | | | | | | * | | | | | | * | | |
Noah Doyle
(3)(11)
|
| | | | 22,727 | | | | | | * | | | | | | * | | |
Matthew W. Foehr
|
| | | | — | | | | | | * | | | | | | * | | |
Paul V. Maier
|
| | | | — | | | | | | * | | | | | | * | | |
Gerald T. Proehl
|
| | | | — | | | | | | * | | | | | | * | | |
All current executive officers and directors as a group (8 persons)
|
| | | | 811,270 | | | | | | 17.4 % | | | | | | 12.4 % | | |
Underwriter
|
| |
Number of
Shares |
| ||||
Aegis Capital Corp
|
| |
|
| ||||
Chardan Capital Markets, LLC
|
| | | | | | | |
Barrington Research Associates, Inc.
|
| | | | | | | |
Total | | | | | 1,820,000 | | | |
|
| | |
Per
Share |
| |
Total Without
Over-Allotment Option |
| |
Total With
Over-Allotment Option |
| |||||||||
Public offering price
|
| | | $ | | | | | $ | | | | | $ | | | |||
Underwriting discount (7%)
|
| | | $ | | | | | $ | | | | | $ | | | |||
Proceeds, before expense, to us
|
| | | $ | | | | | $ | | | | | $ | | | |||
Non-accountable expense allowance (1%)
(1)
|
| | | $ | | | | | $ | | | | | $ | | | |
| | |
Page
|
||
AUDITED FINANCIAL STATEMENTS | | | | | |
| | | | F-2 | |
| | | | F-3 | |
| | | | F-4 | |
| | | | F-5 | |
| | | | F-6 | |
| | | | F-7 |
| | |
Page
|
| |||
| | | | F-26 | | | |
| | | | F-27 | | | |
| | | | F-28 | | | |
| | | | F-29 | | |
| | |
December 31,
|
| |||||||||||
| | |
2014
|
| |
2013
|
| ||||||||
ASSETS | | | | | | | | | | | | | | ||
Current assets
|
| | | | | | | | | | | | | ||
Cash and cash equivalents
|
| | | $ | 2,747,248 | | | | | $ | 448,226 | | | ||
Prepaid expenses
|
| | | | 57,115 | | | | | | 76,636 | | | ||
Total current assets
|
| | | | 2,804,363 | | | | | | 524,862 | | | ||
Other assets
|
| | | | 10,331 | | | | | | 15,359 | | | ||
Deferred offering costs
|
| | | | 143,454 | | | | | | — | | | ||
Property and equipment, net
|
| | | | 5,172 | | | | | | 7,485 | | | ||
Total Assets
|
| | | $ | 2,963,320 | | | | | $ | 547,706 | | | ||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | | | | | | | ||
Current liabilities | | | | | | | | | | | | | | ||
Accounts payable
|
| | | $ | 1,083,597 | | | | | $ | 834,496 | | | ||
Accrued expenses
|
| | | | 168,635 | | | | | | 27,443 | | | ||
Notes payable
|
| | | | — | | | | | | 31,500 | | | ||
Other liabilities
|
| | | | 2,518 | | | | | | 4,517 | | | ||
Total current liabilities
|
| | | | 1,254,750 | | | | | | 897,956 | | | ||
Preferred stock subject to redemption, $0.001 par value, 16,378,646 and 11,878,646 shares authorized as of December 31, 2014 and December 31, 2013, respectively, 13,399,668 and 10,408,652 shares issued and outstanding at December 31, 2014 and December 2013, respectively. $9.1 million aggregate liquidation preference of Series B cumulative preferred stock at December 31, 2014
|
| | | | 16,203,612 | | | | | | 12,413,876 | | | ||
Stockholders’ deficit | | | | | | | | | | | | | | ||
Preferred stock, par value $0.001, 8,887,500 shares authorized, issued and outstanding as of December 31, 2014 and December 31, 2013
|
| | | | 8,888 | | | | | | 8,888 | | | ||
Common stock, par value $0.001, 50,000,000 and 26,500,000 shares
authorized as of December 31, 2014 and December 31, 2013, respectively; 465,384 and 451,398 shares issued and outstanding as of December 31, 2014 and December 31, 2013, respectively |
| | | | 465 | | | | | | 451 | | | ||
Additional paid-in capital
|
| | | | 3,399,924 | | | | | | 2,059,347 | | | ||
Accumulated deficit
|
| | | | (17,904,319 ) | | | | | | (14,832,812 ) | | | ||
Total stockholders’ deficit
|
| | | | (14,495,042 ) | | | | | | (12,764,126 ) | | | ||
Total Liabilities and Stockholders’ Deficit
|
| | | $ | 2,963,320 | | | | | $ | 547,706 | | | ||
|
| | |
For the Years Ended December 31,
|
| |||||||||||
| | |
2014
|
| |
2013
|
| ||||||||
Operating costs and expenses: | | | | | | | | | | | | | | ||
Research and development
|
| | | $ | 113,931 | | | | | $ | 461,551 | | | ||
Patent costs
|
| | | | 197,731 | | | | | | 292,358 | | | ||
General and administrative
|
| | | | 1,969,960 | | | | | | 1,356,888 | | | ||
Total operating expenses
|
| | | | 2,281,622 | | | | | | 2,110,797 | | | ||
Operating loss
|
| | | | (2,281,622 ) | | | | | | (2,110,797 ) | | | ||
Other expense (income): | | | | | | | | | | | | | | ||
Interest income
|
| | | | (525 ) | | | | | | (1,677 ) | | | ||
Interest expense
|
| | | | 213,516 | | | | | | 6,076 | | | ||
Other income
|
| | | | (21,148 ) | | | | | | (19,365 ) | | | ||
Total other expense (income)
|
| | | | 191,843 | | | | | | (14,966 ) | | | ||
Net loss
|
| | | | (2,473,465 ) | | | | | $ | (2,095,831 ) | | | ||
Cumulative preferred stock dividends
|
| | | | 589,462 | | | | | | 547,303 | | | ||
Accretion of discount on Series C preferred stock
|
| | | | 8,580 | | | | | | — | | | ||
Net loss applicable to common stockholders
|
| | | $ | (3,071,507 ) | | | | | $ | (2,643,134 ) | | | ||
Net loss per common share – basic and diluted
|
| | | $ | (6.79 ) | | | | | $ | (5.86 ) | | | ||
Weighted average common shares outstanding – basic and diluted
|
| | | | 452,509 | | | | | | 451,398 | | | ||
|
| | |
Preferred
Stock Subject to Redemption |
| |
Stockholders’ Deficit
|
| |
Total
Stockholders’ Deficit |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | |
Preferred Stock
|
| |
Common Stock
|
| |
Additional
Paid-in Capital |
| |
Accumulated
Deficit |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| |||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2012
|
| | | | 9,885,423 | | | | | $ | 11,093,677 | | | | | | 8,887,500 | | | | | $ | 8,888 | | | | | | 451,398 | | | | | $ | 451 | | | | | $ | 2,032,697 | | | | | $ | (12,189,678 ) | | | | | $ | (10,147,642 ) | | | |||||||||
Conversion of note payable into shares
|
| | | | 103,234 | | | | | | 122,901 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 12,253 | | | | | | — | | | | | | 12,253 | | | |||||||||
Prepaid forward sale of Series B preferred stock
|
| | | | — | | | | | | 150,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | |||||||||
Issuance of shares subject to redemption
|
| | | | 419,995 | | | | | | 499,995 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | |||||||||
Stock based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 14,397 | | | | | | — | | | | | | 14,397 | | | |||||||||
Cumulative dividends on Series B preferred stock
|
| | | | — | | | | | | 547,303 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (547,303 ) | | | | | | (547,303 ) | | | |||||||||
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (2,095,831 ) | | | | | | (2,095,831 ) | | | |||||||||
Balance at December 31, 2013
|
| | | | 10,408,652 | | | | | $ | 12,413,876 | | | | | | 8,887,500 | | | | | $ | 8,888 | | | | | | 451,398 | | | | | $ | 451 | | | | | $ | 2,059,347 | | | | | $ | (14,832,812 ) | | | | | $ | (12,764,126 ) | | | |||||||||
Conversion of notes payable into preferred stock subject to redemption and warrants to purchase common stock
|
| | | | 621,788 | | | | | | 660,635 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 136,733 | | | | | | — | | | | | | 136,733 | | | |||||||||
Issuance of preferred stock subject to
redemption and warrants to purchase common stock, net of offering cost of $68,767 |
| | | | 2,369,228 | | | | | | 2,531,059 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 482,068 | | | | | | — | | | | | | 482,068 | | | |||||||||
Exercise of options on common stock
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 13,986 | | | | | | 14 | | | | | | 14,386 | | | | | | — | | | | | | 14,400 | | | |||||||||
Stock based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 707,390 | | | | | | — | | | | | | 707,390 | | | |||||||||
Cumulative dividends on Series B preferred stock
|
| | | | — | | | | | | 589,462 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (589,462 ) | | | | | | (589,462 ) | | | |||||||||
Accretion of discount on Series C preferred stock
|
| | | | — | | | | | | 8,580 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (8,580 ) | | | | | | (8,580 ) | | | |||||||||
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (2,473,465 ) | | | | | | (2,473,465 ) | | | |||||||||
Balance at December 31, 2014
|
| | | | 13,399,668 | | | | | $ | 16,203,612 | | | | | | 8,887,500 | | | | | $ | 8,888 | | | | | | 465,384 | | | | | $ | 465 | | | | | $ | 3,399,924 | | | | | $ | (17,904,319 ) | | | | | $ | (14,495,042 ) | | | |||||||||
|
| | |
For the Years Ended December 31,
|
| |||||||||
| | |
2014
|
| |
2013
|
| ||||||
Cash flows from operating activities | | | | | | | | | | | | | |
Net loss
|
| | | $ | (2,473,465 ) | | | | | $ | (2,095,831 ) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | ||||||||||
Depreciation
|
| | | | 3,479 | | | | | | 2,139 | | |
Stock based compensation
|
| | | | 707,390 | | | | | | 14,397 | | |
Change in fair value of put embedded in convertible debt
|
| | | | (21,148 ) | | | | | | — | | |
Accretion of discount on convertible debt
|
| | | | 10,192 | | | | | | — | | |
Non-cash interest on conversion of debt
|
| | | | 184,445 | | | | | | — | | |
Increase (decrease) in cash attributable to changes in operating assets
and liabilities: |
| | | ||||||||||
Prepaid expenses
|
| | | | 19,521 | | | | | | 1,655 | | |
Other assets
|
| | | | 5,028 | | | | | | (7,903 ) | | |
Accounts payable
|
| | | | 249,101 | | | | | | 119,742 | | |
Accrued expenses
|
| | | | 160,071 | | | | | | 4,370 | | |
Other liabilities
|
| | | | (1,999 ) | | | | | | 4,517 | | |
Net cash used in operating activities
|
| | | | (1,157,385 ) | | | | | | (1,956,914 ) | | |
Cash flows from investing activities | | | | | | | | | | | | | |
Purchase of property and equipment
|
| | | | (1,166 ) | | | | | | (8,692 ) | | |
Net cash used in investing activities
|
| | | | (1,166 ) | | | | | | (8,692 ) | | |
Cash flows from financing activities | | | | | | | | | | | | | |
Deferred offering costs
|
| | | | (143,454 ) | | | | | | — | | |
Proceeds from borrowing under notes payable
|
| | | | 605,000 | | | | | | — | | |
Repayment of borrowing under note payable
|
| | | | (31,500 ) | | | | | | (6,000 ) | | |
Net proceeds from issuance of preferred stock subject to redemption and warrants to purchase common stock
|
| | | | 3,013,127 | | | | | | 499,995 | | |
Proceeds received on prepaid forward sale of preferred stock subject to redemption
|
| | | | — | | | | | | 150,000 | | |
Proceeds from exercise of options on common stock
|
| | | | 14,400 | | | | | | — | | |
Net cash provided by financing activities
|
| | | | 3,457,573 | | | | | | 643,995 | | |
Net increase (decrease) in cash
|
| | | | 2,299,022 | | | | | | (1,321,611 ) | | |
Cash at beginning of period
|
| | | | 448,226 | | | | | | 1,769,837 | | |
Cash at end of period
|
| | | $ | 2,747,248 | | | | | $ | 448,226 | | |
Non-cash financing activities: | | | | | | | | | | | | | |
Conversion of account payable to note payable
|
| | | $ | — | | | | | $ | 37,500 | | |
Conversion of notes payable into preferred stock subject to redemption and warrants to purchase common stock
|
| | | $ | 612,923 | | | | | $ | 135,154 | | |
Cumulative preferred stock dividends
|
| | | $ | 589,462 | | | | | $ | 547,303 | | |
Accretion of Series C
|
| | | $ | 8,580 | | | | |||||
Cash paid for interest
|
| | | $ | — | | | | | $ | — | | |
Cash paid for taxes
|
| | | $ | — | | | | | $ | — | | |
| | | | | |
As of December 31,
|
| |||||||||||
| | |
Estimated Life
|
| |
2014
|
| |
2013
|
| ||||||||
Computers and equipment
|
| |
5 years
|
| | | $ | 5,487 | | | | | $ | 4,320 | | | ||
Furniture and fixtures
|
| |
7 years
|
| | | | 4,270 | | | | | | 4,270 | | | ||
Leasehold improvements
|
| |
7 years
|
| | | | — | | | | | | 3,500 | | | ||
Total property and equipment
|
| | | | | | | 9,757 | | | | | | 12,090 | | | ||
Accumulated depreciation
|
| | | | | | | (4,585 ) | | | | | | (4,605 ) | | | ||
Total property and equipment, net of accumulated depreciation
|
| | | | | | $ | 5,172 | | | | | $ | 7,485 | | | ||
|
| | |
Year ended December 31, 2014
|
| |||||||||
| | |
Low
|
| |
High
|
| ||||||
Expected dividend yield
|
| | | | 0.00 % | | | | | | 0.00 % | | |
Expected stock-price volatility
|
| | | | 51.45 % | | | | | | 64.24 % | | |
Risk-free interest rate
|
| | | | 0.88 % | | | | | | 3.04 % | | |
Expected term of options
|
| | | | 5 | | | | | | 10 | | |
Stock price
|
| | | $ | 1.14 | | | | | $ | 5.86 | | |
|
Year
|
| |
Share Class
|
| |
Price per Share
|
|
|
2005
|
| |
Common Stock
(a)
|
| |
$1.79
|
|
|
2006
|
| |
Series A-2 Preferred Stock
(a)(b)
|
| |
$0.40
|
|
|
2008 – 2009
|
| |
Series A-3 Preferred Stock
(b)
|
| |
$0.62
|
|
|
2010 – 2013
|
| |
Series B Preferred Stock
(b)
|
| |
$1.19
|
|
|
2014
|
| |
Series C Preferred Stock
(b)
|
| |
$1.30
|
|
| | |
Valuation Dates
|
| |||||||||||||||
| | |
November 7, 2013
|
| |
July 31, 2012
|
| |
December 31, 2010
|
| |||||||||
Risk-free rate
|
| | | | 0.55 % | | | | | | 0.57 % | | | | | | 2.01 % | | |
Maturity (years)
|
| | | | 3.00 | | | | | | 4.00 | | | | | | 5.00 | | |
Volatility | | | | | 58.00 % | | | | | | 61.00 % | | | | | | 61.00 % | | |
Grant Date
|
| |
Number of Common
Shares Underlying Options Granted |
| |
Exercise Price
per Common Share |
| |
Estimated Fair Value
per Share of Common Stock |
| |
Intrinsic Value
Option |
| ||||||
2005 | | | | | 58,321 | | | |
$0.07
|
| | | $ | 1.79 | | | |
$1.72
|
|
2009 | | | | | 60,559 | | | |
$0.72 – $0.79
|
| | | $ | 4.43 | | | |
$3.71 – $3.64
|
|
2011 | | | | | 33,846 | | | |
$1.00
|
| | | $ | 1.00 | | | |
$0.00
|
|
2012 | | | | | 60,019 | | | |
$1.14
|
| | | $ | 1.14 | | | |
$0.00
|
|
2013 | | | | | 100,000 | | | |
$1.14 – $1.30
|
| | | $ | 1.14 | | | |
$0.00
|
|
2014 | | | | | 1,626,740 | | | |
$5.86 – $13.23
|
| | | $ | 5.86 | | | |
$0.00
|
|
| | |
Options
|
| |
Weighted Average
Exercise Price |
| ||||||||
Outstanding at December 31, 2013
|
| | | | 226,793 | | | | | $ | 1.083 | | | ||
Granted
|
| | | | 1,626,740 | | | | | | 7.722 | | | ||
Exercised/Expired/Forfeited
|
| | | | (64,816 ) | | | | | | (0.888 ) | | | ||
Outstanding at December 31, 2014
|
| | | | 1,788,717 | | | | | $ | 7.128 | | | ||
Exercisable at December 31, 2014
|
| | | | 162,237 | | | | | $ | 4.053 | | | ||
Expected to be vested
|
| | | | 1,626,480 | | | | | $ | 7.434 | | | ||
|
| | |
December 31,
|
| |||||||||||
| | |
2014
|
| |
2013
|
| ||||||||
Statutory U.S. federal rate
|
| | | | 34.0 % | | | | | | 34.0 % | | | ||
State income tax, net of federal benefit
|
| | | | 3.9 % | | | | | | 3.9 % | | | ||
Meals & entertainment
|
| | | | (0.3 )% | | | | | | (0.4 )% | | | ||
Others | | | | | (0.5 )% | | | | | | (2.8 )% | | | ||
Forward sale of preferred stock
|
| | | | (2.3 )% | | | | | | 0.0 % | | | ||
Non-cash interest on conversion
|
| | | | (2.8 )% | | | | | | 0.0 % | | | ||
Valuation allowance
|
| | | | (32.0 )% | | | | | | (34.7 )% | | | ||
Provision for income taxes
|
| | | | 0.0 % | | | | | | 0.0 % | | | ||
|
| | |
As of December 31,
|
| |||||||||||
| | |
2014
|
| |
2013
|
| ||||||||
Deferred tax assets: | | | | | | | | | | | | | | ||
Net operating loss carry forwards
|
| | | $ | 3,675,012 | | | | | $ | 3,306,227 | | | ||
Patent costs
|
| | | | 318,652 | | | | | | 243,722 | | | ||
Capitalized interest
|
| | | | 85,568 | | | | | | 8,518 | | | ||
Accrued vacation
|
| | | | 10,237 | | | | | | 6,192 | | | ||
Research and development credit
|
| | | | 200,482 | | | | | | 73,484 | | | ||
Stock based compensation
|
| | | | 383,381 | | | | | | 115,314 | | | ||
Other
|
| | | | 4,460 | | | | | | 4,828 | | | ||
Gross deferred tax assets
|
| | | | 4,677,792 | | | | | | 3,758,285 | | | ||
Valuation allowance
|
| | | | (4,677,792 ) | | | | | | (3,758,285 ) | | | ||
Net deferred tax assets
|
| | | $ | — | | | | | $ | — | | | ||
|
| | |
March 31,
2015 |
| |
December 31,
2014 |
| ||||||||
| | |
(unaudited)
|
| | | | | | | |||||
ASSETS | | | | | | | | | | | | | | ||
Current assets | | | | | | | | | | | | | | ||
Cash and cash equivalents
|
| | | $ | 1,975,313 | | | | | $ | 2,747,248 | | | ||
Prepaid expenses
|
| | | | 56,353 | | | | | | 57,115 | | | ||
Total current assets
|
| | | | 2,031,666 | | | | | | 2,804,363 | | | ||
Other assets
|
| | | | 10,331 | | | | | | 10,331 | | | ||
Deferred offering costs
|
| | | | 296,863 | | | | | | 143,454 | | | ||
Property and equipment, net
|
| | | | 4,869 | | | | | | 5,172 | | | ||
Total Assets
|
| | | $ | 2,343,729 | | | | | $ | 2,963,320 | | | ||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | | | | | | | ||
Current liabilities | | | | | | | | | | | | | | ||
Accounts payable
|
| | | $ | 1,002,723 | | | | | $ | 1,083,597 | | | ||
Accrued expenses
|
| | | | 218,636 | | | | | | 168,635 | | | ||
Other liabilities
|
| | | | 1,679 | | | | | | 2,518 | | | ||
Total current liabilities
|
| | | | 1,223,038 | | | | | | 1,254,750 | | | ||
Preferred stock subject to redemption, $0.001 par value,16,378,646 shares authorized as of March 31, 2015 and December 31, 2014; 14,869,662 and 13,399,668 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively; million aggregate liquidation preference of Series B cumulative preferred stock at March 31, 2015
|
| | | | 16,384,715 | | | | | | 16,203,612 | | | ||
Stockholders’ deficit | | | | ||||||||||||
Preferred stock, par value $0.001, 8,887,500 shares authorized, issued and outstanding as of March 31, 2015 and December 31, 2014
|
| | | | 8,888 | | | | | | 8,888 | | | ||
Common stock, par value $0.001, 50,000,000 shares authorized as of March 31, 2015 and December 31, 2014; 465,384 shares issued and outstanding as of March 31, 2015 and December 31, 2014
|
| | | | 465 | | | | | | 465 | | | ||
Additional paid-in capital
|
| | | | 4,199,047 | | | | | | 3,399,924 | | | ||
Accumulated deficit
|
| | | | (19,472,424 ) | | | | | | (17,904,319 ) | | | ||
Total stockholders’ deficit
|
| | | | (15,264,024 ) | | | | | | (14,495,042 ) | | | ||
Total Liabilities and Stockholders’ Deficit
|
| | | $ | 2,343,729 | | | | | $ | 2,963,320 | | | ||
|
| | |
For the Three Months Ended March 31,
|
| |||||||||||
| | |
2015
|
| |
2014
|
| ||||||||
Operating costs and expenses: | | | | | | | | | | | | | | ||
Research and development
|
| | | $ | 31,460 | | | | | $ | 5,850 | | | ||
Patent costs
|
| | | | 62,274 | | | | | | 36,782 | | | ||
General and administrative
|
| | | | 1,302,565 | | | | | | 243,909 | | | ||
Total operating expenses
|
| | | | 1,396,299 | | | | | | 286,541 | | | ||
Operating loss
|
| | | | (1,396,299 ) | | | | | | (286,541 ) | | | ||
Other income: | | | | | | | | | | | | | | ||
Interest income
|
| | | | 2,204 | | | | | | 204 | | | ||
Other income
|
| | | | 7,091 | | | | | | — | | | ||
Total other income
|
| | | | 9,295 | | | | | | 204 | | | ||
Net loss
|
| | | $ | (1,387,004 ) | | | | | $ | (286,337 ) | | | ||
Cumulative preferred stock dividends
|
| | | | 149,283 | | | | | | 147,445 | | | ||
Accretion of discount on Series C preferred stock
|
| | | | 31,818 | | | | | | — | | | ||
Net loss applicable to common stockholders
|
| | | $ | (1,568,105 ) | | | | | $ | (433,782 ) | | | ||
Net loss per common share – basic and diluted
|
| | | $ | (3.37 ) | | | | | $ | (0.96 ) | | | ||
Weighted average common shares outstanding – basic and diluted
|
| | | | 465,384 | | | | | | 451,398 | | | ||
|
| | |
For the Three Months Ended March 31,
|
| |||||||||
| | |
2015
|
| |
2014
|
| ||||||
Cash flows from operating activities | | | | | | | | | | | | | |
Net loss
|
| | | $ | (1,387,004 ) | | | | | $ | (286,337 ) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | ||||||||||
Depreciation
|
| | | | 303 | | | | | | 1,267 | | |
Stock based compensation
|
| | | | 799,125 | | | | | | 213 | | |
Increase (decrease) in cash attributable to changes in operating assets
and liabilities: |
| | | | | | | | | | | | |
Prepaid expenses
|
| | | | 762 | | | | | | (32,256 ) | | |
Accounts payable
|
| | | | (80,874 ) | | | | | | 35,564 | | |
Accrued expenses
|
| | | | 50,001 | | | | | | (7,137 ) | | |
Other liabilities
|
| | | | (839 ) | | | | | | (386 ) | | |
Net cash used in operating activities
|
| | | | (618,526 ) | | | | | | (289,072 ) | | |
Cash flows from investing activities | | | | | | | | | | | | | |
Purchase of property and equipment
|
| | | | — | | | | | | (1,166 ) | | |
Net cash used in investing activities
|
| | | | — | | | | | | (1,166 ) | | |
Cash flows from financing activities | | | | | | | | | | | | | |
Deferred offering costs
|
| | | | (153,409 ) | | | | | | — | | |
Repayment of borrowing under note payable
|
| | | | — | | | | | | (9,000 ) | | |
Net cash used in financing activities
|
| | | | (153,409 ) | | | | | | (9,000 ) | | |
Net decrease in cash
|
| | | | (771,935 ) | | | | | | (299,238 ) | | |
Cash at beginning of period
|
| | | | 2,747,248 | | | | | | 448,226 | | |
Cash at end of period
|
| | | $ | 1,975,313 | | | | | $ | 148,988 | | |
Non-cash financing activities: | | | | | | | | | | | | | |
Cumulative preferred stock dividends
|
| | | $ | 149,283 | | | | | $ | 147,445 | | |
Accretion of Series C
|
| | | $ | 31,818 | | | | | $ | — | | |
Cash paid for interest
|
| | | $ | — | | | | | $ | — | | |
Cash paid for taxes
|
| | | $ | — | | | | | $ | — | | |
| | |
Estimated Life
|
| |
March 31,
2015 |
| |
December 31,
2014 |
| ||||||||
Computers and equipment
|
| |
5 years
|
| | | $ | 5,487 | | | | | $ | 5,487 | | | ||
Furniture and fixtures
|
| |
7 years
|
| | | | 4,270 | | | | | | 4,270 | | | ||
Total property and equipment
|
| | | | | | | 9,757 | | | | | | 9,757 | | | ||
Accumulated depreciation
|
| | | | | | | (4,888 ) | | | | | | (4,585 ) | | | ||
Total property and equipment, net of accumulated depreciation
|
| | | | | | $ | 4,869 | | | | | $ | 5,172 | | | ||
|
| | |
Warrants
|
| |
Weighted Average
Exercise Price |
| ||||||||
Outstanding at December 31, 2014
|
| | | | 418,323 | | | | | $ | 9.30 | | | ||
Granted
|
| | | | — | | | | | | — | | | ||
Exercised/Expired/Forfeited
|
| | | | — | | | | | | — | | | ||
Outstanding at March 31, 2015
|
| | | | 418,323 | | | | | $ | 9.30 | | | ||
Exercisable at March 31, 2015
|
| | | | 418,323 | | | | | $ | 9.30 | | | ||
|
| | |
Three months ended March 31, 2015
|
| |||||||||
| | |
Low
|
| |
High
|
| ||||||
Expected dividend yield
|
| | | | 0.00 % | | | | | | 0.00 % | | |
Expected stock-price volatility
|
| | | | 51.45 % | | | | | | 65.06 % | | |
Risk-free interest rate
|
| | | | 0.77 % | | | | | | 2.00 % | | |
Expected term of options
|
| | | | 5 | | | | | | 10 | | |
Stock price
|
| | | $ | 5.86 | | | | | $ | 5.86 | | |
|
Year
|
| |
Share Class
|
| |
Price per Share
|
|
|
2005
|
| |
Common Stock
(a)
|
| |
$1.79
|
|
|
2006
|
| |
Series A-2 Preferred Stock
(a)(b)
|
| |
$0.40
|
|
|
2008 – 2009
|
| |
Series A-3 Preferred Stock
(b)
|
| |
$0.62
|
|
|
2010 – 2013
|
| |
Series B Preferred Stock
(b)
|
| |
$1.19
|
|
|
2014
|
| |
Series C Preferred Stock
(b)
|
| |
$1.30
|
|
| | |
Valuation Date
|
| |||||||||||||||
| | |
November 7, 2013
|
| |
July 31, 2012
|
| |
December 31, 2010
|
| |||||||||
Risk-free rate
|
| | | | 0.55 % | | | | | | 0.57 % | | | | | | 2.01 % | | |
Maturity (years)
|
| | | | 3.00 | | | | | | 4.00 | | | | | | 5.00 | | |
Volatility | | | | | 58.00 % | | | | | | 61.00 % | | | | | | 61.00 % | | |
Grant Date
|
| |
Number of Common
Shares Underlying Options Granted |
| |
Exercise Price
per Common Share |
| |
Estimated Fair Value
per Share of Common Stock |
| |
Intrinsic Value
Option |
| ||||||
2005 | | | | | 58,321 | | | |
$0.07
|
| | | $ | 1.79 | | | |
$1.72
|
|
2009 | | | | | 60,559 | | | |
$0.72 – $0.79
|
| | | $ | 4.43 | | | |
$3.71 – $3.64
|
|
2011 | | | | | 33,846 | | | |
$1.00
|
| | | $ | 1.00 | | | |
$0.00
|
|
2012 | | | | | 60,019 | | | |
$1.14
|
| | | $ | 1.14 | | | |
$0.00
|
|
2013 | | | | | 100,000 | | | |
$1.14 – $1.30
|
| | | $ | 1.14 | | | |
$0.00
|
|
2014 | | | | | 1,626,740 | | | |
$5.86 – $13.23
|
| | | $ | 5.86 | | | |
$0.00
|
|
| | |
Options
|
| |
Weighted Average
Exercise Price |
| ||||||||
Outstanding at December 31, 2014
|
| | | | 1,788,717 | | | | | $ | 7.128 | | | ||
Granted
|
| | | | — | | | | | | — | | | ||
Exercised/Expired/Forfeited
|
| | | | (918 ) | | | | | | (5.863 ) | | | ||
Outstanding at March 31, 2015
|
| | | | 1,787,799 | | | | | $ | 7.131 | | | ||
Exercisable at March 31, 2015
|
| | | | 208,918 | | | | | $ | 4.419 | | | ||
Expected to be vested
|
| | | | 1,578,881 | | | | | $ | 7.490 | | | ||
|
| | |
Total
|
| ||||
SEC registration fee
|
| | | $ | 3,045.37 | | | |
FINRA filing fee
|
| | | $ | 4,431.20 | | | |
NASDAQ listing fee
|
| | | $ | 50,000.00 | | | |
Printing and engraving expenses
|
| | | $ | 50,000.00 | | | |
Legal fees and expenses
|
| | | $ | 450,000.00 | | | |
Accounting fees and expenses
|
| | | $ | 200,000.00 | | | |
Transfer agent and registrar fees
|
| | | $ | 5,000.00 | | | |
Miscellaneous
|
| | | $ | 237,523.43 | | | |
Total
|
| | | $ | 1,000,000.00 | | | |
|
| *By: | | |
/s/ Andrew J. Ritter
Andrew J. Ritter
Attorney-in-fact |
|
Exhibit No.
|
| |
Description
|
|
1.1 | | | Form of Underwriting Agreement | |
3.1** | | | Restated Certificate of Incorporation of Ritter Pharmaceuticals, Inc. | |
3.2** | | | Bylaws of Ritter Pharmaceuticals, Inc. | |
3.3* | | | Form of Amended and Restated Certificate of Incorporation of Ritter Pharmaceuticals, Inc. | |
3.4* | | | Form of Amended and Restated Bylaws of Ritter Pharmaceuticals, Inc. | |
4.1* | | | Form of Common Stock Certificate of Ritter Pharmaceuticals, Inc. | |
4.2** | | | Amended and Restated Investors’ Rights Agreement, dated as of November 17, 2010, by and among Ritter Pharmaceuticals, Inc. and the persons and entities named therein | |
4.3** | | | Amendment No. 1 to the Amended and Restated Investors’ Rights Agreement, dated as of January 13, 2011, by and among Ritter Pharmaceuticals, Inc. and the persons and entities named therein | |
4.4** | | | Amendment No. 2 to the Amended and Restated Investors’ Rights Agreement, dated as of February 6, 2012, by and among Ritter Pharmaceuticals, Inc. and the persons and entities named therein | |
4.5** | | | Amendment No. 3 to the Amended and Restated Investors’ Rights Agreement, dated as of December 4, 2014, by and among Ritter Pharmaceuticals, Inc. and the persons and entities named therein | |
4.6* | | | Amendment No. 4 to the Amended and Restated Investors’ Rights Agreement, dated as of , 2015, by and among Ritter Pharmaceuticals, Inc. and the persons and entities named therein | |
4.7 | | | Form of Representative’s Warrant Agreement | |
5.1* | | | Opinion of Reed Smith LLP | |
10.1** | | | Office Lease, dated June 25, 2013, by and between Douglas Emmett 1997, LLC and Ritter Pharmaceuticals, Inc. | |
10.2** | | | Offer Letter, dated December 2, 2014, by and between Michael D. Step and Ritter Pharmaceuticals, Inc. | |
10.3** | | | Executive Compensation Plan | |
10.4** | | | Executive Severance & Change in Control Agreement, dated October 1, 2014, by and between Ritter Pharmaceuticals, Inc. and Michael D. Step | |
10.5** | | | 2008 Stock Plan | |
10.6** | | | 2009 Stock Plan | |
10.7 | | | Form of 2015 Stock Plan | |
10.8** | | | Stock Option Agreement, dated December 2, 2014, by and between Ritter Pharmaceuticals, Inc. and Michael D. Step | |
10.9** | | | Stock Option Agreement, dated December 2, 2014, by and between Ritter Pharmaceuticals, Inc. and Michael D. Step | |
10.10** | | | Stock Option Agreement, dated December 2, 2014, by and between Ritter Pharmaceuticals, Inc. and Michael D. Step | |
10.11** | | | Stock Option Agreement, dated September 25, 2013, by and between Ritter Pharmaceuticals, Inc. and Andrew J. Ritter | |
10.12** | | | Stock Option Agreement, dated December 2, 2014, by and between Ritter Pharmaceuticals, Inc. and Andrew J. Ritter | |
10.13** | | | Stock Option Agreement, dated December 2, 2014, by and between Ritter Pharmaceuticals, Inc. and Andrew J. Ritter | |
10.14** | | | Stock Option Agreement, dated September 25, 2013, by and between Ritter Pharmaceuticals, Inc. and Ira E. Ritter | |
Exhibit No.
|
| |
Description
|
|
10.15** | | | Stock Option Agreement, dated December 2, 2014, by and between Ritter Pharmaceuticals, Inc. and Ira E. Ritter | |
10.16** | | | Stock Option Agreement, dated December 2, 2014, by and between Ritter Pharmaceuticals, Inc. and Ira E. Ritter | |
10.17** | | | Research and Development Agreement & License, dated November 30, 2010, by and among Kolu Pohaku Technologies, LLC, Kolu Pohaku Management, LLC and Ritter Pharmaceuticals, Inc. | |
10.18** | | | Amendment No. 1 to Research and Development Agreement & License, dated July 6, 2011, by and among Kolu Pohaku Technologies, LLC, Kolu Pohaku Management, LLC and Ritter Pharmaceuticals, Inc. | |
10.19** | | | Amendment No. 2 to Research and Development Agreement & License, dated September 30, 2011, by and among Kolu Pohaku Technologies, LLC, Kolu Pohaku Management, LLC and Ritter Pharmaceuticals, Inc. | |
10.20** | | | Amendment No. 3 to Research and Development Agreement & License, dated February 6, 2012, by and among Kolu Pohaku Technologies, LLC, Kolu Pohaku Management, LLC and Ritter Pharmaceuticals, Inc. | |
10.21** | | | Amendment No. 4 to Research and Development Agreement & License, dated November 4, 2013, by and among Kolu Pohaku Technologies, LLC, Kolu Pohaku Management, LLC and Ritter Pharmaceuticals, Inc. | |
10.22** | | | Put and Call Option Agreement, dated November 30, 2010, by and between Kolu Pohaku Technologies, LLC and Ritter Pharmaceuticals, Inc. | |
10.23** | | | Subordinated Convertible Promissory Note to SJ Investment Company, LLC, dated May 23, 2014, in the principal amount of $25,000.00 | |
10.24** | | | Subordinated Convertible Promissory Note to Javelin Venture Partners, L.P., dated May 23, 2014, in the principal amount of $350,000.00 | |
10.25** | | | Subordinated Convertible Promissory Note to Javelin Venture Partners, L.P., dated September 8, 2014, in the principal amount of $80,000.00 | |
10.26** | | | Unsecured Promissory Note to Javelin Venture Partners, L.P., dated October 9, 2014, in the principal amount of $70,000.00 | |
10.27** | | | Subordinated Convertible Promissory Note, dated October 20, 2014, in the principal amount of $80,000.00 | |
10.28** | | | Series C Preferred Stock and Warrant Purchase Agreement, dated December 4, 2014, by and among Ritter Pharmaceuticals, Inc. and the Investors named therein | |
10.29** | | | Form of Indemnification Agreement between Ritter Pharmaceuticals, Inc. and each of its directors and executive officers | |
10.30** | | | Clinical Supply and Operation Agreement, dated December 16, 2009, by and among Ritter Pharmaceuticals, Inc. and Ricerche Sperimentali Montale SpA and Inalco SpA | |
10.31** | | | Amendment 1 to the Clinical Supply and Cooperation Agreement, dated September 25, 2010, by and among Ritter Pharmaceuticals, Inc. and Ricerche Sperimentali Montale SpA and Inalco SpA | |
21.1** | | | Subsidiaries of Registrant | |
23.1 | | | Consent of Mayer Hoffman McCann P.C., independent registered public accounting firm | |
23.2* | | | Consent of Reed Smith LLP (included in Exhibit 5.1) | |
24.1** | | | Power of Attorney (included on applicable signature pages) | |
Exhibit 1.1
UNDERWRITING AGREEMENT
between
RITTER PHARMACEUTICALS, INC.
and
AEGIS CAPITAL CORP.,
as Representative of the Several Underwriters
RITTER PHARMACEUTICALS, INC.
UNDERWRITING AGREEMENT
New York, New York
[•], 2015
Aegis Capital Corp.
As Representative of the several Underwriters named on Schedule
1 attached hereto
810 Seventh Avenue, 18
th
Floor
New York, New York 10019
Ladies and Gentlemen:
The undersigned, Ritter Pharmaceuticals, Inc., a corporation formed under the laws of the State of Delaware (the “ Company ”), hereby confirms its agreement (this “ Agreement ”) with Aegis Capital Corp. (hereinafter referred to as “you” (including its correlatives) or the “ Representative ”) and with the other underwriters named on Schedule 1 hereto for which the Representative is acting as representative (the Representative and such other underwriters being collectively called the “ Underwriters ” or, individually, an “ Underwriter ”) as follows:
1. | Purchase and Sale of Shares . |
1.1 Firm Shares .
1.1.1. Nature and Purchase of Firm Shares .
(i) On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the several Underwriters, an aggregate of [•] shares (“ Firm Shares ”) of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”).
(ii) The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Shares set forth opposite their respective names on Schedule 1 attached hereto and made a part hereof at a purchase price of $[•] per share (93% of the per Firm Share offering price). The Firm Shares are to be offered initially to the public at the offering price set forth on the cover page of the Prospectus (as defined in Section 2.1.1 hereof); provided, however, that the purchase price to be paid by the Underwriters for any Firm Shares purchased by existing stockholders, officers or directors of the Company (“ Company’s Insiders ”) shall be $[•] per share (96% of the per Firm Share offering price).
1.1.2. Shares Payment and Delivery .
(i) Delivery and payment for the Firm Shares shall be made at 10:00 a.m., Eastern time, on the third (3 rd ) Business Day following the effective date (the “ Effective Date ”) of the Registration Statement (as defined in Section 2.1.1 below) (or the fourth (4 th ) Business Day following the Effective Date if the Registration Statement is declared effective after 4:01 p.m., Eastern time) or at such earlier time as shall be agreed upon by the Representative and the Company, at the offices of Greenberg Traurig, LLP, The MetLife Building, 200 Park Avenue, New York, NY 10166 (“ Representative Counsel ”), or at such other place (or remotely by facsimile or other electronic transmission) as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Shares is called the “ Closing Date .”
(ii) Payment for the Firm Shares shall be made on the Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company upon delivery of the certificates (in form and substance satisfactory to the Underwriters) representing the Firm Shares (or through the facilities of the Depository Trust Company (“ DTC ”)) for the account of the Underwriters. The Firm Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two (2) full Business Days prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Shares except upon tender of payment by the Representative for all of the Firm Shares. The term “ Business Day ” means any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions are authorized or obligated by law to close in New York, New York.
1.2 Over-allotment Option .
1.2.1. Option Shares . For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares, the Company hereby grants to the Underwriters an option to purchase up to [•] additional shares of Common Stock, representing fifteen percent (15%) of the Firm Shares sold in the offering, from the Company (the “ Over-allotment Option ”). Such [•] additional shares of Common Stock, the net proceeds of which will be deposited with the Company’s account, are hereinafter referred to as “ Option Shares .” The purchase price to be paid per Option Share shall be equal to the price per Firm Share set forth in Section 1.1.1 hereof. The Firm Shares and the Option Shares are hereinafter referred to together as the “ Public Securities .” The offering and sale of the Public Securities is hereinafter referred to as the “ Offering .”
1.2.2. Exercise of Option . The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares within 45 days after the Effective Date. The Underwriters shall not be under any obligation to purchase any Option Shares prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of oral notice to the Company from the Representative, which must be confirmed in writing by overnight mail or facsimile or other electronic transmission setting forth the number of Option Shares to be purchased and the date and time for delivery of and payment for the Option Shares (the “ Option Closing Date ”), which shall not be later than five (5) full Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of Representative Counsel or at such other place (including remotely by facsimile or other electronic transmission) as shall be agreed upon by the Company and the Representative. If such delivery and payment for the Option Shares does not occur on the Closing Date, the Option Closing Date will be as set forth in the notice. Upon exercise of the Over-allotment Option with respect to all or any portion of the Option Shares, subject to the terms and conditions set forth herein, (i) the Company shall become obligated to sell to the Underwriters the number of Option Shares specified in such notice and (ii) each of the Underwriters, acting severally and not jointly, shall purchase that portion of the total number of Option Shares then being purchased as set forth in Schedule 1 opposite the name of such Underwriter.
1.2.3. Payment and Delivery . Payment for the Option Shares shall be made on the Option Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company upon delivery to you of certificates (in form and substance satisfactory to the Underwriters) representing the Option Shares (or through the facilities of DTC) for the account of the Underwriters. The Option Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two (2) full Business Days prior to the Option Closing Date. The Company shall not be obligated to sell or deliver the Option Shares except upon tender of payment by the Representative for applicable Option Shares.
- 2 - |
1.3 Representative’s Warrants .
1.3.1. Purchase Warrants . The Company hereby agrees to issue and sell to the Representative (and/or its designees) on the Closing Date an option (“ Representative’s Warrant ”) for the purchase of an aggregate of [•] shares of Common Stock, representing 4.0% of the Firm Shares (excluding the Option Shares), for an aggregate purchase price of $100.00. The Representative’s Warrant agreement, in the form attached hereto as Exhibit A (the “ Representative’s Warrant Agreement ”), shall be exercisable, in whole or in part, commencing on a date which is one (1) year after the Effective Date and expiring on the five-year anniversary of the Effective Date at an initial exercise price per share of Common Stock of $[•], which is equal to 125.0% of the initial public offering price of the Firm Shares. The Representative’s Warrant and the shares of Common Stock issuable upon exercise thereof are hereinafter referred to together as the “ Representative’s Securities .” The Representative understands and agrees that there are significant restrictions pursuant to FINRA Rule 5110 against transferring the Representative’s Warrant and the underlying shares of Common Stock during the one hundred eighty (180) days after the Effective Date and by its acceptance thereof shall agree that it will not sell, transfer, assign, pledge or hypothecate the Representative’s Warrant, or any portion thereof, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities for a period of one hundred eighty (180) days following the Effective Date to anyone other than (i) an Underwriter or a selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the Representative or of any such Underwriter or selected dealer; and only if any such transferee agrees to the foregoing lock-up restrictions.
1.3.2. Delivery . Delivery of the Representative’s Warrant Agreement shall be made on the Closing Date and shall be issued in the name or names and in such authorized denominations as the Representative may request.
2. Representations and Warranties of the Company . The Company represents and warrants to the Underwriters as of the Applicable Time (as defined below), as of the Closing Date and as of the Option Closing Date, if any, as follows:
2.1 Filing of Registration Statement .
2.1.1. Pursuant to the Securities Act . The Company has filed with the U.S. Securities and Exchange Commission (the “ Commission ”) a registration statement, and an amendment or amendments thereto, on Form S-1 (File No. 333-202924), including any related prospectus or prospectuses, for the registration of the Public Securities and the Representative’s Securities under the Securities Act of 1933, as amended (the “ Securities Act ”), which registration statement and amendment or amendments have been prepared by the Company in all material respects in conformity with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act (the “ Securities Act Regulations ”) and will contain all material statements that are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement became effective (including the Preliminary Prospectus included in the registration statement, financial statements, schedules, exhibits and all other documents filed as a part thereof and all information deemed to be a part thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Securities Act Regulations (the “ Rule 430A Information ”)), is referred to herein as the “ Registration Statement .” If the Company files any registration statement pursuant to Rule 462(b) of the Securities Act Regulations, then after such filing, the term “ Registration Statement ” shall include such registration statement filed pursuant to Rule 462(b). The Registration Statement has been declared effective by the Commission on the date hereof.
Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus
- 3 - |
that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “ Preliminary Prospectus .” The Preliminary Prospectus, subject to completion, dated [•], 2015, that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the “ Pricing Prospectus .” The final prospectus in the form first furnished to the Underwriters for use in the Offering is hereinafter called the “ Prospectus .” Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer to the latest Preliminary Prospectus included in the Registration Statement.
“ Applicable Time ” means [TIME] [a.m./p.m.], Eastern time, on the date of this Agreement.
“ Issuer Free Writing Prospectus ” means any “issuer free writing prospectus,” as defined in Rule 433 of the Securities Act Regulations (“ Rule 433 ”), including without limitation any “free writing prospectus” (as defined in Rule 405 of the Securities Act Regulations) relating to the Public Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Public Securities or of the Offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).
“ Issuer General Use Free Writing Prospectus ” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “ bona fide electronic road show,” as defined in Rule 433 (the “ Bona Fide Electronic Road Show ”)), as evidenced by its being specified in Schedule 2-B hereto.
“ Issuer Limited Use Free Writing Prospectus ” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.
“ Pricing Disclosure Package ” means any Issuer General Use Free Writing Prospectus issued at or prior to the Applicable Time, the Pricing Prospectus and the information included on Schedule 2-A hereto, all considered together.
2.1.2. Pursuant to the Exchange Act . The Company has filed with the Commission a Form 8-A[/A] (File Number 000-[•]) providing for the registration pursuant to Section 12(b) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), of the shares of Common Stock. The registration of the shares of Common Stock under the Exchange Act has been declared effective by the Commission on or prior to the date hereof. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the shares of Common Stock under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration.
2.2 Stock Exchange Listing . The shares of Common Stock have been approved for listing on The NASDAQ Capital Market (the “ Exchange ”), and the Company has taken no action designed to, or likely to have the effect of, delisting the shares of Common Stock from the Exchange, nor has the Company received any notification that the Exchange is contemplating terminating such listing except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.3 No Stop Orders, etc . Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has instituted or, to the Company’s knowledge, threatened to institute, any proceedings with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information.
- 4 - |
2.4 Disclosures in Registration Statement .
2.4.1. Compliance with Securities Act and 10b-5 Representation .
(i) Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus, including the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto, and the Prospectus, at the time each was filed with the Commission, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus delivered to the Underwriters for use in connection with this Offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Neither the Registration Statement nor any amendment thereto, at its effective time, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.
(iii) The Pricing Disclosure Package, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Limited Use Free Writing Prospectus hereto does not conflict with the information contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, and each such Issuer Limited Use Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Representative expressly for use in the Registration Statement, the Pricing Prospectus or the Prospectus or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter consists solely of the following disclosure contained in the “Underwriting” section of the Prospectus: (i) the table showing the number of securities to be purchased by each Underwriter, (ii) the fourth full paragraph under the caption “Underwriting”, (iii) the second and third sentences of the second paragraph under the heading “Discount” under the caption “Underwriting” and (iv) the sections titled “Discretionary Accounts”, “Electronic Offer, Sale and Distribution of Securities”, “Stabilization” and “Passive Market Making” under the capital “Underwriting” (the “ Underwriters’ Information ”).
(iv) Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Date or at any Option Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to the Underwriters’ Information.
2.4.2. Disclosure of Agreements . The agreements and documents described in the Registration Statement, the Pricing Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents
- 5 - |
required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and that is referred to in the Registration Statement, the Pricing Disclosure Package and the Prospectus has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. None of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in material default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a material default thereunder. To the best of the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental or regulatory agency, body or court, domestic or foreign, having jurisdiction over the Company or any of its assets or business (each, a “ Governmental Entity ”), including, without limitation, those relating to environmental laws and regulations.
2.4.3. Prior Securities Transactions . Since January 1, 2012, no securities have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Preliminary Prospectus.
2.4.4. Regulations . The disclosures in the Registration Statement, the Pricing Disclosure Package and the Prospectus concerning the effects of federal, state, local and all foreign laws, rules and regulations relating to the Company’s business as currently conducted or contemplated are correct and complete in all material respects and no other such laws, rules or regulations are required to be disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus which are not so disclosed.
2.4.5. No Other Distribution of Offering Materials. The Company has not, directly or indirectly, distributed and will not distribute any offering material in connection with the Offering other than any Preliminary Prospectus, any Issuer Free Writing Prospectus, the Prospectus and other materials, if any, permitted under the Securities Act and consistent with Section 3.2 below.
2.5 Changes After Dates in Registration Statement .
2.5.1. No Material Adverse Change . Since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except as otherwise specifically stated therein: (i) there has been no material adverse change in the financial position or results of operations of the Company, nor any change or development that, singularly or in the aggregate, would involve a material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company (a “ Material Adverse Change ”); (ii) there have been no material transactions entered into by the Company, other than as contemplated pursuant to this Agreement; and (iii) no officer or director of the Company has resigned from any position with the Company.
- 6 - |
2.5.2. Recent Securities Transactions, etc . Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, and except as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not: (i) issued any securities, other than shares of Common Stock issuable upon the exercise or conversion of then outstanding options, warrants and convertible securities, or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.
2.6 Reserved .
2.7 Independent Accountants . To the knowledge of the Company, Mayer Hoffman McCann P.C. (the “ Auditor ”), whose report is filed with the Commission as part of the Registration Statement, the Pricing Disclosure Package and the Prospectus, is an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board. The Auditor has not, during the periods covered by the financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.
2.8 Financial Statements, etc . The financial statements, including the notes thereto included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, fairly present in all material respects the financial position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“ GAAP ”), consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by GAAP). Except as included therein, no historical or pro forma financial statements are required to be included in the Registration Statement, the Pricing Disclosure Package or the Prospectus under the Securities Act or the Securities Act Regulations. The pro forma and pro forma as adjusted financial information and the related notes, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus have been properly compiled and prepared in all material respects in accordance with the applicable requirements of the Securities Act and the Securities Act Regulations and present fairly in all material respects the information shown therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. All disclosures contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply in all material respects with Regulation G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. Each of the Registration Statement, the Pricing Disclosure Package and the Prospectus discloses all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (a) the Company has not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions other than in the ordinary course of business, (b) the Company has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock, (c) there has not been any change in the capital stock of the Company, (d) other than in the ordinary course of business, the Company has not made any grants under any stock compensation plan, and (e) there has not been any material adverse change in the Company’s long-term or short-term debt.
- 7 - |
2.9 Authorized Capital; Options, etc . The Company had, at the date or dates indicated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company will have on the Closing Date the adjusted stock capitalization set forth therein. Except as set forth in, or contemplated by, the Registration Statement, the Pricing Disclosure Package and the Prospectus, on the Effective Date, as of the Applicable Time and on the Closing Date and any Option Closing Date, there will be no stock options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued shares of Common Stock of the Company or any security convertible or exercisable into shares of Common Stock of the Company, or any contracts or commitments to issue or sell shares of Common Stock or any such options, warrants, rights or convertible securities.
2.10 Valid Issuance of Securities, etc.
2.10.1. Outstanding Securities . All issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no contractual rights of rescission or the ability to force the Company to repurchase such securities with respect thereto, and are not subject to personal liability by reason of being such holders; and except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, none of such securities were issued in violation of the preemptive rights, rights of first refusal or rights of participation of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized shares of Common Stock conform in all material respects to all statements relating thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The offers and sales of the outstanding shares of Common Stock, options, warrants and other rights to purchase or exchange such securities for shares of the Common Stock were at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky” laws or, based in part on the representations and warranties of the purchasers of such shares of Common Stock, exempt from such registration requirements. The description of the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, accurately and fairly present, in all material respects, the information required to be shown with respect to such plans, arrangements, options and rights.
2.10.2. Securities Sold Pursuant to this Agreement . The Public Securities and Representative’s Securities have been duly authorized for issuance and sale and, when issued and paid for, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Public Securities and Representative’s Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Public Securities and Representative’s Securities has been duly and validly taken. The Public Securities and Representative’s Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. All corporate action required to be taken for the authorization, issuance and sale of the Representative’s Warrant has been duly and validly taken; the shares of Common Stock issuable upon exercise of the Representative’s Warrant have been duly authorized and reserved for issuance by all necessary corporate action on the part of the Company and when paid for and issued in accordance with the Representative’s Warrant and the Representative’s Warrant Agreement, such shares of Common Stock will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; and such shares of Common Stock are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company.
- 8 - |
2.11 Registration Rights of Third Parties . Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, no holders of any securities of the Company or any options, warrants, rights or other securities exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Securities Act or to include any such securities in the Registration Statement or any other registration statement to be filed by the Company.
2.12 Validity and Binding Effect of Agreements . The execution, delivery and performance of this Agreement and the Representative’s Warrant Agreement have been duly and validly authorized by the Company, and, when executed and delivered, will constitute, the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
2.13 No Conflicts, etc . The execution, delivery and performance by the Company of this Agreement and the Representative’s Warrant Agreement, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a material breach of, or conflict with any of the terms and provisions of, or constitute a material default under, or result in the creation, modification, termination or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement or any other agreement or instrument to which the Company is a party or as to which any property of the Company is a party; (ii) result in any violation of the provisions of the Company’s Certificate of Incorporation (as the same have been amended or restated from time to time, the “ Charter ”) or the by-laws of the Company; or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Entity as of the date hereof (including, without limitation, those promulgated by the Food and Drug Administration of the U.S. Department of Health and Human Services (the “ FDA ”) or by any foreign, state or local Governmental Entity performing functions similar to those performed by the FDA), except in the cases of clauses (i) and (iii) for such breaches, conflicts or violations which would not reasonably be expected to have a Material Adverse Change.
2.14 No Defaults; Violations . No material default exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the properties or assets of the Company is subject. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company is not (i) in violation of any term or provision of its Charter or by-laws, or (ii) in violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any Governmental Entity, except in the cases of clause (ii) for such violations which would not reasonably be expected to have a Material Adverse Change.
2.15 Corporate Power; Licenses; Consents .
2.15.1. Conduct of Business . Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has all requisite corporate power and authority, and has all necessary Authorizations (as defined below) of and from all Governmental Entities
- 9 - |
that it needs as of the date hereof to conduct its business purpose as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.15.2. Transactions Contemplated Herein . The Company has all corporate power and authority to enter into this Agreement and to carry out the provisions and conditions hereof, and all Authorizations required in connection therewith have been obtained. No Authorization of, and no filing with, Governmental Entity is required for the valid issuance, sale and delivery of the Public Securities and the consummation of the transactions and agreements contemplated by this Agreement and the Representative’s Warrant Agreement and as contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, except with respect to applicable federal and state securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“ FINRA ”).
2.16 D&O Questionnaires . To the Company’s knowledge, all information contained in the questionnaires (the “ Questionnaires ”) completed by each of the Company’s directors and officers immediately prior to the Offering (the “ Insiders ”) as supplemented by all information concerning the Company’s directors and officers as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus provided to the Underwriters, is true and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed in the Questionnaires to become inaccurate and incorrect in any material respect.
2.17 Litigation; Governmental Proceedings . There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s knowledge, any executive officer or director which has not been disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus which is required to be disclosed.
2.18 Good Standing . The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of the State of Delaware, and is duly qualified to do business and is in good standing in each other jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify, singularly or in the aggregate, would not have or reasonably be expected to result in a Material Adverse Change.
2.19 Insurance . The Company carries or is entitled to the benefits of insurance (including, without limitation, as to directors and officers insurance coverage), with reputable insurers, in such amounts and covering such risks which the Company believes are adequate, and all such insurance is in full force and effect. The Company has no reasonable basis to believe that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change.
2.20 Transactions Affecting Disclosure to FINRA .
2.20.1. Finder’s Fees . Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by the Company or any Insider with respect to the sale of the Public Securities hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its stockholders that may affect the Underwriters’ compensation, as determined by FINRA.
2.20.2. Payments Within Six (6) Months . Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (i) any person, as a finder’s fee, consulting fee or
- 10 - |
otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the six (6) months prior to the initial filing of the Registration Statement, other than the payment to the Underwriters as provided hereunder in connection with the Offering.
2.20.3. Use of Proceeds . None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.
2.20.4. FINRA Affiliation . There is no (i) officer or director of the Company, (ii) to the Company’s knowledge, beneficial owner of 5% or more of any class of the Company's securities or (iii) to the Company’s knowledge, beneficial owner of the Company's unregistered equity securities which were acquired during the 180-day period immediately preceding the filing of the Registration Statement that is an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
2.20.5. Information . All information provided by the Company in its FINRA questionnaire to Representative Counsel specifically for use by Representative Counsel in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all material respects.
2.21 Foreign Corrupt Practices Act . Neither the Company or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any other person acting on behalf of the Company, has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company to any material damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have had a Material Adverse Change or (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.
2.22 Compliance with OFAC . Neither the Company or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any other person acting on behalf of the Company, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“ OFAC ”), and the Company will not, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
2.23 Money Laundering Laws . The operations of the Company are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “ Money Laundering Laws ”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.
- 11 - |
2.24 Regulatory . All preclinical and clinical studies conducted by or on behalf of the Company that are material to the Company have been adequately described in the Registration Statement, the Pricing Disclosure Package and the Prospectus in all material respects. The clinical and preclinical studies conducted by or on behalf of the Company that are described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, or the results of such studies which are referred to in the Registration Statement, the Pricing Disclosure Package and the Prospectus, were and, if still ongoing, are being conducted in material compliance with all laws and regulations applicable thereto in the jurisdictions in which they are being conducted and with all laws and regulations applicable to preclinical and clinical studies from which data will be submitted to support marketing approval. The descriptions in the Registration Statement, the Pricing Disclosure Package and the Prospectus of the results of such studies are accurate and complete in all material respects and fairly present the data derived from such studies, and the Company has no knowledge of, or reasonable basis to believe that, any large well-controlled clinical study the aggregate results of which are inconsistent with or otherwise call into question the results of any clinical study conducted by or on behalf of the Company that are described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or the results of which are referred to in the Registration Statement, the Pricing Disclosure Package and the Prospectus. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not received any written notices or statements from the FDA, the European Medicines Agency (“ EMA ”) or any other governmental agency or authority imposing, requiring, requesting or suggesting a clinical hold, termination, suspension or material modification for or of any clinical or preclinical studies that are described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or the results of which are referred to in the Registration Statement, the Pricing Disclosure Package and the Prospectus. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not received any written notices or statements from the FDA, the EMA or any other governmental agency, and otherwise has no knowledge of, or reason to believe that, (i) any investigational new drug application for potential product of the Company is or has been rejected or determined to be non-approvable or conditionally approvable; and (ii) any license, approval, permit or authorization to conduct any clinical trial of any potential product of the Company has been, will be or may be suspended, revoked, modified or limited.
2.25 Officers’ Certificate . Any certificate signed by any duly authorized officer of the Company and delivered to you or to Representative Counsel shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.
2.26 Lock-Up Agreements. Schedule 3 hereto contains a complete and accurate list of the Company’s officers, directors and each owner of the Company’s outstanding shares of Common Stock (or securities convertible or exercisable into shares of Common Stock) (collectively, the “ Lock-Up Parties ”). The Company has caused each of the Lock-Up Parties to deliver to the Representative an executed Lock-Up Agreement, in the form attached hereto as Exhibit B ( the “ Lock-Up Agreement ”), prior to the execution of this Agreement.
2.27 Subsidiaries . The Company has no subsidiaries.
2.28 Related Party Transactions .
2.28.1 Business Relationships . There are no business relationships or related party transactions involving the Company or any other person required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus that have not been described as required.
2.28.2 No Relationships with Customers and Suppliers . No relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, stockholders,
- 12 - |
customers or suppliers of the Company, or any of the Company’s affiliates, on the other hand, which is required to be described in the Pricing Disclosure Package and the Prospectus and which is not so described.
2.28.3 No Unconsolidated Entities . There are no transactions, arrangements or other relationships between and/or among the Company, any of its Subsidiaries or affiliates (as such term is defined in Rule 405 of the Securities Act) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s liquidity or the availability of or requirements for its capital resources required to be described in the Pricing Disclosure Package and the Prospectus which have not been described as required.
2.28.4 No Loans or Advances to Affiliates . There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.29 Board of Directors . The Board of Directors of the Company is comprised of the persons set forth under the heading of the Pricing Prospectus and the Prospectus captioned “Management.” The qualifications of the persons serving as board members and the overall composition of the board comply with the Exchange Act, the rules and regulations of the Commission promulgated thereunder (the “ Exchange Act Regulations ”), the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder (the “ Sarbanes-Oxley Act ”) applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors of the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board of Directors qualify as “independent,” as defined under the listing rules of the Exchange.
2.30 Sarbanes-Oxley Compliance .
2.30.1. Disclosure Controls . The Company has developed and currently maintains disclosure controls and procedures that will comply in all material respects with Rule 13a-15 or 15d-15 under the Exchange Act Regulations, and such controls and procedures are effective to ensure that all material information concerning the Company will be made known on a timely basis to the individuals responsible for the preparation of the Company’s Exchange Act filings and other public disclosure documents.
2.30.2. Compliance . The Company is, or at the Applicable Time and on the Closing Date will be, in material compliance with the provisions of the Sarbanes-Oxley Act applicable to it, and has implemented or will implement such programs and taken reasonable steps to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all of the material provisions of the Sarbanes-Oxley Act.
2.31 Accounting Controls . The Company maintains systems of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply in all material respects with the requirements of the Exchange Act and have been designed by, or under the supervision of, their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii)
- 13 - |
transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company is not aware of any material weaknesses in its internal controls. The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are known to the Company’s management and that have adversely affected or are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (ii) any fraud known to the Company’s management, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
2.32 No Investment Company Status . The Company is not and, after giving effect to the Offering and the application of the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be, required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.
2.33 No Labor Disputes . No labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent. The Company is not aware that any key employee or significant group of employees of the Company plans to terminate employment with the Company.
2.34 Intellectual Property Rights . The Company owns or possesses or has valid rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and similar rights (“ Intellectual Property Rights ”) necessary for the conduct of the business of the Company as currently carried on and as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. To the knowledge of the Company, no action or use by the Company necessary for the conduct of its business as currently carried on and as described in the Registration Statement and the Prospectus will involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property Rights of others. The Company has not received any notice alleging any such infringement, fee or conflict with asserted Intellectual Property Rights of others. Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change (A) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any of the Intellectual Property Rights owned by the Company; (B) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the rights of the Company in or to any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim, that would, individually or in the aggregate, together with any other claims in this Section 2.34, reasonably be expected to result in a Material Adverse Change; (C) the Intellectual Property Rights owned by the Company and, to the knowledge of the Company, the Intellectual Property Rights licensed to the Company have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or in part, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this Section 2.34, reasonably be expected to result in a Material Adverse Change; (D) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company infringes, misappropriates or otherwise violates any Intellectual Property Rights or other proprietary rights of others, the Company has not received any written notice of such claim and the Company is unaware of any other facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this Section 2.34, reasonably be expected to result in a
- 14 - |
Material Adverse Change; and (E) to the Company’s knowledge, no employee of the Company is in or has ever been in violation in any material respect of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company, or actions undertaken by the employee while employed with the Company and could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change. To the Company’s knowledge, all material technical information developed by and belonging to the Company which has not been patented has been kept confidential. The Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus and are not described therein. The Registration Statement, the Pricing Disclosure Package and the Prospectus contain in all material respects the same description of the matters set forth in the preceding sentence. None of the technology employed by the Company has been obtained or is being used by the Company in violation of any contractual obligation binding on the Company or, to the Company’s knowledge, any of its officers, directors or employees, or otherwise in violation of the rights of any persons..
2.35 Taxes . The Company has filed all material returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. The Company has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. Except as disclosed in writing to the Underwriters, (i) no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company. There are no tax liens against the assets, properties or business of the Company. The term “ taxes ” means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto. The term “ returns ” means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes.
2.36 ERISA Compliance . The Company and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ ERISA ”)) established or maintained by the Company or its “ERISA Affiliates” (as defined below) are in compliance in all material respects with ERISA. “ ERISA Affiliate ” means, with respect to the Company, any member of any group of organizations described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “ Code ”) of which the Company is a member. No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the knowledge of
- 15 - |
the Company, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.
2.37 Compliance with Laws . The Company: (A) is and at all times has been in compliance in all material respects with all statutes, rules, or regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product manufactured or distributed by the Company (“ Applicable Laws ”), except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change; (B) has not received any FDA Form 483, notice of adverse finding, warning letter, untitled letter or other correspondence or notice from the U.S. Food and Drug Administration or any other governmental authority alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“ Authorizations ”); (C) possesses all material Authorizations and such Authorizations are valid and in full force and effect and are not in material violation of any term of any such Authorizations; (D) has not received written notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any governmental authority or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such governmental authority or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (E) has not received written notice that any governmental authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such governmental authority is considering such action; (F) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission); and (G) has not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or replacement, safety alert, post-sale warning, “dear doctor” letter, or other notice or action relating to the alleged lack of safety or efficacy of any product or any alleged product defect or violation and, to the Company’s knowledge, no third party has initiated, conducted or intends to initiate any such notice or action.
2.38 Environmental Laws . The Company is in compliance with all foreign, federal, state and local rules, laws and regulations relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of health and safety or the environment which are applicable to their businesses (“ Environmental Laws ”), except where the failure to comply would not, singularly or in the aggregate, result in a Material Adverse Change. There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic or other wastes or other hazardous substances by, due to, or caused by the Company (or, to the Company’s knowledge, any other entity for whose acts or omissions the Company is or may otherwise be liable) upon any of the property now or previously owned or leased by the Company, or upon any other property, in violation of any law, statute, ordinance, rule, regulation, order, judgment, decree or permit or which would, under any law, statute, ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability which would not have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Change; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company has knowledge, except for any such disposal, discharge, emission, or other release of any kind which would not have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Change. In the ordinary course of business, the Company conducts periodic reviews of the effect of Environmental Laws on its business and assets, in the course of which they identify and evaluate associated costs and liabilities (including, without limitation, any capital or operating
- 16 - |
expenditures required for clean-up, closure of properties or compliance with Environmental Laws or governmental permits issued thereunder, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such reviews, the Company has reasonably concluded that such associated costs and liabilities would not have, singularly or in the aggregate, a Material Adverse Change.
2.39 Real Property . Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has good and marketable title in fee simple to, or has valid rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company, in each case free and clear of all liens, encumbrances, security interests, claims and defects that do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company; and all of the leases and subleases material to the business of the Company, and under which the Company holds properties described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, are in full force and effect, and the Company has not received any written notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company to the continued possession of the leased or subleased premises under any such lease or sublease, which would result in a Material Adverse Change.
2.40 Contracts Affecting Capital . There are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405 of the Securities Act Regulations) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s liquidity or the availability of or requirements for its capital resources required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus which have not been described as required.
2.41 Loans to Directors or Officers . There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company to or for the benefit of any of the officers or directors of the Company, or any of their respective family members, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.42 Ineligible Issuer . At the time of filing the Registration Statement and any post-effective amendment thereto, at the time of effectiveness of the Registration Statement and any amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations) of the Public Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.
2.43 Smaller Reporting Company . As of the time of filing of the Registration Statement, the Company was a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act Regulations.
2.44 Industry Data . The statistical and market-related data included in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate or represent the Company’s good faith estimates that are made on the basis of data derived from such sources.
2.45 Reverse Stock Split . The Company has taken all necessary corporate action to effectuate a reverse stock split of its shares of Common Stock on the basis of one (1) such share for each seven and
- 17 - |
fifteen one-hundredths (7.15) shares issued and outstanding shares thereof (the “ Reverse Stock Split ”), such Reverse Stock Split to be effective no later than the first trading day of the Firm Shares following the date hereof.
2.46 Emerging Growth Company . From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly in or through any Person authorized to act on its behalf in any Testing-the Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “ Emerging Growth Company ”). “ Testing-the-Waters Communication ” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act.
2.47 Testing-the-Waters Communications . The Company has not (i) alone engaged in any Testing-the-Waters Communications, other than Testing-the-Waters Communications with the written consent of the Representative and with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) authorized anyone other than the Representative to engage in Testing-the-Waters Communications. The Company confirms that the Representative has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule 2-C hereto. “ Written Testing-the-Waters Communication ” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.
2.48 Electronic Road Show . The Company has made available a Bona Fide Electronic Road Show in compliance with Rule 433(d)(8)(ii) of the Securities Act Regulations such that no filing of any “road show” (as defined in Rule 433(h) of the Securities Act Regulations) is required in connection with the Offering.
2.49 Margin Securities . The Company does not own any “margin securities” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the “ Federal Reserve Board ”), and none of the proceeds of Offering will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the shares of Common Stock to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Federal Reserve Board.
2.50 Forward-Looking Statements . No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
2.51 Integration . Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act that would require the registration of any such securities under the Securities Act.
2.52 Confidentiality and Non-Competitions . To the Company’s knowledge, no director, officer, key employee or consultant of the Company is subject to any confidentiality, non-disclosure, non-competition agreement or non-solicitation agreement with any employer or prior employer that could reasonably be expected to materially affect his ability to be and act in his respective capacity of the Company or be expected to result in a Material Adverse Change.
- 18 - |
2.53 Minute Books . The Company has made available to the Underwriters and counsel for the Underwriters, copies of the minutes from all meetings and all written consents describing all actions of the board of directors (including each board committee) and stockholders of the Company (or analogous governing bodies and interest holders, as applicable), since the time of its incorporation through the date of the latest meeting and action, which accurately reflect in all material respects all transactions referred to therein. There are no material transactions, agreements, dispositions or other actions of the Company that are not properly approved and/or accurately and fairly recorded in the minutes and written consents of the Company, as applicable.
2.54 Stabilization . Neither the Company nor, to its knowledge, any of its employees, directors or stockholders (without the consent of the Representative) has taken, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.
3. | Covenants of the Company . The Company covenants and agrees as follows: |
3.1 Amendments to Registration Statement . The Company shall deliver to the Representative, prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representative shall reasonably object in writing.
3.2 Federal Securities Laws .
3.2.1. Compliance . The Company, subject to Section 3.2.2, shall comply with the requirements of Rule 430A of the Securities Act Regulations, and will notify the Representative promptly, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed; (ii) of the receipt of any comments from the Commission; (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information; (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Public Securities and Representative’s Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Securities Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the Offering of the Public Securities and Representative’s Securities. The Company shall effect all filings required under Rule 424(b) of the Securities Act Regulations, in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and shall take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company shall use its best efforts to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.
3.2.2. Continued Compliance . The Company shall comply with the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations so as to permit the completion of the distribution of the Public Securities as contemplated in this Agreement and in the Registration Statement, the Pricing Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“ Rule 172 ”), would be) required by the Securities Act to be delivered in
- 19 - |
connection with sales of the Public Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will 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; (ii) amend or supplement the Pricing Disclosure Package or the Prospectus in order that the Pricing Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the Pricing Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the Securities Act or the Securities Act Regulations, the Company will promptly (A) give the Representative notice of such event; (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Pricing Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representative with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representative or counsel for the Underwriters shall reasonably object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representative notice of any filings made pursuant to the Exchange Act or the Exchange Act Regulations within 48 hours prior to the Applicable Time. The Company shall give the Representative notice of its intention to make any such filing from the Applicable Time until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof and will furnish the Representative with copies of the related document(s) a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative or counsel for the Underwriters shall reasonably object, unless required by law or the Exchange.
3.2.3. Exchange Act Registration . For a period of three (3) years after the date of this Agreement, the Company shall use its reasonable best efforts to maintain the registration of the shares of Common Stock under the Exchange Act, provided that such provision shall not prevent a sale, merger or similar transaction involving the Company. For a period of three (3) years after the date of this Agreement, the Company shall not deregister the shares of Common Stock under the Exchange Act without the prior written consent of the Representative, which consent shall not be unreasonably withheld, provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.
3.2.4. Free Writing Prospectuses . The Company agrees that, unless it obtains the prior written consent of the Representative, it shall not make any offer relating to the Public Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representative shall be deemed to have consented to each Issuer General Use Free Writing Prospectus hereto and any “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by the Representative. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Underwriters as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not
- 20 - |
misleading, the Company will promptly notify the Underwriters and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
3.2.5. Testing-the-Waters Communications . If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company shall promptly notify the Representative and shall promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
3.3 Delivery to the Underwriters of Registration Statements . The Company has delivered or made available or shall deliver or make available to the Representative and counsel for the Representative, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and will also deliver to the Underwriters, without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
3.4 Delivery to the Underwriters of Prospectuses . The Company has delivered or made available or will deliver or make available to each Underwriter, without charge, as many copies of each Preliminary Prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations, would be) required to be delivered under the Securities Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
3.5 Effectiveness and Events Requiring Notice to the Representative . The Company shall use its best efforts to cause the Registration Statement to remain effective with a current prospectus for at least nine (9) months after the Applicable Time, and shall notify the Representative immediately and confirm the notice in writing: (i) of the effectiveness of the Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Public Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (iv) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for any additional information from the Commission; and (vi) of the happening of any event during the period described in this Section 3.5 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the Pricing Disclosure Package or the Prospectus untrue or that requires the making of any changes in (a) the Registration Statement in order to make the statements therein not misleading, or (b) in the Pricing Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company shall make every reasonable effort to obtain promptly the lifting of such order.
- 21 - |
3.6 Review of Financial Statements. For a period of three (3) years after the date of this Agreement, the Company, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company’s financial statements for each of the three fiscal quarters immediately preceding the announcement of any quarterly financial information, provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.
3.7 Listing . For a period of three (3) years after the date of this Agreement, the Company shall use its reasonable best efforts to maintain the listing of the shares of Common Stock (including the Public Securities) on the Exchange or another national securities exchange for at least three years from the date of this Agreement, provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.
3.8 Financial Public Relations Firm . As of the Effective Date, the Company shall have retained a financial public relations firm reasonably acceptable to the Representative and the Company, which shall initially be Lippert/Heilshorn & Associates, which firm shall be experienced in assisting issuers in initial public offerings of securities and in their relations with their security holders, and shall retain such firm or another firm reasonably acceptable to the Representative for a period of not less than two (2) years after the Effective Date, provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.
3.9 Reports to the Representative .
3.9.1. Periodic Reports, etc . For a period of three (3) years after the date of this Agreement, at the Representative’s request, the Company shall furnish to the Representative copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish to the Representative: (i) a copy of each periodic report the Company shall be required to file with the Commission under the Exchange Act and the Exchange Act Regulations; (ii) a copy of every press release and every news item and article with respect to the Company or its affairs which was released by the Company; (iii) a copy of each Form 8-K prepared and filed by the Company; (iv) five copies of each registration statement filed by the Company under the Securities Act; (v) a copy of each report or other communication furnished to stockholders and (vi) such additional documents and information with respect to the Company and the affairs of any future subsidiaries of the Company as the Representative may from time to time reasonably request; provided the Representative shall sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representative and Representative Counsel in connection with the Representative’s receipt of such information. Documents filed with the Commission pursuant to its EDGAR system or otherwise publicly filed or made available shall be deemed to have been delivered to the Representative pursuant to this Section 3.9.1.
3.9.2. Transfer Agent; Transfer Sheets . For a period of three (3) years after the date of this Agreement, the Company shall retain a transfer agent and registrar acceptable to the Representative (the “ Transfer Agent ”) and shall furnish to the Representative at the Company’s sole cost and expense such transfer sheets of the Company’s securities as the Representative may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and DTC; provided that such provision shall not prevent a sale, merger or similar transaction involving the Company. Corporate Stock Transfer, Inc. is acceptable to the Representative to act as Transfer Agent for the shares of Common Stock.
3.9.3. Trading Reports . For a period of three (3) years after the date of this Agreement, the Company shall provide to the Representative, at the Company’s expense, such reports published by Exchange relating to price trading of the Public Securities, as the Representative shall reasonably request,
- 22 - |
provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.
3.10 Payment of Expenses
3.10.1. General Expenses Related to the Offering . The Company hereby agrees to pay on each of the Closing Date and the Option Closing Date, if any, to the extent not paid at the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the shares of Common Stock to be sold in the Offering (including the Option Shares) with the Commission; (b) all Public Filing System filing fees associated with the review of the Offering by FINRA; (c) all fees and expenses relating to the listing of such Public Securities on the Exchange and such other stock exchanges as the Company and the Representative together determine; (d) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors in an amount not to exceed $5,000 per individual and $15,000 in the aggregate; (e) all fees, expenses and disbursements relating to the registration or qualification of the Public Securities under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of “blue sky” counsel, it being agreed that such fees and expenses will be limited to if the Offering is commenced on the Over the Counter Bulletin Board, the Company shall make a payment of up to $10,000 to such counsel upon the commencement of “blue sky” work by such counsel and an additional payment of $5,000 to such counsel at Closing to cover such counsel’s fees and expenses); (f) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Public Securities under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (g) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement, any Blue Sky Surveys and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (h) the costs and expenses of a public relations firm; (i) the costs of preparing, printing and delivering certificates representing the Public Securities; (j) fees and expenses of the transfer agent for the shares of Common Stock; (k) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (l) the costs (up to $2,500) associated with one set of bound volumes of the public offering materials as well as commemorative mementos and lucite tombstones, each of which the Company or its designee shall provide within a reasonable time after the Closing Date in such quantities as the Representative may reasonably request; (m) the fees and expenses of the Company’s accountants; (n) the fees and expenses of the Company’s legal counsel and other agents and representatives; (o) the fees and expenses of the Underwriter’s legal counsel not to exceed $50,000, but only if the gross proceeds to the Company from the Offering equal or exceed $25 million; (p) the $21,775 cost associated with the Underwriter’s use of Ipreo’s book-building, prospectus tracking and compliance software for the Offering; and (q) upon the successful completion of this Offering, up to $20,000 of the Underwriter’s actual accountable “road show” expenses for the Offering. Notwithstanding the foregoing, the Company’s obligations to reimburse the Representative for any out-of-pocket expenses actually incurred as set forth in the preceding sentence shall not exceed $125,000.00 in the aggregate, including but not limited to the reasonable legal fees and road show expenses as described therein. The Representative may deduct from the net proceeds of the Offering payable to the Company on the Closing Date, or the Option Closing Date, if any, the expenses set forth herein to be paid by the Company to the Underwriters, less the Advance (as such term is defined in Section 8.3 hereof).
3.10.2. Non-accountable Expenses . The Company further agrees that, in addition to the expenses payable pursuant to Section 3.10.1, on the Closing Date it shall pay to the Representative, by deduction from the net proceeds of the Offering contemplated herein, a non-accountable expense
- 23 - |
allowance equal to one percent (1%) of the gross proceeds received by the Company from the sale of the Firm Shares (excluding the Option Shares), provided, however, that in the event that the Offering is terminated, the Company agrees to reimburse the Underwriters pursuant to Section 8.3 hereof.
3.11 Application of Net Proceeds . The Company shall apply the net proceeds from the Offering received by it in a manner consistent in all material respects with the application thereof described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
3.12 Delivery of Earnings Statements to Security Holders . The Company shall make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth (15 th ) full calendar month following the date of this Agreement, an earnings statement (which need not be certified by an independent registered public accounting firm unless required by the Securities Act or the Securities Act Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at least twelve (12) consecutive months beginning after the date of this Agreement.
3.13 Stabilization . Neither the Company nor, to its knowledge, any of its employees, directors or stockholders (without the consent of the Representative) shall take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.
3.14 Internal Controls . The Company shall maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
3.15 Accountants . As of the date of this Agreement, the Company shall retain an independent registered public accounting firm, as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board, reasonably acceptable to the Representative, and the Company shall continue to retain a nationally recognized independent registered public accounting firm for a period of at least three (3) years after the date of this Agreement; provided that such provision shall not prevent a sale, merger or similar transaction involving the Company. The Representative acknowledges that the Auditor is acceptable to the Representative.
3.16 FINRA . For a period of 90 days from the later of the Closing Date or the Option Closing Date, the Company shall advise the Representative (who shall make an appropriate filing with FINRA) if it is or becomes aware that (i) any officer or director of the Company, (ii) any beneficial owner of 5% or more of any class of the Company’s securities or (iii) any beneficial owner of the Company's unregistered equity securities which were acquired during the 180 days immediately preceding the filing of the Registration Statement is or becomes an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
3.17 No Fiduciary Duties . The Company acknowledges and agrees that the Underwriters’ responsibility to the Company is solely contractual in nature and that none of the Underwriters or their affiliates or any selling agent shall be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement.
- 24 - |
3.18 Company Lock-Up Agreements .
3.18.1. Restriction on Sales of Capital Stock . The Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of 180 days after the date of this Agreement (the “ Lock-Up Period ”), (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) file or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company other than a registration statement on Form S-4 or S-8; or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clause (i), (ii) or (iii) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise.
The restrictions contained in this Section 3.18.1 shall not apply to (i) the shares of Common Stock to be sold hereunder, (ii) the issuance by the Company of shares of Common Stock upon the exercise of a stock option or warrant or the conversion of a security outstanding on the date hereof, of which the Representative has been advised in writing, (iii) the issuance by the Company of any security under any equity compensation plan of the Company, (iv) the issuance of securities in connection with mergers, acquisitions, joint ventures, licensing arrangements or any other similar non-capital raising transactions or (v) the issuance by the Company of shares of Common Stock to consultants in the Company’s ordinary course of business; provided that, prior to the issuance of any such stock options or shares of capital stock of the Company that are vested or vest during the Lock-Up Period, each recipient thereof shall sign and deliver a Lock-Up Agreement.
3.18.2. Restriction on Continuous Offerings . Notwithstanding the restrictions contained in Section 3.18.1, the Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of 12 months after the date of this Agreement, directly or indirectly in any “at-the-market” or continuous equity transaction, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company.
3.19 Release of D&O Lock-up Period . If the Representative, in its sole discretion, agrees to release or waive the restrictions set forth in the Lock-Up Agreements described in Section 2.26 hereof for an officer or director of the Company and provide the Company with notice of the impending release or waiver at least three (3) Business Days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit C hereto through a major news service at least two (2) Business Days before the effective date of the release or waiver.
3.20 Blue Sky Qualifications . The Company shall use its reasonable best efforts, in cooperation with the Underwriters, if necessary, to qualify the Public Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Public Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
- 25 - |
3.21 Reporting Requirements . The Company, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and Exchange Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Public Securities as may be required under Rule 463 under the Securities Act Regulations.
3.22 Emerging Growth Company Status . The Company shall promptly notify the Representative if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Public Securities within the meaning of the Securities Act and (ii) fifteen (15) days following the completion of the Lock-Up Period.
3.23 Press Releases . Prior to the Closing Date and any Option Closing Date, the Company shall not issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Representative is notified), without the prior written consent of the Representative, which consent shall not be unreasonably withheld, unless in the judgment of the Company and its counsel, and after notification to the Representative, such press release or communication is required by law.
3.24 Sarbanes-Oxley . The Company shall at all times comply with all applicable provisions of the Sarbanes-Oxley Act in effect from time to time.
3.25 IRS Forms . The Company shall deliver to each Underwriter (or its agent), prior to or at the Closing Date, a properly completed and executed Internal Revenue Service (“ IRS ”) Form W-9 or an IRS Form W-8, as appropriate, together with all required attachments to such form.
4. Conditions of Underwriters’ Obligations . The obligations of the Underwriters to purchase and pay for the Public Securities, as provided herein, shall be subject to (i) the continuing accuracy of the representations and warranties of the Company in all material respects as of the date hereof and as of each of the Closing Date and the Option Closing Date, if any; (ii) the accuracy of the statements of officers of the Company made pursuant to the provisions hereof; (iii) the performance by the Company in all material respects of its obligations hereunder; and (iv) the following conditions:
4.1 Regulatory Matters .
4.1.1. Effectiveness of Registration Statement; Rule 430A Information . The Registration Statement shall have become effective not later than 5:30 p.m., Eastern time, on the date of this Agreement or such later date and time as shall be consented to in writing by you, and, at each of the Closing Date and any Option Closing Date, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto shall have been issued under the Securities Act, no order preventing or suspending the use of any Preliminary Prospectus or the Prospectus shall have been issued and no proceedings for any of those purposes shall have been instituted or are pending or, to the Company’s knowledge, contemplated by the Commission. The Company has complied with each request (if any) from the Commission for additional information. A prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) under the Securities Act Regulations (without reliance on Rule 424(b)(8)) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A under the Securities Act Regulations.
- 26 - |
4.1.2. FINRA Clearance . On or before the date of this Agreement, the Representative shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.
4.1.3. Exchange Stock Market Clearance . On the Closing Date, the Company’s Common Stock, including the Firm Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance. On the first Option Closing Date (if any), the Company’s Common Stock, including the Option Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance.
4.2 Company Counsel Matters .
4.2.1. Closing Date Opinion of Counsel . On the Closing Date, the Representative shall have received the favorable opinion of Reed Smith LLP, counsel to the Company, dated the Closing Date and addressed to the Representative, in form and substance reasonably satisfactory to the Representative.
4.2.2. Opinion of Special Intellectual Property Counsel for the Company . On the Closing Date, the Representative shall have received the opinion of Knobbe Martens Olson & Bear LLP, special intellectual property counsel for the Company, dated the Closing Date and addressed to the Representative, in form and substance reasonably satisfactory to the Representative.
4.2.3. Option Closing Date Opinions of Counsel . On the Option Closing Date, if any, the Representative shall have received the favorable opinions of each counsel listed in Sections 4.2.1 and 4.2.2, dated the Option Closing Date, addressed to the Representative and in form and substance reasonably satisfactory to the Representative, confirming as of the Option Closing Date, the statements made by such counsels in their respective opinions delivered on the Closing Date.
4.2.4. Reliance . In rendering such opinions, such counsel may rely: (i) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to the Representative) of other counsel reasonably acceptable to the Representative, familiar with the applicable laws; and (ii) as to matters of fact, to the extent they deem proper, on certificates or other written statements of officers of the Company and officers of departments of various jurisdictions having custody of documents respecting the corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to Representative Counsel if requested.
4.3 Comfort Letters .
4.3.1. Cold Comfort Letter . At the time this Agreement is executed the Representative shall have received a cold comfort letter containing statements and information of the type customarily included in accountants’ comfort letters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus, addressed to the Representative and in form and substance satisfactory in all respects to the Representative and to Representative Counsel from the Auditor, dated as of the date of this Agreement.
4.3.2. Bring-down Comfort Letter . At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received from the Auditor a letter, dated as of the Closing Date or the Option Closing Date, as applicable, to the effect that the Auditor reaffirms the statements made in the letter furnished pursuant to Section 4.3.1, except that the specified date referred to shall be a date not more than three (3) business days prior to the Closing Date or the Option Closing Date, as applicable.
- 27 - |
4.4 Officers’ Certificates .
4.4.1. Officers’ Certificate . The Company shall have furnished to the Representative a certificate, dated the Closing Date and any Option Closing Date (if such date is other than the Closing Date), of its Chief Executive Officer or President, and its Chief Financial Officer stating on behalf of the Company and not in an individual capacity that (i) such officers have carefully examined the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date) did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Pricing Disclosure Package, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), any Issuer Free Writing Prospectus as of its date and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading, (ii) since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus, (iii) to the best of their knowledge after reasonable investigation, as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the representations and warranties of the Company in this Agreement are true and correct in all material respects (except for those representations and warranties qualified as to materiality, which shall be true and correct in all respects and except for those representations and warranties which refer to facts existing at a specific date, which shall be true and correct as of such date) and the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date (or any Option Closing Date if such date is other than the Closing Date), and (iv) there has not been, subsequent to the date of the most recent audited financial statements included in the Pricing Disclosure Package, any material adverse change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a material adverse change in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company, except as set forth in the Prospectus.
4.4.2. Secretary’s Certificate . At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date or the Option Date, as the case may be, respectively, certifying on behalf of the Company and not in an individual capacity: (i) that each of the Charter and Bylaws is true and complete, has not been modified and is in full force and effect; (ii) that the resolutions of the Company’s Board of Directors relating to the Offering are in full force and effect and have not been modified; (iii) as to the accuracy and completeness of all correspondence between the Company or its counsel and the Commission; and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.
4.5 No Material Changes . Prior to and on each of the Closing Date and each Option Closing Date, if any: (i) there shall have been no Material Adverse Change in the condition or prospects or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (ii) no action, suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Insider before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations, prospects or financial condition or income of the Company, except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (iii) no stop order shall
- 28 - |
have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; and (iv) the Registration Statement, the Pricing Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations and shall conform in all material respects to the requirements of the Securities Act and the Securities Act Regulations, and neither the Registration Statement, the Pricing Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
4.6 No Material Misstatement or Omission . The Underwriters shall not have discovered and disclosed to the Company on or prior to the Closing Date and any Option Closing Date that the Registration Statement or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Underwriters, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading, or that the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus or the Prospectus or any amendment or supplement thereto contains an untrue statement of fact which, in the opinion of such counsel, is material or omits to state any fact which, in the opinion of such counsel, is material and is necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading.
4.7 Corporate Proceedings . All corporate proceedings and other legal matters incident to the authorization, form and validity of each of this Agreement, the Representative’s Warrant Agreement, the Registration Statement, the Pricing Disclosure Package, each Issuer Free Writing Prospectus, if any, and the Prospectus and all other legal matters relating to this Agreement, the Representative’s Warrant Agreement and the transactions contemplated hereby and thereby shall be reasonably satisfactory in all material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.
4.8 Delivery of Agreements .
4.8.1. Lock-Up Agreements . On or before the date of this Agreement, the Company shall have delivered to the Representative executed copies of the Lock-Up Agreements from each of the persons listed in Schedule 3 hereto.
4.8.2. Representative’s Warrant Agreement . On the Closing Date, the Company shall have delivered to the Representative executed copies of the Representative’s Warrant Agreement.
4.9 Additional Documents . At the Closing Date and at each Option Closing Date (if any) Representative Counsel shall have been furnished with such documents and opinions as they may require for the purpose of enabling Representative Counsel to deliver an opinion to the Underwriters, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Public Securities and the Representative’s Securities as herein contemplated shall be satisfactory in form and substance to the Representative and Representative Counsel.
4.10 Reverse Stock Split . Not later than the first trading day of the Firm Shares following the date hereof, the Reverse Stock Split shall be effective.
- 29 - |
5. | Indemnification . |
5.1 Indemnification of the Underwriters .
5.1.1. General . The Company shall indemnify and hold harmless each Underwriter, its affiliates and each of its and their respective directors, officers, members, employees, representatives and agents and each person, if any, who controls any such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively the “ Underwriter Indemnified Parties, ” and each an “ Underwriter Indemnified Party ”), against any and all loss, liability, claim, damage and expense whatsoever (including but not limited to any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter Indemnified Parties and any third party, or otherwise) to which they or any of them may become subject under the Securities Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Registration Statement, the Pricing Disclosure Package, the Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication (as from time to time each may be amended and supplemented); (ii) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering, including any “road show” or investor presentations made to investors by the Company (whether in person or electronically); or (iii) any application or other document or written communication (in this Section 5, collectively called “ application ”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Public Securities and Representative’s Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, the Exchange or any other national securities exchange; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon, and in conformity with, the Underwriters’ Information. With respect to any untrue statement or omission or alleged untrue statement or omission made in the Pricing Disclosure Package, the indemnity agreement contained in this Section 5.1.1 shall not inure to the benefit of any Underwriter Indemnified Party to the extent that any loss, liability, claim, damage or expense of such Underwriter Indemnified Party results from the fact that a copy of the Prospectus was not given or sent to the person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Public Securities to such person as required by the Securities Act and the Securities Act Regulations, and if the untrue statement or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of non-compliance by the Company with its obligations under Section 3.3 hereof.
5.1.2. Procedure . If any action is brought against an Underwriter Indemnified Party in respect of which indemnity may be sought against the Company pursuant to Section 5.1.1, such Underwriter Indemnified Party shall promptly notify the Company in writing of the institution of such action and the Company shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of such Underwriter Indemnified Party) and payment of actual expenses. Such Underwriter Indemnified Party shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter Indemnified Party unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company in connection with the defense of such action, or (ii) the Company shall not have employed counsel to have charge of the defense of such action, or (iii) such indemnified party or parties shall have been advised by its counsel that there may be defenses available to it or them which are different from or additional to those available to the Company
- 30 - |
(in which case the Company shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events the reasonable fees and expenses of not more than one additional firm of attorneys selected by the Underwriter Indemnified Parties who are party to such action (in addition to local counsel) shall be borne by the Company. Notwithstanding anything to the contrary contained herein, if any Underwriter Indemnified Party shall assume the defense of such action as provided above, the Company shall have the right to approve the terms of any settlement of such action, which approval shall not be unreasonably withheld.
5.2 Indemnification of the Company . Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the several Underwriters, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, the Underwriters’ Information. In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5.1.2. The Company agrees promptly to notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or any person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, in connection with the issuance and sale of the Public Securities or in connection with the Registration Statement, the Pricing Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication.
5.3 Contribution .
5.3.1. Contribution Rights . If the indemnification provided for in this Section 5 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 5.1 or 5.2 in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and each of the Underwriters, on the other hand, from the Offering, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, with respect to such Offering shall be deemed to be in the same proportion as the total proceeds from the Offering purchased under this Agreement (before deducting expenses) received by the Company bear to the total underwriting discount and commissions received by the Underwriters in connection with the Offering, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company, on the one hand, and the Underwriters, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or the Underwriters, on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such
- 31 - |
untrue statement, omission, act or failure to act; provided that the parties hereto agree that the written information furnished to the Company through the Representative by or on behalf of any Underwriter for use in any Preliminary Prospectus, any Registration Statement or the Prospectus, or in any amendment or supplement thereto, consists solely of the Underwriters’ Information. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 5.3.1 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage, expense, liability, action, investigation or proceeding referred to above in this Section 5.3.1 shall be deemed to include, for purposes of this Section 5.3.1, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating, preparing to defend or defending against or appearing as a third party witness in respect of, or otherwise incurred in connection with, any such loss, claim, damage, expense, liability, action, investigation or proceeding. Notwithstanding the provisions of this Section 5.3.1 no Underwriter shall be required to contribute any amount in excess of the total discount and commission received by such Underwriter in connection with the Offering less the amount of any damages which such Underwriter has otherwise paid or becomes liable to pay by reason of any untrue or alleged untrue statement, omission or alleged omission, act or alleged act or failure to act or alleged failure to act. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
5.3.2. Contribution Procedure . Within fifteen (15) days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (“contributing party”), notify the contributing party of the commencement thereof, but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid 15 days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section 5.3.2 are intended to supersede, to the extent permitted by law, any right to contribution under the Securities Act, the Exchange Act or otherwise available. The Underwriters’ obligations to contribute as provided in this Section 5.3 are several and in proportion to their respective underwriting obligation, and not joint.
6. | Default by an Underwriter . |
6.1 Default Not Exceeding 10% of Firm Shares or Option Shares . If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Shares or the Option Shares, if the Over-allotment Option is exercised hereunder, and if the number of the Firm Shares or Option Shares with respect to which such default relates does not exceed in the aggregate 10% of the number of Firm Shares or Option Shares that all Underwriters have agreed to purchase hereunder, then such Firm Shares or Option Shares to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments hereunder.
6.2 Default Exceeding 10% of Firm Shares or Option Shares . In the event that the default addressed in Section 6.1 relates to more than 10% of the Firm Shares or Option Shares, you may in your discretion arrange for yourself or for another party or parties to purchase such Firm Shares or Option Shares to which such default relates on the terms contained herein. If, within one (1) Business Day after such default relating to more than 10% of the Firm Shares or Option Shares, you do not arrange for the purchase of such Firm Shares or Option Shares, then the Company shall be entitled to a further period of
- 32 - |
one (1) Business Day within which to procure another party or parties satisfactory to you to purchase said Firm Shares or Option Shares on such terms. In the event that neither you nor the Company arrange for the purchase of the Firm Shares or Option Shares to which a default relates as provided in this Section 6, this Agreement will automatically be terminated by you or the Company without liability on the part of the Company (except as provided in Sections 3.9 and 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); provided, however, that if such default occurs with respect to the Option Shares, this Agreement will not terminate as to the Firm Shares; and provided, further, that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other Underwriters and to the Company for damages occasioned by its default hereunder.
6.3 Postponement of Closing Date . In the event that the Firm Shares or Option Shares to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, you or the Company shall have the right to postpone the Closing Date or Option Closing Date for a reasonable period, but not in any event exceeding five (5) Business Days, in order to effect whatever changes may thereby be made necessary in the Registration Statement, the Pricing Disclosure Package or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus that in the opinion of counsel for the Underwriter may thereby be made necessary. The term “ Underwriter ” as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such shares of Common Stock.
7. | Additional Covenants . |
7.1 Board Composition and Board Designations . The Company shall ensure as of the Closing Date and the Option Closing Date, if any, that: (i) the qualifications of the persons serving as members of the Board of Directors and the overall composition of the Board comply with the Sarbanes-Oxley Act, the Exchange Act and the listing rules of the Exchange or any other national securities exchange, as the case may be, in the event the Company seeks to have any of its securities listed on another exchange or quoted on an automated quotation system, and (ii) if applicable, at least one member of the Audit Committee of the Board of Directors qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange.
7.2 Prohibition on Press Releases and Public Announcements . The Company shall not issue press releases or engage in any other publicity, without the Representative’s prior written consent, for a period ending at 5:00 p.m., Eastern time, on the first (1 st ) Business Day following the fortieth (40 th ) day after the Closing Date, other than normal and customary releases issued in the ordinary course of the Company’s business.
7.3 Right of First Refusal . Provided that the Firm Shares are sold in accordance with the terms of this Agreement, the Representative shall have an irrevocable right of first refusal (the “ Right of First Refusal ”), for a period of twelve (12) months after the Effective Date, to act as sole book-runner and/or sole placement agent, at the Representative’s sole and exclusive direction, for each and every future public or private equity or debt offering, including all equity linked financings (each, a “ Subject Transaction ”), during such twelve (12) month period, of the Company, or any successor to or subsidiary of the Company, on terms and conditions customary to the Representative for such Subject Transactions. The Representative shall have the sole right to determine whether or not any other broker dealer shall have the right to participate in any such Subject Transaction and the economic terms of any such participation; provided, however, that at least two (2) co-managers chosen by the Company and reasonably satisfactory to the Representative may participate in any underwritten public offering with substantially the same economics to the underwriters as the Offering. For the avoidance of any doubt, the Company shall not retain, engage or solicit any additional investment banker, book-runner, financial
- 33 - |
advisor, underwriter and/or placement agent in a Subject Transaction during the twelve (12) month period referred to above without the express written consent of the Representative. The Company shall notify the Representative of its intention to pursue a Subject Transaction, including the material terms thereof, by providing written notice thereof by registered mail or overnight courier service addressed to the Representative. If the Representative fails to exercise its Right of First Refusal with respect to any Subject Transaction within ten (10) Business Days after the mailing of such written notice, then the Representative shall have no further claim or right with respect to the Subject Transaction. The Representative may elect, in its sole and absolute discretion, not to exercise its Right of First Refusal with respect to any Subject Transaction; provided that any such election by the Representative shall not adversely affect the Representative’s Right of First Refusal with respect to any other Subject Transaction during the twelve (12) month period agreed to above. The terms and conditions of any such engagements shall be set forth in separate agreements and may be subject to, among other things, satisfactory completion of due diligence by the Representative, market conditions, the absence of a material adverse change to the Company’s business, financial condition and prospects, approval of the Representative’s internal committee and any other conditions that the Representative may deem appropriate for transactions of such nature.
8. | Effective Date of this Agreement and Termination Thereof . |
8.1 Effective Date . This Agreement shall become effective when both the Company and the Representative have executed the same and delivered counterparts of such signatures to the other party.
8.2 Termination . The Representative shall have the right to terminate this Agreement at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in your opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the New York Stock Exchange or the Nasdaq Stock Market LLC shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction; or (iii) if the United States shall have become involved in a new war or an increase in major hostilities; or (iv) if a banking moratorium has been declared by a New York State or federal authority; or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets; or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in your opinion, make it inadvisable to proceed with the delivery of the Firm Shares or Option Shares; or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder; or (viii) if the Representative shall have become aware after the date hereof of such a material adverse change in the conditions or prospects of the Company, or such adverse material change in general market conditions as in the Representative’s judgment would make it impracticable to proceed with the offering, sale and/or delivery of the Public Securities or to enforce contracts made by the Underwriters for the sale of the Public Securities.
8.3 Expenses . Notwithstanding anything to the contrary in this Agreement, except in the case of a default by the Underwriters, pursuant to Section 6.2 above, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Underwriters their actual and accountable out-of-pocket expenses related to the transactions contemplated herein then due and payable (including the reasonable fees and disbursements of Representative Counsel not to exceed $50,000.00) up to $100,000, inclusive of the $25,000 advance for accountable expenses previously paid by the Company to the Representative (the “ Advance ”) and upon demand the Company shall pay the full amount thereof to the Representative on behalf of the Underwriters; provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement .
- 34 - |
Notwithstanding the foregoing, any advance received by the Representative will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(f)(2)(C).
8.4 Indemnification . Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Section 5 shall remain in full force and effect and shall not be in any way affected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof.
8.5 Representations, Warranties, Agreements to Survive . All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company or (ii) delivery of and payment for the Public Securities.
9. | Miscellaneous . |
9.1 Notices . All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed (registered or certified mail, return receipt requested), personally delivered or sent by facsimile transmission and confirmed and shall be deemed given when so delivered or faxed and confirmed or if mailed, two (2) days after such mailing.
If to the Representative:
Aegis Capital Corp.
810 Seventh Avenue, 18
th
Floor
New York, New York 10019
Attn: Mr. David Bocchi, Managing Director of Investment Banking
Fax No.: (212) 813-1047
with a copy (which shall not constitute notice) to:
Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue
New York, NY 10166
Attn: Anthony J. Marsico, Esq.
Fax No.: 212-805-9362
If to the Company:
Ritter Pharmaceuticals, Inc.
1801 Century Park East #1820
Los Angeles, CA 90067
Attention: Michael D. Step
Fax No: (310) 919-1600
with a copy (which shall not constitute notice) to:
Reed Smith LLP
599 Lexington Avenue
- 35 - |
New York, NY 10022
Attention: Yvan-Claude Pierre, Esq.
Fax No: 212-521-5450
9.2 Headings . The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.
9.3 Amendment . This Agreement may only be amended by a written instrument executed by each of the parties hereto.
9.4 Entire Agreement . This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.
9.5 Binding Effect . This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters, the Company and the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors, legal representatives, heirs and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from any of the Underwriters.
9.6 Governing Law; Consent to Jurisdiction; Trial by Jury . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
9.7 Execution in Counterparts . This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Delivery of a signed counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and sufficient delivery thereof.
9.8 Waiver, etc . The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor
- 36 - |
to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
[ Signature Page Follows ]
- 37 - |
If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.
Very truly yours, | ||
RITTER PHARMACEUTICALS, INC. | ||
By: | ||
Name: | ||
Title: | ||
Confirmed as of the date first written above mentioned, on behalf of itself and as Representative of the several Underwriters named on Schedule 1 hereto: |
AEGIS CAPITAL CORP.
By: | ||
Name: | ||
Title: |
[Signature Page]
Ritter Pharmaceuticals, Inc. – Underwriting Agreement
SCHEDULE 1
Underwriter |
Total Number of
Firm Shares to be
|
Number of Additional
Shares to be Purchased if the Over-Allotment Option is Fully Exercised |
||||||
Aegis Capital Corp. | ||||||||
TOTAL |
Sch. 1 -1 |
SCHEDULE 2-A
Pricing Information
Number of Firm Shares: [•]
Number of Option Shares: [•]
Public Offering Price per Share: $[•]
Underwriting Discount per Share: $[•]
Proceeds to Company per Share (before expenses, excluding the Company’s Insiders’ participation): $[•]
Underwriting Non-accountable expense allowance per Share: $[•]
SCHEDULE 2-B
Issuer General Use Free Writing Prospectuses
[None.]
SCHEDULE 2-C
Written Testing-the-Waters Communications
[None.]
Sch. 2 -1 |
SCHEDULE 3
List of Lock-Up Parties
Sch. 3 -1 |
EXHIBIT A
Form of Representative’s Warrant Agreement
THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT FOR A PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE OTHER THAN (I) AEGIS CAPITAL CORP. OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF AEGIS CAPITAL CORP. OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER.
THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO [________________] [ DATE THAT IS ONE YEAR FROM THE EFFECTIVE DATE OF THE OFFERING ]. VOID AFTER 5:00 P.M., EASTERN TIME, [___________________] [ DATE THAT IS FIVE YEARS FROM THE EFFECTIVE DATE OF THE OFFERING ].
COMMON STOCK PURCHASE WARRANT
For the Purchase of [_____] Shares of Common Stock
of
RITTER PHARMACEUTICALS, INC.
1. Purchase Warrant . THIS CERTIFIES THAT, in consideration of funds duly paid by or on behalf of Aegis Capital Corp. (“ Holder ”), as registered owner of this Purchase Warrant, to Ritter Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”), Holder is entitled, at any time or from time to time from [________________] [ DATE THAT IS ONE YEAR FROM THE EFFECTIVE DATE OF THE OFFERING ] (the “ Commencement Date ”), and at or before 5:00 p.m., Eastern time, [____________] [ DATE THAT IS FIVE YEARS FROM THE EFFECTIVE DATE OF THE OFFERING ] (the ” Expiration Date ”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to [____] shares of common stock of the Company, par value $0.001 per share (the “ Shares ”), subject to adjustment as provided in Section 6 hereof. If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase Warrant may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate this Purchase Warrant. This Purchase Warrant is initially exercisable at $[___] per Share [ 125% of the public offering price of the Firm Shares sold in the Offering ]; provided , however , that upon the occurrence of any of the events specified in Section 6 hereof, the rights granted by this Purchase Warrant, including the exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as therein specified. The term “ Exercise Price ” shall mean the initial exercise price or the adjusted exercise price, depending on the context. The term “ Effective Date ” shall mean [ ], the date on which the Registration Statement on Form S-1 (File No. 333-202924) of the Company was declared effective by the
Ex. A- 1 |
Securities and Exchange Commission.
2. Exercise .
2.1 Exercise Form . In order to exercise this Purchase Warrant, the exercise form attached hereto must be duly executed and completed and delivered to the Company, together with this Purchase Warrant and payment of the Exercise Price for the Shares being purchased payable in cash by wire transfer of immediately available funds to an account designated by the Company or by certified check or official bank check. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Warrant shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.
2.2 Cashless Exercise . If at any time after the Commencement Date there is no effective registration statement registering, or no current prospectus available for, the resale of the Shares by the Holder, then in lieu of exercising this Purchase Warrant by payment of cash or check payable to the order of the Company pursuant to Section 2.1 above, Holder may elect to receive the number of Shares equal to the value of this Purchase Warrant (or the portion thereof being exercised), by surrender of this Purchase Warrant to the Company, together with the exercise form attached hereto, in which event the Company shall issue to Holder, Shares in accordance with the following formula:
X | = | Y(A-B) | |
A |
Where, | |||||
X | = | The number of Shares to be issued to Holder; | |||
Y | = | The number of Shares for which the Purchase Warrant is being exercised; | |||
A | = | The fair market value of one Share; and | |||
B | = | The Exercise Price. |
For purposes of this Section 2.2, the fair market value of a Share is defined as follows:
(i) | if the Company’s common stock is traded on a securities exchange, the value shall be deemed to be the closing price on such exchange prior to the exercise form being submitted in connection with the exercise of the Purchase Warrant; or |
(ii) | if the Company’s common stock is actively traded over-the-counter, the value shall be deemed to be the closing bid price prior to the exercise form being submitted in connection with the exercise of the Purchase Warrant; if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors. |
2.3 Legend . Each certificate for the securities purchased under this Purchase Warrant shall bear a legend as follows unless such securities have been registered under the Securities Act of 1933, as amended (the “ Securities Act ”):
“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), or applicable state law. Neither the securities nor any interest therein may be offered for sale, sold or otherwise transferred except pursuant to an effective registration
Ex. A- 2 |
statement under the Securities Act, or pursuant to an exemption from registration under the Securities Act and applicable state law which, in the opinion of counsel to the Company, is available.”
3. Transfer .
3.1 General Restrictions . The registered Holder of this Purchase Warrant agrees by his, her or its acceptance hereof, that such Holder will not: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant for a period of one hundred eighty (180) days following the Effective Date to anyone other than: (i) Aegis Capital Corp. (“ Aegis ”) or an underwriter or a selected dealer participating in the Offering, or (ii) a bona fide officer or partner of Aegis or of any such underwriter or selected dealer, in each case in accordance with FINRA Conduct Rule 5110(g)(1), or (b) cause this Purchase Warrant or the securities issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Purchase Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(g)(2). On and after 180 days after the Effective Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly executed and completed, together with the Purchase Warrant and payment of all transfer taxes, if any, payable in connection therewith. The Company shall within five (5) business days transfer this Purchase Warrant on the books of the Company and shall execute and deliver a new Purchase Warrant or Purchase Warrants of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Securities Act . The securities evidenced by this Purchase Warrant shall not be transferred unless and until: (i) the Company has received the opinion of counsel for the Holder that the securities may be transferred pursuant to an exemption from registration under the Securities Act and applicable state securities laws, the availability of which is established to the reasonable satisfaction of the Company (the Company hereby agreeing that the opinion of Greenberg Traurig, LLP shall be deemed satisfactory evidence of the availability of an exemption), or (ii) a registration statement or a post-effective amendment to the Registration Statement relating to the offer and sale of such securities has been filed by the Company and declared effective by the U.S. Securities and Exchange Commission (the “ Commission ”) and compliance with applicable state securities law has been established.
4. Registration Rights .
4.1 Demand Registration .
4.1.1 Grant of Right . The Company, upon written demand (a “ Demand Notice ”) of the Holders of at least 51% of the Purchase Warrants and/or the underlying Shares (“Majority Holders”), agrees to register, on one occasion, all or any portion of the Shares underlying the Purchase Warrants (collectively, the “ Registrable Securities ”). On such occasion, the Company will file a registration statement with the Commission covering the Registrable Securities within sixty (60) days after receipt of a Demand Notice and use its reasonable best efforts to have the registration statement declared effective promptly thereafter, subject to compliance with review by the Commission; provided , however , that the Company shall not be required to comply with a Demand Notice if the Company has filed a registration statement with respect to which the Holder is entitled to piggyback registration rights pursuant to Section 4.2 hereof and either: (i) the Holder has elected to participate in the offering covered by such registration statement or (ii) if such registration statement relates to an underwritten primary offering of securities of the Company, until the offering covered by such registration statement has been withdrawn or until thirty
Ex. A- 3 |
(30) days after such offering is consummated. The demand for registration may be made at any time during a period of four (4) years beginning on the Commencement Date. The Company covenants and agrees to give written notice of its receipt of any Demand Notice by any Holders to all other registered Holders of the Purchase Warrants and/or the Registrable Securities within ten (10) days after the date of the receipt of any such Demand Notice.
4.1.2 Terms . The Company shall bear all fees and expenses attendant to the registration of the Registrable Securities pursuant to Section 4.1.1, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. The Company agrees to use its reasonable best efforts to cause the filing required herein to become effective promptly and to qualify or register the Registrable Securities in such States as are reasonably requested by the Holders; provided , however , that in no event shall the Company be required to register the Registrable Securities in a State in which such registration would cause: (i) the Company to be obligated to register or license to do business in such State or submit to general service of process in such State, or (ii) the principal stockholders of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration statement filed pursuant to the demand right granted under Section 4.1.1 to remain effective for a period of at least twelve (12) consecutive months after the date that the Holders of the Registrable Securities covered by such registration statement are first given the opportunity to sell all of such securities. The Holders shall only use the prospectuses provided by the Company to sell the shares covered by such registration statement, and will immediately cease to use any prospectus furnished by the Company if the Company advises the Holder that such prospectus may no longer be used due to a material misstatement or omission. Notwithstanding the provisions of this Section 4.1.2, the Holder shall be entitled to a demand registration under this Section 4.1.2 on only one (1) occasion and such demand registration right shall terminate on the fifth anniversary of the Effective Date in accordance with FINRA Rule 5110(f)(2)(G)(iv).
4.2 “Piggy-Back” Registration .
4.2.1 Grant of Right . In addition to the demand right of registration described in Section 4.1 hereof, the Holder shall have the right, for a period of no more than seven (7) years from the Effective Date in accordance with FINRA Rule 5110(f)(2)(G)(v), to include the Registrable Securities as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or any equivalent form); provided , however , that if, solely in connection with any primary underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by such Holders; provided , however , that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities.
4.2.2 Terms . The Company shall bear all fees and expenses attendant to registering the
Ex. A- 4 |
Registrable Securities pursuant to Section 4.2.1 hereof, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company until such time as all of the Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement. Except as otherwise provided in this Purchase Warrant, there shall be no limit on the number of times the Holder may request registration under this Section 4.2.2; provided , however , that such registration rights shall terminate on the sixth anniversary of the Commencement Date.
4.3 General Terms .
4.3.1 Indemnification . The Company shall indemnify the Holders of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20 (a) of the Securities Exchange Act of 1934, as amended (“ Exchange Act ”), against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 5.1 of the Underwriting Agreement between the Underwriters and the Company, dated as of [___________], 2015. The Holders of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5.2 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.
4.3.2 Exercise of Purchase Warrants . Nothing contained in this Purchase Warrant shall be construed as requiring the Holders to exercise their Purchase Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.
4.3.3 Documents Delivered to Holders . The Company shall furnish to each Holder participating in any of the foregoing offerings and to each underwriter of any such offering, if any, a signed counterpart, addressed to such Holder or underwriter, of: (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing under any underwriting agreement related thereto), and (ii) a “cold comfort” letter dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement) signed by the independent registered public accounting firm which has issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in
Ex. A- 5 |
accountants’ letters delivered to underwriters in underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the offering requesting the correspondence and memoranda described below and to the managing underwriter, if any, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request.
4.3.4 Underwriting Agreement . The Company shall enter into an underwriting agreement with the managing underwriter(s), if any, selected by any Holders whose Registrable Securities are being registered pursuant to this Section 4, which managing underwriter shall be reasonably satisfactory to the Company. Such agreement shall be reasonably satisfactory in form and substance to the Company, each Holder and such managing underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders, their Shares and their intended methods of distribution.
4.3.5 Documents to be Delivered by Holders . Each of the Holders participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.
4.3.6 Damages . Should the registration or the effectiveness thereof required by Sections 4.1 and 4.2 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holders shall, in addition to any other legal or other relief available to the Holders, be entitled to obtain specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.
5. New Purchase Warrants to be Issued .
5.1 Partial Exercise or Transfer . Subject to the restrictions in Section 3 hereof, this Purchase Warrant may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Warrant for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax if exercised pursuant to Section 2.1 hereto, the Company shall cause to be delivered to the Holder without charge a new Purchase Warrant of like tenor to this Purchase Warrant in the name of the Holder evidencing the right of the Holder to purchase the number of Shares purchasable hereunder as to which this Purchase Warrant has not been exercised or assigned.
5.2 Lost Certificate . Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Warrant and of reasonably satisfactory indemnification or
Ex. A- 6 |
the posting of a bond, the Company shall execute and deliver a new Purchase Warrant of like tenor and date. Any such new Purchase Warrant executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.
6. Adjustments .
6.1 Adjustments to Exercise Price and Number of Securities . The Exercise Price and the number of Shares underlying the Purchase Warrant shall be subject to adjustment from time to time as hereinafter set forth:
6.1.1 Share Dividends; Split Ups. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is increased by a stock dividend payable in Shares or by a split up of Shares or other similar event, then, on the effective day thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding Shares, and the Exercise Price shall be proportionately decreased.
6.1.2 Aggregation of Shares. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is decreased by a consolidation, combination or reclassification of Shares or other similar event, then, on the effective date thereof, the number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding Shares, and the Exercise Price shall be proportionately increased.
6.1.3 Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding Shares other than a change covered by Section 6.1.1 or 6.1.2 hereof or that solely affects the par value of such Shares, or in the case of any share reconstruction or amalgamation or consolidation of the Company with or into another corporation (other than a consolidation or share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding Shares), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Warrant shall have the right thereafter (until the expiration of the right of exercise of this Purchase Warrant) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of the number of Shares of the Company obtainable upon exercise of this Purchase Warrant immediately prior to such event; and if any reclassification also results in a change in Shares covered by Section 6.1.1 or 6.1.2, then such adjustment shall be made pursuant to Sections 6.1.1, 6.1.2 and this Section 6.1.3. The provisions of this Section 6.1.3 shall similarly apply to successive reclassifications, reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.
6.1.4 Changes in Form of Purchase Warrant. This form of Purchase Warrant need not be changed because of any change pursuant to this Section 6.1, and Purchase Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in the Purchase Warrants initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase Warrants reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the Commencement Date or the computation thereof.
6.2 Substitute Purchase Warrant . In case of any consolidation of the Company with, or share
Ex. A- 7 |
reconstruction or amalgamation of the Company with or into, another corporation (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification or change of the outstanding Shares), the corporation formed by such consolidation or share reconstruction or amalgamation shall execute and deliver to the Holder a supplemental Purchase Warrant providing that the holder of each Purchase Warrant then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Warrant) to receive, upon exercise of such Purchase Warrant, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or share reconstruction or amalgamation, by a holder of the number of Shares for which such Purchase Warrant might have been exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale or transfer. Such supplemental Purchase Warrant shall provide for adjustments which shall be identical to the adjustments provided for in this Section 6. The above provision of this Section shall similarly apply to successive consolidations or share reconstructions or amalgamations.
6.3 Elimination of Fractional Interests . The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Purchase Warrant, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may be, to the nearest whole number of Shares or other securities, properties or rights.
7. Reservation and Listing . The Company shall at all times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of the Purchase Warrants, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Warrants and payment of the Exercise Price therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. The Company further covenants and agrees that upon exercise of the Purchase Warrants and payment of the exercise price therefor, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. As long as the Purchase Warrants shall be outstanding, the Company shall use its commercially reasonable efforts to cause all Shares issuable upon exercise of the Purchase Warrants to be listed (subject to official notice of issuance) on all national securities exchanges (or, if applicable, on the OTC Bulletin Board or any successor trading market) on which the Shares issued to the public in the Offering may then be listed and/or quoted.
8. Certain Notice Requirements .
8.1 Holder’s Right to Receive Notice . Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive notice as a stockholder for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company. If, however, at any time prior to the expiration of the Purchase Warrants and their exercise, any of the events described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen days prior to the date fixed as a record date or the date of closing the transfer books (the “ Notice Date ”) for the determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other stockholders of the Company at the same time and in the same manner that such notice is given to the stockholders.
Ex. A- 8 |
8.2 Events Requiring Notice . The Company shall be required to give the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its Shares for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, (ii) the Company shall offer to all the holders of its Shares any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation) or a sale of all or substantially all of its property, assets and business shall be proposed.
8.3 Notice of Change in Exercise Price . The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders of such event and change (“ Price Notice ”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s Chief Financial Officer.
8.4 Transmittal of Notices . All notices, requests, consents and other communications under this Purchase Warrant shall be in writing and shall be deemed to have been duly made (1) when hand delivered, (2) when mailed by express mail or private courier service or (3) when the event requiring notice is disclosed in all material respects and filed in a current report on Form 8-K or in a definitive proxy statement on Schedule 14A prior to the Notice Date: (i) if to the registered Holder of the Purchase Warrant, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to following address or to such other address as the Company may designate by notice to the Holders:
If to the Holder:
Aegis Capital Corp.
810 Seventh Avenue, 11
th
Floor
New York, New York 10019
Attn: Mr. David Bocchi, Managing Director of Investment Banking
Fax No.: (212) 813-1047
with a copy (which shall not constitute notice) to:
Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue
New York, NY 10166
Attn: Anthony J. Marsico, Esq.
Fax No.: 212-805-9362
If to the Company:
Ritter Pharmaceuticals, Inc.
1801 Century Park East #1820
Los Angeles, CA 90067
Attention: Michael D. Step
Fax No: (310) 919-1600
with a copy (which shall not constitute notice) to:
Ex. A- 9 |
Reed Smith LLP
599 Lexington Avenue
New York, NY 10022
Attention: Yvan-Claude Pierre, Esq.
Fax No: 212-521-5450
9. Miscellaneous .
9.1 Amendments . The Company and Aegis may from time to time supplement or amend this Purchase Warrant without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company and Aegis may deem necessary or desirable and that the Company and Aegis deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of and be signed by the party against whom enforcement of the modification or amendment is sought.
9.2 Headings . The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Warrant.
9.3. Entire Agreement . This Purchase Warrant (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Warrant) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.
9.4 Binding Effect . This Purchase Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted assignees, respective successors, legal representative and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Warrant or any provisions herein contained.
9.5 Governing Law; Submission to Jurisdiction; Trial by Jury . This Purchase Warrant shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Warrant shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 8 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and the Holder hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
Ex. A- 10 |
9.6 Waiver, etc . The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
9.7 Execution in Counterparts . This Purchase Warrant may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Such counterparts may be delivered by facsimile transmission or other electronic transmission.
9.8 Exchange Agreement . As a condition of the Holder’s receipt and acceptance of this Purchase Warrant, Holder agrees that, at any time prior to the complete exercise of this Purchase Warrant by Holder, if the Company and Aegis enter into an agreement (“ Exchange Agreement ”) pursuant to which they agree that all outstanding Purchase Warrants will be exchanged for securities or cash or a combination of both, then Holder shall agree to such exchange and become a party to the Exchange Agreement.
[ Signature Page Follows ]
Ex. A- 11 |
IN WITNESS WHEREOF, the Company has caused this Purchase Warrant to be signed by its duly authorized officer as of the ____ day of _______, 2015.
RITTER PHARMACEUTICALS, INC.
By: | ||
Name: | ||
Title: |
Ex. A- 12 |
[ Form to be used to exercise Purchase Warrant ]
Date: __________, 20___
The undersigned hereby elects irrevocably to exercise the Purchase Warrant for ______ shares of common stock, par value $0.001 per share (the “ Shares ”), of Ritter Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”), and hereby makes payment of $____ (at the rate of $____ per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.
or
The undersigned hereby elects irrevocably to convert its right to purchase ___ Shares of the Company under the Purchase Warrant for ______ Shares, as determined in accordance with the following formula:
The undersigned agrees and acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with respect to the calculation shall be resolved by the Company in its sole discretion.
Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been converted.
Signature |
Signature Guaranteed |
Ex. A- 13 |
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name: | ||
(Print in Block Letters) |
Address: | ||
NOTICE: The signature to this form must correspond with the name as written upon the face of the Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.
Ex. A- 14 |
[ Form to be used to assign Purchase Warrant ]
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the within Purchase Warrant):
FOR VALUE RECEIVED, __________________ does hereby sell, assign and transfer unto the right to purchase shares of common stock, par value $0.001 per share, of Ritter Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”), evidenced by the Purchase Warrant and does hereby authorize the Company to transfer such right on the books of the Company.
Dated: __________, 20__
Signature |
Signature Guaranteed |
NOTICE: The signature to this form must correspond with the name as written upon the face of the within Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.
Ex. A- 15 |
EXHIBIT B
Form of Lock-Up Agreement
[•], 2015
Aegis Capital Corp.
810 Seventh Avenue, 18
th
Floor
New York, New York 10019
Ladies and Gentlemen:
The undersigned understands that Aegis Capital Corp. (the “ Representative ”) proposes to enter into an Underwriting Agreement (the “ Underwriting Agreement ”) with Ritter Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”), providing for the public offering (the “ Public Offering ”) of shares of common stock, par value $0.001 per share, of the Company (the “ Shares ”).
To induce the Representative to continue its efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of the Representative, the undersigned will not, during the period commencing on the date hereof and ending 180 days after the date of the final prospectus (the “ Prospectus ”) relating to the Public Offering (the “ Lock-Up Period ”), (1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any Shares or any securities convertible into or exercisable or exchangeable for Shares, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “ Lock-Up Securities ”); (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Lock-Up Securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to the registration of any Lock-Up Securities; or (4) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to any Lock-Up Securities. Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Representative in connection with (a) transactions relating to Lock-Up Securities acquired in the Public Offering or in open market transactions after the completion of the Public Offering; provided that no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), shall be required or shall be voluntarily made in connection with subsequent sales of Lock-Up Securities acquired in the Public Offering or such open market transactions; (b) transfers of Lock-Up Securities as a bona fide gift, by will or intestacy or to a family member or trust for the benefit of the undersigned or a family member (for purposes of this lock-up agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (c) transfers of Lock-Up Securities to a charity or educational institution; (d) if the undersigned is a corporation, partnership, limited liability company or other business entity, (i) any transfers of Lock-Up Securities to another corporation, partnership or other business entity that controls, is controlled by or is under common control with the undersigned or (ii) distributions of Lock-Up Securities to current or former members, partners, stockholders, subsidiaries or affiliates (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned or to any investment fund or other entity that controls or manages the undersigned (including, for the avoidance of doubt, a fund managed by the same manager or managing member or general partner or management company or by an entity controlling, controlled by, or under common control with such manager or managing member or general partner or management company as the undersigned or who shares a common investment advisor with the undersigned); (e) if the undersigned is a trust, to a trustee or beneficiary of the trust; provided that in the case of any transfer pursuant to the
Ex. B- 1 |
foregoing clauses (b), (c) (d) or (e), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to the Representative a lock-up agreement substantially in the form of this lock-up agreement and (iii) no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made; (f) the receipt by the undersigned from the Company of Shares upon the vesting of restricted stock awards or stock units or upon the exercise of options to purchase the Company’s Common Stock (the “ Plan Shares ”) or the transfer of Shares or any securities convertible into Shares to the Company upon a vesting event of the Company’s securities or upon the exercise of options to purchase the Company’s securities, in each case on a “cashless” or “net exercise” basis or to cover tax obligations of the undersigned in connection with such vesting or exercise, but only to the extent such right expires during the Lock-up Period, provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made within 30 days after the date of the Prospectus, and after such 30 th day, if the undersigned is required to file a report under Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership of Shares during the Lock-Up Period, the undersigned shall include a statement in such report to the effect that the purpose of such transfer was to cover tax withholding obligations of the undersigned in connection with such vesting or exercise and, provided further , that the Plan Shares shall be subject to the terms of this lock-up agreement; (g) the transfer of Lock-Up Securities pursuant to agreements under which the Company has the option to repurchase such securities or a right of first refusal with respect to the transfer of such securities; (h) the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Lock-Up Securities, provided that (i) such plan does not provide for the transfer of Lock-Up Securities during the Lock-Up Period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by or on behalf of the undersigned or the Company regarding the establishment of such plan, such public announcement or filing shall include a statement to the effect that no transfer of Lock-Up Securities may be made under such plan during the Lock-Up Period; (i) the conversion of the outstanding preferred stock of the Company into Shares, provided that such Shares remain subject to the terms of this agreement; (j) the transfer of Lock-Up Securities that occurs by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement, provided that the undersigned shall use its reasonable best efforts to cause the transferee to sign and deliver a lock-up agreement substantially in the form of this lock-up agreement for the balance of the Lock-Up Period, and provided further , that any filing under Section 16(a) of the Exchange Act that is required to be made during the Lock-Up Period as a result of such transfer shall include a statement that such transfer has occurred by operation of law; and (k)the transfer of Lock-Up Securities pursuant to a change of control of the Company; provided that in the event that the change of control is not completed, the Lock-Up Securities owned by the undersigned shall remain subject to the restrictions contained in this lock-up agreement. For purposes of clause (k) above, “change of control” shall mean the consummation of any bona fide third party tender offer, merger, consolidation or other similar transaction the result of which is that any “person” (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of a majority of total voting power of the voting stock of the Company. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s Lock-Up Securities except in compliance with this lock-up agreement.
If the undersigned is an officer or director of the Company, (i) the undersigned agrees that the foregoing restrictions shall be equally applicable to any issuer-directed or “friends and family” Shares that the undersigned may purchase in the Public Offering; (ii) the Representative agrees that, at least three (3) business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Lock-Up Securities, the Representative will notify the Company of the impending release or waiver; and (iii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two (2) business days before the effective date of the release or waiver. Any release or waiver granted by the Representative hereunder to any such officer or director shall only be effective two (2) business days after the publication
Ex. B- 2 |
date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer of Lock-Up Securities not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this lock-up agreement to the extent and for the duration that such terms remain in effect at the time of such transfer.
The undersigned understands that the Company and the Representative are relying upon this lock-up agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
The undersigned understands that, if the Underwriting Agreement is not executed by September 30, 2015, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Shares to be sold thereunder, then this lock-up agreement shall be void and of no further force or effect.
Ex. B- 3 |
Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Representative.
Very truly yours, | ||
(Name - Please Print) | ||
(Signature) | ||
(Name of Signatory, in the case of entities - Please Print) | ||
(Title of Signatory, in the case of entities - Please Print) | ||
Address: | ||
Ex. B- 4 |
EXHIBIT C
Form of Press Release
RITTER PHARMACEUTICALS, INC.
[Date]
Ritter Pharmaceuticals, Inc. (the “Company”) announced today that Aegis Capital Corp., acting as representative for the underwriters in the Company’s recent public offering of _______ shares of the Company’s common stock, is [waiving] [releasing] a lock-up restriction with respect to _________ shares of the Company’s common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on _________, 20___, and the shares may be sold on or after such date.
This press release is not an offer or sale of the securities in the United States or in any other jurisdiction where such offer or sale is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act of 1933, as amended.
Ex. C- 1 |
Exhibit 4.7
Form of Representative’s Warrant Agreement
THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT FOR A PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE OTHER THAN (I) AEGIS CAPITAL CORP. OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF AEGIS CAPITAL CORP. OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER.
THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO [________________] [ DATE THAT IS ONE YEAR FROM THE EFFECTIVE DATE OF THE OFFERING ]. VOID AFTER 5:00 P.M., EASTERN TIME, [___________________] [ DATE THAT IS FIVE YEARS FROM THE EFFECTIVE DATE OF THE OFFERING ].
COMMON STOCK PURCHASE WARRANT
For the Purchase of [_____] Shares of Common Stock
of
RITTER PHARMACEUTICALS, INC.
1. Purchase Warrant . THIS CERTIFIES THAT, in consideration of funds duly paid by or on behalf of Aegis Capital Corp. (“ Holder ”), as registered owner of this Purchase Warrant, to Ritter Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”), Holder is entitled, at any time or from time to time from [________________] [ DATE THAT IS ONE YEAR FROM THE EFFECTIVE DATE OF THE OFFERING ] (the “ Commencement Date ”), and at or before 5:00 p.m., Eastern time, [____________] [ DATE THAT IS FIVE YEARS FROM THE EFFECTIVE DATE OF THE OFFERING ] (the ” Expiration Date ”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to [____] shares of common stock of the Company, par value $0.001 per share (the “ Shares ”), subject to adjustment as provided in Section 6 hereof. If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase Warrant may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate this Purchase Warrant. This Purchase Warrant is initially exercisable at $[___] per Share [ 125% of the public offering price of the Firm Shares sold in the Offering ]; provided , however , that upon the occurrence of any of the events specified in Section 6 hereof, the rights granted by this Purchase Warrant, including the exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as therein specified. The term “ Exercise Price ” shall mean the initial exercise price or the adjusted exercise price, depending on the context. The term “ Effective Date ” shall mean [ ], the date on which the Registration Statement on Form S-1 (File No. 333-202924) of the Company was declared effective by the Securities and Exchange Commission.
1 |
2. Exercise .
2.1 Exercise Form . In order to exercise this Purchase Warrant, the exercise form attached hereto must be duly executed and completed and delivered to the Company, together with this Purchase Warrant and payment of the Exercise Price for the Shares being purchased payable in cash by wire transfer of immediately available funds to an account designated by the Company or by certified check or official bank check. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Warrant shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.
2.2 Cashless Exercise . If at any time after the Commencement Date there is no effective registration statement registering, or no current prospectus available for, the resale of the Shares by the Holder, then in lieu of exercising this Purchase Warrant by payment of cash or check payable to the order of the Company pursuant to Section 2.1 above, Holder may elect to receive the number of Shares equal to the value of this Purchase Warrant (or the portion thereof being exercised), by surrender of this Purchase Warrant to the Company, together with the exercise form attached hereto, in which event the Company shall issue to Holder, Shares in accordance with the following formula:
X | = | Y(A-B) | |
A |
Where, | |||
X | = | The number of Shares to be issued to Holder; | |
Y | = | The number of Shares for which the Purchase Warrant is being exercised; | |
A | = | The fair market value of one Share; and | |
B | = | The Exercise Price. |
For purposes of this Section 2.2, the fair market value of a Share is defined as follows:
(i) if the Company’s common stock is traded on a securities exchange, the value shall be deemed to be the closing price on such exchange prior to the exercise form being submitted in connection with the exercise of the Purchase Warrant; or
(ii) if the Company’s common stock is actively traded over-the-counter, the value shall be deemed to be the closing bid price prior to the exercise form being submitted in connection with the exercise of the Purchase Warrant; if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors.
2.3 Legend . Each certificate for the securities purchased under this Purchase Warrant shall bear a legend as follows unless such securities have been registered under the Securities Act of 1933, as amended (the “ Securities Act ”):
“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), or applicable state law. Neither the securities nor any interest therein may be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Securities Act, or pursuant to an exemption from registration under the Securities Act and applicable state law which, in the opinion of counsel to the Company, is available.”
2 |
3. Transfer .
3.1 General Restrictions . The registered Holder of this Purchase Warrant agrees by his, her or its acceptance hereof, that such Holder will not: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant for a period of one hundred eighty (180) days following the Effective Date to anyone other than: (i) Aegis Capital Corp. (“ Aegis ”) or an underwriter or a selected dealer participating in the Offering, or (ii) a bona fide officer or partner of Aegis or of any such underwriter or selected dealer, in each case in accordance with FINRA Conduct Rule 5110(g)(1), or (b) cause this Purchase Warrant or the securities issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Purchase Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(g)(2). On and after 180 days after the Effective Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly executed and completed, together with the Purchase Warrant and payment of all transfer taxes, if any, payable in connection therewith. The Company shall within five (5) business days transfer this Purchase Warrant on the books of the Company and shall execute and deliver a new Purchase Warrant or Purchase Warrants of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Securities Act . The securities evidenced by this Purchase Warrant shall not be transferred unless and until: (i) the Company has received the opinion of counsel for the Holder that the securities may be transferred pursuant to an exemption from registration under the Securities Act and applicable state securities laws, the availability of which is established to the reasonable satisfaction of the Company (the Company hereby agreeing that the opinion of Greenberg Traurig, LLP shall be deemed satisfactory evidence of the availability of an exemption), or (ii) a registration statement or a post-effective amendment to the Registration Statement relating to the offer and sale of such securities has been filed by the Company and declared effective by the U.S. Securities and Exchange Commission (the “ Commission ”) and compliance with applicable state securities law has been established.
4. Registration Rights .
4.1 Demand Registration .
4.1.1 Grant of Right . The Company, upon written demand (a “ Demand Notice ”) of the Holders of at least 51% of the Purchase Warrants and/or the underlying Shares (“Majority Holders”), agrees to register, on one occasion, all or any portion of the Shares underlying the Purchase Warrants (collectively, the “ Registrable Securities ”). On such occasion, the Company will file a registration statement with the Commission covering the Registrable Securities within sixty (60) days after receipt of a Demand Notice and use its reasonable best efforts to have the registration statement declared effective promptly thereafter, subject to compliance with review by the Commission; provided , however , that the Company shall not be required to comply with a Demand Notice if the Company has filed a registration statement with respect to which the Holder is entitled to piggyback registration rights pursuant to Section 4.2 hereof and either: (i) the Holder has elected to participate in the offering covered by such registration statement or (ii) if such registration statement relates to an underwritten primary offering of securities of the Company, until the offering covered by such registration statement has been withdrawn or until thirty (30) days after such offering is consummated. The demand for registration may be made at any time during a period of four (4) years beginning on the Commencement Date. The Company covenants and agrees to give written notice of its receipt of any Demand Notice by any Holders to all other registered
3 |
Holders of the Purchase Warrants and/or the Registrable Securities within ten (10) days after the date of the receipt of any such Demand Notice.
4.1.2 Terms . The Company shall bear all fees and expenses attendant to the registration of the Registrable Securities pursuant to Section 4.1.1, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. The Company agrees to use its reasonable best efforts to cause the filing required herein to become effective promptly and to qualify or register the Registrable Securities in such States as are reasonably requested by the Holders; provided , however , that in no event shall the Company be required to register the Registrable Securities in a State in which such registration would cause: (i) the Company to be obligated to register or license to do business in such State or submit to general service of process in such State, or (ii) the principal stockholders of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration statement filed pursuant to the demand right granted under Section 4.1.1 to remain effective for a period of at least twelve (12) consecutive months after the date that the Holders of the Registrable Securities covered by such registration statement are first given the opportunity to sell all of such securities. The Holders shall only use the prospectuses provided by the Company to sell the shares covered by such registration statement, and will immediately cease to use any prospectus furnished by the Company if the Company advises the Holder that such prospectus may no longer be used due to a material misstatement or omission. Notwithstanding the provisions of this Section 4.1.2, the Holder shall be entitled to a demand registration under this Section 4.1.2 on only one (1) occasion and such demand registration right shall terminate on the fifth anniversary of the Effective Date in accordance with FINRA Rule 5110(f)(2)(G)(iv).
4.2 “Piggy-Back” Registration .
4.2.1 Grant of Right . In addition to the demand right of registration described in Section 4.1 hereof, the Holder shall have the right, for a period of no more than seven (7) years from the Effective Date in accordance with FINRA Rule 5110(f)(2)(G)(v), to include the Registrable Securities as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or any equivalent form); provided , however , that if, solely in connection with any primary underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by such Holders; provided , however , that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities.
4.2.2 Terms . The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 4.2.1 hereof, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the
4 |
Company shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company until such time as all of the Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement. Except as otherwise provided in this Purchase Warrant, there shall be no limit on the number of times the Holder may request registration under this Section 4.2.2; provided , however , that such registration rights shall terminate on the sixth anniversary of the Commencement Date.
4.3 General Terms .
4.3.1 Indemnification . The Company shall indemnify the Holders of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20 (a) of the Securities Exchange Act of 1934, as amended (“ Exchange Act ”), against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 5.1 of the Underwriting Agreement between the Underwriters and the Company, dated as of [___________], 2015. The Holders of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5.2 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.
4.3.2 Exercise of Purchase Warrants . Nothing contained in this Purchase Warrant shall be construed as requiring the Holders to exercise their Purchase Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.
4.3.3 Documents Delivered to Holders . The Company shall furnish to each Holder participating in any of the foregoing offerings and to each underwriter of any such offering, if any, a signed counterpart, addressed to such Holder or underwriter, of: (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing under any underwriting agreement related thereto), and (ii) a “cold comfort” letter dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement) signed by the independent registered public accounting firm which has issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the offering requesting the correspondence and memoranda described below and to the managing underwriter, if any, copies of all correspondence
5 |
between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request.
4.3.4 Underwriting Agreement . The Company shall enter into an underwriting agreement with the managing underwriter(s), if any, selected by any Holders whose Registrable Securities are being registered pursuant to this Section 4, which managing underwriter shall be reasonably satisfactory to the Company. Such agreement shall be reasonably satisfactory in form and substance to the Company, each Holder and such managing underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders, their Shares and their intended methods of distribution.
4.3.5 Documents to be Delivered by Holders . Each of the Holders participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.
4.3.6 Damages . Should the registration or the effectiveness thereof required by Sections 4.1 and 4.2 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holders shall, in addition to any other legal or other relief available to the Holders, be entitled to obtain specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.
5. New Purchase Warrants to be Issued .
5.1 Partial Exercise or Transfer . Subject to the restrictions in Section 3 hereof, this Purchase Warrant may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Warrant for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax if exercised pursuant to Section 2.1 hereto, the Company shall cause to be delivered to the Holder without charge a new Purchase Warrant of like tenor to this Purchase Warrant in the name of the Holder evidencing the right of the Holder to purchase the number of Shares purchasable hereunder as to which this Purchase Warrant has not been exercised or assigned.
5.2 Lost Certificate . Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Warrant and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Warrant of like tenor and date. Any such new Purchase Warrant executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.
6 |
6. Adjustments .
6.1 Adjustments to Exercise Price and Number of Securities . The Exercise Price and the number of Shares underlying the Purchase Warrant shall be subject to adjustment from time to time as hereinafter set forth:
6.1.1 Share Dividends; Split Ups. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is increased by a stock dividend payable in Shares or by a split up of Shares or other similar event, then, on the effective day thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding Shares, and the Exercise Price shall be proportionately decreased.
6.1.2 Aggregation of Shares. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is decreased by a consolidation, combination or reclassification of Shares or other similar event, then, on the effective date thereof, the number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding Shares, and the Exercise Price shall be proportionately increased.
6.1.3 Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding Shares other than a change covered by Section 6.1.1 or 6.1.2 hereof or that solely affects the par value of such Shares, or in the case of any share reconstruction or amalgamation or consolidation of the Company with or into another corporation (other than a consolidation or share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding Shares), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Warrant shall have the right thereafter (until the expiration of the right of exercise of this Purchase Warrant) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of the number of Shares of the Company obtainable upon exercise of this Purchase Warrant immediately prior to such event; and if any reclassification also results in a change in Shares covered by Section 6.1.1 or 6.1.2, then such adjustment shall be made pursuant to Sections 6.1.1, 6.1.2 and this Section 6.1.3. The provisions of this Section 6.1.3 shall similarly apply to successive reclassifications, reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.
6.1.4 Changes in Form of Purchase Warrant. This form of Purchase Warrant need not be changed because of any change pursuant to this Section 6.1, and Purchase Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in the Purchase Warrants initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase Warrants reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the Commencement Date or the computation thereof.
6.2 Substitute Purchase Warrant . In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company with or into, another corporation (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification or change of the outstanding Shares), the corporation formed by such consolidation or share reconstruction
7 |
or amalgamation shall execute and deliver to the Holder a supplemental Purchase Warrant providing that the holder of each Purchase Warrant then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Warrant) to receive, upon exercise of such Purchase Warrant, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or share reconstruction or amalgamation, by a holder of the number of Shares for which such Purchase Warrant might have been exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale or transfer. Such supplemental Purchase Warrant shall provide for adjustments which shall be identical to the adjustments provided for in this Section 6. The above provision of this Section shall similarly apply to successive consolidations or share reconstructions or amalgamations.
6.3 Elimination of Fractional Interests . The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Purchase Warrant, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may be, to the nearest whole number of Shares or other securities, properties or rights.
7. Reservation and Listing . The Company shall at all times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of the Purchase Warrants, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Warrants and payment of the Exercise Price therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. The Company further covenants and agrees that upon exercise of the Purchase Warrants and payment of the exercise price therefor, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. As long as the Purchase Warrants shall be outstanding, the Company shall use its commercially reasonable efforts to cause all Shares issuable upon exercise of the Purchase Warrants to be listed (subject to official notice of issuance) on all national securities exchanges (or, if applicable, on the OTC Bulletin Board or any successor trading market) on which the Shares issued to the public in the Offering may then be listed and/or quoted.
8. Certain Notice Requirements .
8.1 Holder’s Right to Receive Notice . Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive notice as a stockholder for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company. If, however, at any time prior to the expiration of the Purchase Warrants and their exercise, any of the events described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen days prior to the date fixed as a record date or the date of closing the transfer books (the “ Notice Date ”) for the determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other stockholders of the Company at the same time and in the same manner that such notice is given to the stockholders.
8.2 Events Requiring Notice . The Company shall be required to give the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its Shares for the purpose of entitling them to receive a dividend or distribution payable
8 |
otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, (ii) the Company shall offer to all the holders of its Shares any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation) or a sale of all or substantially all of its property, assets and business shall be proposed.
8.3 Notice of Change in Exercise Price . The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders of such event and change (“ Price Notice ”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s Chief Financial Officer.
8.4 Transmittal of Notices . All notices, requests, consents and other communications under this Purchase Warrant shall be in writing and shall be deemed to have been duly made (1) when hand delivered, (2) when mailed by express mail or private courier service or (3) when the event requiring notice is disclosed in all material respects and filed in a current report on Form 8-K or in a definitive proxy statement on Schedule 14A prior to the Notice Date: (i) if to the registered Holder of the Purchase Warrant, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to following address or to such other address as the Company may designate by notice to the Holders:
If to the Holder:
Aegis Capital Corp.
810 Seventh Avenue, 11
th
Floor
New York, New York 10019
Attn: Mr. David Bocchi, Managing Director of Investment Banking
Fax No.: (212) 813-1047
with a copy (which shall not constitute notice) to:
Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue
New York, NY 10166
Attn: Anthony J. Marsico, Esq.
Fax No.: 212-805-9362
If to the Company:
Ritter Pharmaceuticals, Inc.
1801 Century Park East #1820
Los Angeles, CA 90067
Attention: Michael D. Step
Fax No: (310) 919-1600
with a copy (which shall not constitute notice) to:
Reed Smith LLP
599 Lexington Avenue
9 |
New York, NY 10022
Attention: Yvan-Claude Pierre, Esq.
Fax No: 212-521-5450
9. Miscellaneous .
9.1 Amendments . The Company and Aegis may from time to time supplement or amend this Purchase Warrant without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company and Aegis may deem necessary or desirable and that the Company and Aegis deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of and be signed by the party against whom enforcement of the modification or amendment is sought.
9.2 Headings . The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Warrant.
9.3. Entire Agreement . This Purchase Warrant (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Warrant) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.
9.4 Binding Effect . This Purchase Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted assignees, respective successors, legal representative and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Warrant or any provisions herein contained.
9.5 Governing Law; Submission to Jurisdiction; Trial by Jury . This Purchase Warrant shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Warrant shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 8 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and the Holder hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
9.6 Waiver, etc . The failure of the Company or the Holder to at any time enforce any of the
10 |
provisions of this Purchase Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
9.7 Execution in Counterparts . This Purchase Warrant may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Such counterparts may be delivered by facsimile transmission or other electronic transmission.
9.8 Exchange Agreement . As a condition of the Holder’s receipt and acceptance of this Purchase Warrant, Holder agrees that, at any time prior to the complete exercise of this Purchase Warrant by Holder, if the Company and Aegis enter into an agreement (“ Exchange Agreement ”) pursuant to which they agree that all outstanding Purchase Warrants will be exchanged for securities or cash or a combination of both, then Holder shall agree to such exchange and become a party to the Exchange Agreement.
[ Signature Page Follows ]
11 |
IN WITNESS WHEREOF, the Company has caused this Purchase Warrant to be signed by its duly authorized officer as of the ____ day of _______, 2015.
RITTER PHARMACEUTICALS, INC. | |||
By: | |||
Name: | |||
Title: |
12 |
[ Form to be used to exercise Purchase Warrant ]
Date: __________, 20___
The undersigned hereby elects irrevocably to exercise the Purchase Warrant for ______ shares of common stock, par value $0.001 per share (the “ Shares ”), of Ritter Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”), and hereby makes payment of $____ (at the rate of $____ per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.
or
The undersigned hereby elects irrevocably to convert its right to purchase ___ Shares of the Company under the Purchase Warrant for ______ Shares, as determined in accordance with the following formula:
X | = | Y(A-B) | ||
A |
Where, | ||||
X | = | The number of Shares to be issued to Holder; | ||
Y | = | The number of Shares for which the Purchase Warrant is being exercised; | ||
A | = | The fair market value of one Share which is equal to $_____; and | ||
B | = | The Exercise Price which is equal to $______ per share |
The undersigned agrees and acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with respect to the calculation shall be resolved by the Company in its sole discretion.
Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been converted.
Signature |
Signature Guaranteed |
13 |
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name: | ||
(Print in Block Letters) | ||
Address: | ||
NOTICE: The signature to this form must correspond with the name as written upon the face of the Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.
14 |
[ Form to be used to assign Purchase Warrant ]
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the within Purchase Warrant):
FOR VALUE RECEIVED, __________________ does hereby sell, assign and transfer unto the right to purchase shares of common stock, par value $0.001 per share, of Ritter Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”), evidenced by the Purchase Warrant and does hereby authorize the Company to transfer such right on the books of the Company.
Dated: __________, 20__
Signature |
Signature Guaranteed |
NOTICE: The signature to this form must correspond with the name as written upon the face of the within Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.
15 |
Exhibit 10.7
RITTER PHARMACEUTICALS, INC.
2015 EQUITY INCENTIVE PLAN
ARTICLE
1.
PURPOSE
Ritter Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”), hereby establishes the Ritter Pharmaceuticals, Inc. 2015 Stock Incentive Plan, effective [______ __, 2015] (the “ Plan ”). The Plan permits the grant of certain Awards, as described herein.
The purposes of the Plan are to optimize the profitability and growth of the Company through long-term incentives that are consistent with the Company’s objectives and that link Grantees’ interests to those of the Company’s stockholders; to give Grantees an incentive for excellence in individual performance; to promote teamwork among Grantees; and to give the Company flexibility in attracting and retaining key employees, directors and consultants.
ARTICLE
2.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
2.1 “ Administrator ” means the Committee that conducts the general administration of the Plan as provided in Article 12. With reference to the duties of the Committee under the Plan which have been delegated to one or more persons pursuant to Section 12.6, or which the Board has assumed, the term “Administrator” shall refer to such person(s) unless the Committee or the Board has revoked such delegation or the Board has terminated the assumption of such duties.
2.2 “ Advisor ” means a consultant, advisor, or other independent service provider to the Company or any Subsidiary who qualifies as a “consultant” under the applicable rules of the Securities and Exchange Commission for registration of shares on a Form S-8 Registration Statement.
2.3 “ Award ” means an Option, a Restricted Stock award, a Restricted Stock Unit award, a Stock Appreciation Right award, a Performance Award, a Dividend Equivalent award, a Deferred Stock award, or a Stock Payment award, which is awarded or granted under the Plan.
2.4 “ Award Agreement ” means a written agreement entered into between the Company and a Grantee setting forth the terms and provisions applicable to an Award or Awards granted to the Grantee which may be, in the Company’s discretion, transmitted to the Grantee electronically.
2.5 “ Award Limit ” means with respect to Awards the limit(s) set forth in Sections 3.1 and 3.3.
2.6 “ Board ” means the Board of Directors of the Company.
2.7 “ Cause ” has the meaning set forth in any employment, consulting or other agreement between any of the Company Group and a Grantee. If there is no such agreement, or if such agreement does not define “Cause” or if there are multiple definitions of “Cause” under such agreements, then
“Cause” means: (a) any act or omission of the Grantee that, in connection with his employment with the Company, amounts to or constitutes a breach of a fiduciary duty, gross negligence, willful misconduct, or material misconduct, or that amounts to or constitutes fraud, embezzlement, or misappropriation; (b) Grantee’s breach of any term(s) of an agreement by and between Grantee and a member of the Company Group and, only if such breach may be or is capable of being cured by Grantee, Grantee’s failure to cure such violation within thirty (30) days from the date on which the Company delivers written notice of such violation to Grantee; (c) Grantee’s violation of any policy(ies) established, adopted, or maintained by the Company and, only if such violation may be or is capable of being cured by Grantee, Grantee’s failure to cure such violation within thirty (30) days from the date on which the Company delivers written notice of such violation to Grantee; (d) any act or omission of Grantee that the Company determines is materially injurious to a member of the Company Group; (e) any act or omission of Grantee that causes a member of the Company Group to suffer or endure public disgrace or disrepute; (f) Grantee’s misappropriation of corporate assets or corporate opportunities; or (g) Grantee’s indictment for or conviction of a felony.
2.8 “ Change in Control ” following the Effective Date and excluding the initial offering pursuant to which the Company becomes a public corporation for the first time, a change in control of the Company shall mean each of the following:
(a) a transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company constituting more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; provided, that a Change in Control shall not be deemed to occur as a result of a change of ownership resulting from the death of a stockholder, and a Change in Control shall not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation and in which the stockholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such stockholder to more than 50% of all votes to which all stockholders of the parent corporation would be entitled in the election of directors; or
(b) there is consummated a merger or consolidation of the Company with another entity where the stockholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the surviving entity would be entitled in the election of directors; or
(c) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction having a similar effect), other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity which directly or indirectly controls, is controlled by, or is under common control with, the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions. Further, if a Change in Control constitutes a payment
2 |
event with respect to any portion of an Award that provides for the deferral of compensation and is subject to Section 409A of the Code, the transaction or event described in subsection (a), (b) or (c) with respect to such Award (or portion thereof) must also constitute a “change in control event,” as defined in Treasury Regulation §1.409A-3(i)(5) to the extent required by Section 409A.
2.9 “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations thereunder.
2.10 “ Committee ” means the Compensation Committee of the Board, or another committee or subcommittee of the Board, appointed as provided in Section 12.1.
2.11 “ Common Stock ” means the Common Stock of the Company, par value $0.001 per share.
2.12 “ Company ” means Ritter Pharmaceuticals, Inc., a Delaware corporation, and any successor thereto.
2.13 “ Company Group ” means the Company and any Subsidiary.
2.14 “ Covered Employee ” means any Employee who is, or could be, a “covered employee” within the meaning of Section 162(m) of the Code.
2.15 “ Deferred Stock ” means a right to receive Shares awarded under Section 10.4.
2.16 “ Director ” means a member of the Board of Directors of the Company or any Subsidiary.
2.17 “ Dividend Equivalent ” means a right to receive the equivalent value (in cash or Shares ) of dividends paid on Shares , awarded under Section 10.2.
2.18 “ DRO ” shall mean a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended from time to time, or the rules thereunder.
2.19 “ Effective Date ” means the date the Plan is approved by the Board, subject to approval of the Plan by the Company’s stockholders.
2.20 “ Eligible Individual ” means any person who is an Employee, an Advisor or a Director, as determined by the Committee.
2.21 “ Employee ” means any officer or other employee (as determined in accordance with Section 3401(c) of the Code and the regulations thereunder) of the Company or any Subsidiary.
2.22 “ Equity Restructuring ” means a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other securities of the Company) or the share price of Common Stock (or other securities) and causes a change in the per share value of the Common Stock underlying outstanding Awards.
3 |
2.23 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time.
2.24 “ Fair Market Value ” means, as of any given date, the value of a Share determined as follows: (a) if the Common Stock is listed on any (i) established securities exchange (such as the New York Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market), (ii) national market system or (iii) automated quotation system on which the Shares are listed, quoted or traded, its Fair Market Value shall be the closing price for a share of Common Stock as quoted on such exchange or system for such date or, if there were no sales of Common Stock on the date in question, the last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (b) if the Common Stock is not listed on an established securities exchange, national market system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer, Fair Market Value shall be the last reported bid price for such date or, if there was no bid price for a share of Common Stock on such date, the last preceding date for which such information exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (c) if the Common Stock is neither listed on an established securities exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, Fair Market Value shall be established by the Administrator in good faith based on the reasonable application of a reasonable valuation method not inconsistent with the requirements of Section 409A of the Code.
2.25 “ Good Reason ” has the meaning set forth in any employment, consulting or other agreement between any of the Company Group and a Grantee. If there is no such agreement, or if such agreement does not define “Good Reason” or if there are multiple definitions of “Good Reason” under such agreements, then “Good Reason” means the occurrence of any of the following without the Grantee’s consent, and which is not cured within thirty (30) days after written notice thereof to the Company: (a) material breach by a member of the Company Group of any employment agreement with the Grantee; (b) material diminution of the Grantee’s base salary; (c) material diminution of the Grantee’s job responsibilities or duties; or (d) material geographic relocation of the Grantee’s principal place of employment. Written notice of Good Reason must be provided within three (3) months after the occurrence of the event constituting Good Reason.
2.26 “ Grantee ” means a person who has been granted an Award.
2.27 “ Greater Than 10% Stockholder ” means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary corporation (as defined in Section 424(f) of the Code) or parent corporation thereof (as defined in Section 424(e) of the Code).
2.28 “ Incentive Stock Option ” means an Option that is intended to qualify as an incentive stock option and that conforms to the applicable provisions of Section 422 of the Code.
2.29 “ Non-Employee Director ” means a Director who is not an Employee.
2.30 “ Nonqualified Stock Option ” means an Option that is not an Incentive Stock Option.
2.31 “ Option ” means a right to purchase Shares at a specified exercise price, granted under Article 6. An Option shall be either a Nonqualified Stock Option or an Incentive Stock Option; provided, that Options granted to Non-Employee Directors or Advisors may only be Nonqualified Stock Options.
4 |
2.32 “ Performance Award ” means a cash bonus award, stock bonus award, performance award or an incentive award that is paid in cash, Shares or a combination of both, awarded under Section 10.1.
2.33 “ Performance-Based Compensation ” means any compensation that is intended to qualify as “performance-based compensation” as described in Section 162(m)(4)(C) of the Code.
2.34 “ Performance Criteria ” means the criteria (and adjustments) that the Committee selects for an Award for purposes of establishing the Performance Goal(s) for a Performance Period, determined as follows:
(a) The Performance Criteria used to establish Performance Goals are limited to the following: (i) gross or net earnings (either before or after one or more of the following: interest, taxes, depreciation and amortization), (ii) gross or net sales or revenue, (iii) gross or net income or adjusted income (either before or after taxes), (iv) operating earnings or profit, (v) cash flow (including, but not limited to, operating cash flow and free cash flow), (vi) return on assets, (vii) return on capital, (viii) return on stockholders’ equity, (ix) return on sales, (x) gross or net profit or operating margin, (xi) costs, (xii) funds from operations, (xiii) expenses, (xiv) working capital, (xv) earnings per share or adjusted earnings per share, (xvi) price per share of Common Stock, (xvii) regulatory body approval for commercialization of a product, (xviii) implementation or completion of critical projects, (xix) market share, or (xx) total stockholder return, any of which may be measured either in absolute terms or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices.
(b) The Administrator may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to one or more of the Performance Goals. Such adjustments may include one or more of the following: (i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the disposal of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under applicable accounting standards; (ix) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; or (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments, (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; or (xiv) items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions. For all Awards intended to qualify as Performance-Based Compensation, such determinations shall be made within the time periods prescribed by, and otherwise in compliance with, Section 162(m) of the Code.
2.35 “ Performance Goals ” mean, for a Performance Period, one or more goals established in writing by the Administrator for the Performance Period based upon one or more Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, or an individual. The achievement of each Performance Goal shall be determined in accordance with applicable accounting standards.
2.36 “ Performance Period ” means one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more
5 |
Performance Goals will be measured for the purpose of determining a Grantee’s right to, and the payment of, a Performance Award.
2.37 “ Permitted Transferee ” shall mean, with respect to a Grantee, any “family member” of the Grantee, as defined under the instructions to use of the Form S-8 Registration Statement under the Securities Act, after taking into account any state, federal, local or foreign tax and securities laws applicable to transferable Awards
2.38 “ Plan ” means this Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan, as it may be amended or restated from time to time.
2.39 “ Prior Plans ” shall mean, collectively, the following plans of the Company: the Ritter Pharmaceuticals, Inc. 2008 Stock Plan; and the Ritter Pharmaceuticals, Inc. 2009 Stock Plan; and in each case as such plan may be amended from time to time.
2.40 “ Restricted Stock ” means Common Stock awarded under Article 8 that is subject to certain restrictions and may be subject to risk of forfeiture or repurchase.
2.41 “ Restricted Stock Unit ” means a unit granted under Section 10.5 to acquire Shares or an equivalent amount of cash.
2.42 “ Securities Act ” means the Securities Act of 1933, as amended.
2.43 “ Shares ” mean shares of Common Stock.
2.44 “ Stock Appreciation Right ” or “ SAR ” means a stock appreciation right awarded to a Grantee under Section 9.1.
2.45 “ Stock Payment ” means (a) a payment in the form of Shares , or (b) an option or other right to purchase Shares , as part of a bonus, deferred compensation or other arrangement, awarded under Section 10.3
2.46 “ Subsidiary ” means any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing more than fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
2.47 “ Substitute Award ” means an Award granted under the Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by another company or entity outside the Company Group in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock where the Company or other member of the Company Group is the survivor; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an Option or a SAR.
2.48 “ Termination of Service ” means:
(a) As to an Advisor, the time when the engagement of a Grantee as an Advisor to the Company Group is terminated for any reason, with or without Cause, including, without limitation, by resignation, discharge, death or retirement, but excluding terminations where the Advisor simultaneously
6 |
commences or remains in employment or service with another member of the Company Group or is expected to shortly thereafter commence such employment or service.
(b) As to a Non-Employee Director, the time when a Grantee who is a Non-Employee Director ceases to be a Director for any reason, including, without limitation, a termination by resignation, failure to be elected, death or retirement, but excluding terminations where the Grantee simultaneously commences or remains in employment or service with another member of the Company Group or is expected to shortly thereafter commence such employment or service.
(c) As to an Employee, the time when the employee-employer relationship between a Grantee and the Company Group is terminated for any reason, including, without limitation, a termination by resignation, discharge, death, disability or retirement, but excluding terminations where the Grantee simultaneously commences or remains in employment or service with another member of the Company Group or is expected to shortly thereafter commence such employment or service.
The Administrator, in its sole discretion, shall determine the effect of all matters and questions relating to Terminations of Service, including, without limitation, the question of whether a Termination of Service resulted from a discharge for Cause or resignation for Good Reason and all questions of whether particular leaves of absence or other interruptions in service constitute a Termination of Service; provided that, with respect to Incentive Stock Options, such determination shall be made consistent with the requirements of Section 422(a)(2) of the Code. For purposes of the Plan, a Grantee’s employee-employer relationship or consultancy relations shall be deemed to be terminated in the event that the Subsidiary employing or contracting with such Grantee ceases to remain a Subsidiary following any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off). Further, if a Termination of Service constitutes a payment event with respect to any portion of an Award that provides for the deferral of compensation and is subject to Section 409A of the Code, the Termination of Service must also constitute a “Separation from Service,” as defined in Treasury Regulation §1.409A-1(h) to the extent required by Section 409A.
ARTICLE
3.
SHARES SUBJECT TO THE PLAN
3.1 Number of Shares .
(a) Subject to Section 13.2 and Section 3.1(b) the aggregate number of Shares which may be issued or transferred pursuant to Awards under the Plan is (i) [______](_____) , plus (ii) any Shares which are available for grant under the Prior Plans on the Effective Date or are subject to awards under the Prior Plans which after the Effective Date are forfeited or lapse unexercised or are settled in cash and are not issued under the Prior Plans. No more than [______](_____) Shares may be delivered upon the exercise of Incentive Stock Options. After the Effective Date, no awards may be granted under any Prior Plan, however, any awards under any Prior Plan that are outstanding as of the Effective Date shall continue to be subject to the terms and conditions of such Prior Plan.
(b) To the extent that (i) an Award terminates, expires, lapses or is forfeited for any reason, or (ii) an Award is settled in cash (in whole or in part) without the delivery of Shares to the Grantee, or (iii) any Shares subject to an award under any Prior Plan terminate, expire, lapse or are forfeited for any reason or an award under any Prior Plan is settled for cash (in whole or in part), then any Shares subject to the Award, to the extent of such termination, expiration, lapse, forfeiture, or cash settlement, shall again be available for the grant of an Award pursuant to the Plan. Any Shares tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award
7 |
shall again be available for the grant of an Award pursuant to the Plan, subject to Section 3.1(a). Any Shares repurchased by the Company under Section 8.4 at the same price paid by the Grantee so that such Shares are returned to the Company will again be available for Awards. To the extent permitted by applicable law or any exchange rule, Shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form or combination by the Company or any member of the Company Group shall not be counted against Shares available for grant pursuant to the Plan. Dividend Equivalents paid in cash in conjunction with any other outstanding Award shall not be counted against the Shares available for issuance under the Plan. Notwithstanding the provisions of this Section 3.1(b), no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.
3.2 Stock Distributed . Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Common Stock, treasury Common Stock or Common Stock purchased on the open market.
3.3 Limitation on Shares Subject to Individual Awards . Notwithstanding any provision in the Plan to the contrary, and subject to Section 13.2, the maximum aggregate number of Shares with respect to one or more Awards that may be granted to any one person during any calendar year shall be [______](_____) Shares ; provided, however, that the foregoing limitations shall not apply until the earliest of: (a) the first material modification of the Plan (including any increase in the number of shares reserved for issuance under the Plan in accordance with Section 3.1); (b) the issuance of all of the Shares reserved for issuance under the Plan; (c) the first meeting of stockholders at which members of the Board are to be elected that occurs after the close of the third calendar year following the calendar year in which occurred the first registration of an equity security of the Company under Section 12 of the Exchange Act; or (d) such other date required by Section 162(m) of the Code. To the extent required by Section 162(m) of the Code, shares subject to Awards which are canceled shall continue to be counted against the Award Limit.
ARTICLE
4.
GRANTING OF AWARDS
4.1 Participation . The Administrator may from time to time select from among all Eligible Individuals those to whom an Award shall be granted and shall determine the nature and amount of each Award, which shall not be inconsistent with the requirements of the Plan. The Administrator may also grant Awards to individuals in connection with their hiring, retention or otherwise, prior to the date the individual first performs services for the Company or any Subsidiary; provided that such Awards shall not become vested or exercisable, and no shares shall be issued to such individual, prior to the date the individual first commences performance of such services. No Eligible Individual shall have any right to be granted an Award pursuant to the Plan.
4.2 Award Agreement . Each Award shall be evidenced by an Award Agreement. Award Agreements evidencing Performance-Based Compensation shall contain terms and conditions as necessary to meet the requirements of Code Section 162(m). Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the requirements of Section 422 of the Code.
4.3 Limitations Applicable to Section 16 Persons . Any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, shall be granted pursuant to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the
8 |
application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
4.4 Foreign Grantees . Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the members of the Company Group operate or have Employees, Directors or Advisors, or in order to comply with the requirements of any foreign securities exchange, the Administrator, in its sole discretion, has the power and authority to: (a) determine which members of the Company Group shall be covered by the Plan; (b) determine which Eligible Individuals outside the United States are eligible to participate in the Plan; (c) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with applicable foreign laws or listing requirements of any such foreign securities exchange; (d) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or modifications shall be attached to the Plan as appendices); provided, however , that no such subplans and/or modifications shall increase the share limitations contained in Sections 3.1 and 3.3; and (e) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals or listing requirements of any such foreign securities exchange. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Code, the Exchange Act, the Securities Act , any other U.S. securities law or governing statute , the rules of the securities exchange or automated quotation system on which the Shares are listed, quoted or traded or any other applicable law.
4.5 Stand-Alone and Tandem Awards . Awards granted pursuant to the Plan may be granted, in the sole discretion of the Administrator, either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
ARTICLE
5.
PROVISIONS APPLICABLE TO AWARDS INTENDED TO QUALIFY AS PERFORMANCE-BASED COMPENSATION.
5.1 Purpose . The Committee, in its sole discretion, may determine at the time an Award is granted whether such Award is intended to qualify as Performance-Based Compensation. If the Committee, in its sole discretion, decides to grant such an Award to an Eligible Individual that is intended to qualify as Performance-Based Compensation, then the provisions of this Article 5 control over any contrary provision contained in the Plan. The Administrator may in its sole discretion grant Awards to other Eligible Individuals based on Performance Criteria or Performance Goals that do not satisfy the requirements of this Article 5 and that are not intended to qualify as Performance-Based Compensation. Unless otherwise specified by the Administrator at the time of grant, the Performance Criteria with respect to an Award intended to be Performance-Based Compensation payable to a Covered Employee shall be determined on the basis of a pplicable accounting standards. The Committee, in its sole discretion, may determine at the time an Award is granted or at any time thereafter whether such Award is not intended to qualify as Performance-Based Compensation .
5.2 Applicability . The grant of an Award to an Eligible Individual for a particular Performance Period shall not require the grant of an Award to such individual in any subsequent Performance Period and the grant of an Award to any one Eligible Individual shall not require the grant of an Award to any other Eligible Individual in such period or in any other period.
9 |
5.3 Types of Awards . Notwithstanding anything in the Plan to the contrary, the Committee may grant any Award to an Eligible Individual intended to qualify as Performance-Based Compensation, including, without limitation, Restricted Stock the restrictions with respect to which lapse upon the attainment of specified Performance Goals, and any Performance Awards described in Article 10 that vest or become exercisable or payable upon the attainment of one or more specified Performance Goals.
5.4 Procedures with Respect to Performance-Based Awards . To the extent necessary to comply with the requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted to one or more Covered Employees and which is intended to qualify as Performance-Based Compensation, no later than 90 days following the commencement of any Performance Period or any designated fiscal period or period of service (or such earlier time as may be required under Section 162(m) of the Code), the Committee shall, in writing, (a) designate one or more Eligible Individuals , (b) select the Performance Criteria applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period based on the Performance Criteria, and (d) specify the relationship between Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each such Covered Employee for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether and the extent to which the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned under such Awards, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant , including the assessment of individual or corporate performance for the Performance Period.
5.5 Payment of Performance-Based Awards . Unless otherwise provided in the applicable Award Agreement and only to the extent otherwise permitted by Section 162(m)(4)(C) of the Code, as to an Award that is intended to qualify as Performance-Based Compensation, the Grantee must be employed by the Company or a Subsidiary throughout the Performance Period. Unless otherwise provided in the applicable Award Agreement , a Grantee shall be eligible to receive payment pursuant to such Awards for a Performance Period only if and to the extent the Performance Goals for such period are achieved.
5.6 Additional Limitations . Notwithstanding any other provision of the Plan and except as otherwise determined by the Administrator , any Award which is granted to an Eligible Individual and is intended to qualify as Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code or any regulations or rulings issued thereunder that are requirements for qualification as Performance-Based Compensation, and the Plan and the Award Agreement shall be deemed amended to the extent necessary to conform to such requirements.
ARTICLE
6.
GRANTING OF OPTIONS
6.1 Granting of Options to Eligible Individuals . The Administrator is authorized to grant Options to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine that are not inconsistent with the Plan.
6.2 Qualification of Incentive Stock Options . No Incentive Stock Option shall be granted to any person who is not an Employee of the Company or any “subsidiary corporation” (as Code Section 424(f) defines such term) with respect to the Company. No person who qualifies as a Greater Than 10% Stockholder may be granted an Incentive Stock Option unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. Any Incentive Stock Option granted under the Plan may be modified by the Administrator, with the consent of the Grantee, to disqualify such Option from
10 |
treatment as an “incentive stock option” under Section 422 of the Code. To the extent that the aggregate fair market value of stock with respect to which “incentive stock options” (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Grantee during any calendar year under the Plan, and all other plans of the Company and any entity that is a parent or subsidiary corporation (as Code Sections 424(e) and (f) define those terms) with respect to the Company, exceeds $100,000, the Options shall be treated as Nonqualified Stock Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options and other “incentive stock options” into account in the order in which they were granted and the fair market value of stock shall be determined as of the time the respective options were granted.
6.3 Option Exercise Price . For each Option, the exercise price per Share shall be set by the Administrator, but shall not be less than 100% of the Fair Market Value of a Share on the date the Option is granted (or, as to Incentive Stock Options, on the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). In addition, in the case of Incentive Stock Options granted to a Greater Than 10% Stockholder, such price shall not be less than 110% of the Fair Market Value of a Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code).
6.4 Option Term . The term of each Option shall be set by the Administrator in its sole discretion; provided, however , that, notwithstanding any provision of the Plan, the term shall not be more than ten (10) years from the date the Option is granted, or five (5) years from the date an Incentive Stock Option is granted to a Greater Than 10% Stockholder. The Administrator shall determine the time period, including the time period following a Termination of Service, during which the Grantee has the right to exercise the vested Options, which time period may not extend beyond the expiration of the Option term. Except as limited by Sections 409A or 422 of the Code, the Administrator may extend the term of any outstanding Option, and may extend the time period during which vested Options may be exercised in connection with any Termination of Service of the Grantee, and may amend any other term or condition of such Option relating to such a Termination of Service.
6.5 Option Vesting .
(a) The period during which the right to exercise, in whole or in part, an Option vests in the Grantee shall be set by the Administrator in its sole discretion. Such vesting may be based on service with the Company Group, Performance Criteria or any other criteria selected by the Administrator. At any time after grant of an Option, the Administrator may, in its sole discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at a Grantee’s Termination of Service shall thereafter become exercisable, except as may be otherwise provided in the Award Agreement or by action of the Administrator following the grant of the Option.
6.6 Substitute Awards . Notwithstanding the foregoing provisions of this Article 6, in the case of an Option that is a Substitute Award, the exercise price per share of the Shares subject to such Option may be less than the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Administrator) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares.
11 |
ARTICLE
7.
EXERCISE OF OPTIONS
7.1 Partial Exercise . A vested Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional shares and the Administrator may require by the terms of the Option that a partial exercise must be with respect to at least a minimum number of Shares.
7.2 Manner of Exercise . All or a portion of an exercisable Option shall be deemed exercised upon the exercise effective date specified in the notice delivered pursuant to Section 7.2(a) below or, if later, upon delivery of all of the additional items required under Sections 7.2(b) through 7.2(d) below, to the Secretary of the Company or such other person or entity designated by the Administrator, as applicable:
(a) A written or electronic notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, shall be exercised upon an exercise effective date specified in the notice; provided, that any such specified exercise effective date must fall within the exercise period applicable to the Option under the Award Agreement and the Plan. The notice shall be signed by or on behalf of the Grantee or other person entitled to exercise the Option or such portion of the Option;
(b) Such representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal, state or foreign securities laws or regulations , the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded or any other applicable law . The Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option is exercised pursuant to Section 11.3 by any person or persons other than the Grantee, appropriate proof of the right of such person or persons to exercise the Option , as determined in the sole discretion of the Administrator ; and
(d) Full payment of the exercise price and satisfaction of applicable withholding taxes to the stock administrator of the Company for the Shares with respect to which the Option, or portion thereof, is exercised, in a manner permitted by Sections 11.1 and 11.2.
7.3 Notification Regarding Disposition . The Grantee shall give the Company prompt written or electronic notice of any disposition of owned Shares acquired by exercise of an Incentive Stock Option which occurs within (a) two years from the date of grant (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code), or (b) one year after the transfer of such shares to such Grantee.
ARTICLE
8.
AWARD OF RESTRICTED STOCK
8.1 Award of Restricted Stock .
(a) The Administrator is authorized to grant Restricted Stock to Eligible Individuals, and shall determine the terms and conditions, including the restrictions applicable to each award of
12 |
Restricted Stock, which terms and conditions shall not be inconsistent with the Plan, and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate.
(b) The Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock; provided, however , that if a purchase price is charged, such purchase price shall be no less than the par value of the Shares to be purchased, unless otherwise permitted by applicable state law. In all cases, legal consideration shall be required for each issuance of Restricted Stock.
8.2 Rights as Stockholders . The Award Agreement shall provide, in the discretion of the Administrator, as of what date or event and under what conditions the Grantee shall have the rights of a stockholder with respect to Shares of Restricted Stock, including any right to receive all dividends and other distributions paid or made with respect to the shares or to have all dividends and other distributions converted into additional Restricted Stock; provided, however , that, in the sole discretion of the Administrator, any extraordinary distributions made in Common Stock with respect to the Shares shall be subject to the same restrictions as the Shares.
8.3 Restrictions . All shares of Restricted Stock (including any shares received by Grantees thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each individual Award Agreement, be subject to such restrictions and vesting requirements as the Administrator shall provide. Such restrictions may include, without limitation, restrictions concerning the transferability of the shares of Restricted Stock and such restrictions may lapse separately or in combination at such times and pursuant to such circumstances or based on such criteria as selected by the Administrator, including, without limitation, criteria based on the Grantee’s duration of employment, directorship or consultancy with the Company Group, Company performance, business unit performance, or individual performance. By action taken after the Restricted Stock is issued, the Administrator may, on such terms and conditions as it may determine to be appropriate, accelerate the vesting of such Restricted Stock by removing any or all of the restrictions imposed by the terms of the Award Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire.
8.4 Repurchase or Forfeiture of Restricted Stock . If no price was paid by the Grantee for the Restricted Stock, upon a Termination of Service, the Grantee’s rights in unvested Restricted Stock then subject to restrictions shall lapse, and such Restricted Stock shall be surrendered to the Company and cancelled without consideration. If a price was paid by the Grantee for the Restricted Stock, upon a Termination of Service, the Company shall have the right to repurchase from the Grantee the unvested Restricted Stock then subject to restrictions at a cash price per share equal to the price paid by the Grantee for such Restricted Stock or such other amount specified in the Award Agreement. The Administrator in its sole discretion may provide that in the event of certain events, including a Change in Control, the Grantee’s death, retirement or disability or any other specified Termination of Service or any other event, the Grantee’s rights in unvested Restricted Stock shall not lapse and such Restricted Stock shall vest.
8.5 Certificates for Restricted Stock . Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Administrator determines. Certificates or book entries evidencing shares of Restricted Stock must include an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, in its sole discretion, retain physical possession of any stock certificate until such time as all applicable restrictions lapse.
8.6 Section 83(b) Election . If a Grantee makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Grantee would otherwise be taxable under Section 83(a) of the
13 |
Code, the Grantee shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.
ARTICLE 9.
AWARD OF STOCK APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation Rights .
(a) The Administrator is authorized to grant Stock Appreciation Rights (either alone, or in tandem with other Awards) to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine consistent with the Plan.
(b) A Stock Appreciation Right shall entitle the Grantee (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the Stock Appreciation Right from the Fair Market Value on the date of exercise of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations the Administrator may impose. Except as described in (c) below, the exercise price per Share subject to each Stock Appreciation Right shall be set by the Administrator, but shall not be less than 100% of the Fair Market Value on the date the Stock Appreciation Right is granted.
(c) Notwithstanding the foregoing provisions of Section 9.1(b), in the case of an Stock Appreciation Right that is a Substitute Award, the price per share of the shares subject to such Stock Appreciation Right may be less than 100% of the Fair Market Value per share on the date of grant ; provided , that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Administrator) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares.
9.2 Stock Appreciation Right Vesting .
(a) The period during which the right to exercise, in whole or in part, a Stock Appreciation Right vests in the Grantee shall be set by the Administrator in its sole discretion. Such vesting may be based on service with the Company or any Subsidiary, or any other criteria selected by the Administrator. At any time after grant of a Stock Appreciation Right, the Administrator may, in its sole discretion and subject to whatever terms and conditions it selects, accelerate the period during which a Stock Appreciation Right vests.
(b) No portion of a Stock Appreciation Right which is unexercisable at Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in the Award Agreement or by action of the Administrator following the grant of the Stock Appreciation Right.
14 |
9.3 Manner of Exercise . All or a portion of an exercisable Stock Appreciation Right shall be deemed exercised upon delivery of all of the following to the stock administrator of the Company, or such other person or entity designated by the Administrator, or his, her or its office, as applicable:
(a) A written or electronic notice complying with the applicable rules established by the Administrator stating that the Stock Appreciation Right, or a portion thereof, is exercised. The notice shall be signed by the Grantee or other person then entitled to exercise the Stock Appreciation Right or such portion of the Stock Appreciation Right;
(b) Such representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal, state or foreign securities laws or regulations. The Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance;
(c) In the event that the Stock Appreciation Right shall be exercised pursuant to this Section 9.3 by any person or persons other than the Grantee, appropriate proof of the right of such person or persons to exercise the Stock Appreciation Right; and
(d) Full payment of any exercise price and satisfaction of applicable withholding taxes to the stock administrator of the Company for the Shares with respect to which the Stock Appreciation Right, or portion thereof, is exercised, in a manner permitted by Sections 11.1 and 11.2.
ARTICLE
10.
AWARD OF PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK PAYMENTS, RESTRICTED STOCK UNITS
10.1 Performance Awards .
(a) The Administrator is authorized to grant Performance Awards to any Eligible Individual and to determine whether such Performance Awards shall be Performance-Based Compensation. The value of Performance Awards may be linked to any one or more of the Performance Criteria or other specific criteria determined by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Performance Awards may be paid in cash, Shares , or both, as determined by the Administrator.
(b) Without limiting Section 10.1(a), the Administrator may grant Performance Awards to any Eligible Individual in the form of a cash bonus payable upon the attainment of objective Performance Goals, or such other criteria, whether or not objective, which are established by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Any such bonuses paid to a Grantee which are intended to be Performance-Based Compensation shall be based upon objectively determinable bonus formulas established in accordance with Article 5.
10.2 Dividend Equivalents . Dividend Equivalents may be granted by the Administrator based on dividends declared on the Common Stock, to be credited as of dividend payment dates during the period between the date an Award is granted to a Grantee and the date such Award vests, is exercised, is distributed or expires, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula, at such time and subject to such limitations as may be determined by the Administrator. Notwithstanding the foregoing, no Dividend
15 |
Equivalents shall be payable with respect to the Shares underlying any Award unless otherwise expressly provided in an Award Agreement.
10.3 Stock Payments . The Administrator is authorized to make Stock Payments to any Eligible Individual. The number or value of shares of any Stock Payment shall be determined by the Administrator and may be based upon one or more Performance Criteria or any other specific criteria, including service to the Company Group, determined by the Administrator. Shares underlying a Stock Payment which is subject to a vesting schedule or other conditions or criteria set by the Administrator will not be issued until those conditions have been satisfied. Unless otherwise provided by the Administrator, a Grantee of a Stock Payment shall have no rights as a Company stockholder with respect to such Stock Payment until such time as the Stock Payment has vested and the Shares underlying the Award have been issued to the Grantee. Stock Payments may, but are not required to, be made in lieu of base salary, bonus, fees or other cash compensation otherwise payable to such Eligible Individual.
10.4 Deferred Stock . The Administrator is authorized to grant Deferred Stock to any Eligible Individual. The number of shares of Deferred Stock shall be determined by the Administrator and may be based on one or more Performance Criteria or other specific criteria, including service to the Company Group, as the Administrator determines, in each case on a specified date or dates or over any period or periods determined by the Administrator. Shares underlying a Deferred Stock Award which is subject to a vesting schedule or other conditions or criteria set by the Administrator will not be issued until those conditions have been satisfied. Unless otherwise provided by the Administrator, a Grantee of Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Award has vested and the Shares underlying the Award has been issued to the Grantee.
10.5 Restricted Stock Units . The Administrator is authorized to grant Restricted Stock Units to any Eligible Individual. The number and terms and conditions of Restricted Stock Units shall be determined by the Administrator. The Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including conditions based on one or more Performance Criteria or other specific criteria, including service to the Company Group, in each case on a specified date or dates or over any period or periods, as the Administrator determines. The Administrator shall specify, or permit the Grantee to elect, the conditions and dates upon which the Shares underlying the Restricted Stock Units which shall be issued, which dates shall not be earlier than the date as of which the Restricted Stock Units vest and become nonforfeitable and which conditions and dates shall be established and administered in a manner compliant with or exempt from Section 409A of the Code. Restricted Stock Units may be paid in cash, Shares, or both, as determined by the Administrator. Unless otherwise provided in an Award Agreement, o n the distribution dates, the Company shall issue to the Grantee one vested Share (or the Fair Market Value of one such Share in cash) for each vested and nonforfeitable Restricted Stock Unit.
10.6 Term . The term of a Performance Award, Dividend Equivalent award, Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award shall be set by the Administrator in its sole discretion.
10.7 Exercise or Purchase Price . The Administrator may establish the exercise or purchase price of a Performance Award, shares of Deferred Stock, shares distributed as a Stock Payment award or shares distributed pursuant to a Restricted Stock Unit award; provided, however , that value of the consideration shall not be less than the par value of a Share , unless otherwise permitted by applicable law.
10.8 Exercise upon Termination of Service . A Performance Award, Dividend Equivalent award, Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award is exercisable or distributable only while the Grantee is an Employee, Director or Advisor, as applicable. The
16 |
Administrator, however, in its sole discretion may provide that an Award described in this Article 10 may be exercised or distributed subsequent to a Termination of Service in certain events, including a Change in Control, the Grantee’s death, retirement or disability or any other specified types of Termination of Service, including but not limited to termination without Cause and/or resignation for Good Reason.
ARTICLE 11.
ADDITIONAL TERMS OF AWARDS
11.1 Payment . The Administrator shall determine in its discretion the methods by which payments by any Grantee with respect to any Awards granted under the Plan shall be made, including, without limitation: (a) cash or check denominated in U.S. dollars, (b) Shares (including Shares otherwise issuable in settlement of the Award) or shares of Common Stock held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required, (c) payment through a broker in accordance with procedures permitted by applicable law and regulations, or (d) other form of legal consideration acceptable to the Administrator. The Administrator shall also determine the methods by which Shares shall be accepted in payment or delivered (or deemed to be delivered) to Grantees. Notwithstanding any other provision of the Plan to the contrary, no Grantee who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
11.2 Tax Withholding . The Company Group has the authority and the right to deduct or withhold from amounts due under this Plan or other compensation payable, or require a Grantee to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including FICA or employment tax obligation) required by law to be withheld with respect to any taxable event concerning a Grantee arising as a result of the Plan. The Administrator may in its sole discretion and in satisfaction of the foregoing requirement allow a Grantee to elect to have the Company withhold Shares otherwise issuable under an Award (or allow the surrender of Shares ). The number of Shares which may be so withheld or surrendered shall not exceed the number of shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates that are applicable to such supplemental taxable income.
11.3 Transferability of Awards .
(a) Except as otherwise provided in Section 11.3(b):
(i) No Award under the Plan may be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, or, subject to the consent of the Administrator, pursuant to a DRO, unless and until such Award has been exercised, or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed;
(ii) No Award or interest or right therein shall be liable for the debts, contracts or engagements of the Grantee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; and
17 |
(iii) During the lifetime of the Grantee, only the Grantee may exercise an Award (or any portion thereof) granted to him under the Plan, unless it has been disposed of pursuant to a DRO. After the death of the Grantee, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan and the applicable Award Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Grantee’s will or under the then-applicable laws of descent and distribution.
(b) Notwithstanding Section 11.3(a), a Grantee may, if permitted by and in the manner determined by the Administrator, designate a beneficiary to exercise the rights of the Grantee and to receive any distribution with respect to any Award upon the Grantee’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Grantee, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator. If the Grantee is married and resides in a community property state, a designation of a person other than the Grantee’s spouse as his or her beneficiary with respect to more than 50% of the Grantee’s interest in the Award shall not be effective without the prior written or electronic consent of the Grantee’s spouse. If no beneficiary has been designated or survives the Grantee, payment shall be made to the person entitled thereto pursuant to the Grantee’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Grantee at any time provided the change or revocation is filed with the Administrator prior to the Grantee’s death.
(c) Notwithstanding Section 11.3(a), the Administrator, in its sole discretion, may determine to permit a Grantee to transfer an Award other than an Incentive Stock Option to any one or more Permitted Transferees, subject to the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than by will or the laws of descent and distribution; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Award as applicable to the original Holder (other than the ability to further transfer the Award); and (iii) the Grantee and the Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under applicable federal, state and foreign securities laws and (C) evidence the transfer.
11.4 Conditions to Issuance of Shares .
(a) Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries evidencing Shares pursuant to the exercise of any Award, unless and until the Board or the Committee has determined, with advice of counsel, that the issuance of such Shares is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the Shares are listed or traded, and the Shares are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Board or the Committee may require that a Grantee make such reasonable covenants, agreements, and representations as the Board or the Committee , in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements.
(b) All Share certificates delivered pursuant to the Plan and all shares issued pursuant to book entry procedures are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state, or foreign securities or other laws, rules and regulations and the rules of any securities exchange or automated quotation system on
18 |
which the Shares are listed, quoted, or traded. The Administrator may place legends on any Share certificate or book entry to reference restrictions applicable to the Shares .
(c) The Administrator has the right to require any Grantee to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of any Award, including a window-period limitation, as may be imposed in the sole discretion of the Administrator.
(d) No fractional Shares shall be issued and the Administrator shall determine, in its sole discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding down.
(e) Notwithstanding any other provision of the Plan, unless otherwise determined by the Administrator or required by any applicable law, rule or regulation, the Company shall not deliver to any Grantee certificates evidencing Shares issued in connection with any Award and instead such Shares shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
11.5 Forfeiture Provisions . Pursuant to its general authority to determine the terms and conditions applicable to Awards under the Plan, the Administrator has the right to provide, in the terms of Awards made under the Plan, or to require a Grantee to agree by separate written or electronic instrument, that: (a) any proceeds, gains or other economic benefit actually or constructively received by the Grantee upon any receipt or exercise of the Award, or upon the receipt or resale of any Shares underlying the Award, must be paid to the Company, and/or (b) the Award shall terminate, be cancelled and any unexercised portion of the Award (whether or not vested) shall be forfeited under certain specified circumstances, including if (i) a Termination of Service occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, or (ii) the Grantee at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator or (iii) the Grantee incurs a Termination of Service for Cause or circumstances constituting Cause are determined to have existed at the time of Grantee’s Termination of Service.
11.6 Prohibition on Repricing . Subject to Section 13.2, the Administrator shall not, without the approval of the stockholders of the Company, (i) authorize the amendment of any outstanding Option or Stock Appreciation Right to reduce its exercise price per share , or (ii) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right exercise price per share exceeds the Fair Market Value of the underlying Shares. Subject to Section 13.2, the Administrator shall have the authority, without the approval of the stockholders of the Company, to amend any outstanding award to increase the price per share or to cancel and replace an Award with the grant of an Award having a price per share that is greater than or equal to the price per share of the original Award.
11.7 Deemed Acceptance of Plan and Award Terms . The Company shall issue no Shares pursuant to an Award until the Grantee has executed the Award Agreement and satisfied all conditions and/or restrictions applicable to the Shares. Acceptance of an Award under the Plan shall be deemed acceptance of the terms and conditions of the Plan and the Award Agreement.
11.8 Clawback . Notwithstanding any other provisions in this Plan, any Award which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).
19 |
ARTICLE 12.
ADMINISTRATION
12.1 Administrator . The Plan shall be administered by a committee or subcommittee of the Board which shall be appointed by the Board (such committee being the “ Committee ”). The Committee shall consist solely of two or more members of the Board each of whom is a “non-employee director” as defined by Rule 16b-3 of the Exchange Act or any successor rule, an “outside director” for purposes of Section 162(m) of the Code and an “independent director” under the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded ; provided, that any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 12.1 or otherwise provided in any charter of the Committee. Except as may otherwise be provided in any charter of the Committee, appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written or electronic notice to the Board. Vacancies in the Committee may only be filled by the Board, and Committee members shall serve at the Board’s discretion. Reference to the Committee shall refer to the Board if the Committee does not or ceases to exist and the Board does not appoint a Committee. The Board or Committee may delegate its authority hereunder to the extent permitted by Section 12.6. Notwithstanding the foregoing, (i) the full Board, acting by majority of its members in office shall conduct the general administration of the Plan if required by applicable law, exchange rule or regulation and (ii) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to all Awards granted to Non-Employee Directors and for purposes of such Awards the term “Committee” as used in this Plan shall be deemed to refer to the Board..
12.2 Duties and Powers of Committee . It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Award Agreement, and to adopt such rules for the administration, interpretation and application of the Plan as are not inconsistent therewith, to interpret, amend or revoke any such rules. Any grant or Award under the Plan, or interpretation or determination of terms and conditions for any Award, need not be the same with respect to each Grantee. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act or any successor rule, or Section 162(m) of the Code, or any regulations or rules issued thereunder, or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded are required to be determined in the sole discretion of the Committee.
12.3 Action by the Committee . Unless otherwise established by the Board or in any charter of the Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any member of the Company Group, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
12.4 Authority of Administrator . Subject to any specific designation in the Plan, the Administrator has the exclusive power, authority and sole discretion to:
20 |
(a) Designate Eligible Individuals to receive Awards;
(b) Determine the type or types of Awards to be granted to each Eligible Individual ;
(c) Determine the number of Awards to be granted and the number of Shares to which an Award will relate;
(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, purchase price, any performance criteria, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines;
(e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares , other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(f) Prescribe forms of Award Agreement, which need not be identical for each Grantee;
(g) Decide all other matters that must be determined in connection with an Award;
(h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(i) Interpret and construe the terms of, and any matter arising pursuant to, the Plan or any Award Agreement or other instrument entered into under the Plan; and
(j) Make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan.
12.5 Decisions Binding . The Administrator’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.
12.6 Delegation of Authority . To the extent permitted by applicable law or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded , the Board or Committee may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to Article 12; provided, however , that in no event shall an officer of the Company be delegated the authority to grant awards to, or amend awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder ; provided further, that any delegation of administrative authority shall only be permitted to the extent it is permissible under Section 162(m) of the Code and applicable securities laws or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded . Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board may at any time rescind the authority
21 |
so delegated or appoint a new delegate. At all times, the delegate appointed under this Section 12.6 shall serve in such capacity at the pleasure of the Board and the Committee.
ARTICLE
13.
MISCELLANEOUS PROVISIONS
13.1 Amendment, Suspension or Termination of the Plan . Subject to any applicable law or government regulation, to any requirement that must be satisfied if the Plan is intended to be a stockholder-approved plan for purposes of Section 162(m) of the Code and to the rules of any exchange or quotation system on which the Shares may be listed or quoted, the Plan may be amended, modified or terminated by the Board or the Administrator without the approval of the stockholders of the Company, except that stockholder approval shall be required for any amendment that would: (a) increase the limits imposed in Section 3.1 on the maximum number of Shares which may be issued under the Plan or as Incentive Stock Options; provided, however , that any adjustment under Section 13.2 shall not constitute an increase for purposes of this Section 13.1; (b) reduce the price per share of any outstanding Option or Stock Appreciation Right granted under the Plan or cancel any such Award in exchange for cash when the exercise price per Share exceeds the Fair Market Value of the underlying Shares; or (c) materially change the class of persons who are eligible to participate in the Plan. Except as provided in Section 13.10, no amendment, suspension or termination of the Plan shall, without the consent of the Grantee, materially impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. In no event may any Award be granted under the Plan after the tenth (10 th ) anniversary of the Effective Date. Subject to other applicable provisions of the Plan, Awards made under the Plan prior to such termination of the Plan shall remain in effect until satisfied or terminated in accordance with the Plan and the terms of the Awards.
13.2 Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events .
(a) In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of the Company’s stock or the share price of the Company’s stock other than an Equity Restructuring, the Administrator shall make equitable adjustments, if any, to reflect such change with respect to (i) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 on the maximum number and kind of shares which may be issued under the Plan, and adjustments of the Award Limit); (ii) the number and kind of shares of Common Stock (or other securities or property) subject to outstanding Awards; (iii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (iv) the grant or exercise price per share for any outstanding Awards under the Plan. Any adjustment affecting an Award intended to be Performance Based Compensation will be made consistent with the requirements of Code Section 162(m).
(b) In the event of any transaction or event described in Section 13.2(a) or any unusual or nonrecurring transactions or events affecting the Company, any member of the Company Group , or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting principles, the Administrator, in its sole discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Grantee’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits
22 |
intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles.
(i) To provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Grantee’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 13.2 the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Grantee’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion having an aggregate value not exceeding the amount that could have been attained upon the exercise of such Award or realization of the Grantee’s rights had such Award been currently exercisable or payable or fully vested;
(ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
(iii) To make adjustments in the number and type of shares of the Company’s stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards and Awards which may be granted in the future;
(iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and
(v) To provide that the Award cannot vest, be exercised or become payable after such event.
(c) In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 13.2(a) and 13.2(b):
(i) The number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, shall be equitably adjusted ; and/or
(ii) The Administrator shall make such equitable adjustments, if any, as the Administrator in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 on the maximum number and kind of shares which may be issued under the Plan, and adjustments of the Award Limit). The adjustments provided under this Section 13.2(c) shall be nondiscretionary and shall be final and binding on the affected Grantee and the Company.
(d) Notwithstanding any other provision of the Plan, in the event of a Change in Control, unless otherwise determined by the Administrator, each outstanding Award shall be assumed or an equivalent Award substituted by the successor corporation or a parent or subsidiary of the successor corporation. In the event that, or to the extent that, the successor corporation in a Change in Control refuses to assume or substitute for the Award, or if the Administrator determines that such assumption or substitution is not desirable or is only desirable for a portion of any outstanding Award, then the
23 |
Administrator may take any or all of the following actions: (i) determine that an outstanding Award shall accelerate and become exercisable, or determine that the restrictions and conditions on an outstanding Award shall lapse, in whole or in part, as applicable, upon the Change of Control or upon such other event as the Administrator determines; (ii) require that a Grantee surrender his or her outstanding Award, or any portion of such outstanding Award, in exchange for a payment by the Company, in cash or stock, as determined by the Administrator, in an amount equal to the Fair Market Value of the vested portion of the Award (with respect to Options or Stock Appreciation Rights, or other similar appreciation value Awards, such value shall be determined amount by which the then Fair Market Value of the shares of Company Stock subject to the Grantee’s unexercised Award exceeds the any applicable exercise price or other grant price or base value or the Award); or (iii) after giving the Grantee an opportunity to exercise the vested portion of his or her outstanding Award, terminate any or all unexercised portion of the Award at such time as the Administrator deems appropriate. Such surrender or termination shall take place as of the date of the Change of Control or such other date as the Administrator may specify.
(e) For the purposes of this Section 13.2, an Award shall be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each share of Common Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however , that if such consideration received in the Change in Control was not solely common stock of the successor corporation or its parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Award, for each share of Common Stock subject to an Award, to be solely common stock of the successor corporation or its parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.
(f) The Administrator may, in its sole discretion, include such further provisions and limitations in any Award, agreement or certificate, as it may deem equitable and in the best interests of the Company that are not inconsistent with the provisions of the Plan.
(g) With respect to Awards which are granted to Covered Employees and are intended to qualify as Performance-Based Compensation, no adjustment or action described in this Section 13.2 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause such Award to fail to so qualify as Performance-Based Compensation, unless the Administrator determines that the Award should not so qualify. No adjustment or action described in this Section 13.2 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the Administrator determines that the Award is not to comply with such exemptive conditions.
(h) The existence of the Plan, the Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
24 |
(i) No action shall be taken under this Section 13.2 which shall cause an Award to fail to comply with Section 409A of the Code or the regulations issued thereunder, to the extent applicable to such Award.
(j) In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Common Stock or the share price of the Common Stock including any Equity Restructuring, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the exercise of any Award during a period of sixty (60) days prior to the consummation of any such transaction.
13.3 Approval of Plan by Stockholders . The Plan will be submitted for the approval of the Company’s stockholders within twelve (12) months after the date of the Board’s initial adoption of this Plan. Awards may be granted or awarded prior to such stockholder approval, provided that such Awards shall not be exercisable, shall not vest and the restrictions thereon shall not lapse and no Shares shall be issued pursuant thereto prior to the time when the Plan is approved by the stockholders, and provided further that if such approval has not been obtained at the end of said twelve (12) month period, all Awards previously granted or awarded under the Plan shall thereupon be canceled and become null and void.
13.4 No Stockholders Rights . Except as otherwise provided herein, a Grantee shall have none of the rights of a stockholder with respect to shares of Common Stock covered by any Award until the Grantee becomes the record owner of such shares of Common Stock.
13.5 Paperless Administration . In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Grantee may be permitted through the use of such an automated system.
13.6 Effect of Plan upon Other Compensation or Benefit Plans . The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company Group. Nothing in the Plan shall be construed to limit the right of the Company Group: (a) to establish any other forms of incentives or compensation for Employees, Directors or Advisors, or (b) to grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper corporate purpose including without limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association. No payment pursuant to the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company Group except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
13.7 Compliance with Laws . The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of Shares and the payment of money under the Plan or under Awards granted or awarded hereunder are subject to compliance with all applicable federal, state, local and foreign laws, rules and regulations (including but not limited to state, federal and foreign securities law and margin requirements) , the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded, and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all
25 |
applicable legal requirements. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
13.8 Titles and Headings, References to Sections of the Code or Exchange Act . The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. References to sections of the Code, the Securities Act, the Exchange Act or another specific law shall include any amendment or successor thereto and any regulations promulgated thereunder.
13.9 Governing Law . The Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware, without regard to conflicts of laws thereof.
13.10 Section 409A . The Plan and all Awards granted hereunder are intended to comply with, or otherwise be exempt from, Section 409A of the Code (“ Section 409A ”). The Plan and all Awards granted under the Plan shall be administered, interpreted, and construed in a manner consistent with Section 409A to the extent necessary to avoid the imposition of additional taxes under Section 409A(a)(1)(B). Should any provision of the Plan, any Award Agreement, or any other agreement or arrangement contemplated by the Plan be found not to comply with, or otherwise be exempt from, the provisions of Section 409A, such provision shall be modified and given effect (retroactively if necessary), in the sole discretion of the Administrator, and without the consent of the holder of the Award, in such manner as the Administrator determines to be necessary or appropriate to comply with, correct under, or to effectuate an exemption from, Section 409A; provided, that this Section 13.10 does not create an obligation on the part of the Company or Administrator to take any such action. Each Grantee shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on such Grantee or for his or her account in connection with this Plan or any Award (including any taxes and penalties under Code Section 409A) and none of the Company, the Administrator, or any of the member of the Company Group shall have any obligation to indemnify or otherwise hold any Grantee harmless from any or all such taxes or penalties nor to withhold taxes in the most favorable manner available. The Company makes no representations concerning the tax consequences of any Grantee’s participation in this Plan under any federal, state or local tax law, nor with regard. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Termination of Service of a Grantee who is a “specified employee” within the meaning of Section 409A shall instead be paid on the first payroll date after the six-month anniversary of the Grantee’s Termination of Service (or the participant’s death, if earlier). Notwithstanding anything in the Plan to the contrary, in no event shall the Administrator exercise its discretion to accelerate the payment or settlement of an Award where such payment or settlement constitutes deferred compensation within the meaning of Section 409A unless, and solely to the extent that, such accelerated payment or settlement is permissible under Treasury Regulation section 1.409A-3(j)(4) or any successor provision.
13.11 No Rights to Awards; No Rights to Continued Employment or Engagement . No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Administrator is obligated to treat Eligible Individuals, Grantees or any other persons uniformly. Nothing in the Plan or in any Award Agreement confers upon any Grantee any right to continue in the employ of, or as a Director or Advisor for, any member of the Company Group, or interferes with or restricts in any way the rights of the Company Group, which rights are hereby expressly reserved, to discharge any Grantee at any time for any reason whatsoever, with or without cause.
26 |
13.12 Unfunded Status of Awards . The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Grantee pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Grantee any rights that are greater than those of a general creditor of the Company or any member of the Company Group.
13.13 Indemnification . To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided, that he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
* * * * *
I hereby certify that the foregoing Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan was duly adopted by the Board of Directors of Ritter Pharmaceuticals, Inc. on ______ __, 2015.
I hereby certify that the foregoing Ritter Pharmaceuticals, Inc. 2015 Equity Incentive Plan was duly adopted by the stockholders of Ritter Pharmaceuticals, Inc. on ______ __, 2015
Executed on this ____ day of ______, 2015.
[Name, Title] |
27 |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As independent registered public accountants, we hereby consent to the use in this Registration Statement on Form S-1/A and related Prospectus of our report dated March 13, 2015 (except for the matters noted in Note 11, as to which the date is May 8, 2015, and except for the effects of the stock split as described in Note 2 and Note 3, as to which the date is May __, 2015) relating to the financial statements of Ritter Pharmaceuticals, Inc, (which report includes an explanatory paragraph relating to the uncertainty of the Company’s ability to continue as a going concern) and to the reference to us under the caption "Experts" which is contained in this Prospectus.
The foregoing consent is in the form that will be signed upon the completion of the reverse stock split described in Note 2 and Note 3 to the financial statements.
/s/ Mayer Hoffman McCann P.C.
Orange County, California
May 8, 2015