|
Delaware
(State or other jurisdiction of
incorporation or organization) |
| |
2834
(Primary Standard Industrial
Classification Code Number) |
| |
83-1377888
(I.R.S. Employer
Identification Number) |
|
|
Edwin M. O’Connor, Esq.
Alicia M. Tschirhart, Esq. Goodwin Procter LLP 100 Northern Avenue Boston, MA 02210 (617) 570-1000 |
| |
Peter N. Handrinos. Esq.
Wesley C. Holmes, Esq. Latham & Watkins LLP 200 Clarendon Street Boston, MA 02116 (617) 948-6000 |
|
|
Large Accelerated Filer
☐
|
| |
Accelerated Filer
☐
|
|
|
Non-Accelerated Filer
☒
|
| |
Smaller Reporting Company
☒
|
|
| | | |
Emerging Growth Company
☒
|
|
| | |||||||||||
Title of each Class of
Securities to be Registered |
| | |
Proposed
Maximum Aggregate Offering Price(1)(2) |
| | |
Amount of
Registration Fee |
| |||
Common Stock, par value $0.0001 per share
|
| | |
$100,000,000
|
| | | | $ | 10,910 | | |
| TABLE OF CONTENTS | | | |||||
| | | | | | Page | | |
| | | | | 1 | | | |
| | | | | 6 | | | |
| | | | | 8 | | | |
| | | | | 10 | | | |
| | | | | 58 | | | |
| | | | | 60 | | | |
| | | | | 61 | | | |
| | | | | 62 | | | |
| | | | | 64 | | | |
| | | | | 67 | | | |
| | | | | 79 | | | |
| | | | | 115 | | | |
| | | | | 124 | | | |
| | | | | 131 | | | |
| | | | | 133 | | | |
| | | | | 136 | | | |
| | | | | 138 | | | |
| | | | | 143 | | | |
| | | | | 145 | | | |
| | | | | 149 | | | |
| | | | | 157 | | | |
| | | | | 157 | | | |
| | | | | 157 | | | |
| | | | | F-1 | | |
| | |
YEAR ENDED
DECEMEBER 31, |
| |
Three Months ENDED
MARCH 31, |
| ||||||||||||||||||
| | |
2019
|
| |
2020
|
| |
2020
|
| |
2021
|
| ||||||||||||
| | |
(in thousands, except share and per share amounts)
|
| |||||||||||||||||||||
| | | | | | | | | | | | | | |
(unaudited)
|
| |||||||||
Statements of Operations and Comprehensive
Loss Data: |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | |
Research and development
|
| | | $ | 3,112 | | | | | $ | 7,940 | | | | | $ | 1,206 | | | | | $ | 2,196 | | |
General and administrative
|
| | | | 218 | | | | | | 949 | | | | | | 152 | | | | | | 584 | | |
Total operating expensess
|
| | | | 3,330 | | | | | | 8,889 | | | | | | 1,358 | | | | | | 2,780 | | |
Provision for income taxes
|
| | | | 1 | | | | | | — | | | | | | — | | | | | | — | | |
Loss from operations
|
| | | | (3,331) | | | | | | (8,889) | | | | | | (1,358) | | | | | | (2,780) | | |
Other income (expense), net
|
| | | | 1 | | | | | | (722) | | | | | | (78) | | | | | | (1) | | |
Net loss and comprehensive loss
|
| | | $ | (3,330) | | | | | $ | (9,611) | | | | | $ | (1,436) | | | | | $ | (2,781) | | |
Net loss per share, basic and diluted(1)
|
| | | $ | (4.44) | | | | | $ | (12.98) | | | | | $ | (1.91) | | | | | $ | (3.70) | | |
Weighted-average shares of common stock outstanding, basic and diluted(1)
|
| | | | 750,000 | | | | | | 752,377 | | | | | | 750,000 | | | | | | 755,000 | | |
Pro forma net loss per share, basic and diluted(2)
|
| | | | | | | | | $ | (1.32) | | | | | | | | | | | $ | (0.20) | | |
Pro forma weighted-average shares of common stock outstanding, basic and diluted(2)
|
| | | | | | | | | | 7,376,560 | | | | | | | | | | | | 13,966,844 | | |
|
| | |
As of March 31, 2021
|
| |||||||||||||||
| | |
Actual
|
| |
Pro Forma(1)
|
| |
Pro Forma as
Adjusted(2) |
| |||||||||
| | |
(in thousands)
|
| |||||||||||||||
| | |
(unaudited)
|
| |||||||||||||||
Balance Sheet Data: | | | | | | | | | | | | | | | | | | | |
Cash
|
| | | $ | 8,641 | | | | | $ | 64,178 | | | | | $ | | | |
Working capital(3)
|
| | | | 7,822 | | | | | | 63,359 | | | | | | | | |
Total assets
|
| | | | 9,948 | | | | | | 65,485 | | | | | | | | |
Total liabilities
|
| | | | 1,782 | | | | | | 1,782 | | | | | | | | |
Convertible preferred stock
|
| | | | 24,281 | | | | | | — | | | | | | | | |
Total accumulated deficit
|
| | | | (16,201) | | | | | | (16,201) | | | | | | | | |
Total shareholders’ (deficit) equity
|
| | | | (16,115) | | | | | | 63,703 | | | | | | | | |
| | |
As of March 31, 2021
|
| |||||||||||||||
| | |
Actual
|
| |
Pro Forma
|
| |
Pro Forma as
Adjusted(1) |
| |||||||||
| | |
(in thousands, except share and per share amounts)
|
| |||||||||||||||
Cash
|
| | | $ | 8,641 | | | | | $ | 64,178 | | | | | $ | | | |
Series A redeemable convertible preferred shares, $0.0001 par value: 40,052,154 shares authorized; 10,713,808 issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted
|
| | | | 20,281 | | | | | | — | | | | | | | | |
Series seed redeemable convertible preferred shares, $0.0001 par value: 4,000,000 shares authorized, issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted
|
| | | | 4,000 | | | | | | — | | | | | | | | |
Shareholders’ (deficit) equity: | | | | | | | | | | | | | | | | | | | |
Common stock, $0.0001 par value: 50,000,000 shares
authorized, 755,000 issued and outstanding, actual; 50,000,000 shares authorized, 44,807,154 issued and outstanding, pro forma; shares authorized, shares issued and outstanding, pro forma as adjusted |
| | | | — | | | | | | 4 | | | | | | | | |
Additional paid-in capital
|
| | | | 86 | | | | | | 79,900 | | | | | | | | |
Accumulated deficit
|
| | | | (16,201) | | | | | | (16,201) | | | | | | | | |
Total shareholders’ (deficit) equity
|
| | | | (16,115) | | | | | | 63,703 | | | | | | | | |
Total capitalization
|
| | | $ | 8,166 | | | | | $ | 63,703 | | | | | $ | | | |
|
|
Assumed initial public offering price per share
|
| | | | | | | | | $ | | | |
|
Historical net tangible book value per share as of March 31, 2021
|
| | | $ | (21.34) | | | | | | | | |
|
Increase in net tangible book value per share attributable to the pro forma adjustments described above
|
| | | $ | 22.76 | | | | | | | | |
|
Pro forma net tangible book value per share as of March 31, 2021, before giving
effect to this offering |
| | | $ | 1.42 | | | | | | | | |
|
Increase in pro forma net tangible book value per share attributable to investors purchasing shares in this offering
|
| | | $ | | | | | | | | | |
|
Pro forma as adjusted net tangible book value per share immediately after this offering
|
| | | | | | | | | | | | |
|
Dilution in pro forma as adjusted net tangible book value per share to new investors
purchasing shares in this offering |
| | | | | | | | | | | | |
|
| | |
Shares Purchased
|
| |
Total Consideration
|
| |
Average Price
Per Share |
| |||||||||||||||||||||
| | |
Number
|
| |
Percent
|
| |
Amount
|
| |
Percent
|
| ||||||||||||||||||
Existing stockholders
|
| | | | | | | | | | % | | | | | $ | | | | | | % | | | | | $ | | | ||
New investors
|
| | | | | | | | | | | | | | | | | | | | | | | | | $ | | | |||
Total
|
| | | | | | | | | 100.0% | | | | | $ | | | | | | 100.0% | | | | | | | | | ||
|
| | |
THREE MONTHS ENDED MARCH 31,
|
| | ||||||||||||||
| | |
2020
|
| |
2021
|
| |
CHANGE
|
| |||||||||
| | |
(Unaudited)
|
| | ||||||||||||||
Operating expenses: | | | | | |||||||||||||||
Research and development
|
| | | $ | 1,206 | | | | | $ | 2,196 | | | | | $ | 990 | | |
General and administrative
|
| | | | 152 | | | | | | 584 | | | | | | 432 | | |
Total operating expenses
|
| | | | 1,358 | | | | | | 2,780 | | | | | | 1,422 | | |
Loss from operations
|
| | | | (1,358) | | | | | | (2,780) | | | | | | (1,422) | | |
Other expense: | | | | | |||||||||||||||
Interest expense
|
| | | | (38) | | | | | | — | | | | | | 38 | | |
Change in fair value of convertible promissory notes
|
| | | | (40) | | | | | | — | | | | | | 40 | | |
Other expense
|
| | | | — | | | | | | (1) | | | | | | (1) | | |
Total other expense
|
| | | | (78) | | | | | | (1) | | | | | | 77 | | |
Net loss and comprehensive loss
|
| | | $ | (1,436) | | | | | $ | (2,781) | | | | | $ | (1,345) | | |
|
| | |
Years Ended December 31,
|
| | | | | | | |||||||||
| | |
2019
|
| |
2020
|
| |
Change
|
| |||||||||
Operating expenses: | | | | | | | | | | | | | | | | | | | |
Research and development
|
| | | $ | 3,112 | | | | | $ | 7,940 | | | | | $ | 4,828 | | |
General and administrative
|
| | | | 218 | | | | | | 949 | | | | | | 731 | | |
Total operating expenses
|
| | | | 3,330 | | | | | | 8,889 | | | | | | 5,559 | | |
Provision for income taxes
|
| | | | 1 | | | | | | — | | | | | | (1) | | |
Loss from operations
|
| | | | (3,331) | | | | | | (8,889) | | | | | | (5,558) | | |
Other income (expense): | | | | | | | | | | | | | | | | | | | |
Interest expense
|
| | | | — | | | | | | (75) | | | | | | (75) | | |
Change in fair value of convertible promissory notes
|
| | | | — | | | | | | (644) | | | | | | (644) | | |
Other income (expense)
|
| | | | 1 | | | | | | (3) | | | | | | (4) | | |
Total other income (expense)
|
| | | | 1 | | | | | | (722) | | | | | | (723) | | |
Net loss and comprehensive loss
|
| | | $ | (3,330) | | | | | $ | (9,611) | | | | | $ | (6,281) | | |
|
| | |
THREE MONTHS ENDED MARCH 31,
|
| |||||||||
| | |
2020
|
| |
2021
|
| ||||||
| | |
(unaudited)
|
| |||||||||
Net cash used in operating activities
|
| | | $ | (1,183) | | | | | $ | (3,775) | | |
Net cash used by investing activities
|
| | | | — | | | | | | (40) | | |
Net cash provided by financing activities
|
| | | | — | | | | | | 7,883 | | |
Net (decrease) increase in cash
|
| | | $ | (1,183) | | | | | $ | 4,068 | | |
|
| | |
Years Ended December 31,
|
| |||||||||
| | |
2019
|
| |
2020
|
| ||||||
Net cash used in operating activities
|
| | | $ | (2,781) | | | | | $ | (7,859) | | |
Net cash provided by financing activities
|
| | | | 2,500 | | | | | | 8,918 | | |
Net (decrease) increase in cash
|
| | | $ | (281) | | | | | $ | 1,059 | | |
|
Grant Date
|
| |
Number of
Shares Subject to Options Granted |
| |
Per Share
Exercise Price of Options(1) |
| |
Fair Value
per Common Share on Grant Date(1) |
| |
Per Share
Estimated Fair Value of Options(2) |
| ||||||||||||
February 14, 2020(3)
|
| | | | 150,000 | | | | | $ | 0.56 | | | | | $ | 0.56 | | | | | | (3) | | |
May 1, 2020(3)
|
| | | | 50,000 | | | | | $ | 0.56 | | | | | $ | 0.56 | | | | | | (3) | | |
May 19, 2020(3)
|
| | | | 50,000 | | | | | $ | 0.56 | | | | | $ | 0.56 | | | | | | (3) | | |
September 4, 2020
|
| | | | 441,645 | | | | | $ | 0.56 | | | | | $ | 0.56 | | | | | $ | 0.35 | | |
November 24, 2020
|
| | | | 24,976 | | | | | $ | 0.56 | | | | | $ | 0.56 | | | | | $ | 0.35 | | |
April 2, 2021
|
| | | | 5,285,039 | | | | | $ | 0.69 | | | | | $ | 0.69 | | | | | | (4) | | |
June 2, 2021
|
| | | | 25,800 | | | | | $ | 2.47 | | | | | $ | 2.47 | | | | | | (4) | | |
Functional Class
|
| |
Description
|
|
I
|
| | No limitation of physical activity, and ordinary physical activity does not cause undue dyspnea or fatigue, chest pain or near syncope. | |
II
|
| | Slight limitation of physical activity, but patients are comfortable at rest. Ordinary physical activity causes undue dyspnea or fatigue, chest pain or near syncope. | |
III
|
| | Marked limitation of physical activity, but patients are still comfortable at rest. Less than ordinary activity causes undue dyspnea or fatigue, chest pain or near syncope. | |
IV
|
| | Patients are unable to carry out any physical activity without symptoms, and discomfort is increased by any physical activity. Signs of right heart failure manifest, and dyspnea and/or fatigue may even be present at rest. | |
Application No.
|
| |
Related
Product |
| |
Protection Sought
|
| |
Projected
Expiration* |
| |
Jurisdiction
|
|
62/849,054 | | | AV-101 | | | Composition of Matter; Use | | | N/A | | | US | |
16/874,111 | | | AV-101 | | | Composition of Matter; Use | | | 5/14/2040 | | | US | |
PCT/US20/32872 | | | AV-101 | | | Composition of Matter; Use; Process | | | N/A | | | International PCT | |
62/849,056 | | | AV-101 | | | Composition of Matter; Use | | | N/A | | | US | |
16/874,118 | | | AV-101 | | | Composition of Matter; Use | | | 5/14/2040 | | | US | |
62/849,058 | | | AV-101 | | | Process | | | N/A | | | US | |
16/874,122 | | | AV-101 | | | Process | | | 5/14/2040 | | | US | |
62/849,059 | | | AV-101 | | | Composition of Matter; Use | | | N/A | | | US | |
16/874,128 | | | AV-101 | | | Composition of Matter; Use | | | 5/14/2040 | | | US | |
62/877,575 | | | AV-101 | | | Composition of Matter; Process | | | N/A | | | US | |
16/874,143 | | | AV-101 | | | Composition of Matter; Process | | | 5/14/2040 | | | US | |
62/942,408 | | | AV-101 | | | Composition of Matter; Use | | | N/A | | | US | |
16/874,153 | | | AV-101 | | | Composition of Matter; Use | | | 5/14/2040 | | | US | |
62/984,037 | | | AV-101 | | | Use; Kit | | | N/A | | | US | |
16/874,168 | | | AV-101 | | | Use; Kit | | | 5/14/2040 | | | US | |
62/958,481 | | | AV-101 | | | Use | | | N/A | | | US | |
16/874,190 | | | AV-101 | | | Use | | | 5/14/2040 | | | US | |
PCT/US20/32874 | | | AV-101 | | | Use | | | N/A | | | International PCT | |
63/117,258 | | | AV-101 | | | Composition of Matter; Combination Products; Use | | | N/A | | | US | |
63/150,731 | | | AV-101 | | | Composition of Matter; Combination Products; Use | | | N/A | | | US | |
63/149,446 | | | AV-101 | | | Process; Composition of Matter | | | N/A | | | US | |
Name
|
| |
Age
|
| |
Position
|
|
Executive Officers: | | | | | | | |
Timothy P. Noyes
|
| |
59
|
| | Chief Executive Officer and Director | |
Benjamin T. Dake, Ph.D.
|
| |
45
|
| | President, Chief Operating Officer and Secretary | |
George A. Eldridge
|
| |
58
|
| | Chief Financial Officer and Treasurer | |
Hunter Gillies, M.B.Ch.B.
|
| |
55
|
| | Chief Medical Officer | |
Ralph Niven, Ph.D.
|
| |
61
|
| | Chief Development Officer | |
Non-Employee Directors: | | | | | | | |
Mark Iwicki
|
| |
54
|
| | Chairperson and Director | |
David Grayzel, M.D.
|
| |
53
|
| | Director | |
Maha Katabi, Ph.D.
|
| |
47
|
| | Director | |
Joshua Resnick, M.D.
|
| |
46
|
| | Director | |
Name and
principal position |
| |
Year
|
| |
Salary
($) |
| |
Bonus
($)(1) |
| |
Stock
awards ($) |
| |
Option
awards (2) ($) |
| |
Non-equity
incentive plan compensation ($) |
| |
All other
compensation ($)(6) |
| |
Total
($) |
| ||||||||||||||||||||||||
Benjamin T. Dake, Ph.D.
|
| | | | 2020 | | | | | | 240,556 | | | | | | 86,656 | | | | | | — | | | | | | 174,907 | | | | | | — | | | | | | — | | | | | | 502,119 | | |
President, Chief Operating Officer and Secretary
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Hunter Gillies, M.B.Ch.B. (3)
|
| | | | 2020 | | | | | | 240,000 | | | | | | 55,680 | | | | | | — | | | | | | 61,093 | | | | | | — | | | | | | 66,668 | | | | | | 423,441 | | |
Chief Medical Officer
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Ralph Niven, Ph.D. (4)
|
| | | | 2020 | | | | | | 175,000 | | | | | | 86,333(5) | | | | | | — | | | | | | 60,863 | | | | | | — | | | | | | 111,000 | | | | | | 433,196 | | |
Chief Development Officer
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
Options awards
|
| ||||||||||||||||||||||||||||||
Name
|
| |
Vesting
Commencement Date |
| |
Number of
Securities Underlying Unexercised Options (#) Exercisable |
| |
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
| |
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
| |
Option
Exercise Price ($) |
| |
Option
Expiration Date |
| |||||||||||||||
Benjamin T. Dake, Ph.D.
|
| | | | 1/1/2020(1) | | | | | | 15,000 | | | | | | 135,000 | | | | | | | | | 0.56 | | | | | | 9/3/2030 | | |
| | | | | 8/1/2020(2) | | | | | | — | | | | | | 224,645 | | | | | | | | | 0.56 | | | | | | 9/3/2030 | | |
Hunter Gillies, M.B.Ch.B.
|
| | | | 5/1/2020(1) | | | | | | 5,000 | | | | | | 45,000 | | | | | | | | | 0.56 | | | | | | 9/3/2030 | | |
| | | | | 8/1/2020(2) | | | | | | — | | | | | | 74,882 | | | | | | | | | 0.56 | | | | | | 9/3/2030 | | |
Ralph Niven, Ph.D.
|
| | | | 6/1/2020(1) | | | | | | — | | | | | | 45,000 | | | | | | | | | 0.56 | | | | | | 9/3/2030 | | |
| | | | | 8/1/2020(2) | | | | | | — | | | | | | 74,882 | | | | | | | | | 0.56 | | | | | | 9/3/2030 | | |
| | |
Fees Earned or Paid
in Cash ($) |
| |
Option
Awards ($)(1) |
| |
All Other
Compensation ($) |
| |
Total ($)
|
| ||||||||||||
David Grayzel, M.D.
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Mark Iwicki
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Maha Katabi, Ph.D.
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Jonathan Leff, M.D.(2)
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Joshua Resnick, M.D.
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Andrew Levin, M.D., Ph.D.(3)
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | |
Annual
Retainer |
| |||
Board of Directors: | | | | | | | |
Members
|
| | | $ | | | |
Additional retainer for non-executive chair
|
| | | $ | | | |
Audit Committee: | | | | | | | |
Members (other than chair)
|
| | | $ | | | |
Retainer for chair
|
| | | $ | | | |
Compensation Committee: | | | | | | | |
Members (other than chair)
|
| | | $ | | | |
Retainer for chair
|
| | | $ | | | |
Nominating and Corporate Governance Committee: | | | | | | | |
Members (other than chair)
|
| | | $ | | | |
Retainer for chair
|
| | | $ | | |
STOCKHOLDER
|
| |
PRINCIPAL
AMOUNT OF 2019 NOTES |
| |||
Entities affiliated with RA Capital Management, L.P.(1)
|
| | | $ | 2,500,000 | | |
STOCKHOLDER
|
| |
PRINCIPAL
AMOUNT OF 2020 NOTES |
| |||
Entities affiliated with RA Capital Management, L.P.(1)
|
| | | $ | 2,500,000 | | |
|
STOCKHOLDER
|
| |
SHARES OF
SERIES A PREFERRED STOCK |
| |
TOTAL
PURCHASE PRICE |
| ||||||
Entities affiliated with RA Capital Management, L.P.(1)(2)
|
| | | | 9,244,584 | | | | | $ | 17,499,997.55 | | |
Sofinnova Venture Partners X, L.P.(3)
|
| | | | 10,565,238 | | | | | $ | 19,999,995.55 | | |
Atlas Venture Fund XII, L.P.(4)
|
| | | | 7,976,754 | | | | | $ | 15,099,995.34 | | |
Entities affiliated with Cormorant Asset Management(5)
|
| | | | 4,754,357 | | | | | $ | 8,999,997.83 | | |
Citadel Multi-Strategy Equities Master Fund Ltd.(6)
|
| | | | 3,169,570 | | | | | $ | 5,999,996.02 | | |
|
Name of Beneficial Owner
|
| |
Number of
Shares Beneficially Owned |
| |
Percentage of Shares
Outstanding Beneficially Owned |
| ||||||||||||
| | | | | | | | |
Before
Offering |
| |
After
Offering |
| ||||||
Entities affiliated with RA Capital Management, L.P.(1)
|
| | | | 17,015,582 | | | | | | 38.0% | | | | | | % | | |
Sofinnova Venture Partners X, L.P.(2)
|
| | | | 10,565,238 | | | | | | 23.6% | | | | | | % | | |
Atlas Venture Fund XII, L.P.(3)
|
| | | | 7,976,754 | | | | | | 17.8% | | | | | | % | | |
Entities affiliated with Cormorant Global(4)
|
| | | | 4,754,357 | | | | | | 10.6% | | | | | | % | | |
Citadel Multi-Strategy Equities Master Fund Ltd.(5)
|
| | | | 3,169,570 | | | | | | 7.1% | | | | | | % | | |
Named Executive Officers and Directors: | | | | | | | | | | | | | | | | | | | |
Timothy P. Noyes(6)
|
| | | | — | | | | | | — | | | | | | % | | |
Mark Iwicki(7)
|
| | | | 22,728 | | | | | | * | | | | | | % | | |
David Grayzel, M.D.
|
| | | | — | | | | | | — | | | | | | % | | |
Maha Katabi, Ph.D.
|
| | | | — | | | | | | — | | | | | | % | | |
Joshua Resnick, M.D.
|
| | | | — | | | | | | — | | | | | | % | | |
Benjamin T. Dake, Ph.D.(8)
|
| | | | 179,818 | | | | | | * | | | | | | % | | |
George A. Eldridge(9)
|
| | | | — | | | | | | — | | | | | | % | | |
Hunter Gillies, M.B.Ch.B.(10)
|
| | | | 56,188 | | | | | | * | | | | | | % | | |
Ralph Niven, Ph.D.(11)
|
| | | | 50,251 | | | | | | * | | | | | | % | | |
All executive officers and directors as a group (9 persons)(12)
|
| | | | 308,985 | | | | | | * | | | | | | % | | |
Underwriter
|
| |
Number of Shares
|
|
Jefferies LLC
|
| |
|
|
Cowen and Company, LLC
|
| | | |
Evercore Group L.L.C.
|
| | | |
Wedbush Securities Inc.
|
| | | |
Total
|
| | | |
|
| | |
Per Share
|
| |
Total
|
| ||||||||||||||||||
| | |
Without
Option to Purchase Additional Shares |
| |
With
Option to Purchase Additional Shares |
| |
Without
Option to Purchase Additional Shares |
| |
With
Option to Purchase Additional Shares |
| ||||||||||||
Public offering price
|
| | | $ | | | | | $ | | | | | $ | | | | | $ | | | ||||
Underwriting discounts and commissions paid by us
|
| | | $ | | | | | $ | | | | | $ | | | | | $ | | | ||||
Proceeds to us, before expenses
|
| | | $ | | | | | $ | | | | | $ | | | | | $ | | | |
Audited Financial Statements:
|
| |
Page
|
| |||
| | | | F-2 | | | |
Financial Statements as of and for the Years Ended December 31, 2019 and 2020: | | | | | | | |
| | | | F-3 | | | |
| | | | F-4 | | | |
| | | | F-5 | | | |
| | | | F-6 | | | |
| | | | F-7 | | |
Unaudited Interim Condensed Financial Statements:
|
| |
Page
|
| |||
Financial Statements as of December 31, 2020 and March 31, 2021 and the Three Months Ended March 31, 2020 and 2021:
|
| | | | | | |
| | | | F-21 | | | |
| | | | F-22 | | | |
| | | | F-23 | | | |
| | | | F-24 | | | |
| | | | F-25 | | |
| | |
December 31,
|
| |||||||||
| | |
2019
|
| |
2020
|
| ||||||
Assets | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | |
Cash
|
| | | $ | 3,514 | | | | | $ | 4,573 | | |
Prepaid expenses and other current assets
|
| | | | — | | | | | | 103 | | |
Total current assets
|
| | | | 3,514 | | | | | | 4,676 | | |
Property and equipment, net (Note 2)
|
| | | | — | | | | | | 39 | | |
Total assets
|
| | | $ | 3,514 | | | | | $ | 4,715 | | |
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | |
Accounts payable (including related party amounts of $3 and $6, respectively)
|
| | | $ | 542 | | | | | $ | 618 | | |
Accrued and other current liabilities (Note 3)
|
| | | | 115 | | | | | | 1,156 | | |
Total current liabilities
|
| | | | 657 | | | | | | 1,774 | | |
Convertible promissory notes to related party (Note 4)
|
| | | | 2,500 | | | | | | — | | |
Commitments and contingencies (Note 10) | | | | | | | | | | | | | |
Series A redeemable convertible preferred stock, $0.0001 par value; 0 and 40,052,154 shares authorized at December 31, 2019 and 2020, respectively; 0 and 6,489,534 shares issued and outstanding at December 31, 2019 and 2020, respectively; aggregate liquidation preference of $12,285 at December 31, 2020
|
| | | | — | | | | | | 12,285 | | |
Series Seed redeemable convertible preferred stock, $0.0001 par value; 4,000,000 shares authorized, issued and outstanding at December 31, 2019 and 2020; aggregate liquidation preference of $4,000 at December 31, 2020
|
| | | | 4,000 | | | | | | 4,000 | | |
Stockholders’ deficit: | | | | | | | | | | | | | |
Common stock, $0.0001 par value; 5,000,000 and 50,000,000 shares authorized
at December 31, 2019 and 2020, respectively; 750,000 and 755,000 shares issuedand outstanding at December 31, 2019 and 2020, respectively |
| | | | — | | | | | | — | | |
Additional paid-in capital
|
| | | | — | | | | | | 63 | | |
Accumulated deficit
|
| | | | (3,643) | | | | | | (13,407) | | |
Total stockholders’ deficit
|
| | | | (3,643) | | | | | | (13,344) | | |
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit
|
| | | $ | 3,514 | | | | | $ | 4,715 | | |
|
| | |
Years Ended December 31,
|
| |||||||||
|
2019
|
| |
2020
|
| ||||||||
Operating expenses: | | | | | | | | | | | | | |
Research and development (includes related party amounts of $20 and $72, respectively)
|
| | | $ | 3,112 | | | | | $ | 7,940 | | |
General and administrative (includes related party amounts of $0 and $31, respectively)
|
| | | | 218 | | | | | | 949 | | |
Total operating expenses
|
| | | | 3,330 | | | | | | 8,889 | | |
Provision for income taxes
|
| | | | 1 | | | | | | — | | |
Loss from operations
|
| | | | (3,331) | | | | | | (8,889) | | |
Other income (expense): | | | | | | | | | | | | | |
Interest expense
|
| | | | — | | | | | | (75) | | |
Change in fair value of convertible promissory notes
|
| | | | — | | | | | | (644) | | |
Other income (expense)
|
| | | | 1 | | | | | | (3) | | |
Total other income (expense)
|
| | | | 1 | | | | | | (722) | | |
Net loss and comprehensive loss
|
| | | $ | (3,330) | | | | | $ | (9,611) | | |
Net loss per share, basic and diluted
|
| | | $ | (4.44) | | | | | $ | (12.98) | | |
Weighted-average shares of common stock outstanding, basic and diluted
|
| | | | 750,000 | | | | | | 752,377 | | |
|
| | |
Series A Redeemable
Convertible Preferred Stock |
| |
Series Seed Redeemable
Convertible Preferred Stock |
| | |
Common Stock
|
| |
Additional
Paid-In Capital |
| |
Accumulated
Deficit |
| |
Total
Stockholders’ Deficit |
| ||||||||||||||||||||||||||||||||||||
|
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| | |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2018
|
| | | | — | | | | | $ | — | | | | | | 4,000,000 | | | | | $ | 4,000 | | | | | | | 750,000 | | | | | $ | — | | | | | $ | — | | | | | $ | (313) | | | | | | (313) | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | (3,330) | | | | | | (3,330) | | |
Balance at December 31, 2019
|
| | | | — | | | | | | — | | | | | | 4,000,000 | | | | | | 4,000 | | | | | | | 750,000 | | | | | | — | | | | | | — | | | | | | (3,643) | | | | | | (3,643) | | |
Issuance of Series A redeemable convertible preferred stock upon conversion of December 2019 convertible promissory notes to related party
|
| | | | 1,700,343 | | | | | | 3,219 | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Issuance of Series A redeemable convertible preferred stock upon conversion of July 2020 convertible promissory notes to related party
|
| | | | 1,320,655 | | | | | | 2,500 | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Issuance of Series A redeemable convertible
preferred stock at $1.893 per share, net of issuance costs of $153 |
| | | | 3,468,536 | | | | | | 6,413 | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Accretion of Series A redeemable convertible
preferred stock to redemption value |
| | | | — | | | | | | 153 | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | (153) | | | | | | (153) | | |
Issuance of common stock upon exercise of stock options
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | 5,000 | | | | | | — | | | | | | 5 | | | | | | — | | | | | | 5 | | |
Stock based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | 58 | | | | | | — | | | | | | 58 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | (9,611) | | | | | | (9,611) | | |
Balance at December 31, 2020
|
| | | | 6,489,534 | | | | | $ | 12,285 | | | | | | 4,000,000 | | | | | $ | 4,000 | | | | | | | 755,000 | | | | | $ | — | | | | | $ | 63 | | | | | $ | (13,407) | | | | | $ | (13,344) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
Years Ended December 31,
|
| |||||||||
|
2019
|
| |
2020
|
| ||||||||
Cash flow from operating activities: | | | | | | | | | | | | | |
Net loss
|
| | | $ | (3,330) | | | | | $ | (9,611) | | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | | |
Depreciation expense
|
| | | | — | | | | | | 1 | | |
Stock based compensation expense
|
| | | | — | | | | | | 58 | | |
Non-cash interest expense
|
| | | | — | | | | | | 75 | | |
Change in fair value of convertible promissory notes to related party
|
| | | | — | | | | | | 644 | | |
Changes in operating assets and liabilities:
|
| | | | | | | | | | | | |
Prepaid expenses and other current assets
|
| | | | 2 | | | | | | (103) | | |
Accounts payable
|
| | | | 436 | | | | | | 37 | | |
Accrued and other current liabilities
|
| | | | 111 | | | | | | 1,040 | | |
Net cash used in operating activities
|
| | | | (2,781) | | | | | | (7,859) | | |
Cash flow from financing activities: | | | | | | | | | | | | | |
Proceeds from sale of Series A redeemable convertible preferred stock, net of issuance costs
|
| | | | — | | | | | | 6,413 | | |
Proceeds from issuance of convertible promissory notes to related party
|
| | | | — | | | | | | 2,500 | | |
Proceeds from exercise of stock options
|
| | | | — | | | | | | 5 | | |
Proceeds from issuance of convertible promissory notes to related party
|
| | | | 2,500 | | | | | | — | | |
Net cash provided by financing activities
|
| | | | 2,500 | | | | | | 8,918 | | |
Net (decrease) increase in cash
|
| | | | (281) | | | | | | 1,059 | | |
Cash at the beginning of the year
|
| | | | 3,795 | | | | | | 3,514 | | |
Cash at the end of the year
|
| | | $ | 3,514 | | | | | $ | 4,573 | | |
Supplemental disclosure of noncash investing and financing activities: | | | | | | | | | | | | | |
Conversion of convertible promissory notes to related party to Series A redeemable convertible preferred stock
|
| | | $ | — | | | | | $ | (3,219) | | |
Conversion of convertible promissory notes to related party to Series A redeemable convertible preferred stock
|
| | | $ | — | | | | | $ | (2,500) | | |
Accrued but unpaid property and equipment purchases
|
| | | $ | — | | | | | $ | 40 | | |
| | |
Years Ended December 31,
|
| |||||||||
| | |
2019
|
| |
2020
|
| ||||||
Numerator: | | | | | | | | | | | | | |
Net loss and comprehensive loss
|
| | | $ | (3,330) | | | | | $ | (9,611) | | |
Accretion of Series A redeemable convertible preferred stock to redemption value
|
| | | | — | | | | | | (153) | | |
Net loss and comprehensive loss available to common stockholders
|
| | | $ | (3,330) | | | | | $ | (9,764) | | |
Denominator: | | | | | | | | | | | | | |
Weighted-average common stock outstanding, basic and diluted
|
| | | | 750,000 | | | | | | 752,377 | | |
Net loss per share, basic and diluted
|
| | | $ | (4.44) | | | | | $ | (12.98) | | |
|
| | |
December 31,
|
| |||||||||
|
2019
|
| |
2020
|
| ||||||||
Series Seed redeemable convertible preferred stock
|
| | | | 4,000,000 | | | | | | 4,000,000 | | |
Series A redeemable convertible preferred stock
|
| | | | — | | | | | | 6,489,534 | | |
Common stock options granted and outstanding
|
| | | | — | | | | | | 711,621 | | |
Total
|
| | | | 4,000,000 | | | | | | 11,201,155 | | |
|
| | |
December 31,
|
| |||||||||
|
2019
|
| |
2020
|
| ||||||||
Research and development equipment
|
| | | $ | — | | | | | $ | 40 | | |
Less accumulated depreciation
|
| | | | — | | | | | | (1) | | |
Total property and equipment, net
|
| | | $ | — | | | | | $ | 39 | | |
|
| | |
December 31,
|
| |||||||||
|
2019
|
| |
2020
|
| ||||||||
Accrued research and development
|
| | | $ | 111 | | | | | $ | 946 | | |
Accrued payroll and other employee benefits
|
| | | | — | | | | | | 192 | | |
Other
|
| | | | 4 | | | | | | 18 | | |
Total accrued and other current liabilities
|
| | | $ | 115 | | | | | $ | 1,156 | | |
|
| | |
Convertible
Promissory Notes (in thousands) |
| |||
Balance at December 31, 2018
|
| | | $ | — | | |
Issuance of convertible promissory notes, related party
|
| | | | 2,500 | | |
Balance at December 31, 2019
|
| | | | 2,500 | | |
Issuance of convertible promissory notes, related party
|
| | | | 2,500 | | |
Change in fair value of convertible promissory notes, related party
|
| | | | 644 | | |
Exchange of convertible promissory notes (Note 4)
|
| | | | (5,644) | | |
Balance at December 31, 2020
|
| | | $ | — | | |
|
| | |
December 31,
|
| |||||||||
|
2019
|
| |
2020
|
| ||||||||
Series Seed redeemable convertible preferred stock
|
| | | | 4,000,000 | | | | | | 4,000,000 | | |
Series A redeemable convertible preferred stock
|
| | | | — | | | | | | 6,489,534 | | |
Common stock options granted and outstanding
|
| | | | — | | | | | | 711,621 | | |
Common stock reserved for future option grants
|
| | | | 50,000 | | | | | | 532,015 | | |
Total
|
| | | | 4,250,000 | | | | | | 11,733,170 | | |
|
| | |
Options
|
| |
Weighted-
Average Exercise Price |
| |
Weighted-Average
Remaining Contractual Term (in years) |
| |
Aggregate
Intrinsic Value (in thousands) |
| ||||||||||||
Outstanding at December 31, 2019
|
| | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | |
Granted
|
| | | | 716,621 | | | | | | 0.56 | | | | | | | | | | | | | | |
Exercised
|
| | | | (5,000) | | | | | | 0.95 | | | | | | | | | | | | | | |
Cancelled/Forfeited
|
| | | | — | | | | | | — | | | | | | | | | | | | | | |
Outstanding at December 31, 2020
|
| | | | 711,621 | | | | | $ | 0.56 | | | | | | 9.69 | | | | | $ | — | | |
Vested and exercisable at December 31, 2020
|
| | | | 27,043 | | | | | $ | 0.56 | | | | | | 9.68 | | | | | $ | — | | |
Vested and expected to vest at December 31,
2020 |
| | | | 711,621 | | | | | $ | 0.56 | | | | | | 9.69 | | | | | $ | — | | |
|
| | |
Years Ended December 31,
|
| |||||||||
|
2019
|
| |
2020
|
| ||||||||
Expected term (in years)
|
| | | | — | | | | | | 5.5 – 6.1 | | |
Expected volatility
|
| | | | — | | | | | | 68.0 – 79.4% | | |
Risk-free interest rate
|
| | | | — | | | | | | 0.4 – 1.5% | | |
Expected dividend
|
| | | | — | | | | | | — | | |
| | |
Years Ended December 31,
|
| |||||||||
| | |
2019
|
| |
2020
|
| ||||||
Research and development
|
| | | $ | — | | | | | $ | 30 | | |
General and administrative
|
| | | | — | | | | | | 28 | | |
Total
|
| | | $ | — | | | | | $ | 58 | | |
|
| | |
December 31,
|
| |||||||||
|
2019
|
| |
2020
|
| ||||||||
Deferred income tax assets: | | | | | | | | | | | | | |
NOL and credit carryforwards
|
| | | $ | 990 | | | | | $ | 2,836 | | |
Compensation accruals
|
| | | | — | | | | | | 38 | | |
Intangible assets
|
| | | | 1 | | | | | | 9 | | |
Other
|
| | | | — | | | | | | 2 | | |
Gross deferred tax assets
|
| | | | 991 | | | | | | 2,885 | | |
Less: valuation allowance
|
| | | | (991) | | | | | | (2,885) | | |
Total deferred tax assets
|
| | | | — | | | | | | — | | |
Net deferred tax assets
|
| | | $ | — | | | | | $ | — | | |
|
| | |
Years Ended December 31,
|
| |||||||||
|
2019
|
| |
2020
|
| ||||||||
Income taxes computed at the statutory rate
|
| | | $ | (699) | | | | | $ | (2,018) | | |
State taxes
|
| | | | (210) | | | | | | (89) | | |
Permanent differences
|
| | | | 11 | | | | | | 41 | | |
Convertible promissory notes
|
| | | | — | | | | | | 151 | | |
Stock-based compensation
|
| | | | — | | | | | | 10 | | |
Other
|
| | | | — | | | | | | 11 | | |
Change in valuation allowance
|
| | | | 899 | | | | | | 1,894 | | |
Total tax provision
|
| | | $ | 1 | | | | | $ | — | | |
|
| | |
December 31,
2020 |
| |
March 31,
2021 |
| ||||||
| | |
(Note 1)
|
| | | | | | | |||
Assets | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | |
Cash
|
| | | $ | 4,573 | | | | | $ | 8,641 | | |
Prepaid expenses and other current assets
|
| | | | 103 | | | | | | 963 | | |
Total current assets
|
| | | | 4,676 | | | | | | 9,604 | | |
Property and equipment, net (Note 2)
|
| | | | 39 | | | | | | 37 | | |
Other long-term assets
|
| | | | — | | | | | | 307 | | |
Total assets
|
| | | $ | 4,715 | | | | | $ | 9,948 | | |
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit | | | | | | | | | | | | | |
Current liabilities:
|
| | | | | | | | | | | | |
Accounts payable (including related party amounts of $18 and $9,
respectively) |
| | | $ | 618 | | | | | $ | 1,550 | | |
Accrued and other current liabilities (Note 3)
|
| | | | 1,156 | | | | | | 232 | | |
Total current liabilities
|
| | | | 1,774 | | | | | | 1,782 | | |
Commitments and contingencies (Note 9)
|
| | | | | | | | | | | | |
Series A redeemable convertible preferred stock, $0.0001 par value;
40,052,154 shares authorized at December 31, 2020 and March 31, 2021; 6,489,534 and 10,713,808 shares issued and outstanding at December 31, 2020 and March 31, 2021, respectively; aggregate liquidation preference of $20,281 at March 31, 2021 |
| | | | 12,285 | | | | | | 20,281 | | |
Series Seed redeemable convertible preferred stock, $0.0001 par value;
4,000,000 shares authorized, issued and outstanding at December 31, 2020 and March 31, 2021; aggregate liquidation preference of $4,000 at March 31, 2021 |
| | | | 4,000 | | | | | | 4,000 | | |
Stockholders’ deficit: | | | | | | | | | | | | | |
Common stock, $0.0001 par value; 50,000,000 shares authorized at December 31, 2020 and March 31, 2021; 755,000 shares issued and outstanding at December 31, 2020 and March 31, 2021
|
| | | | — | | | | | | — | | |
Additional paid-in capital
|
| | | | 63 | | | | | | 86 | | |
Accumulated deficit
|
| | | | (13,407) | | | | | | (16,201) | | |
Total stockholders’ deficit
|
| | | | (13,344) | | | | | | (16,115) | | |
Total liabilities, redeemable convertible preferred stock and stockholders’
deficit |
| | | $ | 4,715 | | | | | $ | 9,948 | | |
|
| | |
Three Months
Ended March 31, |
| |||||||||
| | |
2020
|
| |
2021
|
| ||||||
Operating expenses: | | | | | | | | | | | | | |
Research and development (includes related party amounts of $16 and $15, respectively)
|
| | | $ | 1,206 | | | | | $ | 2,196 | | |
General and administrative (includes related party amounts of $8 and $5, respectively)
|
| | | | 152 | | | | | | 584 | | |
Total operating expenses
|
| | | | 1,358 | | | | | | 2,780 | | |
Loss from operations
|
| | | | (1,358) | | | | | | (2,780) | | |
Other expense: | | | | | | | | | | | | | |
Interest expense
|
| | | | (38) | | | | | | — | | |
Change in fair value of convertible promissory notes
|
| | | | (40) | | | | | | — | | |
Other expense
|
| | | | — | | | | | | (1) | | |
Total other expense
|
| | | | (78) | | | | | | (1) | | |
Net loss and comprehensive loss
|
| | | $ | (1,436) | | | | | $ | (2,781) | | |
Net loss per share, basic and diluted
|
| | | $ | (1.91) | | | | | $ | (3.70) | | |
Weighted-average shares of common stock outstanding, basic and diluted
|
| | | | 750,000 | | | | | | 755,000 | | |
|
| | |
Series A Redeemable Convertible
Preferred Stock |
| |
Series Seed Redeemable Convertible
Preferred Stock |
| | |
Common Stock
|
| |
Additional
Paid-In Capital |
| |
Accumulated
Deficit |
| |
Total
Stockholders’ Deficit |
| ||||||||||||||||||||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| | |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019
|
| | | | — | | | | | | — | | | | | | 4,000,000 | | | | | | 4,000 | | | | | | | 750,000 | | | | | | — | | | | | | — | | | | | | (3,643) | | | | | | (3,643) | | |
Stock based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | 7 | | | | | | — | | | | | | 7 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | (1,436) | | | | | | (1,436) | | |
Balance at March 31, 2020
|
| | | | — | | | | | $ | — | | | | | | 4,000,000 | | | | | $ | 4,000 | | | | | | | 750,000 | | | | | $ | — | | | | | $ | 7 | | | | | $ | (5,079) | | | | | $ | (5,072) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
Series A Redeemable Convertible
Preferred Stock |
| |
Series Seed Redeemable Convertible
Preferred Stock |
| | |
Common Stock
|
| |
Additional
Paid-In Capital |
| |
Accumulated
Deficit |
| |
Total
Stockholders’ Deficit |
| ||||||||||||||||||||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| | |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020
|
| | | | 6,489,534 | | | | | | 12,285 | | | | | | 4,000,000 | | | | | | 4,000 | | | | | | | 755,000 | | | | | | — | | | | | | 63 | | | | | | (13,407) | | | | | | (13,344) | | |
Issuance of Series A redeemable
convertible preferred stock at $1.893 per share, net of issuance costs of $13 |
| | | | 4,224,274 | | | | | | 7,983 | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Accretion of Series A redeemable convertible preferred stock to redemption value
|
| | | | — | | | | | | 13 | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | (13) | | | | | | (13) | | |
Stock based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | 23 | | | | | | — | | | | | | 23 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | (2,781) | | | | | | (2,781) | | |
Balance at March 31, 2021
|
| | | | 10,713,808 | | | | | $ | 20,281 | | | | | | 4,000,000 | | | | | $ | 4,000 | | | | | | | 755,000 | | | | | $ | — | | | | | $ | 86 | | | | | $ | (16,201) | | | | | $ | (16,115) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
Three Months
Ended March 31, |
| |||||||||
| | |
2020
|
| |
2021
|
| ||||||
Cash flow from operating activities: | | | | | | | | | | | | | |
Net loss
|
| | | $ | (1,436) | | | | | $ | (2,781) | | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | | |
Depreciation expense
|
| | | | — | | | | | | 2 | | |
Stock based compensation expense
|
| | | | 7 | | | | | | 23 | | |
Non-cash interest expense
|
| | | | 38 | | | | | | — | | |
Change in fair value of convertible promissory notes to related party
|
| | | | 40 | | | | | | — | | |
Changes in operating assets and liabilities:
|
| | | | | | | | | | | | |
Prepaid expenses and other current assets
|
| | | | (74) | | | | | | (860) | | |
Accounts payable
|
| | | | 91 | | | | | | 765 | | |
Accrued and other current liabilities
|
| | | | 151 | | | | | | (924) | | |
Net cash used in operating activities
|
| | | | (1,183) | | | | | | (3,775) | | |
Cash flow from investing activities: | | | | | | | | | | | | | |
Purchases of property and equipment
|
| | | | — | | | | | | (40) | | |
Net cash used in investing activities
|
| | | | — | | | | | | (40) | | |
Cash flow from financing activities: | | | | | | | | | | | | | |
Proceeds from sale of Series A redeemable convertible preferred stock, net of issuance costs
|
| | | | — | | | | | | 7,983 | | |
Payments for deferred offering costs
|
| | | | — | | | | | | (100) | | |
Net cash provided by financing activities
|
| | | | — | | | | | | 7,883 | | |
Net (decrease) increase in cash
|
| | | | (1,183) | | | | | | 4,068 | | |
Cash at the beginning of the year
|
| | | | 3,514 | | | | | | 4,573 | | |
Cash at the end of the period
|
| | | $ | 2,331 | | | | | $ | 8,641 | | |
Supplemental disclosure of noncash investing and financing activities:
|
| | | | | | | | | | | | |
Deferred offering costs included in accounts payable
|
| | | $ | — | | | | | $ | 207 | | |
| | |
Three Months Ended
March 31, |
| |||||||||
| | |
2020
|
| |
2021
|
| ||||||
Numerator: | | | | | | | | | | | | | |
Net loss and comprehensive loss
|
| | | $ | (1,436) | | | | | $ | (2,781) | | |
Accretion of Series A redeemable convertible preferred stock to redemption value
|
| | | | — | | | | | | (13) | | |
Net loss and comprehensive loss available to common stockholders
|
| | | $ | (1,436) | | | | | $ | (2,794) | | |
Denominator: | | | | | | | | | | | | | |
Weighted-average common stock outstanding, basic and diluted
|
| | | | 750,000 | | | | | | 755,000 | | |
Net loss per share, basic and diluted
|
| | | $ | (1.91) | | | | | $ | (3.70) | | |
|
| | |
December 31,
2020 |
| |
March 31,
2021 |
| ||||||
Series Seed redeemable convertible preferred stock
|
| | | | 4,000,000 | | | | | | 4,000,000 | | |
Series A redeemable convertible preferred stock
|
| | | | 6,489,534 | | | | | | 10,713,808 | | |
Options to purchase common stock
|
| | | | 711,621 | | | | | | 711,621 | | |
Total
|
| | | | 11,201,155 | | | | | | 15,425,429 | | |
|
| | |
December 31,
2020 |
| |
March 31,
2021 |
| ||||||
Research and development equipment
|
| | | $ | 40 | | | | | $ | 40 | | |
Less accumulated depreciation
|
| | | | (1) | | | | | | (3) | | |
Total property and equipment, net
|
| | | $ | 39 | | | | | $ | 37 | | |
|
| | |
December 31,
2020 |
| |
March 31,
2021 |
| ||||||
Accrued research and development
|
| | | $ | 946 | | | | | $ | 104 | | |
Accrued payroll and other employee benefits
|
| | | | 192 | | | | | | 96 | | |
Other
|
| | | | 18 | | | | | | 32 | | |
Total accrued and other current liabilities
|
| | | $ | 1,156 | | | | | $ | 232 | | |
|
| | |
Convertible
Promissory Notes (in thousands) |
| |||
Balance at December 31, 2019
|
| | | $ | 2,500 | | |
Change in fair value of convertible promissory notes, related party
|
| | | | 40 | | |
Balance at March 31, 2020
|
| | | $ | 2,540 | | |
|
| | |
December 31,
2020 |
| |
March 31,
2021 |
| ||||||
Series Seed redeemable convertible preferred stock
|
| | | | 4,000,000 | | | | | | 4,000,000 | | |
Series A redeemable convertible preferred stock
|
| | | | 6,489,534 | | | | | | 10,713,808 | | |
Common stock options granted and outstanding
|
| | | | 711,621 | | | | | | 711,621 | | |
Common stock reserved for future option grants
|
| | | | 532,015 | | | | | | 532,015 | | |
Total
|
| | | | 11,733,170 | | | | | | 15,957,444 | | |
|
| | |
Options
|
| |
Weighted-Average
Exercise Price |
| |
Weighted- Average
Remaining Contractual Term (in years) |
| |
Aggregate
Intrinsic Value (in thousands) |
| ||||||||||||
Outstanding at December 31, 2020
|
| | | | 711,621 | | | | | $ | 0.56 | | | | | | 9.69 | | | | | $ | — | | |
Granted
|
| | | | — | | | | | | — | | | | | | | | | | | | | | |
Exercised
|
| | | | — | | | | | | — | | | | | | | | | | | | | | |
Cancelled/Forfeited
|
| | | | — | | | | | | — | | | | | | | | | | | | | | |
Outstanding at March 31, 2021
|
| | | | 711,621 | | | | | $ | 0.56 | | | | | | 9.44 | | | | | $ | — | | |
Vested and exercisable at March 31, 2021
|
| | | | 60,793 | | | | | $ | 0.56 | | | | | | 9.43 | | | | | $ | — | | |
Vested and expected to vest at March 31,
2021 |
| | | | 711,621 | | | | | $ | 0.56 | | | | | | 9.44 | | | | | $ | — | | |
|
| | |
Three Months
Ended March 31, |
| |||||||||
| | |
2020
|
| |
2021
|
| ||||||
Expected term (in years)
|
| | | | 6.0 | | | | | | — | | |
Expected volatility
|
| | | | 68.0% | | | | | | — | | |
Risk-free interest rate
|
| | | | 1.5% | | | | | | — | | |
Expected dividend
|
| | | | — | | | | | | — | | |
| | |
Three Months
Ended March 31, |
| |||||||||
| | |
2020
|
| |
2021
|
| ||||||
Research and development
|
| | | $ | — | | | | | $ | 12 | | |
General and administrative
|
| | | | 7 | | | | | | 11 | | |
Total
|
| | | $ | 7 | | | | | $ | 23 | | |
|
| | |
Amount
to be Paid |
| |||
SEC registration fee
|
| | | $ | 10,910 | | |
FINRA filing fee
|
| | | $ | 15,500 | | |
Nasdaq Global Market listing fee
|
| | | | * | | |
Printing and mailing expenses
|
| | | | * | | |
Legal fees and expenses
|
| | | | * | | |
Accounting fees and expenses
|
| | | | * | | |
Transfer agent and registrar fees and expenses
|
| | | | * | | |
Miscellaneous
|
| | | | * | | |
Total
|
| | | $ | * | | |
|
Exhibit
Number |
| |
Description
|
|
| 1.1* | | | Form of Underwriting Agreement | |
| 3.1 | | | | |
| 3.2* | | | Form of Second Amended and Restated Certificate of Incorporation of Registrant, to be in effect immediately prior to the completion of this offering. | |
| 3.3 | | | | |
| 3.4* | | |
Form of Amended and Restated Bylaws of Registrant, to be in effect upon the effectiveness of this registration statement.
|
|
| 4.1* | | | Form of Specimen Common Stock Certificate. | |
| 4.2 | | | | |
| 5.1* | | | Opinion of Goodwin Procter LLP. | |
| 10.1# | | | | |
| 10.2#* | | | 2021 Stock Option and Incentive Plan, and form of award agreements thereunder. | |
| 10.3#* | | | 2021 Employee Stock Purchase Plan. | |
| 10.4#* | | | Non-Employee Director Compensation Policy. | |
| 10.5#* | | | Form of Indemnification Agreement between the Registrant and each of its directors and executive officers. | |
| 10.6#* | | | Form of Amended and Restated Employment Agreement. | |
| 10.7# | | | | |
| 10.8# | | | | |
| 10.9# | | | Offer Letter between the Registrant and Ralph Niven, dated April 26, 2020. | |
|
Exhibit
Number |
| |
Description
|
|
| 10.10#* | | | Senior Executive Cash Incentive Bonus Plan. | |
| 21.1 | | | | |
| 23.1 | | | | |
| 23.2* | | | Consent of Goodwin Procter LLP (included in Exhibit 5.1). | |
| 24.1 | | | |
|
Name
|
| |
Title
|
| |
Date
|
|
|
/s/ Timothy P. Noyes
Timothy P. Noyes
|
| |
Chief Executive Officer and Director
Principal Executive Officer |
| | June 9, 2021 | |
|
/s/ George A. Eldridge
George A. Eldridge
|
| |
Chief Financial Officer
Principal Financial Officer and Principal Accounting Officer |
| | June 9, 2021 | |
|
/s/ David Grayzel
David Grayzel, M.D.
|
| | Director | | | June 9, 2021 | |
|
/s/ Mark Iwicki
Mark Iwicki
|
| | Director | | | June 9, 2021 | |
|
/s/ Maha Katabi
Maha Katabi, Ph.D.
|
| | Director | | | June 9, 2021 | |
|
/s/ Joshua Resnick
Joshua Resnick, M.D.
|
| | Director | | | June 9, 2021 | |
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AEROVATE THERAPEUTICS INC.
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
Aerovate Therapeutics Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),
DOES HEREBY CERTIFY:
1. That the name of this corporation is Aerovate Therapeutics Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on July 27, 2018 under the name Aerovate Therapeutics Inc.
2. That the Board of Directors of the Corporation (the “Board of Directors”) duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:
First: The name of this corporation is Aerovate Therapeutics Inc. (the “Corporation”).
Second: The address, including street, number, city, and county, of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801; and the name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company.
Third: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.
Fourth: The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 50,000,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”) and (ii) 44,052,154 shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”).
The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK
1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.
2. Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of this Amended and Restated Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.
B. PREFERRED STOCK
40,052,154 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock”, and 4,000,000 shares of the authorized Preferred Stock are hereby designated “Series Seed Preferred Stock”, each of which shall have the rights, preferences, powers, privileges and restrictions, qualifications and limitations ascribed to such series of Preferred Stock in this Part B of this Article Fourth. Unless otherwise indicated, references to “sections” or “subsections” in this Part B of this Article Fourth refer to sections and subsections of Part B of this Article Fourth.
1. Dividends.
The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in this Amended and Restated Certificate of Incorporation) the holders of the Preferred Stock then outstanding shall first, on a pari passu basis, receive, or simultaneously receive, a dividend on each outstanding share of Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series A Preferred Stock or Series Seed Preferred Stock, as applicable, as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Series Seed Preferred Stock or Series A Preferred Stock, as applicable, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series Seed Preferred Stock or Series A Preferred Stock, as applicable, determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the applicable Original Issue Price (as defined below); provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series Seed Preferred Stock or Series A Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series Seed Preferred Stock or Series A Preferred Stock dividend. The “Series Seed Original Issue Price” shall mean $1.00 per share, and the “Series A Original Issue Price” shall mean $1.893 per share, in each case subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock. Each of the Series Seed Original Issue Price and the Series A Original Issue Price is an “Original Issue Price”.
2
2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.
2.1 Preferential Payments to Holders of Preferred Stock.
2.1.1 In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders or, in the case of a Deemed Liquidation Event (as defined below), out of the consideration payable to stockholders in such Deemed Liquidation Event or the Available Proceeds (as defined below), before any payment shall be made to the holders of Series Seed Preferred Stock or Common Stock by reason of their ownership thereof, an amount per share equal to the Series A Original Issue Price, plus any dividends declared but unpaid thereon. If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1, the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
2.1.2 In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after payment of amounts due to the holders of shares of Series A Preferred Stock pursuant to Subsection 2.1.1 hereof, the holders of shares of Series Seed Preferred Stock then outstanding shall be entitled to be paid out of the remaining assets of the Corporation available for distribution to its stockholders, and in the event of a Deemed Liquidation Event (as defined below), after payment of amounts due to the holders of shares of Series A Preferred Stock pursuant to Subsection 2.1.1 hereof, the holders of shares of Series Seed Preferred Stock then outstanding shall be entitled to be paid out of the remaining consideration payable to stockholders in such Deemed Liquidation Event or out of the Available Proceeds (as defined below), as applicable, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series Seed Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series Seed Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter referred to as the “Series Seed Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series Seed Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1.2, the holders of shares of Series Seed Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
3
2.2 Distribution of Remaining Assets. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after the payment in full of all Series A Liquidation Amounts (as defined below) and Series Seed Liquidation Amounts required to be paid to the holders of shares of Series A Preferred Stock and Series Seed Preferred Stock, as applicable, the remaining assets of the Corporation available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration not payable to the holders of shares of Series A Preferred Stock and Series Seed Preferred Stock pursuant to Section 2.1 or the remaining Available Proceeds, as the case may be, shall be distributed among the holders of the shares of Series A Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to Common Stock pursuant to the terms of this Amended and Restated Certificate of Incorporation immediately prior to such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event; provided, however, that if the aggregate amount which the holders of Series A Preferred Stock are entitled to receive under Subsections 2.1.1 and 2.2 shall exceed $5.679 per share (subject to appropriate adjustment in the event of a stock split, stock dividend, combination, reclassification, or similar event affecting the Series A Preferred Stock) (the “Maximum Participation Amount”), each holder of Series A Preferred Stock shall be entitled to receive upon such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event the greater of (i) the Maximum Participation Amount and (ii) the amount such holder would have received if all shares of Series A Preferred Stock had been converted into Common Stock immediately prior to such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event. The aggregate amount which a holder of a share of Series A Preferred Stock is entitled to receive under Subsections 2.1.1 and 2.2 is hereinafter referred to as the “Series A Liquidation Amount.”
2.3 Deemed Liquidation Events.
2.3.1 Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of at least sixty-five percent (65%) of the outstanding shares of Series A Preferred Stock (excluding Pre-Purchased Shares (as defined in the Series A Preferred Stock Purchase Agreement (as defined below) for so long as such shares remain Pre-Purchased Shares in accordance with the terms and conditions of the Series A Preferred Stock Purchase Agreement), voting together as a single class on an as converted into Common Stock basis (the “Requisite Holders”), elect otherwise by written notice sent to the Corporation at least five (5) days prior to the effective date of any such event:
(a) | a merger or consolidation in which |
(i) | the Corporation is a constituent party or |
(ii) | a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation, |
4
except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or
(b) (1) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or (2) the sale or disposition (whether by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.
2.3.2 Effecting a Deemed Liquidation Event.
(a) The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation in such Deemed Liquidation Event shall be paid to the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2.
(b) In the event of a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(ii) or 2.3.1(b), if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within ninety (90) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Preferred Stock no later than the ninetieth (90th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause; (ii) to require the redemption of such shares of Preferred Stock, and (iii) if the Requisite Holders so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors), together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “Available Proceeds”), on the one hundred fiftieth (150th) day after such Deemed Liquidation Event, to redeem all outstanding shares of Preferred Stock at a price per share equal to the Series A Liquidation Amount or Series Seed Liquidation Amount, as applicable. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Preferred Stock, the Corporation shall redeem a pro rata portion of each holder’s shares of Series A Preferred Stock to the fullest extent of such Available Proceeds, based on the respective amounts which would otherwise be payable in respect of the shares of Series A Preferred Stock to be redeemed if the Available Proceeds were sufficient to redeem all such shares, and shall redeem the remaining shares of Series A Preferred Stock as soon as it may lawfully do so under Delaware law governing distributions to stockholders, and then, once all shares of Series A Preferred Stock have been redeemed, shall redeem a pro rata portion of each holder’s shares of Series Seed Preferred Stock to the fullest extent of such remaining Available Proceeds, based on the respective amounts which would otherwise be payable in respect of the shares of Series Seed Preferred Stock to be redeemed if the Available Proceeds were sufficient to redeem all such shares, and shall redeem the remaining shares of Series Seed Preferred Stock as soon as it may lawfully do so under Delaware law governing distributions to stockholders. The provisions of Section 6 shall apply, with such necessary changes in the details thereof as are necessitated by the context, to the redemption of the Preferred Stock pursuant to this Subsection 2.3.2(b). Prior to the distribution or redemption provided for in this Subsection 2.3.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business.
5
2.3.3 Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities to be paid or distributed to such holders pursuant to such Deemed Liquidation Event. The value of such property, rights or securities shall be determined in good faith by the Board of Directors.
2.3.4 Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event, if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Subsection 2.3.4, consideration placed into escrow or retained as a holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.
3. Voting.
3.1 General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Amended and Restated Certificate of Incorporation, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class and on an as-converted to Common Stock basis.
6
3.2 Election of Directors. The holders of record of the shares of Series A Preferred Stock, exclusively and as a separate class, shall be entitled to elect three (3) directors of the Corporation (the “Series A Directors”). Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. If the holders of shares of Series A Preferred Stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Series A Preferred Stock elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class. The holders of record of the shares of Common Stock and of any other class or series of voting stock (including the Series Seed Preferred Stock and Series A Preferred Stock), exclusively and voting together as a single class, shall be entitled to elect the balance of the total number of directors of the Corporation. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director. Except as otherwise provided in this Subsection 3.2, a vacancy in any directorship filled by the holders of any class or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or series or by any remaining director or directors elected by the holders of such class or series pursuant to this Subsection 3.2.
3.3 Series A Preferred Stock Protective Provisions. At any time when shares of Series A Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the Requisite Holders given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.
3.3.1 liquidate, dissolve or wind-up the business and affairs of the Corporation or any of its subsidiaries, effect any merger or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing;
3.3.2 amend, alter, repeal or waive any provision of this Amended and Restated Certificate of Incorporation or Bylaws of the Corporation;
3.3.3 create, authorize the creation of any additional class or series of capital stock unless the same ranks junior to the Series A Preferred Stock in all respects, or increase the authorized number of shares of Series A Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock of the Corporation unless the same ranks junior to the Series A Preferred Stock in all respects;
7
3.3.4 (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Series A Preferred Stock in any respect, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock in any respect or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Series A Preferred Stock in any respect, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock in any respect;
3.3.5 purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Series A Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof;
3.3.6 create, or authorize the creation of, or issue, or authorize the issuance of any debt or create any lien or security interest (except for purchase money liens or statutory liens of landlords, mechanics, materialmen, workmen, warehousemen and other similar persons arising or incurred in the ordinary course of business) or incur other indebtedness, including but not limited to obligations and contingent obligations under guarantees, or permit any subsidiary to take any such action with respect to any debt, lien, security interest or other indebtedness, other than equipment leases, bank lines of credit or trade payables incurred in the ordinary course, unless such debt has received the prior approval of the Board of Directors, including the approval of a majority of the Series A Directors;
3.3.7 create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Corporation, or permit any subsidiary to create, or authorize the creation of, or issue or obligate itself to issue, any shares of any class or series of capital stock, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Corporation, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary;
3.3.8 increase or decrease the authorized number of directors constituting the Board of Directors;
3.3.9 effect a reclassification or recapitalization of the outstanding capital stock of the Corporation;
3.3.10 establish any new employee stock option or similar plan or increase the shares available for issuance under any existing employee stock option, incentive compensation, or similar plan;
8
3.3.11 enter into any agreement or make a commitment to do any of the foregoing in this Section 3.3, or permit, authorize or direct any direct or indirect subsidiary or affiliate of the Corporation to do any of the foregoing in this Section 3.3.
3.4 Series Seed Preferred Stock Protective Provisions. At any time when shares of Series Seed Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of holders of a majority of the shares of Series Seed Preferred Stock then outstanding, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.
3.4.1 alter or change the voting or other powers, preferences or privileges of the Series Seed Preferred Stock so as to affect the Series Seed Preferred Stock adversely and in a manner different than any other series of Preferred Stock, provided, however, that the voting and other powers, preferences and privileges of the Series Seed Preferred Stock shall not be deemed to be adversely affected because of (i) proportional differences in amounts of original issue prices, liquidation preferences and conversion prices of the Series Seed Preferred Stock relative to the other series of Preferred Stock and (ii) the authorization or creation of any new class or series of stock having powers, preferences or special rights senior to or on parity with the Series Seed Preferred Stock; or
3.4.2 increase or decrease the authorized number of shares of Series Seed Preferred Stock.
4. Optional Conversion.
The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):
4.1 Right to Convert.
4.1.1 Conversion Ratio. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, unless waived in writing by such holder, at any time and from time to time following the closing of the so-called “fourth tranche” in accordance with the Series A Preferred Stock Purchase Agreement, or, in advance of such “fourth tranche” with the approval of the Requisite Holders, and in any event, without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series A Original Issue Price by the Series A Conversion Price (as defined below) in effect at the time of conversion. Each share of Series Seed Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series Seed Original Issue Price by the Series Seed Conversion Price (as defined below) in effect at the time of conversion. The “Series A Conversion Price” shall initially be equal to $1.893, and the “Series Seed Conversion Price” shall initially be equal to $1.00, and each of the Series A Conversion Price and Series Seed Conversion Price may be referred to as a “Conversion Price”. Such initial Conversion Price, and the rate at which shares of a series of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.
9
4.1.2 Termination of Conversion Rights. In the event of a notice of redemption of any shares of Preferred Stock pursuant to Section 6, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption, unless the redemption price is not fully paid on such redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock.
4.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
4.3 Mechanics of Conversion.
4.3.1 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall (a) provide written notice to the Corporation’s transfer agent at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holder’s shares of Preferred Stock and, if applicable, any event on which such conversion is contingent and (b), if such holder’s shares are certificated, surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent). Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the shares of Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.
10
4.3.2 Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Amended and Restated Certificate of Incorporation. Before taking any action which would cause an adjustment reducing a Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of a series of Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price.
4.3.3 Effect of Conversion. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock, and/or any series thereof, accordingly.
4.3.4 No Further Adjustment. Upon any such conversion, no adjustment to a Conversion Price shall be made for any declared but unpaid dividends on a series of Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
4.3.5 Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.
11
4.4 Adjustments to Conversion Price for Diluting Issues.
4.4.1 Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:
(a) “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(b) “Series A Original Issue Date” shall mean the date on which the first share of Series A Preferred Stock was issued.
(c) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.
(d) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Series A Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):
(i) | shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on a series of Preferred Stock; |
(ii) | shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5, 4.6, 4.7 or 4.8; |
(iii) | shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors; |
(iv) | shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security; |
12
(v) | shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors; |
(vi) | shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors; |
(vii) | shares of Common Stock, Options or Convertible Securities issued as acquisition consideration pursuant to the acquisition of another entity by the Corporation by merger, purchase of all or substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are approved by the Board of Directors; or |
(viii) | shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors. |
4.4.2 No Adjustment of Conversion Price. No adjustment in the Series A Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the Requisite Holders agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock. No adjustment in the Series Seed Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from holders of a majority of the shares of Series Seed Preferred Stock then outstanding, voting as a separate series, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.
13
4.4.3 Deemed Issue of Additional Shares of Common Stock.
(a) If the Corporation at any time or from time to time after the Series A Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.
(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to a Conversion Price pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the applicable Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing a Conversion Price to an amount which exceeds the lower of (i) the Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.
(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to a Conversion Price pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series A Original Issue Date), are revised after the Series A Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a) shall be deemed to have been issued effective upon such increase or decrease becoming effective.
14
(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to a Conversion Price pursuant to the terms of Subsection 4.4.4, the Conversion Price shall be readjusted to such Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to a Conversion Price provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to a Conversion Price that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
4.4.4 Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Series A Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share less than the applicable Conversion Price in effect immediately prior to such issuance or deemed issuance, then such Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:
CP2 = CP1* (A + B) ÷ (A + C).
For purposes of the foregoing formula, the following definitions shall apply:
(a) “CP2” shall mean the applicable Conversion Price in effect immediately after such issuance or deemed issuance of Additional Shares of Common Stock;
15
(b) “CP1” shall mean the applicable Conversion Price in effect immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock;
(c) “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issuance or deemed issuance or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);
(d) “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued or deemed issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and
(e) “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.
4.4.5 Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issuance or deemed issuance of any Additional Shares of Common Stock shall be computed as follows:
(a) Cash and Property: Such consideration shall:
(i) | insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest; |
(ii) | insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors; and |
(iii) | in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors. |
(b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing:
16
(i) | The total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by |
(ii) | the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities. |
4.4.6 Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to a Conversion Price pursuant to the terms of Subsection 4.4.4, then, upon the final such issuance, the Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).
4.5 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Series A Original Issue Date effect a subdivision of the outstanding Common Stock, the applicable Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series A Original Issue Date combine the outstanding shares of Common Stock, the applicable Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.
17
4.6 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event a Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.
Notwithstanding the foregoing (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of an applicable series of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.
4.7 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of a series Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.
18
4.8 Adjustment for Merger or Reorganization, etc. Subject to the provisions of Subsection 2.3, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock or any series thereof) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.6 or 4.7), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of an applicable series of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of such series of Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of such series of Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the applicable Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of such series of Preferred Stock.
4.9 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of a Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Preferred Stock, furnish or cause to be furnished to such holder a certificate setting forth (i) the Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Preferred Stock.
4.10 Notice of Record Date. In the event:
(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or
(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or
(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,
19
then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least ten (10) days prior to the record date or effective date for the event specified in such notice.
5. Mandatory Conversion.
5.1 Trigger Events. Upon either (a) the closing of the sale of shares of Common Stock to the public at a price per share of at least three (3) times the Series A Original Issue Price (prior to giving effect to underwriters discounts and commissions and subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $50,000,000 of gross proceeds to the Corporation and in connection with such offering the Common Stock is listed for trading on the Nasdaq Stock Market's National Market, the New York Stock Exchange or another exchange or marketplace approved the Board of Directors, or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the Requisite Holders (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), then (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to Subsection 4.1.1 and (ii) such shares may not be reissued by the Corporation.
5.2 Procedural Requirements. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.
20
5A. Special Mandatory Conversion.
5A.1. Trigger Event. Subject to Section 1.3(h) of that certain Series A Preferred Stock Purchase Agreement dated on or about the date on which this Amended and Restated Certificate of Incorporation was effective (the “Series A Preferred Stock Purchase Agreement”), in the event that any holder of shares of Series A Preferred Stock (or one or more of its Affiliates, designees or successor funds) does not purchase at each and every closing held in accordance with the terms and conditions of the Series A Preferred Stock Purchase Agreement, all shares of Series A Preferred Stock allocated to such holder for purchase at such closing, then each share of Series A Preferred Stock held by such holder shall automatically, and without any further action on the part of such holder, be converted into shares of Common Stock at price equal to the product of the Series A Conversion Price in effect immediately prior to the date of such closing multiplied by two (2), effective upon, subject to, and concurrently with, the consummation of such closing. Such conversion is referred to as a “Special Mandatory Conversion.” For the avoidance of doubt, a holder of Series A Preferred Stock shall not be considered a defaulting party or otherwise be considered to have breached or be in default of or to have not fulfilled any of its representations, warranties, covenants, agreements, conditions or obligations contained in the Series A Preferred Stock Purchase Agreement and such failure shall not give rise to any right of indemnification in favor of the Corporation, any other Purchaser (as defined in the Series A Preferred Stock Purchase Agreement) or any of their Affiliates and neither the Corporation, any other Purchaser or any of their Affiliates shall be entitled to any losses, costs or damages with respect to or which accrue, arise out of or relate to such failure, and the parties’ sole and exclusive remedy with respect to such holder of Series A Preferred Stock shall be the conversion of such holder’s shares of Series A Preferred Stock into fully-paid and non-assessable shares of Common Stock pursuant to this Subsection 5A.1.
5A.2. Procedural Requirements. Upon a Special Mandatory Conversion, each holder of shares of Series A Preferred Stock converted pursuant to Subsection 5A.1 shall be sent written notice of such Special Mandatory Conversion and the place designated for mandatory conversion of all such shares of Series A Preferred Stock pursuant to this Section 5A. Upon receipt of such notice, each holder of such shares of Series A Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that any such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Series A Preferred Stock converted pursuant to Subsection 5A.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the time of the Special Mandatory Conversion (notwithstanding the failure of the holder or holders thereof to surrender any certificates for such shares at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders therefor (or lost certificate affidavit and agreement), to receive the items provided for in the next sentence of this Subsection 5A.2. As soon as practicable after the Special Mandatory Conversion and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Series A Preferred Stock so converted, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Series A Preferred Stock converted. Such converted Series A Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly.
21
5A.3. Definitions. For purposes of this Section 5A, the following definitions shall apply:
5A.3.1 “Affiliate” shall mean, with respect to any holder of shares of Series A Preferred Stock, any person, entity or firm which, directly or indirectly, controls, is controlled by or is under common control with such holder, including, without limitation, any entity of which the holder is a partner or member, any partner, officer, director, member or employee of such holder and any venture capital fund, investment fund, registered investment company, asset manager or investment adviser now or hereafter existing of which the holder is a partner or member which is controlled by or under common control with one or more general partners, managing members or investment advisers of such holder or shares the same management company or investment advisor with such holder.
6. Redemption.
6.1 General. Unless prohibited by Delaware law governing distributions to stockholders, shares of Preferred Stock shall be redeemed by the Corporation at a price equal to the applicable Original Issue Price per share, plus all declared but unpaid dividends thereon (the “Redemption Price”), in three (3) annual installments commencing not more than sixty (60) days after receipt by the Corporation at any time on or after fifth (5th) anniversary of the most recent closing conducted in accordance with the Series A Preferred Stock Purchase Agreement from the Requisite Holders of written notice requesting redemption of all shares of Preferred Stock (the “Redemption Request”). Upon receipt of a Redemption Request, the Corporation shall apply all of its assets to any such redemption, and to no other corporate purpose, except to the extent prohibited by Delaware law governing distributions to stockholders. The date of each such installment provided in the Redemption Notice (as defined below) shall be referred to as a “Redemption Date.” On each Redemption Date, the Corporation shall redeem, on a pro rata basis in accordance with the number of shares of Preferred Stock owned by each holder, that number of outstanding shares of Preferred Stock determined by dividing (i) the total number of shares of Preferred Stock outstanding immediately prior to such Redemption Date by (ii) the number of remaining Redemption Dates (including the Redemption Date to which such calculation applies). If on any Redemption Date Delaware law governing distributions to stockholders prevents the Corporation from redeeming all shares of Preferred Stock to be redeemed, the Corporation shall ratably redeem the maximum number of shares that it may redeem consistent with such law, and shall redeem the remaining shares as soon as it may lawfully do so under such law. In such case, the Corporation shall first redeem a pro rata portion of each holder’s shares of Series A Preferred Stock to the fullest extent permitted by law, based on the respective amounts which would otherwise be payable in respect of the shares of Series A Preferred Stock to be redeemed if the Corporation were permitted to redeem all such shares, and shall redeem the remaining shares of Series A Preferred Stock as soon as it may lawfully do so under Delaware law governing distributions to stockholders, and then, once all shares of Series A Preferred Stock have been redeemed, shall redeem a pro rata portion of each holder’s shares of Series Seed Preferred Stock to the fullest extent permitted by law, based on the respective amounts which would otherwise be payable in respect of the shares of Series Seed Preferred Stock to be redeemed if the Corporation were permitted to redeem all such shares, and shall redeem the remaining shares of Series Seed Preferred Stock as soon as it may lawfully do so under Delaware law governing distributions to stockholders.
22
6.2 Redemption Notice. The Corporation shall send written notice of the mandatory redemption (the “Redemption Notice”) to each holder of record of Preferred Stock not less than forty (40) days prior to each Redemption Date. Each Redemption Notice shall state:
(a) the number of shares of Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;
(b) the Redemption Date and the Redemption Price;
(c) the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1); and
(d) for holders of shares in certificated form, that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Preferred Stock to be redeemed.
6.3 Surrender of Certificates; Payment. On or before the applicable Redemption Date, each holder of shares of Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall, if a holder of shares in certificated form, surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Preferred Stock represented by a certificate are redeemed, a new certificate, instrument, or book entry representing the unredeemed shares of Preferred Stock shall promptly be issued to such holder.
23
6.4 Interest. If any shares of Preferred Stock are not redeemed for any reason on any Redemption Date, all such unredeemed shares shall remain outstanding and entitled to all the rights and preferences provided herein, and the Corporation shall pay interest on the Redemption Price applicable to such unredeemed shares at an aggregate per annum rate equal to twelve percent (12%) (increased by one percent (1%) each month following the Redemption Date until the Redemption Price, and any interest thereon, is paid in full), with such interest to accrue daily in arrears and be compounded annually; provided, however, that in no event shall such interest exceed the maximum permitted rate of interest under applicable law (the “Maximum Permitted Rate”), provided, however, that the Corporation shall take all such actions as may be necessary, including without limitation, making any applicable governmental filings, to cause the Maximum Permitted Rate to be the highest possible rate. In the event any provision hereof would result in the rate of interest payable hereunder being in excess of the Maximum Permitted Rate, the amount of interest required to be paid hereunder shall automatically be reduced to eliminate such excess; provided, however, that any subsequent increase in the Maximum Permitted Rate shall be retroactively effective to the applicable Redemption Date to the extent permitted by law.
6.5 Rights Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on the applicable Redemption Date the Redemption Price payable upon redemption of the shares of Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that any certificates evidencing any of the shares of Preferred Stock so called for redemption shall not have been surrendered, all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of any such certificate or certificates therefor.
7. Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption.
8. Waiver. Any of the rights, powers, preferences and other terms of the Series A Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of the Requisite Holders. Any of the rights, powers, preferences and other terms of the Series Seed Preferred Stock set forth herein may be waived on behalf of all holders of Series Seed Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of Series Seed Preferred Stock then outstanding, voting as a separate series.
9. Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.
24
Fifth: Subject to any additional vote required by this Amended and Restated Certificate of Incorporation or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.
Sixth: Subject to any additional vote required by this Amended and Restated Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation. Each director shall be entitled to one vote on each matter presented to the Board of Directors; provided, however, that, so long as the holders of Series A Preferred Stock are entitled to elect at least one Series A Director, the affirmative vote a majority of the Series A Directors in office shall be required for the authorization by the Board of Directors of any of the matters set forth in Section 5.4 of the Investors’ Rights Agreement, dated on or about the date on which this Amended and Restated Certificate of Incorporation was effective, by and among the Corporation and the other parties thereto, as such agreement may be amended from time to time.
Seventh: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
Eighth: Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
Ninth: To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.
Any repeal or modification of the foregoing provisions of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.
Tenth: To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which the General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.
25
Any amendment, repeal or modification of the foregoing provisions of this Article Tenth shall not (a) adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification or (b) increase the liability of any director of the Corporation with respect to any acts or omissions of such director, officer or agent occurring prior to, such amendment, repeal or modification.
Eleventh: The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Series A Preferred Stock or any partner, member, director, stockholder, employee, affiliate or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, the persons referred to in clauses (i) and (ii) are “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation while such Covered Person is performing services in such capacity. Any repeal or modification of this Article Eleventh will only be prospective and will not affect the rights under this Article Eleventh in effect at the time of the occurrence of any actions or omissions to act giving rise to liability. Notwithstanding anything to the contrary contained elsewhere in this Amended and Restated Certificate of Incorporation, the affirmative vote of the Requisite Holders will be required to amend or repeal, or to adopt any provisions inconsistent with this Article Eleventh.
Twelfth: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or the Corporation’s certificate of incorporation or bylaws or (iv) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. If any provision or provisions of this Article Twelfth shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article Twelfth (including, without limitation, each portion of any sentence of this Article Twelfth containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.
* * *
26
3. That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.
4. That this Certificate of Incorporation, which restates and integrates and further amends the provisions of this Corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.
27
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 3rd day of August, 2020.
By: | /s/ Benjamin Dake | |
Benjamin Dake, President |
28
Exhibit 3.3
BY-LAWS
of
AEROVATE THERAPEUTICS INC.
A Delaware Corporation
Adopted: July 27, 2018 | |
/s/ James Schneider, Esq. | |
Name: James Schneider, Esq. | |
Title: Secretary |
BY-LAWS
TABLE OF CONTENTS
ARTICLE I. Stockholders | 1 | |
Section 1.1. | Annual Meeting | 1 |
Section 1.2. | Special Meetings | 1 |
Section 1.3. | Notice of Meeting | 1 |
Section 1.4. | Quorum | 2 |
Section 1.5. | Voting and Proxies | 2 |
Section 1.6. | Action at Meeting | 2 |
Section 1.7. | Action Without Meeting | 2 |
Section 1.8. | Voting of Shares of Certain Holders | 2 |
Section 1.9. | Stockholder Lists | 3 |
ARTICLE II. Board of Directors | 3 | |
Section 2.1. | Powers | 3 |
Section 2.2. | Number of Directors; Qualifications | 3 |
Section 2.3. | Nomination of Directors | 4 |
Section 2.4. | Election of Directors | 4 |
Section 2.5. | Vacancies; Reduction of the Board | 4 |
Section 2.6. | Enlargement of the Board | 4 |
Section 2.7. | Tenure and Resignation | 4 |
Section 2.8. | Removal | 5 |
Section 2.9. | Meetings | 5 |
Section 2.10. | Notice of Meeting | 5 |
Section 2.11. | Agenda | 5 |
Section 2.12. | Quorum | 5 |
Section 2.13. | Action at Meeting | 6 |
Section 2.14. | Action Without Meeting | 6 |
Section 2.15. | Committees | 6 |
ARTICLE III. Officers | 6 | |
Section 3.1. | Enumeration | 6 |
Section 3.2. | Election | 6 |
Section 3.3. | Qualification | 6 |
Section 3.4. | Tenure | 7 |
Section 3.5. | Removal | 7 |
Section 3.6. | Resignation | 7 |
Section 3.7. | Vacancies | 7 |
Section 3.8. | President | 7 |
Section 3.9. | Vice-President(s) | 7 |
Section 3.10. | Treasurer and Assistant Treasurers | 7 |
Section 3.11. | Secretary and Assistant Secretaries | 7 |
Section 3.12. | Other Powers and Duties | 8 |
ARTICLE IV. Capital Stock | 8 | |
Section 4.1. | Stock Certificates | 8 |
Section 4.2. | Transfer of Shares | 8 |
Section 4.3. | Record Holders | 8 |
Section 4.4. | Record Date | 9 |
Section 4.5. | Transfer Agent and Registrar for Shares of Corporation | 9 |
Section 4.6. | Loss of Certificates | 10 |
Section 4.7. | Restrictions on Transfer | 10 |
Section 4.8. | Multiple Classes of Stock | 10 |
By Laws of AEROVATE THERAPEUTICS INC.
| Page i |
ARTICLE V. Dividends | 10 | |
Section 5.1. | Declaration of Dividends | 10 |
Section 5.2. | Reserves | 10 |
ARTICLE VI. Powers of Officers to Contract With the Corporation | 11 | |
ARTICLE VII. Indemnification | 11 | |
Section 7.1. | Definitions | 13 |
Section 7.2. | Right to Indemnification in General | 13 |
Section 7.3. | Proceedings Other Than Proceedings by or in the Right of the Corporation | 14 |
Section 7.4. | Proceedings by or in the Right of the Corporation | 14 |
Section 7.5. | Indemnification of a Party Who is Wholly or Partly Successful | 14 |
Section 7.6. | Indemnification for Expenses of a Witness | 14 |
Section 7.7. | Advancement of Expenses | 15 |
Section 7.8. | Notification and Defense of Claim | 16 |
Section 7.9. | Procedures | 16 |
Section 7.10. | Action by the Corporation | 16 |
Section 7.11. | Non-Exclusivity | 17 |
Section 7.12. | Insurance | 17 |
Section 7.13. | No Duplicative Payment | 17 |
Section 7.14. | Expenses of Adjudication | 17 |
Section 7.15. | Severability | 18 |
ARTICLE VIII. Miscellaneous Provisions | 18 | |
Section 8.1. | Certificate of Incorporation | 18 |
Section 8.2. | Fiscal Year | 18 |
Section 8.3. | Corporate Seal | 18 |
Section 8.4. | Execution of Instruments | 18 |
Section 8.5. | Voting of Securities | 18 |
Section 8.6. | Evidence of Authority | 18 |
Section 8.7. | Corporate Records | 18 |
Section 8.8. | Charitable Contributions | 19 |
Section 8.9. | Communication of Notices | 19 |
Section 8.10. | Electronic Transmissions | 19 |
ARTICLE IX. Amendments | 19 | |
Section 9.1. | Amendment by Stockholders | 19 |
Section 9.2. | Amendment by Board of Directors | 19 |
By Laws of AEROVATE THERAPEUTICS INC.
| Page ii |
BY-LAWS
OF
AEROVATE THERAPEUTICS INC.
(A Delaware Corporation)
ARTICLE I.
Stockholders
Section 1.1. Annual Meeting. The annual meeting of the stockholders of the corporation shall be held on such date as shall be fixed by the Board of Directors, at such time and place within or without the State of Delaware as may be designated in the notice of meeting. If the day fixed for the annual meeting shall fall on a legal holiday, the meeting shall be held on the next succeeding day not a legal holiday. If the annual meeting is omitted on the day herein provided, a special meeting may be held in place thereof, and any business transacted at such special meeting in lieu of annual meeting shall have the same effect as if transacted or held at the annual meeting.
Section 1.2. Special Meetings. Special meetings of the stockholders may be called at any time by the president, by the board of directors, or by stockholders holding not less than thirty percent (30%) of the Corporation’s issued and outstanding capital stock, on an as-converted to Common Stock basis. Special meetings of the stockholders shall be held at such time, date and place within or outside of the State of Delaware as may be designated in the notice of such meeting.
Section 1.3. Notice of Meeting. A written notice stating the place, date, and hour of each meeting of the stockholders, and, in the case of a special meeting, the purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting, and to each stockholder who, under the Certificate of Incorporation or these By-laws, is entitled to such notice, by delivering such notice to such person or leaving it at their residence or usual place of business, or by mailing it, postage prepaid, and addressed to such stockholder at his address as it appears upon the books of the corporation, at least ten (10) days and not more than sixty (60) before the meeting. Such notice shall be given by the secretary, an assistant secretary, or any other officer or person designated either by the secretary or by the person or persons calling the meeting.
The requirement of notice to any stockholder may be waived (i) by a written waiver of notice, executed before or after the meeting by the stockholder or his attorney thereunto duly authorized, and filed with the records of the meeting, (ii) if communication with such stockholder is unlawful, (iii) by attendance at the meeting without protesting prior thereto or at its commencement the lack of notice, or (iv) as otherwise excepted by law. A waiver of notice of any regular or special meeting of the stockholders need not specify the purposes of the meeting.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 1 |
If a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at the meeting at which the adjournment is taken, except that if the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 1.4. Quorum. The holders of a majority in interest of all stock issued, outstanding and entitled to vote at a meeting shall constitute a quorum. Any meeting may be adjourned from time to time by a majority of the votes properly cast upon the question, whether or not a quorum is present.
Section 1.5. Voting and Proxies. Stockholders shall have one vote for each share of stock entitled to vote owned by them of record according to the books of the corporation, unless otherwise provided by law or by the Certificate of Incorporation. Stockholders may vote either in person or by written proxy, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Proxies shall be filed with the secretary of the meeting, or of any adjournment thereof. Except as otherwise limited therein, proxies shall entitle the persons authorized thereby to vote at any adjournment of such meeting. A proxy purporting to be executed by or on behalf of a stockholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of the proxy the corporation receives a specific written notice to the contrary from any one of them.
Section 1.6. Action at Meeting. When a quorum is present at any meeting, a plurality of the votes properly cast for election to any office shall elect to such office, and a majority of the votes properly cast upon any question other than election to an office shall decide such question, except where a larger vote is required by law, the Certificate of Incorporation or these by-laws. No ballot shall be required for any election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election.
Section 1.7. Action Without Meeting. Any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the minimum number of votes necessary to authorize or take such action at a meeting at which shares entitled to vote thereon were present and voted and copies are delivered to the corporation in the manner prescribed by law.
Section 1.8. Voting of Shares of Certain Holders. Shares of stock of the corporation standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent, or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine.
Shares of stock of the corporation standing in the name of a deceased person, a minor ward or an incompetent person, may be voted by his administrator, executor, court-appointed guardian or conservator without a transfer of such shares into the name of such administrator, executor, court appointed guardian or conservator. Shares of capital stock of the corporation standing in the name of a trustee or fiduciary may be voted by such trustee or fiduciary.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 2 |
Shares of stock of the corporation standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such shares unless in the transfer by the pledgor on the books of the corporation he expressly empowered the pledgee to vote thereon, in which case only the pledgee or its proxy shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to this corporation shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time but shares of its own stock held by the corporation in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares.
Section 1.9. Stockholder Lists. The secretary (or the corporation’s transfer agent or other person authorized by these By-laws or by law) shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
ARTICLE II.
Board of Directors
Section 2.1. Powers. Except as reserved to the stockholders by law, by the Certificate of Incorporation or by these By-laws, the business of the corporation shall be managed under the direction of the board of directors, who shall have and may exercise all of the powers of the corporation. In particular, and without limiting the foregoing, the board of directors shall have the power to issue or reserve for issuance from time to time the whole or any part of the capital stock of the corporation which may be authorized from time to time to such person, for such consideration and upon such terms and conditions as they shall determine, including the granting of options, warrants or conversion or other rights to stock.
Section 2.2. Number of Directors; Qualifications. The board of directors shall consist of such number of directors, not less than one (1) nor more than twenty (20), as shall be fixed initially by the incorporator(s) and thereafter by the board of directors. No director need be a stockholder.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 3 |
Section 2.3. Nomination of Directors.
(a) Nominations for the election of directors may be made by the board of directors or by any stockholder entitled to vote for the election of directors. Nominations by stockholders shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the secretary of the corporation not less than 14 days nor more than 60 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 written days’ notice of the meeting is given to stockholders, such notice of nomination by a stockholder shall be delivered or mailed, in the manner prescribed above, to the secretary of the corporation not later than the close of the fifth day following the day on which notice of the meeting was mailed to stockholders.
(b) Each notice under subsection (a) shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, and (iii) the number of shares of stock of the corporation which are beneficially owned by each such nominee.
(c) The chairman of the meeting of stockholders shall determine whether or not a nomination was made in accordance with the procedures of this Section 2.3, and if he shall determine that it was not, he shall so declare to the meeting and the defective nomination shall be disregarded.
Section 2.4. Election of Directors. The initial board of directors shall be designated in the certificate of incorporation, or if not so designated, elected by the incorporator(s) at the first meeting thereof. Thereafter, directors shall be elected by the stockholders at their annual meeting or at any special meeting the notice of which specifies the election of directors as an item of business for such meeting.
Section 2.5. Vacancies; Reduction of the Board. Any vacancy in the board of directors, however occurring, including a vacancy resulting from the enlargement of the board of directors, may be filled by the stockholders or by the directors then in office or by a sole remaining director. In lieu of filling any such vacancy the stockholders or board of directors may reduce the number of directors, but not to a number less than one (1). When one or more directors shall resign from the board of directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.
Section 2.6. Enlargement of the Board. Subject to any additional approvals required by the Corporation’s certificate of incorporation, the board of directors may be enlarged by the stockholders at any meeting or by vote of a majority of the directors then in office.
Section 2.7. Tenure and Resignation. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws, directors shall hold office until the next annual meeting of stockholders and thereafter until their successors are chosen and qualified. Any director may resign by delivering or mailing postage prepaid a written resignation to the corporation at its principal office or to the president, secretary or assistant secretary, if any. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 4 |
Section 2.8. Removal. A director, whether elected by the stockholders or directors, may be removed from office with or without cause at any annual or special meeting of stockholders by vote of a majority of the stockholders entitled to vote in the election of such directors; provided, however, that a director may be removed for cause only after reasonable notice and opportunity to be heard before the stockholders.
Section 2.9. Meetings. Regular meetings of the board of directors may be held without call or notice at such times and such places within or without the State of Delaware as the board may, from time to time, determine, provided that notice of the first regular meeting following any such determination shall be given to directors absent from such determination. A regular meeting of the board of directors shall be held without notice immediately after, and at the same place as, the annual meeting of the stockholders or the special meeting of the stockholders held in place of such annual meeting, unless a quorum of the directors is not then present. Special meetings of the board of directors may be held at any time and at any place designated in the call of the meeting when called by the president, treasurer, or one or more directors. Members of the board of directors or any committee elected thereby may participate in a meeting of such board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence in person at the meeting.
Section 2.10. Notice of Meeting. It shall be sufficient notice to a director to send notice by mail at least seventy-two (72) hours before the meeting addressed to such person at his usual or last known business or residence address or to give notice to such person in person or by telephone at least twenty-four (24) hours before the meeting. Notice shall be given by the secretary, or in his absence or unavailability, may be given by an assistant secretary, if any, or by the officer or directors calling the meeting. The requirement of notice to any director may be waived by a written waiver of notice, executed by such person before or after the meeting or meetings, and filed with the records of the meeting, or by attendance at the meeting without protesting prior thereto or at its commencement the lack of notice. A notice or waiver of notice of a directors’ meeting need not specify the purposes of the meeting.
Section 2.11. Agenda. Any lawful business may be transacted at a meeting of the board of directors, notwithstanding the fact that the nature of the business may not have been specified in the notice or waiver of notice of the meeting.
Section 2.12. Quorum. At any meeting of the board of directors, a majority of the directors then in office shall constitute a quorum for the transaction of business. Any meeting may be adjourned by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 5 |
Section 2.13. Action at Meeting. Any motion adopted by vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, except where a different vote is required by law, by the Certificate of Incorporation or by these By-laws. The assent in writing of any director to any vote or action of the directors taken at any meeting, whether or not a quorum was present and whether or not the director had or waived notice of the meeting, shall have the same effect as if the director so assenting was present at such meeting and voted in favor of such vote or action.
Section 2.14. Action Without Meeting. Any action by the directors may be taken without a meeting if all of the directors consent to the action in writing and the consents are filed with the records of the directors’ meetings. Such consent shall be treated for all purposes as a vote of the directors at a meeting.
Section 2.15. Committees. The board of directors may, by the affirmative vote of a majority of the directors then in office, appoint an executive committee or other committees consisting of one or more directors and may by vote delegate to any such committee some or all of their powers except those which by law, the Certificate of Incorporation or these By-laws they may not delegate. In the absence or disqualification of a member of a committee, the members of the committee present and not disqualified, whether or not they constitute a quorum, may by unanimous vote appoint another member of the board of directors to act at the meeting in place of the absence or disqualified member. Unless the board of directors shall otherwise provide, any such committee may make rules for the conduct of its business, but unless otherwise provided by the board of directors or such rules, its meetings shall be called, notice given or waived, its business conducted or its action taken as nearly as may be in the same manner as is provided in these By-laws with respect to meetings or for the conduct of business or the taking of actions by the board of directors. The board of directors shall have power at any time to fill vacancies in, change the membership of, or discharge any such committee at any time. The board of directors shall have power to rescind any action of any committee, but no such rescission shall have retroactive effect.
ARTICLE III.
Officers
Section 3.1. Enumeration. The officers shall consist of a president, a treasurer, a secretary and such other officers and agents (including one or more vice-presidents, assistant treasurers and assistant secretaries), as the board of directors may, in their discretion, determine.
Section 3.2. Election. The president, treasurer and secretary shall be elected annually by the directors at their first meeting following the annual meeting of the stockholders or any special meeting held in lieu of the annual meeting. Other officers may be chosen by the directors at such meeting or at any other meeting.
Section 3.3. Qualification. An officer may, but need not, be a director or stockholder. Any two or more offices may be held by the same person. Any officer may be required by the directors to give bond for the faithful performance of his duties to the corporation in such amount and with such sureties as the directors may determine. The premiums for such bonds may be paid by the corporation.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 6 |
Section 3.4. Tenure. Except as otherwise provided by the Certificate of Incorporation or these By-laws, the term of office of each officer shall be for one year or until his successor is elected and qualified or until his earlier resignation or removal.
Section 3.5. Removal. Any officer may be removed from office, with or without cause, by the affirmative vote of a majority of the directors then in office; provided, however, that an officer may be removed for cause only after reasonable notice and opportunity to be heard by the board of directors prior to action thereon.
Section 3.6. Resignation. Any officer may resign by delivering or mailing postage prepaid a written resignation to the corporation at its principal office or to the president, secretary, or assistant secretary, if any, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some event.
Section 3.7. Vacancies. A vacancy in any office arising from any cause may be filled for the unexpired portion of the term by the board of directors.
Section 3.8. President. The president shall be the chief executive officer of the corporation. Except as otherwise voted by the board of directors, the president shall preside at all meetings of the stockholders and of the board of directors at which present. The president shall have such duties and powers as are commonly incident to the office and such duties and powers as the board of directors shall from time to time designate.
Section 3.9. Vice-President(s). The vice-president(s), if any, shall have such powers and perform such duties as the board of directors may from time to time determine.
Section 3.10. Treasurer and Assistant Treasurers. The treasurer, subject to the direction and under the supervision and control of the board of directors, shall have general charge of the financial affairs of the corporation. The treasurer shall have custody of all funds, securities and valuable papers of the corporation, except as the board of directors may otherwise provide. The treasurer shall keep or cause to be kept full and accurate records of account which shall be the property of the corporation, and which shall be always open to the inspection of each elected officer and director of the corporation. The treasurer shall deposit or cause to be deposited all funds of the corporation in such depository or depositories as may be authorized by the board of directors. The treasurer shall have the power to endorse for deposit or collection all notes, checks, drafts, and other negotiable instruments payable to the corporation. The treasurer shall perform such other duties as are incidental to the office, and such other duties as may be assigned by the board of directors.
Assistant treasurers, if any, shall have such powers and perform such duties as the board of directors may from time to time determine.
Section 3.11. Secretary and Assistant Secretaries. The secretary shall record, or cause to be recorded, all proceedings of the meetings of the stockholders and directors (including committees thereof) in the book of records of this corporation. The record books shall be open at reasonable times to the inspection of any stockholder, director, or officer. The secretary shall notify the stockholders and directors, when required by law or by these By-laws, of their respective meetings, and shall perform such other duties as the directors and stockholders may from time to time prescribe. The secretary shall have the custody and charge of the corporate seal, and shall affix the seal of the corporation to all instruments requiring such seal, and shall certify under the corporate seal the proceedings of the directors and of the stockholders, when required. In the absence of the secretary at any such meeting, a temporary secretary shall be chosen who shall record the proceedings of the meeting in the aforesaid books.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 7 |
Assistant secretaries, if any, shall have such powers and perform such duties as the board of directors may from time to time designate.
Section 3.12. Other Powers and Duties. Subject to these By-laws and to such limitations as the board of directors may from time to time prescribe, the officers of the corporation shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be conferred by the board of directors.
ARTICLE IV.
Capital Stock
Section 4.1. Stock Certificates. Each stockholder shall be entitled to a certificate representing the number of shares of the capital stock of the corporation owned by such person in such form as shall, in conformity to law, be prescribed from time to time by the board of directors. Each certificate shall be signed by the president or vice-president and treasurer or assistant treasurer or such other officers designated by the board of directors from time to time as permitted by law, shall bear the seal of the corporation, and shall express on its face its number, date of issue, class, the number of shares for which, and the name of the person to whom, it is issued. The corporate seal and any or all of the signatures of corporation officers may be facsimile if the stock certificate is manually counter-signed by an authorized person on behalf of a transfer agent or registrar other than the corporation or its employee.
If an officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed on, a certificate shall have ceased to be such before the certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the time of its issue.
Section 4.2. Transfer of Shares. Title to a certificate of stock and to the shares represented thereby shall be transferred only on the books of the corporation by delivery to the corporation or its transfer agent of the certificate properly endorsed, or by delivery of the certificate accompanied by a written assignment of the same, or a properly executed written power of attorney to sell, assign or transfer the same or the shares represented thereby. Upon surrender of a certificate for the shares being transferred, a new certificate or certificates shall be issued according to the interests of the parties.
Section 4.3. Record Holders. Except as otherwise may be required by law, by the Certificate of Incorporation or by these By-laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-laws.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 8 |
It shall be the duty of each stockholder to notify the corporation of his post office address.
Section 4.4. Record Date. In order that the corporation may determine the stockholders entitled to receive notice of or to vote at any meeting of stockholders or any adjournments thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty days prior to any other action. In such case only stockholders of record on such record date shall be so entitled notwithstanding any transfer of stock on the books of the corporation after the record date.
If no record date is fixed: (i) the record date for determining stockholders entitled to receive notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (ii) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the day on which the first written consent is expressed; and (iii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.
Section 4.5. Transfer Agent and Registrar for Shares of Corporation. The board of directors may appoint a transfer agent and a registrar of the certificates of stock of the corporation. Any transfer agent so appointed shall maintain, among other records, a stockholders’ ledger, setting forth the names and addresses of the holders of all issued shares of stock of the corporation, the number of shares held by each, the certificate numbers representing such shares, and the date of issue of the certificates representing such shares. Any registrar so appointed shall maintain, among other records, a share register, setting forth the total number of shares of each class of shares which the corporation is authorized to issue and the total number of shares actually issued. The stockholders’ ledger and the share register are hereby identified as the stock transfer books of the corporation; but as between the stockholders’ ledger and the share register, the names and addresses of stockholders, as they appear on the stockholders’ ledger maintained by the transfer agent shall be the official list of stockholders of record of the corporation. The name and address of each stockholder of record, as they appear upon the stockholders’ ledger, shall be conclusive evidence of who are the stockholders entitled to receive notice of the meetings of stockholders, to vote at such meetings, to examine a complete list of the stockholders entitled to vote at meetings, and to own, enjoy and exercise any other property or rights deriving from such shares against the corporation. Stockholders, but not the corporation, its directors, officers, agents or attorneys, shall be responsible for notifying the transfer agent, in writing, of any changes in their names or addresses from time to time, and failure to do so will relieve the corporation, its other stockholders, directors, officers, agents and attorneys, and its transfer agent and registrar, of liability for failure to direct notices or other documents, or pay over or transfer dividends or other property or rights, to a name or address other than the name and address appearing in the stockholders’ ledger maintained by the transfer agent.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 9 |
Section 4.6. Loss of Certificates. In case of the loss, destruction or mutilation of a certificate of stock, a replacement certificate may be issued in place thereof upon such terms as the board of directors may prescribe, including, in the discretion of the board of directors, a requirement of bond and indemnity to the corporation.
Section 4.7. Restrictions on Transfer. Every certificate for shares of stock which are subject to any restriction on transfer, whether pursuant to the Certificate of Incorporation, the By-laws or any agreement to which the corporation is a party, shall have the fact of the restriction noted conspicuously on the certificate and shall also set forth on the face or back either the full text of the restriction or a statement that the corporation will furnish a copy to the holder of such certificate upon written request and without charge.
Section 4.8. Multiple Classes of Stock. The amount and classes of the capital stock and the par value, if any, of the shares, shall be as fixed in the Certificate of Incorporation. At all times when there are two or more classes of stock, the several classes of stock shall conform to the description and the terms and have the respective preferences, voting powers, restrictions and qualifications set forth in the Certificate of Incorporation and these By-laws. Every certificate issued when the corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either (i) the full text of the preferences, voting powers, qualifications and special and relative rights of the shares of each class and series authorized to be issued, or (ii) a statement of the existence of such preferences, powers, qualifications and rights, and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge.
ARTICLE V.
Dividends
Section 5.1. Declaration of Dividends. Except as otherwise required by law or by the Certificate of Incorporation, the board of directors may, in its discretion, declare what, if any, dividends shall be paid from the surplus or from the net profits of the corporation for the current or preceding fiscal year, or as otherwise permitted by law. Dividends may be paid in cash, in property, in shares of the corporation’s stock, or in any combination thereof. Dividends shall be payable upon such dates as the board of directors may designate.
Section 5.2. Reserves. Before the payment of any dividend and before making any distribution of profits, the board of directors, from time to time and in its absolute discretion, shall have power to set aside out of the surplus or net profits of the corporation such sum or sums as the board of directors deems proper and sufficient as a reserve fund to meet contingencies or for such other purpose as the board of directors shall deem to be in the best interests of the corporation, and the board of directors may modify or abolish any such reserve.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 10 |
ARTICLE VI.
Powers of Officers to Contract
With the Corporation
Any and all of the directors and officers of the corporation, notwithstanding their official relations to it, may enter into and perform any contract or agreement of any nature between the corporation and themselves, or any and all of the individuals from time to time constituting the board of directors of the corporation, or any firm or corporation in which any such director may be interested, directly or indirectly, whether such individual, firm or corporation thus contracting with the corporation shall thereby derive personal or corporate profits or benefits or otherwise; provided, that (i) the material facts of such interest are disclosed or are known to the board of directors or committee thereof which authorizes such contract or agreement; (ii) if the material facts as to such person’s relationship or interest are disclosed or are known to the stockholders entitled to vote thereon, and the contract is specifically approved in good faith by a vote of the stockholders; or (iii) the contract or agreement is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors, a committee thereof, or the stockholders. Any director of the corporation who is interested in any transaction as aforesaid may nevertheless be counted in determining the existence of a quorum at any meeting of the board of directors which shall authorize or ratify any such transaction. This Article shall not be construed to invalidate any contract or other transaction which would otherwise be valid under the common or statutory law applicable thereto.
ARTICLE VII.
Indemnification
Section 7.1. Definitions. For purposes of this Article VII the following terms shall have the meanings indicated:
“Corporate Status” describes the status of a person who is or was a director, Officer, employee, agent, trustee or fiduciary of the corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the express written request of the corporation.
“Court” means the Court of Chancery of the State of Delaware, the court in which the Proceeding in respect of which indemnification is sought by a Covered Person shall have been brought or is pending, or another court having subject matter jurisdiction and personal jurisdiction over the parties.
“Covered Person” means a person who is a present or former director or Officer of the corporation and shall include such person’s legal representatives, heirs, executors and administrators.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 11 |
“Disinterested” describes any individual, whether or not that individual is a director, Officer, employee or agent of the corporation, who is not and was not and is not threatened to be made a party to the Proceeding in respect of which indemnification, advancement of Expenses or other action is sought by a Covered Person.
“Expenses” shall include, without limitation, all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating or being or preparing to be a witness in a Proceeding.
“Good Faith” shall mean a Covered Person having acted in good faith and in a manner such Covered Person reasonably believed to be in or not opposed to the best interests of the corporation or, in the case of an employee benefit plan, the best interests of the participants or beneficiaries of said plan, as the case may be, and, with respect to any Proceeding which is criminal in nature, having had no reasonable cause to believe such Covered Person’s conduct was unlawful.
“Improper Personal Benefit” shall include, but not be limited to, the personal gain in fact by reason of a person’s Corporate Status of a financial profit, monies or other advantage not also accruing to the benefit of the corporation or to the stockholders generally and which is unrelated to his usual compensation including, but not limited to, (i) in exchange for the exercise of influence over the corporation’s affairs, (ii) as a result of the diversion of corporate opportunity, or (iii) pursuant to the use or communication of confidential or inside information for the purpose of generating a profit from trading in the corporation’s securities. Notwithstanding the foregoing, “Improper Personal Benefit” shall not include any benefit, directly or indirectly, related to actions taken in order to evaluate, discourage, resist, prevent or negotiate any transaction with or proposal from any person or entity seeking control of, or a controlling interest in, the corporation.
“Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and may include law firms or members thereof that are regularly retained by the corporation but not by any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the standards of professional conduct then prevailing and applicable to such counsel, would have a conflict of interest in representing either the corporation or Covered Person in an action to determine the Covered Person’s rights under this Article.
“Officer” means the president, vice presidents, treasurer, assistant treasurer(s), secretary, assistant secretary and such other executive officers as are appointed by the board of directors of the corporation and explicitly entitled to indemnification hereunder.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 12 |
“Proceeding” includes any actual, threatened or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation (including any internal corporate investigation), administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, other than one initiated by the Covered Person, but including one initiated by a Covered Person for the purpose of enforcing such Covered Person’s rights under this Article to the extent provided in Section 7.14 of this Article. “Proceeding” shall not include any counterclaim brought by any Covered Person other than one arising out of the same transaction or occurrence that is the subject matter of the underlying claim.
Section 7.2. Right to Indemnification in General.
(a) Covered Persons. The corporation may indemnify, and may advance Expenses, to each Covered Person who is, was or is threatened to be made a party or otherwise involved in any Proceeding, as provided in this Article and to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may hereafter from time to time permit.
The indemnification provisions in this Article shall be deemed to be a contract between the corporation and each Covered Person who serves in any Corporate Status at any time while these provisions as well as the relevant provisions of the Delaware General Corporation Law are in effect, and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any Proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a contract right may not be modified retroactively without the consent of such Covered Person.
(b) Employees and Agents. The corporation may, to the extent authorized from time to time by the board of directors, grant indemnification and the advancement of Expenses to any employee or agent of the corporation to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of Expenses of Covered Persons.
Section 7.3. Proceedings Other Than Proceedings by or in the Right of the Corporation. Each Covered Person may be entitled to the rights of indemnification provided in this Section 7.3 if, by reason of such Covered Person’s Corporate Status, such Covered Person is, was or is threatened to be made, a party to or is otherwise involved in any Proceeding, other than a Proceeding by or in the right of the corporation. Each Covered Person may be indemnified against Expenses, judgments, penalties, fines and amounts paid in settlements, actually and reasonably incurred by such Covered Person or on such Covered Person’s behalf in connection with such Proceeding or any claim, issue or matter therein, if such Covered Person acted in Good Faith and such Covered Person has not been adjudged during the course of such proceeding to have derived an Improper Personal Benefit from the transaction or occurrence forming the basis of such Proceeding.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 13 |
Section 7.4. Proceedings by or in the Right of the Corporation. Each Covered Person may be entitled to the rights of indemnification provided in this Section 7.4 if, by reason of such Covered Person’s Corporate Status, such Covered Person is, or is threatened to be made, a party to or is otherwise involved in any Proceeding brought by or in the right of the corporation to procure a judgment in its favor. Such Covered Person may be indemnified against Expenses, judgments, penalties, and amounts paid in settlement, actually and reasonably incurred by such Covered Person or on such Covered Person’s behalf in connection with such Proceeding if such Covered Person acted in Good Faith and such Covered Person has not been adjudged during the course of such proceeding to have derived an Improper Personal Benefit from the transaction or occurrence forming the basis of such Proceeding. Notwithstanding the foregoing, no such indemnification shall be made in respect of any claim, issue or matter in such Proceeding as to which such Covered Person shall have been adjudged to be liable to the corporation if applicable law prohibits such indemnification; provided, however, that, if applicable law so permits, indemnification shall nevertheless be made by the corporation in such event if and only to the extent that the Court which is considering the matter shall so determine.
Section 7.5. Indemnification of a Party Who is Wholly or Partly Successful. Notwithstanding any provision of this Article to the contrary, to the extent that a Covered Person is, by reason of such Covered Person’s Corporate Status, a party to or is otherwise involved in and is successful, on the merits or otherwise, in any Proceeding, such Covered Person shall be indemnified to the maximum extent permitted by law, against all Expenses, judgments, penalties, fines, and amounts paid in settlement, actually and reasonably incurred by such Covered Person or on such Covered Person’s behalf in connection therewith. If such Covered Person is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the corporation shall indemnify such Covered Person to the maximum extent permitted by law, against all Expenses, judgments, penalties, fines, and amounts paid in settlement, actually and reasonably incurred by such Covered Person or on such Covered Person’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section 7.5 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
Section 7.6. Indemnification for Expenses of a Witness. Notwithstanding any provision of this Article to the contrary, to the extent that a Covered Person is, by reason of such Covered Person’s Corporate Status, a witness in any Proceeding, such Covered Person shall be indemnified against all Expenses actually and reasonably incurred by such Covered Person or on such Covered Person’s behalf in connection therewith.
Section 7.7. Advancement of Expenses. Notwithstanding any provision of this Article to the contrary, the corporation may advance all reasonable Expenses which, by reason of a Covered Person’s Corporate Status, were incurred by or on behalf of such Covered Person in connection with any Proceeding, within thirty (30) days after the receipt by the corporation of a statement or statements from such Covered Person requesting such advance or advances, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by the Covered Person and shall include or be preceded or accompanied by an undertaking by or on behalf of the Covered Person to repay any Expenses if such Covered Person shall be adjudged to be not entitled to be indemnified against such Expenses. Any advance and undertaking to repay pursuant to this Section 7.7 may be unsecured interest-free, as the corporation sees fit. Advancement of Expenses pursuant to this Section 7.7 shall not require approval of the board of directors or the stockholders of the corporation, or of any other person or body. The secretary of the corporation shall promptly advise the Board in writing of the request for advancement of Expenses, of the amount and other details of the request and of the undertaking to make repayment provided pursuant to this Section 7.7.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 14 |
Section 7.8. Notification and Defense of Claim. Promptly after receipt by a Covered Person of notice of the commencement of any Proceeding, such Covered Person shall, if a claim is to be made against the corporation under this Article, notify the corporation of the commencement of the Proceeding. The failure to notify the corporation will not relieve the corporation from any liability which it may have to such Covered Person otherwise than under this Article. With respect to any such Proceedings to which such Covered Person notifies the corporation:
(a) The corporation will be entitled to participate in the defense at its own expense.
(b) Except as otherwise provided below in this subparagraph (b), the corporation (jointly with any other indemnifying party similarly notified) will be entitled to assume the defense with counsel reasonably satisfactory to the Covered Person. After notice from the corporation to the Covered Person of its election to assume the defense of a suit, the corporation will not be liable to the Covered Person under this Article for any legal or other expenses subsequently incurred by the Covered Person in connection with the defense of the Proceeding other than reasonable costs of investigation or as otherwise provided below in this subparagraph (b). The Covered Person shall have the right to employ his own counsel in such Proceeding but the fees and expenses of such counsel incurred after notice from the corporation of its assumption of the defense shall be at the expense of the Covered Person except as provided in this paragraph. The fees and expenses of counsel shall be at the expense of the corporation if (i) the employment of counsel by the Covered Person has been authorized by the corporation, (ii) the Covered Person shall have concluded reasonably that there may be a conflict of interest between the corporation and the Covered Person in the conduct of the defense of such action and such conclusion is confirmed in writing by the corporation’s outside counsel regularly employed by it in connection with corporate matters, or (iii) the corporation shall not in fact have employed counsel to assume the defense of such Proceeding. The corporation shall be entitled to participate in, but shall not be entitled to assume the defense of any Proceeding brought by or in the right of the corporation or as to which the Covered Person shall have made the conclusion provided for in (ii) above and such conclusion shall have been so confirmed by the corporation’s said outside counsel.
(c) Notwithstanding any provision of this Article to the contrary, the corporation shall not be obligated to indemnify the Covered Person under this Article for any amounts paid in settlement of any Proceeding effected without its written consent. The corporation shall not settle any Proceeding or claim in any manner which would impose any penalty, limitation or disqualification of the Covered Person for any purpose without such Covered Person’s written consent. Neither the corporation nor the Covered Person will unreasonably withhold their consent to any proposed settlement.
(d) If it is determined that the Covered Person is entitled to indemnification other than as afforded under subparagraph (b) above, payment to the Covered Person of the additional amounts for which he is to be indemnified shall be made within ten (10) days after such determination.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 15 |
Section 7.9. Procedures.
(a) Method of Determination. A determination (as provided for by this Article or if required by applicable law in the specific case) with respect to a Covered Person’s entitlement to indemnification shall be made either (a) by the board of directors by a majority vote of a quorum consisting of Disinterested directors, or (b) in the event that a quorum of the board of directors consisting of Disinterested directors is not obtainable or, even if obtainable, such quorum of Disinterested directors so directs, by Independent Counsel in a written determination to the board of directors, a copy of which shall be delivered to the Covered Person seeking indemnification, or (c) by the vote of the holders of a majority of the corporation’s capital stock outstanding at the time entitled to vote thereon.
(b) Initiating Request. A Covered Person who seeks indemnification under this Article shall submit a Request for Indemnification, including such documentation and information as is reasonably available to such Covered Person and is reasonably necessary to determine whether and to what extent such Covered Person is entitled to indemnification.
(c) Presumptions. In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall not presume that the Covered Person is or is not entitled to indemnification under this Article.
(d) Burden of Proof. Each Covered Person shall bear the burden of going forward and demonstrating sufficient facts to support his claim for entitlement to indemnification under this Article. That burden shall be deemed satisfied by the submission of an initial Request for Indemnification pursuant to Section 7.9(b) above.
(e) Effect of Other Proceedings. The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of guilty or of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Article) of itself adversely affect the right of a Covered Person to indemnification or create a presumption that a Covered Person did not act in Good Faith.
(f) Actions of Others. The knowledge, actions, or failure to act, of any director, officer, employee, agent, trustee or fiduciary of the enterprise whose daily activities the Covered Person was actually responsible for may be imputed to a Covered Person for purposes of determining the right to indemnification under this Article.
Section 7.10. Action by the Corporation. Any action, payment, advance determination other than a determination made pursuant to Section 7.9(a) above, authorization, requirement, grant of indemnification or other action taken by the corporation pursuant to this Article shall be effected exclusively through any Disinterested person so authorized by the board of directors of the corporation, including the president or any vice president of the corporation.
Section 7.11. Non-Exclusivity. The rights of indemnification and to receive advancement of Expenses as provided by this Article shall not be deemed exclusive of any other rights to which a Covered Person may at any time be entitled under applicable law, the Certificate of Incorporation, these By-Laws, any agreement, a vote of stockholders or a resolution of the board of directors, or otherwise. No amendment, alteration, rescission or replacement of this Article or any provision hereof shall be effective as to an Covered Person with respect to any action taken or omitted by such Covered Person in such Covered Person’s Corporate Status or with respect to any state of facts then or previously existing or any Proceeding previously or thereafter brought or threatened based in whole or to the extent based in part upon any such state of facts existing prior to such amendment, alteration, rescission or replacement.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 16 |
Section 7.12. Insurance. The corporation may maintain, at its expense, an insurance policy or policies to protect itself and any Covered Person, officer, employee or agent of the corporation or another enterprise against liability arising out of this Article or otherwise, whether or not the corporation would have the power to indemnify any such person against such liability under the Delaware General Corporation Law.
Section 7.13. No Duplicative Payment. The corporation shall not be liable under this Article to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that a Covered Person has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.
Section 7.14. Expenses of Adjudication. In the event that any Covered Person seeks a judicial adjudication, or an award in arbitration, to enforce such Covered Person’s rights under, or to recover damages for breach of, this Article, the Covered Person shall be entitled to recover from the corporation, and shall be indemnified by the corporation against, any and all expenses (of the types described in the definition of Expenses in Section 7.1 of this Article) actually and reasonably incurred by such Covered Person in seeking such adjudication or arbitration, but only if such Covered Person prevails therein. If it shall be determined in such adjudication or arbitration that the Covered Person is entitled to receive part but not all of the indemnification of expenses sought, the expenses incurred by such Covered Person in connection with such adjudication or arbitration shall be appropriately prorated.
Section 7.15. Severability. If any provision or provisions of this Article shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of this Article (including without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this Article (including, without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 17 |
ARTICLE VIII.
Miscellaneous Provisions
Section 8.1. Certificate of Incorporation. All references in these By-laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the corporation, as amended and in effect from time to time.
Section 8.2. Fiscal Year. Except as from time to time otherwise provided by the board of directors, the fiscal year of the corporation shall end on the 31st of December of each year.
Section 8.3. Corporate Seal. The board of directors shall have the power to adopt and alter the seal of the corporation.
Section 8.4. Execution of Instruments. All deeds, leases, transfers, contracts, bonds, notes, and other obligations authorized to be executed by an officer of the corporation on its behalf shall be signed by the president or the treasurer except as the board of directors may generally or in particular cases otherwise determine.
Section 8.5. Voting of Securities. Unless the board of directors otherwise provides, the president or the treasurer may waive notice of and act on behalf of this corporation, or appoint another person or persons to act as proxy or attorney in fact for this corporation with or without discretionary power and/or power of substitution, at any meeting of stockholders or shareholders of any other corporation or organization, any of whose securities are held by this corporation.
Section 8.6. Evidence of Authority. A certificate by the secretary or any assistant secretary as to any action taken by the stockholders, directors or any officer or representative of the corporation shall, as to all persons who rely thereon in good faith, be conclusive evidence of such action. The exercise of any power which by law, by the Certificate of Incorporation, or by these By-laws, or under any vote of the stockholders or the board of directors, may be exercised by an officer of the corporation only in the event of absence of another officer or any other contingency shall bind the corporation in favor of anyone relying thereon in good faith, whether or not such absence or contingency existed.
Section 8.7. Corporate Records. The original, or attested copies, of the Certificate of Incorporation, By-laws, records of all meetings of the incorporators and stockholders, and the stock transfer books (which shall contain the names of all stockholders and the record address and the amount of stock held by each) shall be kept in Delaware at the principal office of the corporation, or at an office of the corporation, or at an office of its transfer agent or of the secretary or of the assistant secretary, if any. Said copies and records need not all be kept in the same office. They shall be available at all reasonable times to inspection of any stockholder for any purpose but not to secure a list of stockholders for the purpose of selling said list or copies thereof or for using the same for a purpose other than in the interest of the applicant, as a stockholder, relative to the affairs of the corporation.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 18 |
Section 8.8. Charitable Contributions. The board of directors from time to time may authorize contributions to be made by the corporation in such amounts as it may determine to be reasonable to corporations, trusts, funds or foundations organized and operated exclusively for charitable, scientific or educational purposes, no part of the net earning of which inures to the private benefit of any stockholder or individual.
Section 8.9. Communication of Notices. Any notices required to be given under these By-laws may be given (i) by delivery in person, (ii) by mailing it, postage prepaid, first class, (iii) by mailing it by nationally or internationally recognized second day or faster courier service, (iv) by facsimile transmission, or (v) by electronic transmission, in each case, to the addressee; provided, however that facsimile transmission or electronic transmission may only be used if the addressee has consented to such means.
Section 8.10. Electronic Transmissions. Notwithstanding any reference in these By-laws to written instruments, all notices, meetings, consents and other communications contemplated by these By-laws may be conducted by means of an electronic transmission, to the extent permitted by law, if specifically authorized by the board of directors of the corporation.
ARTICLE IX.
Amendments
Section 9.1. Amendment by Stockholders. Prior to the issuance of stock, these By-laws may be amended, altered or repealed by the incorporator(s) by majority vote. After stock has been issued, these By-laws may be amended altered or repealed by the stockholders at any annual or special meeting by vote or a majority of all shares outstanding and entitled to vote, except that where the effect of the amendment would be to reduce any voting requirement otherwise required by law, the Certificate of Incorporation or these By-laws, such amendment shall require the vote that would have been required by such other provision. Notice and a copy of any proposal to amend these By-laws must be included in the notice of meeting of stockholders at which action is taken upon such amendment.
Section 9.2. Amendment by Board of Directors. These By-laws may be amended or altered by the board of directors at a meeting duly called for the purpose by majority vote of the directors then in office, except that directors shall not amend the By-laws in a manner which:
(a) changes the stockholder voting requirements for any action;
(b) alters or abolishes any preferential right or right of redemption applicable to a class or series of stock with shares already outstanding;
(c) alters the provisions of Article IX hereof; or
(d) permits the board of directors to take any action which under law, the Certificate of Incorporation, or these By-laws is required to be taken by the stockholders.
Any amendment of these By-laws by the board of directors may be altered or repealed by the stockholders at any annual or special meeting of stockholders.
By Laws of AEROVATE THERAPEUTICS INC.
| Page 19 |
Exhibit 4.2
INVESTORS’ RIGHTS AGREEMENT
THIS INVESTORS’ RIGHTS AGREEMENT (this “Agreement”), is made as of the 5th day of August, 2020 (the “Effective Date”), by and among Aerovate Therapeutics Inc., a Delaware corporation (the “Company”), and each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an “Investor” and any Additional Purchaser (as defined in the Purchase Agreement) that becomes a party to this Agreement in accordance with Section 6.9 hereof.
RECITALS
WHEREAS, the Company and the Investors are parties to that certain Series A Preferred Stock Purchase Agreement of even date herewith (the “Purchase Agreement”); and
WHEREAS, in order to induce the Company to enter into the Purchase Agreement and to induce the Investors to invest funds in the Company pursuant to the Purchase Agreement, the Investors and the Company hereby agree that this Agreement shall govern the rights of the Investors to cause the Company to register shares of Common Stock issuable to the Investors, to receive certain information from the Company, and to participate in future equity offerings by the Company, and shall govern certain other matters as set forth in this Agreement;
NOW, THEREFORE, the parties hereby agree as follows:
1. | Definitions. For purposes of this Agreement: |
1.1 “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer, director or trustee of such Person, or any venture capital fund, investment fund, registered investment company, asset manager or investment adviser now or hereafter existing that is controlled by one or more general partners, managing members or investment adviser of, or shares the same management company or investment adviser with, such Person.
1.2 | “Board of Directors” means the board of directors of the Company. |
1.3 “Certificate of Incorporation” means the Company’s Amended and Restated Certificate of Incorporation, as amended and/or restated from time to time.
1.4 “Common Stock” means shares of the Company’s common stock, par value $0.0001 per share.
1.5 “Competitor” means a Person engaged, directly or indirectly (including through any partnership, limited liability company, corporation, joint venture or similar arrangement (whether now existing or formed hereafter)), in the development of inhalable formulations of imatinib for the treatment of rare cardiopulmonary disease and any other business the Company may engage in from time to time, but shall not include any financial investment firm or collective investment vehicle that, together with its Affiliates, holds less than twenty percent (20%) of the outstanding equity of any Competitor and does not, nor do any of its Affiliates, have a right to designate any members of the board of directors of any Competitor; provided that none of Sofinnova Venture Partners X, L.P. (“Sofinnova”), RA Capital Management, L.P. (“RA Capital”), Osage University Partners III, L.P. (“OUP”), Atlas Venture Fund XII, L.P. (“Atlas”), Cormorant Private Healthcare Fund II, LP (“Cormorant”), Citadel Multi-Strategy Equities Master Fund Ltd. (“Surveyor”), or any of their Affiliates, shall be deemed to be a Competitor hereunder.
1.6 “Damages” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.
1.7 “Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.
1.8 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
1.9 “Excluded Registration” means (i) a registration relating to the sale or grant of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, equity incentive or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.
1.10 “Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
1.11 “Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits forward incorporation of substantial information by reference to other documents filed by the Company with the SEC.
1.12 “GAAP” means generally accepted accounting principles in the United States as in effect from time to time.
1.13 | “Holder” means any holder of Registrable Securities who is a party to this Agreement. |
1.14 “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including, adoptive relationships, of a natural person referred to herein.
1.15 “Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.
1.16 “IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.
1.17 “Key Employee” means any executive-level employee (including, division director and vice president-level positions) as well as any employee who, either alone or in concert with others, develops, invents, programs, or designs any Company Intellectual Property (as defined in the Purchase Agreement).
2
1.18 “Major Investor” means (i) each of Sofinnova, RA Capital, Blackwell Partners LLC – Series A, OUP, Atlas, Cormorant and Surveyor, together with each of their Affiliates, for so long as any such named Investor and such Investor’s Affiliates hold all shares of Registrable Securities purchased by such Investor and such Investor’s Affiliates pursuant to the Purchase Agreement, and (ii) additionally, any Investor (including those Investors named in clause (i) hereof that no longer qualify to be Major Investors pursuant to clause (i) hereof) that, individually or together with such Investor’s Affiliates, holds at least 1,000,000 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof), and, in each case, each Person to whom any of the rights of any such Investor are assigned pursuant to Section 6.1.
1.19 “New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.
1.20 “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
1.21 “Qualified Public Offering” means the closing of the sale of shares of Common Stock to the public at a price per share of at least $5.679 (prior to giving effect to underwrites discounts and commissions and subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act resulting in at least $50,000,000 of gross proceeds to the Company and in connection with such offering the Common Stock is listed for trading on the Nasdaq Stock Market's National Market, the New York Stock Exchange or another exchange or marketplace approved the Board of Directors.
1.22 “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Preferred Stock, excluding any Common Stock issued upon conversion of the Series A Preferred Stock pursuant to the “Special Mandatory Conversion” provisions in the Certificate of Incorporation; (ii) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company, acquired by the Investors after the date hereof, excluding any Common Stock issued upon conversion of the Series A Preferred Stock pursuant to the “Special Mandatory Conversion” provisions in the Certificate of Incorporation; and (iii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i) and (ii) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Subsection 6.1, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Subsection 2.13 of this Agreement. A Holder of Registrable Securities need not convert such Registrable Securities into Common Stock prior to requesting registration hereunder but may make such request in contemplation of conversion of such Registrable Securities into Common Stock prior to the effectiveness of such registration.
1.23 “Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.
3
1.24 “Requisite Holders” means the holders of at least sixty-five percent (65%) of the outstanding shares of Series A Preferred Stock (excluding Pre-Purchased Shares (as defined in the Purchase Agreement) for so long as such shares remain Pre-Purchased Shares in accordance with the terms and conditions of the Purchase Agreement), voting together as a single class on an as converted into Common Stock basis.
1.25 “Restricted Securities” means the securities of the Company required to be notated with the legend set forth in Subsection 2.12(b) hereof.
1.26 | “SEC” means the Securities and Exchange Commission. |
1.27 | “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act. Securities Act. |
1.28 | “SEC Rule 145” means Rule 145 promulgated by the SEC under the |
1.29 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.30 “Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Subsection 2.6.
1.31 “Series A Director” means any director of the Company that the holders of record of the Series A Preferred Stock are entitled to elect, exclusively as a separate class, pursuant to the Certificate of Incorporation.
1.32 “Series A Preferred Stock” means shares of the Company’s Series A Preferred Stock, par value $0.0001 per share.
1.33 “Series Seed Preferred Stock” means shares of the Company’s Series Seed Preferred Stock, par value $0.0001 per share.
2. | Registration Rights. The Company covenants and agrees as follows: |
2.1 | Demand Registration. |
(a) Form S-1 Demand. If at any time after the earlier of (i) three (3) years after the date of this Agreement or (ii) one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from Requisite Holders that the Company file a Form S-1 registration statement with respect to at least thirty- five percent (35%) of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of Selling Expenses, would exceed $5 million), then the Company shall (x) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (y) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Subsections 2.1(c) and 2.3.
4
(b) Form S-3 Demand. If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from the Requisite Holders that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $1 million, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Subsections 2.1(c) and 2.3.
(c) Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Subsection 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than thirty (30) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period.
(d) The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(a) (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations pursuant to Subsection 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Subsection 2.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(b) (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two registrations pursuant to Subsection 2.1(b) within the twelve (12) month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Subsection 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Subsection 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Subsection 2.1(d); provided, that if such withdrawal is during a period the Company has deferred taking action pursuant to Subsection 2.1(c), then the Initiating Holders may withdraw their request for registration and such registration will not be counted as “effected” for purposes of this Subsection 2.1(d).
5
2.2 Company Registration. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Subsection 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Subsection 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Subsection 2.6.
2.3 | Underwriting Requirements. |
(a) If, pursuant to Subsection 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Subsection 2.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Initiating Holders, subject only to the reasonable approval of the Board of Directors. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Subsection 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Subsection 2.3, if the underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares. For purposes of the provision in this Subsection 2.3(a) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.
6
(b) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Subsection 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below thirty percent (30%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. For purposes of the provision in this Subsection 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.
(c) For purposes of Subsection 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Subsection 2.3(a), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.
2.4 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
7
(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such one hundred twenty (120) day period shall be extended for up to sixty (60) days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;
(b) prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;
(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;
(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;
(f) notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. As promptly as practicable thereafter, the Company will prepare and file with the SEC, and furnish without charge to the appropriate Holders and managing underwriter(s), if any, an amendment or supplement to such registration statement or prospectus in order to cause such registration statement or prospectus not to include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and will furnish such copies thereof as the Holders or any underwriters may reasonably request;
(g) use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;
8
(h) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;
(i) promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;
(j) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and
(k) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.
(l) make generally available to its security holders, and deliver to each Holder participating in the registration statement, an earnings statement of the Company that will satisfy the provisions of Section 11(a) of the Securities Act covering a period of twelve (12) months beginning after the effective date of such registration statement as soon as reasonably practicable after the termination of such twelve (12)-month period; and
(m) use its commercially reasonable efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.
In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.
2.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.
9
2.6 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Subsection 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Subsections 2.1(a) or 2.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Subsections 2.1(a) or 2.1(b). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.
2.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.
2.8 Indemnification. If any Registrable Securities are included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Subsection 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.
(b) To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Subsection 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld, conditioned or delayed; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Subsections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.
10
(c) Promptly after receipt by an indemnified party under this Subsection 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Subsection 2.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Subsection 2.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Subsection 2.8.
(d) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either: (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Subsection 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Subsection 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Subsection 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Subsection 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Subsection 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.
11
(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.
(f) Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Subsection 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.
2.9 Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:
(a) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;
(b) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and
(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).
12
2.10 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Requisite Holders, enter into any agreement with any holder or prospective holder of any securities of the Company that would (i) provide to such holder or prospective holder the right to include securities in any registration on other than either a pro rata basis with respect to the Registrable Securities or on a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include; or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to Registrable Securities acquired by any additional Investor that becomes a party to this Agreement in accordance with Subsection 6.9.
2.11 “Market Stand-off” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the IPO, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days), (i) lend; 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; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately prior to the effective date of the registration statement for the IPO or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Subsection 2.11 shall apply only to the IPO, and shall not apply to distributions to current or former partners, members or stockholders of a Holder or to the transfer of any shares owned by a Holder in the Company to its Affiliates or any of the Holder’s stockholders, members, partners or other equity holders; provided that the Affiliate, stockholder member, partner or other equity holder of the Holder agrees to be bound in writing by the restrictions set forth herein, shall not apply to transactions or announcements relating to: (1) securities acquired in the IPO or (2) securities acquired in open market transactions from and after the IPO, shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, or the transfer of any shares to any trust for the direct or indirect benefit of the Holder or the immediate family of the Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, and shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually, and together with their Affiliates, owning one percent (1%) or more of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock). The underwriters in connection with such registration are intended third-party beneficiaries of this Subsection 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Subsection 2.11 or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply pro rata to all Holders subject to such agreements, based on the number of shares subject to such agreements.
13
2.12 | Restrictions on Transfer. |
(a) The Preferred Stock, the Registrable Securities and any other shares of Common Stock issued upon conversion of the Preferred Stock shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop- transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock, the Registrable Securities and any other shares of Common Stock issued upon conversion of the Preferred Stock held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.
(b) Each certificate, instrument, or book entry representing (i) the Preferred Stock, (ii) the Registrable Securities, (iii) any other shares of Common Stock issued upon conversion of the Preferred Stock, and (iv) any other securities issued in respect of the securities referenced in clauses (i), (ii) and (iii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Subsection 2.12(c)) be notated with a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Subsection 2.12.
14
(c) The holder of such Restricted Securities, by acceptance of ownership thereof, agrees to comply in all respects with the provisions of this Section 2. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144; (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration or (z) in any internal transaction in which such Holder transfers Restricted Securities to an Affiliate of such Holder that is an entity and that is ultimately controlled by the same parent company as the Holder (or is the ultimate parent company of the Holder); provided that in the case of clauses (y) and (z) each transferee agrees in writing to be subject to the terms of this Subsection 2.12. Each certificate, instrument, or book entry representing the Restricted Securities transferred as above provided shall be notated with, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Subsection 2.12(b), except that such certificate, instrument, or book entry shall not be notated with such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act. Notwithstanding the foregoing, the Company shall be obligated to reissue promptly unlegended certificates or book entries at the request of any Holder thereof if the Company has completed its IPO and the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification and legend, provided that the second legend listed above shall be removed only at such time as the Holder of such certificate is no longer subject to any restrictions hereunder.
2.13 Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Subsections 2.1 or 2.2 shall terminate upon the earliest to occur of:
(a) the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation; or
(b) such time after consummation of the Qualified Public Offering as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares without limitation during a three-month period without registration.
3. | Information and Observer Rights. |
3.1 Delivery of Financial Statements. The Company shall deliver to each Major Investor, provided that the Board of Directors has not reasonably determined that such Major Investor is a Competitor:
(a) as soon as practicable, but in any event within one hundred eighty (180) days after the end of each fiscal year of the Company (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and a comparison between (x) the actual amounts as of and for such fiscal year and (y) the comparable amounts for the prior year and as included in the Budget (as defined in Subsection 3.1(d) for such year, with an explanation of any material differences between such amounts and a schedule as to the sources and applications of funds for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all such financial statements audited and certified by independent public accountants of regionally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, unaudited statements of income and cash flows for such fiscal quarter, and an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year- end audit adjustments; and (ii) not contain all notes thereto that may be required in accordance with GAAP);
15
(c) as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Common Stock and the exchange ratio or exercise price applicable thereto, and the number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Major Investors to calculate their respective percentage equity ownership in the Company, and certified by the chief financial officer or chief executive officer of the Company as being true, complete, and correct;
(d) as soon as practicable, but in any event thirty (30) days before the end of each fiscal year, a budget and business plan for the next fiscal year (collectively, the “Budget”), approved by the Board of Directors and prepared on a monthly basis, including balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets prepared by the Company; and
(e) such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Investor may from time to time reasonably request; provided, however, that the Company shall not be obligated under this Subsection 3.1 to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in a form reasonably acceptable to the Company); or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.
If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.
Notwithstanding anything else in this Subsection 3.1 to the contrary, the Company may cease providing the information set forth in this Subsection 3.1 during the period starting with the date thirty (30) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Subsection 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.
3.2 Inspection. The Company shall permit each Major Investor (provided that the Board of Directors has not reasonably determined that such Major Investor is a Competitor), at such Major Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Subsection 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form reasonably acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.
16
3.3 Observer Rights. As long as each of RA Capital, Sofinnova, Surveyor, and Atlas Venture, in each case together with its Affiliates, holds any shares of Series A Preferred Stock or shares of Common Stock issued upon the conversion of Series A Preferred Stock (excluding any Common Stock issued upon conversion of the Series A Preferred Stock pursuant to the “Special Mandatory Conversion” provisions in the Certificate of Incorporation), the Company shall invite a representative of each of RA Capital, Sofinnova, Surveyor and Atlas Venture, to attend all meetings of the Board of Directors in a nonvoting observer capacity (each, an “Observer”). The Company shall give each such Observer copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to any other member of the Board of Directors; provided, however, that such Observer shall agree to hold in confidence all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such Observer from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest.
3.4 Termination of Information and Observer Rights. The covenants set forth in Subsection 3.1, Subsection 3.2 and Subsection 3.3 shall terminate and be of no further force or effect (i) immediately before the consummation of the Qualified Public Offering, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first.
3.5 Confidentiality. Each Investor agrees, severally and not jointly, that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Subsection 3.5 by such Investor), (b) is or has been independently developed or conceived by such Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to such Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Subsection 3.5; (iii) to any existing or prospective Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; (iv) to the extent required in connection with any routine or periodic examination or similar process by any regulatory or self-regulatory body or authority not specifically directed at the Company or the confidential information obtained from the Company pursuant to the terms of the Agreement, including, without limitation, quarterly or annual reports, (v) as may otherwise be required by law, regulation, rule, court order or subpoena, provided that, with respect to this clause (v), such Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure; (vi) as required by any court or other governmental body, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure; (vii) in connection with the enforcement of this Agreement or any other agreement with the Company or its subsidiaries or rights under this Agreement or any other agreement with the Company or its subsidiaries; (viii) to comply with applicable law, statutes, rules or regulations or pursuant to any direction, request or requirement (whether or not having the force of law but if not having the force of law being of a type with which institutional investors in the relevant jurisdiction are accustomed to comply) of any self- regulating organization or any governmental, fiscal, monetary or other authority; (ix) for internal market, industry and investment analyses; or (x) to officers, employees, agents, directors, partners, parent or subsidiaries to the extent necessary to obtain their services in connection with monitoring its investment in the Company. This Section 3.5 shall supersede and replace, in its entirety, any agreement between the Company and any Investor related to the confidential treatment of the Company’s information. The Company acknowledges and agrees that in no event shall Surveyor’s confidentiality and non-use obligations hereunder in any manner be deemed or construed as limiting Surveyor’s or its representatives’ (or any of their respective Affiliates’) ability to trade any security of a company that has issued securities that are publicly traded.
17
4. | Rights to Future Stock Issuances. |
4.1 Right of First Offer. Subject to the terms and conditions of this Subsection 4.1 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to each Major Investor. A Major Investor shall be entitled to apportion the right of first offer hereby granted to it in such proportions as it deems appropriate, among (i) itself, and (ii) its Affiliates.
(a) The Company shall give notice (the “Offer Notice”) to each Major Investor, stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.
(b) By notification to the Company within twenty (20) days after the Offer Notice is given, each Major Investor may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the Common Stock issuable or issued upon conversion of Preferred Stock then held by such Major Investor (excluding any Common Stock issued upon conversion of the Series A Preferred Stock pursuant to the “Special Mandatory Conversion” provisions in the Certificate of Incorporation) bears to the total Common Stock issuable or issued upon conversion of Preferred Stock then held by all Major Investors (excluding any Common Stock issued upon conversion of the Series A Preferred Stock pursuant to the “Special Mandatory Conversion” provisions in the Certificate of Incorporation). At the expiration of such twenty (20) day period, the Company shall promptly notify each Major Investor that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Investor”) of any other Major Investor’s failure to do likewise. During the ten (10) day period commencing after the Company has given such notice, each Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which Major Investors were entitled to subscribe but that were not subscribed for by the Major Investors which is equal to the proportion that the Common Stock issuable or issued upon conversion of Preferred Stock then held by such Fully Exercising Investor (excluding any Common Stock issued upon conversion of the Series A Preferred Stock pursuant to the “Special Mandatory Conversion” provisions in the Certificate of Incorporation) bears to the Common Stock issuable or issued upon conversion of Preferred Stock then held by all Fully Exercising Investors (excluding any Common Stock issued upon conversion of the Series A Preferred Stock pursuant to the “Special Mandatory Conversion” provisions in the Certificate of Incorporation) who wish to purchase such unsubscribed shares. The closing of any sale pursuant to this Subsection 4.1(b) shall occur within the later of ninety (90) days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Subsection 4.1(c).
18
(c) If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Subsection 4.1(b), the Company may, during the ninety (90) day period following the expiration of the periods provided in Subsection 4.1(b), offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Major Investors in accordance with this Subsection 4.1.
(d) The right of first offer in this Subsection 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Certificate of Incorporation); (ii) shares of Common Stock issued in the Qualified Public Offering; and (iii) the issuance of shares of Series A Preferred Stock pursuant to Subsection 1.3 of the Purchase Agreement.
(e) Notwithstanding any provision hereof to the contrary, in lieu of complying with the provisions of this Subsection 4.1, the Company may elect to give notice to the Major Investors within thirty (30) days after the issuance of New Securities. Such notice shall describe the type, price, and terms of the New Securities. Each Major Investor shall have twenty (20) days from the date notice is given to elect to purchase up to the number of New Securities that would, if purchased by such Major Investor, maintain such Major Investor’s percentage-ownership position, calculated as set forth in Subsection 4.1(b) before giving effect to the issuance of such New Securities.
4.2 Termination. The covenants set forth in Subsection 4.1 shall terminate and be of no further force or effect (i) immediately before the consummation of the Qualified Public Offering, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first.
5. | Additional Covenants. |
5.1 Insurance. The Company shall obtain, within ninety (90) days of the date hereof, from financially sound and reputable insurers Directors and Officers liability insurance with coverage of the directors (and their Affiliated investors) and the officers of the Company in an amount of not less than $3,000,000 (and will increase such amount to at least $15,000,000 immediately prior to an IPO) per incident and on terms and conditions satisfactory to the Board of Directors, and will use commercially reasonable efforts to cause such insurance policies to be maintained until such time as the Board of Directors determines that such insurance should be discontinued. The policy shall not be cancelable by the Company without prior approval by the Board of Directors, which approval must include the affirmative vote of a majority of the Series A Directors then-serving.
19
5.2 Employee Agreements. The Company will cause (i) each Person now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) to enter into a nondisclosure and proprietary rights assignment agreement, substantially in the form approved by the Board of Directors and provided to the Investors; and (ii) each Person now or hereafter employed by it or by any subsidiary with access to confidential information and/or trade secrets to enter into a nonsolicitation agreement, substantially in the form approved by the Board of Directors and provided to the Investors. In addition, the Company shall not amend, modify, terminate, waive, or otherwise alter, in whole or in part, any of the above-referenced agreements between the Company and any employee involved in the development of the Company’s intellectual property, without the consent of the Board, which approval must include the affirmative vote of a majority of the Preferred Directors then-serving.
5.3 Employee Stock. Unless otherwise approved by the Board of Directors, all future employees, consultants, independent contractors and other service providers of the Company who purchase, receive options to purchase, or receive awards of shares of the Company’s capital stock after the date hereof shall be required to execute restricted stock or option agreements, as applicable, providing for (i) vesting of shares over a four (4) year period, with the first twenty-five percent (25%) of such shares vesting following twelve (12) months of continued employment or service, and the remaining shares vesting in equal monthly installments over the following thirty-six (36) months, and (ii) a market stand-off provision substantially similar to that in Subsection 2.11. Without the prior approval by the Board of Directors, the Company shall not amend, modify, terminate, waive or otherwise alter, in whole or in part, any stock purchase, stock restriction or option agreement with any existing employee, consultant, independent contractor or other service provider if such amendment would cause it to be inconsistent with this Subsection 5.3. In addition, unless otherwise approved by the Board of Directors, the Company shall retain (and not waive) a “right of first refusal” on service provider transfers until the Company’s IPO and shall have the right to repurchase unvested shares at cost upon termination of employment or service of a holder of restricted stock.
5.4 Matters Requiring Investor Director Approval. So long as any shares of Series A Preferred Stock remain outstanding, the Company hereby covenants and agrees with each of the Investors that it shall not, without approval of the Board, which approval must include the affirmative vote of a majority of the Series A Directors then-serving:
(a) make, or permit any subsidiary to make, any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company;
(b) make, or permit any subsidiary to make, any loan or advance to any Person, including, without limitation, any employee or director of the Company or any subsidiary, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board of Directors;
20
(c) guarantee, directly or indirectly, or permit any subsidiary to guarantee, directly or indirectly, any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business;
(d) make any investment inconsistent with any investment policy approved by the Board of Directors;
(e) incur any aggregate indebtedness in excess of $150,000 that is not already included in a budget approved by the Board of Directors, other than trade credit incurred in the ordinary course of business;
(f) otherwise enter into or be a party to any transaction with any director, officer, or employee of the Company or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such Person, including without limitation any “management bonus” or similar plan providing payments to employees in connection with a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, except for transactions made in the ordinary course of business and pursuant to reasonable requirements of the Company’s business and upon fair and reasonable terms that are approved by a majority of the Board of Directors;
(g) hire, terminate, or change the compensation of the executive officers, including approving any option grants or stock awards to executive officers;
(h) change the principal business of the Company, enter new lines of business, or exit the current line of business;
(i) sell, assign, license, pledge, or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or
(j) enter into any corporate strategic relationship involving the payment, contribution, or assignment by the Company or to the Company of money or assets greater than $150,000.
5.5 Board Matters. Unless otherwise determined by the vote of a majority of the directors then in office, including the determination of at least a majority of the Series A Directors, the Board of Directors shall meet at least quarterly (which may be via teleconference) in accordance with an agreed-upon schedule. The Company shall reimburse the nonemployee directors and Observers for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board of Directors, meetings of the committees of the Board of Directors, meetings of the board of directors of any subsidiary of the Company and for reasonable expenses actually incurred while working for the benefit of the Company. Each Series A Director shall be entitled in such person’s discretion to be a member of any committee of the Board and a director of any subsidiary of the Company.
5.6 Successor Indemnification. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, the Certificate of Incorporation, or elsewhere, as the case may be.
21
5.7 Expenses of Counsel. In the event of a transaction which is a Sale of the Company (as defined in the Voting Agreement of even date herewith among the Investors, the Company and the other parties named therein), the reasonable fees and disbursements of one counsel for the Major Investors (“Investor Counsel”), in their capacities as stockholders, shall be borne and paid by the Company. At the outset of considering a transaction which, if consummated would constitute a Sale of the Company, the Company shall obtain the ability to share with the Investor Counsel (and such counsel's clients) and shall share the confidential information (including, without limitation, the initial and all subsequent drafts of memoranda of understanding, letters of intent and other transaction documents and related noncompete, employment, consulting and other compensation agreements and plans) pertaining to and memorializing any of the transactions which, individually or when aggregated with others would constitute the Sale of the Company. The Company shall be obligated to share (and cause the Company's counsel and investment bankers to share) such materials when distributed to the Company's executives and/or any one or more of the other parties to such transaction(s). In the event that Investor Counsel deems it appropriate, in its reasonable discretion, to enter into a joint defense agreement or other arrangement to enhance the ability of the parties to protect their communications and other reviewed materials under the attorney client privilege, the Company shall, and shall direct its counsel to, execute and deliver to Investor Counsel and its clients such an agreement in form and substance reasonably acceptable to Investor Counsel. In the event that one or more of the other party or parties to such transactions require the clients of Investor Counsel to enter into a confidentiality agreement and/or joint defense agreement in order to receive such information, then the Company shall share whatever information can be shared without entry into such agreement and shall, at the same time, in good faith work expeditiously to enable Investor Counsel and its clients to negotiate and enter into the appropriate agreement(s) without undue burden to the clients of Investor Counsel.
5.8 Indemnification Matters. The Company hereby acknowledges that one (1) or more of the directors nominated to serve on the Board of Directors by the Investors (each an “Investor Director”) may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more of the Investors and certain of their Affiliates (collectively, the “Investor Indemnitors”). The Company hereby agrees (a) that it is the indemnitor of first resort (i.e., its obligations to any such Investor Director are primary and any obligation of the Investor Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Investor Director are secondary), (b) that it shall be required to advance the full amount of expenses incurred by such Investor Director and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any such Investor Director to the extent legally permitted and as required by the Company’s Certificate of Incorporation or Bylaws of the Company (or any agreement between the Company and such Investor Director), without regard to any rights such Investor Director may have against the Investor Indemnitors, and, (c) that it irrevocably waives, relinquishes and releases the Investor Indemnitors from any and all claims against the Investor Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Investor Indemnitors on behalf of any such Investor Director with respect to any claim for which such Investor Director has sought indemnification from the Company shall affect the foregoing and the Investor Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Investor Director against the Company. The Investor Directors and the Investor Indemnitors are intended third-party beneficiaries of this Subsection 5.8 and shall have the right, power and authority to enforce the provisions of this Subsection 5.8 as though they were a party to this Agreement.
22
5.9 Right to Conduct Activities. The Company hereby agrees and acknowledges that each of RA Capital (together with its Affiliates), Sofinnova (together with its Affiliates), OUP (together with its Affiliates), Cormorant (together with its Affiliates), Surveyor (together with its Affiliates), and Atlas (together with its Affiliates) is a professional investment organization, and as such reviews the business plans and related proprietary information of many enterprises, some of which may compete directly or indirectly with the Company’s business (as currently conducted or as currently propose to be conducted). The Company hereby agrees that, to the extent permitted under applicable law, none of RA Capital (together with its Affiliates), Sofinnova (together with its Affiliates), OUP (together with its Affiliates), Cormorant (together with its Affiliates), Surveyor (together with its Affiliates), or Atlas (together with its Affiliates) shall be liable to the Company for any claim arising out of, or based upon, (i) the investment by RA Capital (together with its Affiliates), Sofinnova (together with its Affiliates), OUP (together with its Affiliates), Cormorant (together with its Affiliates), Surveyor (together with its Affiliates), or Atlas (together with its Affiliates), or (ii) actions taken by any partner, officer, employee or other representative of RA Capital (or its Affiliates), Sofinnova (or its Affiliates), OUP (or its Affiliates), Cormorant (or its Affiliates), Surveyor (or its Affiliates), or Atlas (or its Affiliates) to assist any such competitive company, whether or not such action was taken as a member of the board of directors of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company; provided, however, that the foregoing shall not relieve (x) any of the Investors from liability associated with the unauthorized disclosure of the Company’s confidential information obtained pursuant to this Agreement, or (y) any director or officer of the Company from any liability associated with his or her fiduciary duties to the Company.
5.10 Cybersecurity. The Company shall, within 180 days following the Initial Closing (as defined in the Purchase Agreement), (a) identify its sensitive data and information, and restrict access (through physical and electronic controls) to those individuals who have a need to access it and (b) implement cybersecurity solution(s) (“Cybersecurity Solutions”) designed to protect its technology and systems (including servers, laptops, desktops, cloud, containers, virtual environments and data centers) and all data contained in such systems. The Company shall use commercially reasonable efforts to ensure that the Cybersecurity Solutions (x) are up-to-date and include industry-standard protections (e.g., antivirus, endpoint detection and response and threat hunting), (y) to the extent determined necessary by the Company or its Board of Directors, are backed by a breach prevention warranty from the vendor certifying the effectiveness of such solutions, and (z) require the vendors to notify the Company of any security incidents posing a risk to the Company’s information (regardless of whether information was actually compromised). The Company shall evaluate on a regular basis whether the Cybersecurity Solutions should be updated to ensure continued effectiveness and industry- standard protections. The Company shall also educate its employees about the proper use and storage of sensitive information, including regular training as determined reasonably necessary by the Company or its Board of Directors.
5.11 Termination of Covenants. The covenants set forth in this Section 5, except for Subsections 5.6, 5.7 and 5.8, shall terminate and be of no further force or effect (i) immediately before the consummation of the Qualified Public Offering, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first.
23
5.12 Reservation of Common Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the conversion of the Preferred Stock, all Common Stock issuable from time to time upon such conversion.
5.13 Foreign Corrupt Practices Act. The Company represents that it shall not, and shall not permit any of its subsidiaries or Affiliates or any of its or their respective directors, officers, managers, employees, independent contractors, representatives or agents to, promise, authorize or make any payment, or otherwise provide any item of value, directly or indirectly, to any foreign official or any foreign political party or official thereof or candidate for foreign political office in violation of the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act 2010, or any other applicable anti-bribery or anti-corruption law. The Company further represents that it shall, and shall cause each of its subsidiaries and Affiliates to, cease all of its or their respective activities, as well as remediate any actions taken by the Company, its subsidiaries or Affiliates, or any of their respective directors, officers, managers, employees, independent contractors, representatives or agents in violation of the FCPA, the U.K. Bribery Act 2010, or any other applicable anti-bribery or anti-corruption law. The Company further represents that it shall use commercially reasonable efforts to–for itself and each of its subsidiaries and Affiliates, maintain systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with the FCPA, the U.K. Bribery Act 2010 and other applicable anti-bribery or anti-corruption law. Upon request, the Company agrees to provide responsive information and/or certifications concerning its compliance with applicable anti-corruption laws. The Company shall promptly notify each Investor if the Company becomes aware of any enforcement action by a government agency with respect to FCPA. The Company shall, and shall cause any direct or indirect subsidiary or entity controlled by it, whether now in existence or formed in the future, to comply with the FCPA. The Company shall use its best efforts to cause any direct or indirect subsidiary, whether now in existence or formed in the future, to comply in all material respects with all applicable laws.
5.14 Defense Production Act. To the extent that the Company engages in the design, fabrication, development, testing, production or manufacture of critical technologies within the meaning of the Defense Production Act of 1950, as amended, including all implementing regulations thereof, whether because of a new categorization of technology by the U.S. government or otherwise, the Company shall promptly provide notice to each Major Investor.
6. | Miscellaneous. |
6.1 Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; or (iii) after such transfer, holds at least 1,000,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations); provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Subsection 2.11. For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall, as a condition to the applicable transfer, establish a single attorney-in- fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.
24
6.2 Governing Law. This Agreement shall be governed by the internal law of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Delaware.
6.3 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
6.4 Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.
6.5 | Notices. |
(a) All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on such party’s signature page hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Subsection 6.5. If notice is given to the Company, a copy shall also be sent to Brown Rudnick LLP, One Financial Center, Boston, MA 02111, Attn: Michael J. Cohen, Esq., and if notice is given to Stockholders,a copy (which shall not constitute notice) shall also be given to Brian Covotta, O’Melveny & Myers LLP, 2765 Sand Hill Rd., Menlo Park, CA 94025.
25
(b) Consent to Electronic Notice. Each Investor consents to the delivery of any stockholder notice pursuant to the Delaware General Corporation Law (the “DGCL”), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (or any successor thereto) at the electronic mail address or the facsimile number set forth below such Investor’s name on the Schedules hereto, as updated from time to time by notice to the Company, or as on the books of the Company. To the extent that any notice given by means of electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted electronic transmission shall be ineffective and deemed to not have been given. Each Investor agrees to promptly notify the Company of any change in such stockholder’s electronic mail address, and that failure to do so shall not affect the foregoing.
6.6 Amendments and Waivers. Any term of this Agreement may be amended, modified or terminated and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the Requisite Holders; provided that the Company may in its sole discretion waive compliance with Subsection 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Subsection 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, (a) this Agreement may not be amended, modified or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, modification, termination, or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction; provided, however, that if, after giving effect to such waiver of Section 4 with respect to a particular transaction, a Major Investor purchases securities in such transaction or issuance (such Major Investor, a “Participating Investor”), such waiver of the provisions of Section 4 shall be deemed to apply to each other Major Investor whose rights were waived or amended only if such other Major Investor has been provided the opportunity to purchase a proportional number of the New Securities being offered by the Company in such transaction based on the pro rata purchase right of such other Major Investor set forth in Section 4, assuming a transaction size determined based upon the amount purchased by the Participating Investor that invested the largest percentage in such transaction, it being agreed that such opportunity may be provided subsequent to the initial closing in which such Participating Investor(s) purchase securities) and (b) Subsections 3.1 and 3.2, Section 4 and any other section of this Agreement applicable to the Major Investors (including this clause (b) of this Subsection 6.6) may not be amended, modified, terminated or waived without the written consent of the holders of at least sixty-five percent (65%) of the Registrable Securities then outstanding and held by the Major Investors. Notwithstanding the foregoing, Schedule A hereto may be amended by the Company from time to time to add transferees of any Registrable Securities in compliance with the terms of this Agreement without the consent of the other parties; and Schedule A hereto may also be amended by the Company after the date of this Agreement without the consent of the other parties to add information regarding any additional Investor who becomes a party to this Agreement in accordance with Subsection 6.9. The Company shall give prompt notice of any amendment, modification or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, modification, termination, or waiver. Any amendment, modification, termination, or waiver effected in accordance with this Subsection 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
26
6.7 Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.
6.8 Aggregation of Stock. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated Persons may apportion such rights as among themselves in any manner they deem appropriate.
6.9 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Company’s Series A Preferred Stock after the date hereof, whether pursuant to the Purchase Agreement or otherwise, any purchaser of such shares of Series A Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder. No action or consent by the Investors shall be required for such joinder to this Agreement by such additional Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor” hereunder.
6.10 Entire Agreement. This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.
6.11 Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
27
6.12 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
6.13 Acknowledgment. The Company acknowledges that the Investors are in the business of venture capital or asset management investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company. Nothing in this Agreement shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.
6.14 Attorneys’ Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the non-prevailing party shall pay all costs and expenses incurred by the prevailing party, including, without limitation, all reasonable attorneys’ fees.
[Remainder of Page Intentionally Left Blank]
28
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
AEROVATE THERAPEUTICS INC. | ||
By: | /s/ Benjamin Dake | |
Name: | Benjamin Dake | |
Title: | President |
Signature Page to Investors’ Rights Agreement
| |
INVESTORS: | |
RA CAPITAL HEALTHCARE FUND, L.P. | |
By: RA Capital Healthcare Fund GP, LLC Its General Partner |
By: | /s/ Peter Kolchinsky | |
Name: Peter Kolchinsky | ||
Title: Manager |
Address: | ||
BLACKWELL PARTNERS LLC - SERIES A |
By: | /s/ Jannine M. Lall | |
Name: Jannine M. Lall | ||
Title: Head of Finance & Controller DUMAC, Inc., Authorized Signatory | ||
By: | /s/ Abayomi A. Adigun | |
Name: Abayomi A. Adigun | ||
Title: Authorized Signatory Title: Investment Manager DUMAC, Inc. Authorized Signatory |
Address: | ||
RA CAPITAL NEXUS FUND, L.P. |
By: RA Capital Nexus Fund GP, LLC
Its: General Partner | ||
By: | /s/ Peter Kolchinsky | |
Name: Peter Kolchinsky | ||
Title:Manager | ||
Address: | ||
Signature Page to Investors’ Rights Agreement
SOFINNOVA VENTURE PARTNERS X, L.P. |
By: Sofinnova Management X, L.L.C. | ||
Its: General Partner | ||
By: | /s / Maha Katabi | |
Name: Maha Katabi | ||
Title: Managing Member |
Address: | ||
CORMORANT PRIVATE HEALTHCARE FUND II, LP |
By: Cormorant Private Healthcare GP II, LLC | ||
Its: General Partner | ||
By: | /s/ Bihua Chen | |
Name: Bihua Chen | ||
Title: Managing Member | ||
Address: | ||
CORMORANT GLOBAL HEALTHCARE MASTER FUND, LP |
By: Cormorant Global Healthcare GP, LLC | ||
Its: General Partner | ||
By: | /s/ Bihua Chen | |
Name: Bihua Chen | ||
Title: Managing Member |
Address: | ||
SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT
ATLAS VENTURE FUND XII, L.P. |
By: Atlas Venture Associates XII, L.P. | ||
Its: General Partner | ||
By: Atlas Venture Associates XII, LLC | ||
Its: General Partner | ||
By: | /s/Ommer Chohan | |
Name: Ommer Chohan | ||
Title: CFO | ||
Address: | ||
Signature Page to Investors’ Rights Agreement
CITADEL MULTI-STRATEGY EQUITIES MASTER FUND LTD. |
By: Citadel Advisors LLC | ||
Its: Portfolio Manager | ||
By | /s/ Shellane Mulcahy | |
Name: | Shellane Mulcahy | |
Title: Authorized Signatory | ||
Address: | ||
OSAGE UNIVERSITY PARTNERS III, LP |
By: Osage University GP III, LLC | ||
Its: General Partner | ||
By: | /s/ William Harrington | |
Name: William Harrington | ||
Title: Managing Member |
Address: | ||
Signature Page to Investors’ Rights Agreement
SCHEDULE A
Investors
RA CAPITAL HEALTHCARE FUND, L.P.
BLACKWELL PARTNERS LLC – SERIES A
RA CAPITAL NEXUS FUND, L.P.
SOFINNOVA VENTURE PARTNERS X, L.P.
CORMORANT PRIVATE HEALTHCARE FUND II, LP
CORMORANT GLOBAL HEALTHCARE MASTER FUND, LP
ATLAS VENTURE FUND XII, L.P.
CITADEL MULTI-STRATEGY EQUITIES MASTER FUND LTD.
OSAGE UNIVERSITY PARTNERS III, LP
Exhibit 10.1
AEROVATE THERAPEUTICS INC.
2018 EQUITY INCENTIVE PLAN
1. Purpose and Eligibility. The purpose of this 2018 Equity Incentive Plan (the “Plan”) of AEROVATE THERAPEUTICS INC., a Delaware corporation (the “Company”) is to provide stock options, stock issuances and other equity interests in the Company (each, an “Award”) to (a) employees, officers, directors, consultants and advisors of the Company and its Affiliates, Parents and Subsidiaries, and (b) any other Person who is determined by the Board to have made (or is expected to make) contributions to the Company. Any person to whom an Award has been granted under the Plan is called a “Participant.” Additional definitions are contained in Section 10.
2. Administration
a. Administration by Board of Directors. The Plan will be administered by the Board of Directors of the Company (the “Board”). The Board, in its sole discretion, shall have the authority to grant and amend Awards, to adopt, amend and repeal rules relating to the Plan and to interpret and correct the provisions of the Plan and any Award. The Board shall have authority, subject to the express limitations of the Plan, (i) to construe and determine the respective Award Agreement, Awards and the Plan, (ii) to prescribe, amend and rescind rules and regulations relating to the Plan and any Awards, (iii) to determine the terms and provisions of the respective Award Agreements and Awards, which need not be identical, (iv) to initiate an Option Exchange Program, and (v) to make all other determinations in the judgment of the Board of Directors necessary or desirable for the administration and interpretation of the Plan. The Board may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award Agreement or Award in the manner and to the extent it shall deem expedient to carry the Plan, any Award Agreement or Award into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be final and binding on all interested persons. Neither the Company nor any member of the Board shall be liable for any action or determination relating to the Plan.
b. Appointment of Committee. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). If so delegated, all references in the Plan to the “Board” shall mean such Committee or the Board.
c. Delegation to Executive Officers. To the extent permitted by applicable law, the Board may delegate to one or more executive officers of the Company the power to grant Awards and exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the maximum number of Awards to be granted and the maximum number of shares issuable to any one Participant pursuant to Awards granted by such executive officers.
3. Stock Available for Awards.
a. Number of Shares. Subject to adjustment under Section 3(b), the aggregate number of shares of Common Stock that may be issued pursuant to the Plan is the Available Shares (as specified on the last page hereof). If any Award expires, or is terminated, surrendered or forfeited, in whole or in part, the unissued Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. If an Award granted under the Plan shall expire or terminate for any reason without having been exercised in full, the unpurchased shares subject to such Award shall again be available for subsequent Awards under the Plan, and if shares of Common Stock issued pursuant to the Plan are repurchased by, or are surrendered or forfeited to, the Company at no more than the price paid for such shares, such shares of Common Stock shall again be available for the grant of Awards under the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.
b. Adjustment to Common Stock. Subject to Section 7, in the event of any stock split, reverse stock split, stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off, split-up, or other similar change in capitalization or similar event, (i) the number and class of Available Shares and the per-Participant share limit, (ii) the number and class of securities, vesting schedule and exercise price per share subject to each outstanding Option, (iii) the repurchase price per security subject to repurchase, and (iv) the terms of each other outstanding Award shall be adjusted by the Company (or substituted Awards may be made, if applicable) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is appropriate. Any such adjustment to outstanding Awards will be effected in a manner that precludes the enlargement of rights and benefits under such Awards.
4. Stock Options.
a. General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option and the shares of Common Stock issued upon the exercise of each Option, including, but not limited to, vesting provisions, repurchase provisions and restrictions relating to applicable federal or state securities laws. Each Option will be evidenced by an Award Agreement, consisting of a Notice of Stock Option Award and Stock Option Award Terms (collectively, an “Award Agreement”).
b. Incentive Stock Options. An Option that the Board intends to be an incentive stock option (an “Incentive Stock Option”) as defined in Section 422 of the Code, as amended, or any successor statute (“Section 422”), shall be granted only to an employee of the Company and shall be subject to and shall be construed consistently with the requirements of Section 422 and regulations thereunder. The Board and the Company shall have no liability if an Option or any part thereof that is intended to be an Incentive Stock Option does not qualify as such. An Option or any part thereof that does not qualify as an Incentive Stock Option is referred to herein as a “Nonstatutory Stock Option” or “Nonqualified Stock Option.”
-2 - |
c. Dollar Limitation. For so long as the Code shall so provide, Options granted to any employee under the Plan (and any other incentive stock option plans of the Company) which are intended to qualify as Incentive Stock Options shall not qualify as Incentive Stock Options to the extent that such Options, in the aggregate, become exercisable for the first time in any one calendar year for shares of Common Stock with an aggregate Fair Market Value (as defined below) (determined as of the respective date or dates of grant) of more than $100,000. The amount of Incentive Stock Options which exceed such $100,000 limitation shall be deemed to be Nonqualified Stock Options. For the purpose of this limitation, unless otherwise required by the Code or regulations of the Internal Revenue Service or determined by the Board, Options shall be taken into account in the order granted, and the Board may designate that portion of any Incentive Stock Option that shall be treated as Nonqualified Option in the event that the provisions of this paragraph apply to a portion of any Option. The designation described in the preceding sentence may be made at such time as the Committee considers appropriate, including after the issuance of the Option or at the time of its exercise.
d. Exercise Price. The Board shall establish the exercise price (or determine the method by which the exercise price shall be determined) at the time each Option is granted and specify the exercise price in the applicable Award Agreement, provided, however, in no event may the per share exercise price of an Option be less than the Fair Market Value of the Common Stock on the date such Option is granted, except in accordance with Section 7. In the case of an Incentive Stock Option granted to a Participant who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company, then the exercise price shall be no less than 110% of the Fair Market Value of the Common Stock on the date of grant. In the case of a grant of an Incentive Stock Option to any other Participant, the exercise price shall be no less than 100% of the Fair Market Value of the Common Stock on the date of grant.
e. Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable Award Agreement; provided, that the term of any Incentive Stock Option may not be more than ten (10) years from the date of grant. In the case of an Incentive Stock Option granted to a Participant who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company, the term of the Option shall be no longer than five (5) years from the date of grant.
f. Exercise of Option. Options may be exercised only by delivery to the Company of a written notice of exercise signed by the proper person together with payment in full as specified in Section 4(g) and the Award Agreement for the number of shares for which the Option is exercised.
g. Payment Upon Exercise. Common Stock purchased upon the exercise of an Option shall be paid for by one or any combination of the following forms of payment as permitted by the Board in its sole and absolute discretion:
i. by check payable to the order of the Company;
ii. only if the Common Stock is then publicly traded, by delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price, or delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price;
-3 - |
iii. to the extent explicitly provided in the applicable Award Agreement, by delivery of shares of Common Stock owned by the Participant valued at Fair Market Value;
iv. by delivery of a promissory note of the Participant, with full recourse to the Participant, to the Company (and delivery to the Company by the Participant of a check in an amount equal to the par value of the shares purchased); or
v. payment of such other lawful consideration as the Board may determine.
Except as otherwise expressly set forth in a Award Agreement, the Board shall have no obligation to accept consideration other than cash and in particular, unless the Board so expressly provides, in no event will the Company accept the delivery of shares of Common Stock that have not been owned by the Participant at least six months prior to the exercise. The fair market value of any shares of the Company's Common Stock or other non-cash consideration which may be delivered upon exercise of an Option shall be determined in such manner as may be prescribed by the Board.
h. Acceleration, Extension, Etc. The Board may, in its sole discretion, and in all instances subject to any relevant tax and accounting considerations which may adversely impact or impair the Company, (i) accelerate the date or dates on which all or any particular Options or Awards granted under the Plan may be exercised, or (ii) extend the dates during which all or any particular Options or Awards granted under the Plan may be exercised or vest.
i. Determination of Fair Market Value. If, at the time an Option is granted under the Plan, the Company's Common Stock is publicly traded under the Exchange Act, “Fair Market Value” shall mean (i) if the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq Small Cap Market of The Nasdaq Stock Market, its fair market value shall be the last reported sales price for such stock (on that date) or the closing bid, if no sales were reported as quoted on such exchange or system as reported in The Wall Street Journal or such other source as the Board deems reliable; or (ii) the average of the closing bid and asked prices last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not reported on a national market system. In the absence of an established market for the Common Stock, the fair market value thereof shall be determined in good faith by the Board after taking into consideration all factors which it deems appropriate.
-4 - |
5. Restricted Stock
a. Grants. The Board may grant Awards to Participants of restricted shares of Common Stock, subject to (i) delivery to the Company by the Participant of (a) a check in an amount at least equal to the par value of the shares purchased or (b) by delivery of a promissory note of the Participant, with full recourse to the Participant, to the Company; or (c) any other form of consideration acceptable to the Board in its sole discretion, and (ii) the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award (each, a “Restricted Stock Award”).
b. Terms and Conditions. The Board shall determine the terms and conditions of any such Restricted Stock Award. Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). After the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or, if the Participant has died, to the beneficiary designated by a Participant, in a manner determined by the Board, to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant’s estate.
6. Other Stock-Based Awards. The Board shall have the right to grant other Awards based upon the Common Stock having such terms and conditions as the Board may determine, including, without limitation, the grant of shares based upon certain conditions, the grant of securities convertible into Common Stock and the grant of stock appreciation rights, phantom stock awards or stock units.
7. General Provisions Applicable to Awards.
a. Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant; provided, however, except as the Board may otherwise determine or provide in an Award, that Nonstatutory Stock Options and Restricted Stock Awards may be transferred pursuant to a qualified domestic relations order (as defined in Employee Retirement Income Security Act of 1974, as amended) or to a grantor-retained annuity trust or a similar estate-planning vehicle in which the trust is bound by all provisions of the Award Agreement and Restricted Stock Award, which are applicable to the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.
b. Documentation. Each Award under the Plan shall be evidenced by a written instrument in such form as the Board shall determine or as executed by an officer of the Company pursuant to authority delegated by the Board. Each Award may contain terms and conditions in addition to those set forth in the Plan, provided that such terms and conditions do not contravene the provisions of the Plan or applicable law.
-5 - |
c. Board Discretion. The terms of each type of Award need not be identical, and the Board need not treat Participants uniformly.
d. Additional Award Provisions. The Board may, in its sole discretion, include additional provisions in any Award Agreement, Restricted Stock Award or other Award granted under the Plan, including without limitation restrictions on transfer, repurchase rights, commitments to pay cash bonuses, to make, arrange for or guaranty loans or to transfer other property to Participants upon exercise of Awards, or transfer other property to Participants upon exercise of Awards, or such other provisions as shall be determined by the Board; provided that such additional provisions shall not be inconsistent with any other term or condition of the Plan or applicable law.
e. Termination of Status. The Board shall determine the effect on an Award of the disability (as defined in Code Section 22(e)(3)), death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant's legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award, subject to applicable law and the provisions of the Code related to Incentive Stock Options.
f. Change of Control of the Company
i. Unless otherwise expressly provided in the applicable Award Agreement or Restricted Stock Award or other Award, in connection with the occurrence of a Change of Control (as defined below), the Board shall, in its sole discretion as to any outstanding Award (including any portion thereof; on the same basis or on different bases, as the Board shall specify), take one or any combination of the following actions:
A. make appropriate provision for the continuation of such Award by the Company or the assumption of such Award by the surviving or acquiring entity and by substituting on an equitable basis for the shares then subject to such Award either (x) the consideration payable with respect to the outstanding shares of Common Stock in connection with the Change of Control, (y) shares of stock of the surviving or acquiring corporation or (z) such other securities as the Board deems appropriate, the Fair Market Value of which shall not materially differ from the Fair Market Value of the shares of Common Stock subject to such Award immediately preceding the Change of Control (as determined by the Board in its sole discretion);
B. accelerate the date of exercise or vesting of such Award;
C. permit the exchange of such Award for the right to participate in any stock option or other employee benefit plan of any successor corporation; or
D. provide for the repurchase of the Award for an amount equal to the difference of (i) the consideration received per share for the securities underlying the Award in the Change of Control minus (ii) the per share exercise price of such securities. Such amount shall be payable in cash or the property payable in respect of such securities in connection with the Change of Control. The value of any such property shall be determined by the Board in its discretion.
-6 - |
E. provide for the termination of such Award immediately prior to the consummation of the Change of Control; provided that no such termination will be effective if the Change of Control is not consummated.
F. For the purpose of this Agreement, a “Change of Control” shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the then outstanding shares of voting stock of the Company (the “Voting Stock”); provided, however, that any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries of 50% or more of Voting Stock shall not constitute a Change of Control; and provided, further, that any acquisition by a corporation with respect to which, following such acquisition, more than 50% of the then outstanding shares of common stock of such corporation, is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the Voting Stock immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Voting Stock, shall not constitute a Change of Control; and provided, further that the acquisition of 50% or more of the Voting Stock pursuant to a transaction, the primary purpose of which was to effect an equity financing of the Company, shall not constitute a Change of Control; or |
(b) The consummation of (i) a reorganization, merger or consolidation (any of the foregoing, a “Merger”), in each case, with respect to which the individuals and entities who were the beneficial owners of the Voting Stock immediately prior to such Merger do not, following such Merger, beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock of the corporation resulting from the Merger (the “Resulting Corporation”) as a result of the individuals’ and entities’ shareholdings in the Company immediately prior to the consummation of the Merger and without regard to any of the individual’s and entities’ shareholdings in the Resulting Corporation immediately prior to the consummation of the Merger, (ii) a complete liquidation or dissolution of the Company or (iii) the sale or other disposition of all or substantially all of the assets of the Company, excluding a sale or other disposition of assets to a subsidiary of the Company. |
-7 - |
g. Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Board shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction. The Board in its sole discretion may provide for a Participant to have the right to exercise his or her Award until fifteen (15) days prior to such transaction as to all of the shares of Common Stock covered by the Option or Award, including shares as to which the Option or Award would not otherwise be exercisable, which exercise may in the sole discretion of the Board, be made subject to and conditioned upon the consummation of such proposed transaction. In addition, the Board may provide that any Company repurchase option applicable to any shares of Common Stock purchased upon exercise of an Option or Award shall lapse as to all such shares of Common Stock, provided the proposed dissolution and liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Award will terminate upon the consummation of such proposed action.
h. Assumption of Options Upon Certain Events. In connection with a merger or consolidation of an entity with the Company, the acquisition by the Company of property or stock of an entity, a corporate transaction, within the meaning of Treasury Regulation 1.424-1(a)(3), involving the Company, or an Affiliate, Parent or Subsidiary, or as otherwise may be permitted by Section 409A of the Code, the Board may grant Awards under the Plan in substitution for stock and stock-based awards issued by such entity or an affiliate thereof. The substitute Awards shall be granted on such terms and conditions as the Board considers appropriate in the circumstances.
i. Parachute Payments and Parachute Awards. Notwithstanding the provisions of Section 7(f), if, in connection with a Change of Control described therein, a tax under Section 4999 of the Code would be imposed on the Participant (after taking into account the exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of the Code), then the number of Awards which shall become exercisable, realizable or vested as provided in such Section shall be reduced (or delayed), to the minimum extent necessary, so that no such tax would be imposed on the Participant (the Awards not becoming so accelerated, realizable or vested, the “Parachute Awards”); provided, however, that if the “aggregate present value” of the Parachute Awards would exceed the tax that, but for this sentence, would be imposed on the Participant under Section 4999 of the Code in connection with the Change of Control, then the Awards shall become immediately exercisable, realizable and vested without regard to the provisions of this sentence. For purposes of the preceding sentence, the “aggregate present value” of an Award shall be calculated on an after-tax basis (other than taxes imposed by Section 4999 of the Code) and shall be based on economic principles rather than the principles set forth under Section 280G of the Code and the regulations promulgated thereunder. All determinations required to be made under this Section 7(i) shall be made by the Company.
j. Amendment of Awards. The Board may amend, modify or terminate any outstanding Award including, but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant's consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant.
-8 - |
k. Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company's counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.
l. Acceleration. The Board may at any time provide that any Options shall become immediately exercisable in full or in part, that any Restricted Stock Awards shall be free of some or all restrictions, or that any other stock-based Awards may become exercisable in full or in part or free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be, despite the fact that the foregoing actions may (i) cause the application of Sections 280G and 4999 of the Code if a Change of Control of the Company occurs, or (ii) disqualify all or part of the Option as an Incentive Stock Option.
m. Time of Granting Awards. The grant of an Award shall, for all purposes, be the date on which the Company completes the corporate action relating to the grant of such Award and all conditions to the grant have been satisfied, provided that conditions to the grant, exercise or vesting of an Award shall not defer the date of grant. Notice of a grant shall be given to each Participant to whom an Award is so granted within a reasonable time after the determination has been made.
n. Participation in Foreign Countries. The Board shall have the authority to adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Subsidiaries may operate to assure the viability of the benefits from Awards granted to Participants performing services in such countries and to meet the objectives of the Plan.
8. Withholding. The Company shall have the right to deduct from payments of any kind otherwise due to the optionee or recipient of an Award any federal, state or local taxes of any kind required by law to be withheld with respect to any shares issued upon exercise of Options under the Plan or the purchase of shares subject to the Award. Subject to the prior approval of the Company, which may be withheld by the Company in its sole discretion, the optionee or recipient of an Award may elect to satisfy such obligation, in whole or in part, (a) by causing the Company to withhold shares of Common Stock otherwise issuable pursuant to the exercise of an Option or the purchase of shares subject to an Award or (b) by delivering to the Company shares of Common Stock already owned by the optionee or Award recipient of an Award. The shares so delivered or withheld shall have a Fair Market Value of the shares used to satisfy such withholding obligation as shall be determined by the Company as of the date that the amount of tax to be withheld is to be determined. An optionee or recipient of an Award who has made an election pursuant to this Section may only satisfy his or her withholding obligation with shares of Common Stock which are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
-9 - |
9. No Exercise of Option if Engagement or Employment Terminated for Cause. If the employment or engagement of any Participant is terminated “for Cause”, the Award may terminate, upon a determination of the Board, on the date of such termination and the Option shall thereupon not be exercisable to any extent whatsoever and the Company shall have the right to repurchase any shares of Common Stock subject to a Restricted Stock Award whether or not such shares have vested. For purposes of this Section 9, “for Cause” shall be defined as follows: (i) if the Participant has executed an employment agreement, the definition of “cause” contained therein, if any, shall govern, or (ii) conduct, as determined by the Board of Directors, involving one or more of the following: (a) gross misconduct or inadequate performance by the Participant which is injurious to the Company; or (b) the commission of an act of embezzlement, fraud or theft, which results in economic loss, damage or injury to the Company; or (c) the unauthorized disclosure of any trade secret or confidential information of the Company (or any client, customer, supplier or other third party who has a business relationship with the Company) or the violation of any noncompetition or nonsolicitation covenant or assignment of inventions obligation with the Company; or (d) the commission of an act which constitutes unfair competition with the Company or which induces any customer or prospective customer of the Company to breach a contract with the Company or to decline to do business with the Company; or (e) the indictment of the Participant for a felony or serious misdemeanor offense, either in connection with the performance of his or her obligations to the Company or which shall adversely affect the Participant's ability to perform such obligations; or (f) the commission of an act of fraud or breach of fiduciary duty which results in loss, damage or injury to the Company; or (g) the failure of the Participant to perform in a material respect his or her employment, consulting or advisory obligations without proper cause. In making such determination, the Board shall act fairly and in utmost good faith. The Board may in its discretion waive or modify the provisions of this Section at a meeting of the Board with respect to any individual Participant with regard to the facts and circumstances of any particular situation involving a determination under this Section.
10. Miscellaneous.
a. Definitions.
i. “Affiliate” means any corporation or trade or business under common control with the Company, within the meaning of Section 414(c) of the Code, or in a controlled group of corporations with the Company, within the meaning of Section 414(b) of the Code.
ii. “Common Stock” means the common stock, par value $0.0001, per share, of the Company.
iii. “Company” means AEROVATE THERAPEUTICS INC. For purposes of eligibility under the Plan, shall include any Affiliate, Parent or Subsidiary of AEROVATE THERAPEUTICS INC. For purposes of Awards of Incentive Stock Options, the term “Company” shall include a Parent or Subsidiary, as determined on the date of an applicable Award. For purposes of Awards other than Incentive Stock Options, the term “Company” shall include any other business venture in which the Company has a direct or indirect significant interest, as determined by the Board in its sole discretion.
iv. “Code” means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder.
-10 - |
v. “Effective Date” means the date the Plan is adopted by the Company’s Board of Directors.
vi. “Employee” for purposes of eligibility under the Plan shall include a person to whom an offer of employment has been extended by the Company.
vii. “Option Exchange Program” means a program whereby outstanding options are exchanged for options with a lower exercise price.
viii. “Parent” means a parent corporation, as defined in Section 424(e) of the Code.
ix. “Subsidiary” means a subsidiary corporation, as defined in Section 424(f) of the Code.
b. No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan.
c. No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder thereof.
d. Compliance with Law. The Company shall not be required to sell or issue any shares of Common Stock under any Award if the sale or issuance of such shares would constitute a violation by the Participant, any other individual exercising an Option, or the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulation. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any share subject to an Award up on any security exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares hereunder, no shares of Common Stock may be issued or sold to the Participant or any other individual exercising an Option pursuant to such Award unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way effect the date of termination of the Award. Any determination in this connection by the Board shall be final, binding and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or the issuance of shares of Common Stock pursuant to the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes that a Option shall not be exercised until the shares of Common Stock covered by such Option are registered or exempt from registration, the exercise of such Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned up on the effectiveness of such registration or availability of such an exemption.
-11 - |
e. Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board. No Awards shall be granted under the Plan after the completion of ten years from the date on which the Plan was adopted by the Board, but Awards previously granted may extend beyond that date.
f. Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time.
g. Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law principles.
-12 - |
Approvals
Original Plan:
Available Shares: |
250,000
|
Adopted by the Board of Directors on: | August 3, 2018
|
Approved by the Stockholders on: | August 3, 2018 |
-13 - |
AEROVATE THERAPEUTICS INC.
2018 EQUITY INCENTIVE PLAN
RESTRICTED STOCK NOTICE
This Restricted Stock Notice (the “Notice”) incorporates herein by reference the Aerovate Therapeutics Inc. 2018 Equity Incentive Plan (the “Plan”) and the attached Restricted Stock Terms (together, the “Agreement).
Participant (the “Participant”)
[NAME]
Address:
_________________
_________________
Restricted Stock: In connection with Participant’s engagement with Aerovate Therapeutics Inc. (the “Company”) as an [TYPE OF ENGAGEMENT] (the “Engagement”), the Participant has been granted a right to purchase shares of common stock of the Company and hereby does agree to purchase such shares, subject to the terms and conditions of this Agreement, as follows:
Total Number of Shares (the “Restricted Shares”):
|
[SHARE #] |
Purchase Price per Share |
[PRICE PER SHARE] |
Date of Purchase:
|
[DATE] | Aggregate Purchase Price | [TOTAL PRICE] |
Vesting Commencement Date: | [VESTING DATE] |
Vesting Schedule: The Participant’s right to retain the Restricted Shares shall vest and the Repurchase Right (as defined below) shall lapse according to the following schedule:
Number of Months (Years) from Vesting Commencement Date
|
% of Grant (or # of Shares) Vested |
Vesting of the Restricted Shares shall cease upon the later to occur of the termination of (i) the Engagement, (ii) the Participant engagement as a consultant to the Company or (iii) the Participants engagement as an employee of the Company. Each of (i), (ii) and (iii) above a “Business Relationship.”
Participant | Company: AEROVATE THERAPEUTICS INC. | ||
By | |||
[NAME] | Name: | ||
Title: | |||
Residence Address |
-14 - |
AEROVATE THERAPEUTICS INC.
RESTRICTED STOCK TERMS
ARTICLE 1.
1.1 Purchase of Shares. The Participant shall purchase on the Date of Purchase the Restricted Shares, subject to the terms and conditions set forth in this Agreement and the terms and conditions of the Aerovate Therapeutics Inc. 2018 Equity Incentive Plan, and at the purchase price per Restricted Share listed on the Notice. The aggregate purchase price for the Restricted Shares listed on the Notice shall be paid by the Participant in cash, or in the sole discretion of the Company, by the issuance of a promissory note in favor of the Company or its assigns indorsed by the Participant, by forgiveness of obligations owed to the Participant by the Company (provided that such forgiveness of such obligations must include a release of claims by the Participant against the Company with respect to such obligations), or in such other manner acceptable to the Company in its sole discretion. Upon receipt of the aggregate purchase price by the Company, the Company shall issue one or more certificates in the name of the Participant for the Restricted Shares. Participant understands and agrees that the Restricted Shares are subject to certain restrictions on transfer and voting, as set forth in the Bylaws of the Company.
1.2 Investment Representations. The Participant represents, warrants and covenants as follows:
(a) The Participant is acquiring the Restricted Shares for his own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Restricted Shares in violation of the Securities Act of 1933, as amended (the “Securities Act”), or any rule or regulation under the Securities.
(b) The Participant has had such opportunity as he has deemed adequate to obtain from representatives of the Company such information as is necessary to permit him to evaluate the merits and risks of an investment in the Company. The Participant acknowledges that certain of such information may be forward-looking and is therefore speculative and subject to known and unknown risks and uncertainties and other factors which may cause the actual performance of the Company to be materially and adversely different from any performance expressed or implied by such forward-looking statements.
(c) The Participant has sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in an investment in the Restricted Shares and to make an informed investment decision with respect to such investment.
(d) The Participant can afford the complete loss of the value of the Restricted Shares and is able to bear the economic risk of holding such Restricted Shares for an indefinite period of time.
(e) The Participant understands that (i) the Restricted Shares have not been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act; (ii) the Restricted Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available unless a public market then exists for the common stock, adequate information concerning the Company is then available to the public, and other terms and conditions of Rule 144 are complied with; and (iv) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Restricted Shares under the Securities Act or to create a public market for the Restricted Shares or its common stock.
ARTICLE 2. COMPANY REPURCHASE RIGHT; RIGHT OF FIRST REFUSAL
2.1 Vesting.
(a) On any given date, the Restricted Shares that have not vested in accordance with the schedule in the Notice (the “Schedule”) shall be referred to as the “Unvested Shares” and shall be subject to repurchase by the Company as provided herein (the “Repurchase Right”). On any given date, the Restricted Shares that shall have vested in accordance with the Schedule are referred to herein as the “Vested Shares”. Subject to the provisions of Section 2.1(b) hereof, in the event that the Business Relationship ceases for any reason or no reason or in the event of an Acquisition, the Company may repurchase (the “Repurchase Right”) from the Participant, (i) all or any portion of the Unvested Shares for the original purchase price indicated on the Notice (the “Issue Price”) and (ii) all or any portion of the Vested Shares for the then fair market value of such Vested Shares (as reasonably determined by the Company’s Board of Directors) (“Fair Market Value” and together with the Issue Price, the “Repurchase Price”). In no event shall the Repurchase Right obligate the Company to purchase from the Participant any Restricted Shares.
(b) For purposes of this Agreement, a Business Relationship with the Company shall include a Business Relationship with an affiliate of the Company (i.e., any business organization controlling, controlled by, or under common control with, the Company).
2.2 Exercise of Repurchase Right and Closing.
(a) The Company shall exercise the Repurchase Right by delivering or mailing to the Participant (or his estate), in accordance with Section 3.7, written notice of exercise within 90 days after the termination of the Relationship of the Participant with the Company.
(b) Within 10 days after his receipt of the Company’s notice of the exercise of the Repurchase Right pursuant to subsection (a) above, the Participant (or his estate) shall tender to the Company at its principal offices the certificate or certificates, if applicable, representing the Restricted Shares which the Company has elected to purchase, duly endorsed in blank by the Participant or with duly executed stock powers attached thereto, all in form suitable for the transfer of such Restricted Shares to the Company after which the Company shall deliver to Participant the Repurchase Price.
(c) After the time at which any Restricted Shares are required to be delivered to the Company for transfer to the Company pursuant to subsection (b) above, the Company shall not pay any dividend to the Participant on account of such Restricted Shares or permit the Participant to exercise any of the privileges or rights of a Participant with respect to such Restricted Shares, but shall, insofar as permitted by law, treat the Company as the owner of such Restricted Shares.
2 |
(d) The Company shall not purchase any fraction of a Restricted Share upon exercise of the Repurchase Right, and any fraction of a Restricted Share resulting from a computation made pursuant to Section 2.1 of this Agreement shall be rounded to the nearest whole Restricted Share (with any one-half Restricted Share being rounded upward).
2.3 Restrictions on Transfer. The Participant shall not, during the term of this Agreement, sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”), any of the Restricted Shares, or any interest therein; except Vested Shares may be transferred in compliance with Section 2.4 or 2.5 hereof.
2.4 Company’s Right of First Refusal.
(a) Exercise of Right: If the Participant or any Authorized Transferee (the “Transferor”) desires to transfer all or any part of the Vested Shares to any person other than the Company (an “Offeror”) the Transferor shall: (i) obtain in writing an irrevocable and unconditional bona fide offer (the “Offer”) for the purchase thereof from the Offeror; and (ii) give written notice (the “Transfer Notice”) to the Company setting forth the Participant’s desire to transfer such shares, which Transfer Notice shall be accompanied by a photocopy of the Offer and shall set forth at least the name and address of the Offeror and the price and terms of the bona fide offer. Upon receipt of the Transfer Notice, the Company shall have an assignable option to purchase any or all of such shares (the “Company Option Shares”) specified in the Transfer Notice, such option to be exercisable by giving, within 30 days after receipt of the Transfer Notice, a written counter-notice to the Transferor. If the Company elects to purchase any or all of such Company Option Shares, it shall be obligated to purchase, and the Participant shall be obligated to sell to the Company, such Company Option Shares at the price and terms indicated in the Offer within 30 days from the date of delivery by the Company of such counter-notice.
(b) Sale of Company Option Shares to Offeror: The Transferor may, for 60 days after the expiration of the 30-day period during which the Company may give the counter-notice, sell, pursuant to the terms of the Offer, any or all of such Company Option Shares not purchased or agreed to be purchased by the Company or its assignee; provided, however, that the Transferor shall not sell such Company Option Shares to the Offeror if the Offeror is a competitor of the Company and the Company gives written notice to the Transferor, within 30 days of its receipt of the Transfer Notice, stating that the Transferor shall not sell such Company Option Shares to such Offeror; and provided, further, that prior to the sale of such Company Option Shares to the Offeror, the Offeror shall execute an agreement with the Company pursuant to which the Offeror agrees to be subject to the restrictions set forth in this Section 2.4. If any or all of such Company Option Shares are not sold pursuant to an Offer within the time permitted above, the unsold Company Option Shares shall remain subject to the terms of this Section 2.4.
(c) Adjustments for Changes in Capital Structure: If there shall be any change in the common stock of the Company through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination or exchange of shares, or the like, the restrictions contained in this Section 2.4 shall apply with equal force to additional and/or substitute securities, if any, received by the Participant in exchange for, or by virtue of his or her ownership of, Company Option Shares.
3 |
(d) Expiration of Company’s Right of First Refusal: The first refusal rights of the Company set forth above shall remain in effect until such time, if ever, (i) as a distribution to the public is made of shares of the Company’s common stock pursuant to a registration statement filed under the Securities Act or a successor statute (a “Public Offering”), or (ii) as an Acquisition is consummated at which time the first refusal rights of the Company or any assignee set forth herein will automatically expire, provided however, that the Company’s Repurchase Right with respect to any Unvested Shares as set forth Section 2.1 shall remain in effect in connection with an Acquisition.
2.5 Authorized Transferees. Notwithstanding anything to the contrary set forth in Sections 2.3 and 2.4, but subject to the transfer restrictions of the Bylaws of the Company, the Participant may transfer Vested Shares to the following persons (hereinafter “Authorized Transferees”):
(a) the Participant as the sole trustee of a trust revocable by the Participant alone;
(b) a corporation of which the Participant owns, directly or indirectly, not less than a majority of the capital stock which is entitled to vote for the election of directors;
(c) the Participant’s executor, administrator, guardian, conservator or other legal representative; or
(d) the Participant’s spouse, or to any of his children or their issue (or to custodians for the benefit of minor children or issue) or transfers of Vested Shares of any such children to their issue (or custodians for the benefit of minor issue);
provided, that in any such case, the Authorized Transferee agrees in writing to be bound by the provisions of this Agreement.
2.6 Market “Stand-Off” Agreement. The Participant hereby agrees that, during the period of duration (not to exceed one hundred eighty (180) days) specified by the Company and an underwriter of common stock or other securities of the Company, following the effective date of a registration statement of the Company filed under the Act, such Participant shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by the Participant at any time during such period except shares included in such registration; provided, however, that all officers and directors of the Company enter into similar agreements. The market “stand-off” agreement established pursuant to this Section 2.6 shall have perpetual duration.
4 |
2.7 Transfers in Violation of Agreement. If any transfer of the Restricted Shares is made or attempted contrary to the provisions of this Agreement, the Company shall have the right to purchase the Restricted Shares from the owner thereof or his transferee at any time before or after the transfer, as herein provided. In the event that the Company elects to exercise its Repurchase Right or Right of First Refusal hereunder, it may do so by canceling the certificate(s) representing the Restricted Shares and depositing the purchase price, which shall be the Issue Price, in a bank account for the benefit of Participant, whereupon such Restricted Shares, as applicable, shall be, for all purposes, canceled and neither the Participant nor any transferee shall have any rights as one of its Participants with respect to such Restricted Shares for any purpose, including without limitation dividend and voting rights, until there has been compliance with all applicable provisions of this Agreement. In addition to any other legal or equitable remedies which it may have, the Company may enforce its rights by actions for specific performance (to the extent permitted by law).
2.8 Take-Along Agreement. If owners of more than 50% of the common stock of the Company (the “Majority Owners”) shall determine to sell or exchange (in a business combination or otherwise) their common stock to a third-party (“Proposed Transferee”), then upon the written request of the Majority Owners each Participant shall be obligated to and shall (i) sell, transfer and deliver to such Proposed Transferee the same percentage of the common stock as is being transferred by the Majority Owners, at the same price and upon the same terms, and (ii) if Participant approval is required, vote all common stock in favor of such transaction.
ARTICLE 3. MISCELLANEOUS
3.1 Adjustments for Stock Splits, Stock Dividends, etc. If from time to time during the term of the Repurchase Right there is any stock split-up, stock dividend, stock distribution or other reclassification of the common stock of the Company, any and all new, substituted or additional securities to which the Participant is entitled by reason of his or her ownership of the Restricted Shares shall be immediately subject to the Repurchase Right, the restrictions on transfer and the other provisions of this Agreement in the same manner and to the same extent as the Restricted Shares, and the Issue Price shall be appropriately adjusted.
3.2 Withholding Taxes.
(a) The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state or local taxes of any kind required by law to be withheld with respect to the purchase of the Restricted Shares by the Participant.
(b) If the Participant elects, in accordance with Section 83(b) of the Internal Revenue Code of 1986, as amended, to recognize ordinary income in the year of acquisition of the Restricted Shares, the Company will require at the time of such election an additional payment for withholding tax purposes based on the difference, if any, between the purchase price for such Restricted Shares and the fair market value of such Restricted Shares as of the date of the purchase of such Restricted Shares by the Participant.
3.3 No Rights to Relationship. Nothing contained in this Agreement shall be construed as giving the Participant any right to continue the Business Relationship.
5 |
3.4 Waiver; Disposition of Stock. From time to time the Company may waive its rights hereunder either generally or with respect to one or more specific transfers which have been proposed, attempted or made. All action to be taken by the Company hereunder shall be taken by vote of a majority of its disinterested members of the Board of Directors then in office. Any Restricted Shares which the Company has elected to purchase hereunder may be disposed of by the Board of Directors in such manner as it deems appropriate, with or without further restrictions upon the transfer thereof.
3.5 Restrictive Legends. All certificates representing Restricted Shares shall have affixed thereto legends in substantially the following form:
“The shares of stock represented by this certificate are subject to restrictions on transfer and an option to purchase set forth in a certain Restricted Stock Agreement between the corporation and the registered owner of this certificate (or his predecessor in interest), and such Agreement is available for inspection without charge at the office of the Secretary of the Corporation.”
“The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be sold, transferred or otherwise disposed of in the absence of an effective registration statement under such Act or an opinion of counsel satisfactory to the corporation to the effect that such registration is not required.”
3.6 Successors and Assigns; Assignment. This Agreement shall be binding upon the parties hereto and their heirs, representatives, successors and assigns. The Company may assign its rights hereunder either generally or from time to time.
3.7 Notices. All notices to a party hereto shall be in writing and shall be deemed to have been adequately given if delivered in person or if given by registered or certified mail, postage prepaid:
If to the Company:
Aerovate Therapeutics Inc.
20 Park Plaza, Suite 1200
Boston, MA 02116
Attention: President and Secretary
with a copy to:
Brown Rudnick LLP
One Financial Center
Boston, MA 02111
Attn: Michael J. Cohen, Esq.
6 |
If to the Participant: to the address on the Notice.
or to such other address as any party may from time to time designate for itself by notice in writing given to the other parties hereto.
3.8 Term and Termination. This Agreement (other than the provisions of Sections 2.4 through 2.7 hereof) shall remain in effect until the Repurchase Right and Right of First Refusal have expired under Sections 2.1 and 2.4 above.
3.9 Amendments. This Agreement may be amended or modified in whole or in part only by an instrument in writing signed by the Company and the Participant.
3.10 Entire Agreement. This Agreement constitutes the entire agreement between the parties, and all premises, representations, understandings, warranties and agreements with reference to the subject matter hereof have been expressed herein or in the documents incorporated herein by reference.
3.11 Applicable Law; Severability. This Agreement shall be governed by and construed and enforced in accordance with law of the State of Delaware. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision hereof shall be prohibited by or invalid under any such law, that provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or nullifying the remainder of that provision or any other provisions of this Agreement.
3.12 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed in original but all of which together shall constitute one and the same instrument.
3.13 Effect of Heading. Any table of contents, title of any article or section heading herein contained is for convenience or reference only and shall not affect the meaning of construction of any of the provisions hereof.
[END OF TERMS]
7 |
AEROVATE THERAPEUTICS INC.
2018 EQUITY INCENTIVE PLAN
NOTICE OF STOCK OPTION AWARD
Unless otherwise defined herein, the terms defined in the 2018 Equity Incentive Plan shall have the same meanings in this Notice of Stock Option Award and the attached Stock Option Award Terms, which is incorporated herein by reference (together, the “Award Agreement”).
Participant (the “Participant”)
«Name»
«Address»
Grant
The undersigned Participant has been granted an option to purchase Common Stock of Aerovate Therapeutics Inc. (the “Company”), subject to the terms and conditions of the Plan and this Award Agreement, as follows:
Date of Grant | «Grant_Date» | Total Exercise Price | $«Total_Exercise_Price» |
Vesting Commencement Date | «Vesting_Date» | Type of Option | ¨ Incentive Stock Option |
Exercise Price per Share | $«Exercise_Price» | ¨ Nonstatutory Stock Option | |
Total Number of Shares Granted | «Shares_Granted» | Term/Expiration Date | «Expiration_Date» |
Vesting Schedule:
This Option shall be exercisable, in whole or in part, according to the following vesting schedule:
Number of Months (or years) after Vesting Commencement Date |
% of Grant (or # of Shares) Vested |
Vesting of this Option shall cease upon the complete termination of the Relationship of the Participant with the Company.
[Describe Acceleration upon Change of Control IF APPROPRIATE]
Participant | Aerovate Therapeutics Inc. | |
Signature | By | |
Print Name | Title | |
Residence Address |
8 |
AEROVATE THERAPEUTICS INC.
STOCK OPTION
AWARD TERMS
1. | Grant of Option. The Committee hereby grants to the Participant named in the Notice of Stock Option Award an option (the “Option”) to purchase the number of Shares set forth in the Notice of Stock Option Award, at the exercise price per Share set forth in the Notice of Stock Option Award (the “Exercise Price”), and subject to the terms and conditions of the 2018 Equity Incentive Plan (the “Plan”), which is incorporated herein by reference. In the event of a conflict between the terms and conditions of the Plan and this Award Agreement, the terms and conditions of the Plan shall prevail. |
If designated in the Notice of Stock Option Award as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 limitation rule of Code Section 422(d) or otherwise fails to satisfy the rules of Code Section 422, this Option shall be treated as a Nonstatutory Stock Option (“NSO”).
2. Exercise of Option.
i. | Right to Exercise. This Option may be exercised during its term in accordance with the Vesting Schedule set out on the Notice of Stock Option Award and with the applicable provisions of the Plan and this Award Agreement. |
ii. | Method of Exercise. This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”) which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”), the Participant’s agreement to be subject to a right of first refusal with respect to Exercised Shares and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by payment of the aggregate Exercise Price. No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise complies with applicable laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Participant on the date on which the Option is exercised with respect to such Shares. |
3. | Termination. This Option shall be exercisable for three months after the Relationship ceases; provided, however, if the Relationship is terminated by the Company for cause, the Option shall terminate immediately. Upon Participant's death or Disability, this Option may be exercised for twelve (12) months after the Relationship ceases. In no event may Participant exercise this Option after the Term/Expiration Date as provided in the Notice of Stock Option Award. The “Relationship” shall mean the service relationship of the Participant, whether as an employee, officer, director, consultant, advisor, or otherwise, with the Company or its past, present, or future Affiliates, Parents or Subsidiaries, as applicable. For the avoidance of doubt, “Relationship” shall include any service relationship with Aerovate Therapeutics Inc. |
4. | Participant's Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended, (the “Securities Act”) at the time this Option is exercised and as a condition of such exercise, the Participant shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B. |
5. | Restrictions on Transfer. By executing this Award Agreement, the Participant acknowledges and agrees that as a condition to exercising this Option, the Shares acquired upon exercise of this Option shall be Shares subject to the terms and conditions of the Bylaws of the Company, which Bylaws impose transfer, voting and other restrictions on the Shares. |
6. | Lock-Up Period. Participant hereby agrees that, if so requested by the Company or any representative of the underwriters (the “Managing Underwriter”) in connection with any registration of the offering of any securities of the Company under the Securities Act, Participant shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period (or such other period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the “Market Standoff Period”) following the effective date of a registration statement of the Company filed under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period. |
7. | Take-Along Agreement. If owners of more than 50% of the common stock of the Company (the “Majority Owners”) shall determine to sell or exchange (in a business combination or otherwise) their common stock to a third-party (“Proposed Transferee”), then upon the written request of the Majority Owners each Participant shall be obligated to and shall (i) sell, transfer and deliver to such Proposed Transferee the same percentage of the Shares as is being transferred by the Majority Owners, at the same price and upon the same terms, and (ii) if Participant approval is required, vote all Shares in favor of such transaction. |
2 |
8. | Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable law. |
9. | Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant. The terms of the Plan and this Award Agreement shall be binding upon the executors, Committees, heirs, successors and assigns of the Participant. |
10. | Term of Option. This Option may be exercised only within the Term set out in the Notice of Stock Option Award which Term may not exceed ten (10) years from the Date of Grant, and may be exercised during such Term only in accordance with the Plan and the terms of this Award Agreement. |
11. | United States Tax Consequences. Set forth below is a brief summary as of the date of this Option of some of the United States federal tax consequences of exercise of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. |
i. | Exercise of ISO. If this Option qualifies as an Incentive Stock Option, there will be no regular federal income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as an adjustment to the alternative minimum tax for federal tax purposes and may subject the Participant to the alternative minimum tax in the year of exercise. |
ii. | Exercise of Nonstatutory Stock Option. There may be a regular federal income tax liability upon the exercise of a Nonstatutory Stock Option. The Participant will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If the Participant is an employee or a former employee, the Company will be required to withhold from the Participant's compensation or collect from the Participant and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise. |
3 |
iii. | Disposition of Shares. In the case of a Nonstatutory Stock Option, if Shares are held for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. In the case of an Incentive Stock Option, if Shares transferred pursuant to the Option are held for at least one year after exercise and for at least two years after the Date of Grant, any gain realized on disposition of the Shares will also be treated as long-term capital gain for federal income tax purposes. If Shares purchased under an Incentive Stock Option are disposed of within one year after exercise or two years after the Date of Grant, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price and the lesser of (1) the Fair Market Value of the Shares on the date of exercise, or (2) the sale price of the Shares. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the Incentive Stock Option Shares were held. |
iv. | Notice of Disqualifying Disposition of Incentive Stock Option Shares. If this Option is an Incentive Stock Option, and if the Participant sells or otherwise disposes of any of the Shares acquired pursuant to the Incentive Stock Option on or before the later of (1) the date two years after the Date of Grant, or (2) the date one year after the date of exercise, the Participant shall immediately notify the Company in writing of such disposition. The Participant agrees that the Participant may be subject to income tax withholding by the Company on the compensation income recognized by the Participant. |
v. | Withholding. Pursuant to applicable federal, state, local or foreign laws, the Company may be required to collect income or other taxes on the grant of this Option, the exercise of this Option, the lapse of a restriction placed on this Option or the Shares issued upon exercise of this Option, or at other times. The Company may require, at such time as it considers appropriate, that the Participant pay the Company the amount of any taxes which the Company may determine is required to be withheld or collected, and the Participant shall comply with the requirement or demand of the Company. In its discretion, the Company may withhold Shares to be received upon exercise of this Option or offset against any amount owed by the Company to the Participant, including compensation amounts, if in its sole discretion it deems this to be an appropriate method for withholding or collecting taxes. |
12. | Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified (except as provided herein and in the Plan) adversely to the Participant's interest except by means of a writing signed by the Company and Participant. This agreement is governed by the internal substantive laws but not the choice of law rules of the State of Delaware. |
4 |
13. | No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING IN THE RELATIONSHIP AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING ENGAGED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE THE RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE. |
Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Participant has reviewed the Plan, this Award Agreement and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Plan, this Award Agreement and this Option. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan, this Award Agreement or this Option. Participant further agrees to notify the Company upon any change in the residence address indicated above.
5 |
Exhibit 10.7
AEROVATE. INC.
c/o RA Capital Management
200 Berkeley Street, Boston, MA 02116
November 4, 2019
BY EMAIL
Ben Dake
Dear Ben:
We are pleased to extend you this offer of employment to serve as the President of Aerovate, Inc. (the "Company") on the terms set forth herein. This offer may be accepted by countersigning where indicated at the end of this letter agreement. For purposes of this letter agreement, we have agreed that your start date is January 1, 2020 (the "Start Date").
Duties and Extent of Senrice
As President of the Company, you will report directly to the Board of Directors of the Company (the "Board") and will have responsibility for performing those duties as are customary for, and are consistent with, your position with the Company, as well as those duties as the Board may from time to time designate. You will resign your current seat on the Company's Board. You agree to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may be adopted from time to time by the Company. Except for vacations and absences due to temporary illness, you will devote substantially all of your work time, attention and ability to the business and affairs of the Company. Notwithstanding the foregoing, you may manage your personal and family investments and engage in religious, charitable and other community activities so long as such activities do not interfere with your obligations to the Company.
Employment at Will
You and the Company understand and agree that you are an employee at-will, and that you may resign, or the Company may terminate your employment, at any time and for any or for no reason in accordance with the termination provisions set forth further below in this letter agreement. Nothing in this letter agreement shall be construed to alter the at-will nature of your employment, nor shall anything in this letter agreement be construed as providing you with a definite term of employment.
Compensation
Until the termination of your employment hereunder, in consideration for your services hereunder, we will compensate you as follows:
• Base Salary. We will pay you, in accordance with the Company's then current payroll practices, a base salary (the "Base Salary") at an annual rate of $200,000.
• Annual Bonus. You will be eligible to receive an annual discretionary bonus in an amount up to 30% of your Base Salary for the relevant year, pro-rated for any partial years. The determination of whether you will receive a discretionary bonus with respect to any given fiscal year of the Company, and the amount of any such discretionary bonus, shall be determined by the Board, in its discretion, after considering your performance and the Company's performance for such fiscal year. If you are awarded a discretionary bonus with respect to a given fiscal year of the Company, the Company will make payment of such discretionary bonus no later than March 31 of the next fiscal year of the Company. If you cease being an employee of the Company for any reason prior to the last day of a fiscal year of the Company, you shall forfeit your right to receive a discretionary bonus for such fiscal year.
• Equity Incentives. Subject to the approval of the Company's Board of Directors, the Company will grant you either a restricted stock or an option award (as you prefer) of shares of the Company's common stock representing 3% of the Company's current fully-diluted capitalization (the "Granted Shares") at the then-current fair market value. You will own 10% of the Granted Shares outright; the remaining 90% shall be subject to standard vesting terms (25% cliff at first anniversary of your Start Date and the balance monthly thereafter over the following thirty-six months, with double-trigger acceleration). This equity grant will be the subject of further agreements between you and the Company delineating in detail the applicable restrictions.
• Vacation. You will be entitled to vacation in accordance with the Company's vacation policy in effect from time to time. Any vacation shall be taken at the reasonable and mutual convenience of the Company and you.
• Benefits. You will also be entitled to participate in such benefits (including group medical insurance), if any, as the Company shall make generally available from time to time to executive-level employees and in such employee benefit plans and fringe benefits as may be offered or made available by the Company from time to time to its employees. The Board reserves the right from time to time to change or terminate the Company's employee benefit plans and fringe benefits. Your participation in such employee benefit plans and fringe benefits, and the amount and nature of the benefits to which you shall be entitled thereunder or in connection therewith, shall be subject to the terms and conditions of such employee benefit plans and fringe benefits.
• Expenses. Upon delivery of reasonable documentation, you will be entitled to reimbursement by the Company during the term of your employment for reasonable travel, entertainment and other business expenses incurred by you in the performance of your duties hereunder in accordance with the policies and practices as the Company may from time to time have in effect. In addition, the Company shall reimburse you (or pay directly) within 30 days following receipt of an invoice all legal fees reasonably incurred in connection with the negotiation of this Agreement, up to a cap of $1,500.00.
Severance
We appreciate that you are taking a risk by leaving your current employment to work for a start up. To that end, your Base Salary will be guaranteed for a period of twelve months from your Start Date (the "Severance Period") under all circumstances except termination for Cause. Should your employment be terminated (other than for Cause) prior to the end of the Severance Period, the only condition precedent to your receiving in a lump sum the remainder of your Base Salary that would have been payable through the end of the Severance Period will be your execution and delivery of a standard separation agreement including a general release. "Cause" shall mean any one or more of the following: (i) your intentional commission of an act, or intentional failure to act, that materially injures the business of the Company; provided, however, that in no event shall any business judgment made in good faith by you and constitute a basis for termination for Cause under this Agreement; (ii) your intentional refusal or intentional failure to act in accordance with any lawful and proper direction or order of the Board; (iii) your intentional and material breach of your fiduciary, statutory, contractual, or common law duties to the Company (including any material breach of this Agreement, the Proprietary Rights Agreement (as defined below), or the Company's written policies); (iv) your conviction, or the entry of a guilty plea or no contest by you, of any felony; or (v) your participation in any fraud against the Company; provided, however, that in the event that any of the foregoing events (identified in (i)-(v)) is reasonably capable of being cured, the Company shall provide written notice to you describing the nature of such event and you shall thereafter have ten (10) business days to cure such event.
Withholding Taxes
All payments and benefits described in this letter agreement or that you may otherwise be entitled or eligible to receive as a result of your employment with the Company will be subject to applicable federal, state and local tax withholdings.
409A Compliance
It is intended that all of the severance benefits and other payments payable under this letter agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code (the "Section 409A"), provided under Treasury Regulations 1.409A l(b)(4), 1.409A l(b)(S) and 1.409A 1(b)(9), and this letter agreement will be construed to the greatest extent possible as consistent with those provisions, and to the extent no so exempt, this letter agreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A. For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A 2(b)(2)(iii)), your right to receive any installment payments under this letter agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. Notwithstanding any provision to the contrary in this letter agreement, if you are deemed by the Company at the time of your "separation from service" under Section 409A to be a "specified employee" for purposes of Section 409A(a)(2)(B)(i), and if any of the payments upon separation from service set forth herein and/or under any other agreement with the Company are deemed to be "deferred compensation", then to the extent delayed commencement of any portion of such payments is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such payments shall not be provided to you prior to the earliest of (i) the expiration of the six-month and one day period measured from the date of your separation from service with the Company, or (ii) such earlier date as permitted under Section 409A without the imposition of adverse taxation. Upon the first business day following the expiration of such applicable Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this paragraph shall be paid in a lump sum to you, and any remaining payments due shall be paid as otherwise provided herein or in the applicable agreement. No interest shall be due on any amounts so deferred. If the Company determines that any severance benefits provided under this letter agreement constitutes "deferred compensation" under Section 409A, for purposes of determining the schedule for payment of the severance benefits, the effective date of the release will not be deemed to have occurred any earlier than the sixtieth (60th) date following the separation from service, regardless of when the release actually becomes effective. In addition to the above, to the extent required to comply with Section 409A and the applicable regulations and guidance issued thereunder, if the applicable deadline for you to execute (and not revoke) the applicable release spans two calendar years, payment of the applicable severance benefits shall not commence until the beginning of the second calendar year. To the extent required to avoid accelerated taxation and/or tax penalties under Section 409A, amounts reimbursable to you under this letter agreement shall be paid to you on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in-kind benefits provided to you) during any one year may not effect amounts reimbursable or provided in any subsequent year. The Company makes no representation that any or all of the payments described in this letter agreement will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to any such payment.
Nondisclosure, Developments, Non-Compete and Non-Solicitation
Prior to commencing your employment with the Company, you agree to sign a copy of the Company's standard Employee Confidential Information, Invention Assignment, Non-Compete and Non Solicitation Agreement, attached as Exhibit A hereto (the "Proprietary Rights Agreement").
No Conflicting Obligation
You hereby represent and warrant that the execution and delivery of this letter agreement, the performance by you of any or all of the terms of this letter agreement and the performance by you of your duties as an employee of the Company do not and will not breach or contravene (i) any agreement or contract (including, without limitation, any employment or consulting agreement, any agreement not to compete or any confidentiality or nondisclosure agreement) to which you are or may become a party on or at any time after the Start Date or (ii) any obligation you may otherwise have under applicable law to any former employer or to any person to whom you have provided, provide or will provide consulting services. You hereby further represent and warrant to the Company that, prior to the date of this letter agreement, you have provided to the Company a copy of any and all potentially conflicting agreements for the Company's review.
Termination
You acknowledge that the employment relationship between the Company and you is at-will, meaning that the employment relationship may be terminated by the Company or you for any reason or for no reason. Either party may terminate your employment with the Company at any time and for any or no reason upon thirty (30) days prior written notice; provided that the Company may terminate you for Cause at any time upon written notice.
Regardless of the reason your employment with the Company terminates, you will continue to comply with the Proprietary Rights Agreement contemplated hereby.
Work Eligibility
You have provided to the Company sufficient documentation to demonstrate your eligibility to work in the United States and, at the request of the Company, shall provide any additional documentation requested by the Company to demonstrate your eligibility to work in the United States.
Governing Law
This letter agreement shall be governed by and construed in accordance with the internal substantive laws of the Commonwealth of Massachusetts.
Dispute Resolution
To ensure the rapid and economical resolution of disputes that may arise in connection with your employment with the Company, you and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this letter agreement, your employment with the Company, or the termination of your employment from the Company, will be resolved pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16, and to the fullest extent permitted by law, by final, binding and confidential arbitration conducted in Boston, Massachusetts by JAMS, Inc. ("JAMS") or its successors, under JAMS' then applicable rules and procedures for employment disputes (which can be found at http://www.jamsadr.com/rules-clauses/, and which will be provided to you on request); provided that the arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision including the arbitrator's essential findings and conclusions and a statement of the award. You and the Company shall be entitled to all rights and remedies that either would be entitled to pursue in a court of law. Both you and the Company acknowledge that by agreeing to this arbitration procedure, you and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. The Company shall pay all filing fees in excess of those which would be required if the dispute were decided in a court of law, and shall pay the arbitrator's fee. Nothing in this letter agreement is intended to prevent either the Company or you from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
Entire Agreement; Amendment
This letter agreement (together with the Proprietary Rights Agreement contemplated hereby) sets forth the sole and entire agreement and understanding between the Company and you with respect to the specific matters contemplated and addressed hereby and thereby. No prior agreement, whether written or oral, shall be construed to change or affect the operation of this letter agreement in accordance with its terms, and any provision of any such prior agreement, which conflicts with or contradicts any provision of this letter agreement, is hereby revoked and superseded. Any prior agreement, if any, you may have with the Company regarding your employment, whether written or oral, is hereby, and without any further action on your part or the Company's, terminated, revoked and superseded by this letter agreement. This letter agreement may be amended or terminated only by a written instrument executed both by you and the Company.
We are excited to have you on board as the Company's President. Please acknowledge your acceptance of this offer and the terms of this letter agreement by signing below and returning a copy to me.
Sincerely, | ||
AEROVATE, INC. | ||
By: | Joshua Resnick |
Name: | /s/ Joshua Resnick | |
Title: | Chairman | |
Accepted and Agreed: | |
I hereby acknowledge that I have had a full and adequate opportunity to read, understand and discuss the terms and conditions contained in this letter agreement prior to signing hereunder. | |
/s/ Benjamin T. Dake | |
Benjamin T. Dake | |
Date: December 5, 2019 |
Exhibit 10.8
AEROVATE. INC.
c/o RA Capital Management
200 Berkeley Street, Boston, MA 02116
April 27 , 2020
BY EMAIL
Hunter Gillies
Dear Hunter:
We are pleased to extend you this offer of employment to serve as the Chief Medical Officer of Aerovate, Inc. (the “Company”) on the terms set forth herein. This offer may be accepted by countersigning where indicated at the end of this letter agreement. For purposes of this letter agreement, we have agreed that your start date is May 1, 2020 (the “Start Date”).
Duties and Extent of Service
As the Company’s Chief Medical Officer, you will report to me and will have responsibility for performing those duties as are customary for, and are consistent with, your position with the Company. You agree to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may be adopted from time to time by the Company. Except for vacations and absences due to temporary illness, you will devote your full-time business efforts to the business and affairs of the Company. Notwithstanding the foregoing, you have informed the Company that you currently work part-time for other entities, and you hereby commit to terminate any and all such outside employment within the first three months of your employment by the Company.
Employment at Will
You and the Company understand and agree that you are an employee at-will, and that you may resign, or the Company may terminate your employment, at any time and for any or for no reason in accordance with the termination provisions set forth further below in this letter agreement. Nothing in this letter agreement shall be construed to alter the at-will nature of your employment, nor shall anything in this letter agreement be construed as providing you with a definite term of employment.
Compensation
Until the termination of your employment hereunder, in consideration for your services hereunder, we will compensate you as follows:
● Base Salary. We will pay you, in accordance with the Company's then current payroll practices, a base salary (the “Base Salary”) at an annual rate of $360,000.
● Annual Bonus. You will be eligible to receive an annual discretionary bonus in an amount up to 20% of your Base Salary for the relevant year, pro-rated for any partial years. The determination of whether you will receive a discretionary bonus with respect to any given fiscal year of the Company, and the amount of any such discretionary bonus, shall be determined by the Board, in its discretion, after considering your performance and the Company’s performance for such fiscal year. If you are awarded a discretionary bonus with respect to a given fiscal year of the Company, the Company will make payment of such discretionary bonus no later than March 31 of the next fiscal year of the Company. If you cease being an employee of the Company for any reason prior to the last day of a fiscal year of the Company, you shall forfeit your right to receive a discretionary bonus for such fiscal year.
● Equity Incentives. Subject to the approval of the Company’s Board of Directors, the Company will grant you either a restricted stock or an option award (as you prefer) of shares of the Company’s common stock representing 1% of the Company’s current fully-diluted capitalization (the “Granted Shares”) at the then-current fair market value. You will own 10% of the Granted Shares upon confirmation of termination of all other outside employment; the remaining 90% shall be subject to standard vesting terms (25% cliff at first anniversary of your Start Date and the balance monthly thereafter over the following thirty-six months, with double-trigger acceleration). This equity grant will be the subject of further agreements between you and the Company delineating in detail the applicable restrictions.
● Vacation. You will be entitled to vacation in accordance with the Company’s vacation policy in effect from time to time. Any vacation shall be taken at the reasonable and mutual convenience of the Company and you.
● Benefits. You will also be entitled to participate in such benefits (including group medical insurance), if any, as the Company shall make generally available from time to time to executive-level employees and in such employee benefit plans and fringe benefits as may be offered or made available by the Company from time to time to its employees. The Board reserves the right from time to time to change or terminate the Company’s employee benefit plans and fringe benefits. Your participation in such employee benefit plans and fringe benefits, and the amount and nature of the benefits to which you shall be entitled thereunder or in connection therewith, shall be subject to the terms and conditions of such employee benefit plans and fringe benefits.
● Expenses. Upon delivery of reasonable documentation, you will be entitled to reimbursement by the Company during the term of your employment for reasonable travel, entertainment and other business expenses incurred by you in the performance of your duties hereunder in accordance with the policies and practices as the Company may from time to time have in effect.
Withholding Taxes
All payments and benefits described in this letter agreement or that you may otherwise be entitled or eligible to receive as a result of your employment with the Company will be subject to applicable federal, state and local tax withholdings.
Nondisclosure, Developments, Non-Compete and Non-Solicitation
Prior to commencing your employment with the Company, you agree to sign a copy of the Company’s standard Employee Confidential Information, Invention Assignment, Non-Compete and Non- Solicitation Agreement, attached as Exhibit A hereto (the “Proprietary Rights Agreement”).
No Conflicting Obligation
You hereby represent and warrant that the execution and delivery of this letter agreement, the performance by you of any or all of the terms of this letter agreement and the performance by you of your duties as an employee of the Company do not and will not breach or contravene (i) any agreement or contract (including, without limitation, any employment or consulting agreement, any agreement not to compete or any confidentiality or nondisclosure agreement) to which you are or may become a party on or at any time after the Start Date or (ii) any obligation you may otherwise have under applicable law to any former employer or to any person to whom you have provided, provide or will provide consulting services. You hereby further represent and warrant to the Company that, prior to the date of this letter agreement, you have provided to the Company a copy of any and all potentially conflicting agreements for the Company’s review.
Termination
You acknowledge that the employment relationship between the Company and you is at-will, meaning that the employment relationship may be terminated by the Company or you for any reason or for no reason. Either party may terminate your employment with the Company at any time and for any or no reason upon thirty (30) days prior written notice; provided that the Company may terminate you for Cause at any time upon written notice. Regardless of the reason your employment with the Company terminates, you will continue to comply with the Proprietary Rights Agreement contemplated hereby.
Work Eligibility
You have provided to the Company sufficient documentation to demonstrate your eligibility to work in the United States and, at the request of the Company, shall provide any additional documentation requested by the Company to demonstrate your eligibility to work in the United States.
Governing Law
This letter agreement shall be governed by and construed in accordance with the internal substantive laws of the Commonwealth of Massachusetts.
Dispute Resolution
To ensure the rapid and economical resolution of disputes that may arise in connection with your employment with the Company, you and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this letter agreement, your employment with the Company, or the termination of your employment from the Company, will be resolved pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16, and to the fullest extent permitted by law, by final, binding and confidential arbitration conducted in Boston, Massachusetts by JAMS, Inc. (“JAMS”) or its successors, under JAMS’ then applicable rules and procedures for employment disputes (which can be found at http://www.jamsadr.com/rules-clauses/, and which will be provided to you on request); provided that the arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision including the arbitrator’s essential findings and conclusions and a statement of the award. You and the Company shall be entitled to all rights and remedies that either would be entitled to pursue in a court of law. Both you and the Company acknowledge that by agreeing to this arbitration procedure, you and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. The Company shall pay all filing fees in excess of those which would be required if the dispute were decided in a court of law, and shall pay the arbitrator’s fee. Nothing in this letter agreement is intended to prevent either the Company or you from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
Entire Agreement; Amendment
This letter agreement (together with the Proprietary Rights Agreement contemplated hereby) sets forth the sole and entire agreement and understanding between the Company and you with respect to the specific matters contemplated and addressed hereby and thereby. No prior agreement, whether written or oral, shall be construed to change or affect the operation of this letter agreement in accordance with its terms, and any provision of any such prior agreement, which conflicts with or contradicts any provision of this letter agreement, is hereby revoked and superseded. Any prior agreement, if any, you may have with the Company regarding your employment, whether written or oral, is hereby, and without any further action on your part or the Company’s, terminated, revoked and superseded by this letter agreement. This letter agreement may be amended or terminated only by a written instrument executed both by you and the Company.
We are excited to have you on board as the Company’s Chief Medical Officer. Please acknowledge your acceptance of this offer and the terms of this letter agreement by signing below and returning a copy to me.
Sincerely, | ||
AEROVATE, INC. | ||
By: | /s/ Ben Dake | |
Name: Ben Dake | ||
Title:President |
Accepted and Agreed: | |
I hereby acknowledge that I have had a full and adequate opportunity to read, understand and discuss the terms and conditions contained in this letter agreement prior to signing hereunder. | |
/s/ Hunter Gillies | |
Hunter Gillies | |
Date: April 27 , 2020 |
Exhibit 10.9
AEROVATE. INC.
c/o RA Capital Management
200 Berkeley Street, Boston, MA 02116
April 26, 2020
BY EMAIL
Ralph Niven
Dear Ralph:
We are pleased to extend you this offer of employment to serve as the Chief Development Officer of Aerovate, Inc. (the “Company”) on the terms set forth herein. This offer may be accepted by countersigning where indicated at the end of this letter agreement. For purposes of this letter agreement, we have agreed that your start date is July 1st, 2020 (the “Start Date”).
Duties and Extent of Service
As the Company’s Chief Development Officer, you will report to me and will have responsibility for performing those duties as are customary for, and are consistent with, your position with the Company. You agree to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may be adopted from time to time by the Company. Except for vacations and absences due to temporary illness, you will devote your full-time business efforts to the business and affairs of the Company
Employment at Will
You and the Company understand and agree that you are an employee at-will, and that you may resign, or the Company may terminate your employment, at any time and for any or for no reason in accordance with the termination provisions set forth further below in this letter agreement. Nothing in this letter agreement shall be construed to alter the at-will nature of your employment, nor shall anything in this letter agreement be construed as providing you with a definite term of employment.
Compensation
Until the termination of your employment hereunder, in consideration for your services hereunder, we will compensate you as follows:
● Base Salary. We will pay you, in accordance with the Company's then current payroll practices, a base salary (the “Base Salary”) at an annual rate of $350,000.
● Annual Bonus. You will be eligible to receive an annual discretionary bonus in an amount up to 10% of your Base Salary for the relevant year, pro-rated for any partial years. The determination of whether you will receive a discretionary bonus with respect to any given fiscal year of the Company, and the amount of any such discretionary bonus, shall be determined by the Board, in its discretion, after considering your performance and the Company’s performance for such fiscal year. If you are awarded a discretionary bonus with respect to a given fiscal year of the Company, the Company will make payment of such discretionary bonus no later than March 31 of the next fiscal year of the Company. If you cease being an employee of the Company for any reason prior to the last day of a fiscal year of the Company, you shall forfeit your right to receive a discretionary bonus for such fiscal year.
● Equity Incentives. Subject to the approval of the Company’s Board of Directors, the Company will grant you either a restricted stock or an option award (as you prefer) of shares of the Company’s common stock representing 1% of the Company’s current fully-diluted capitalization (the “Granted Shares”) at the then-current fair market value. You will own 10% of the Granted Shares on your start date with a vesting commencement date of May 1, 2020; the remaining 90% shall be subject to standard vesting terms (25% cliff at first anniversary of your vesting commencement date and the balance monthly thereafter over the following thirty-six months, with double-trigger acceleration). This equity grant will be the subject of further agreements between you and the Company delineating in detail the applicable restrictions.
● Vacation. You will be entitled to vacation in accordance with the Company’s vacation policy in effect from time to time. Any vacation shall be taken at the reasonable and mutual convenience of the Company and you.
● Benefits. You will also be entitled to participate in such benefits (including group medical insurance), if any, as the Company shall make generally available from time to time to executive-level employees and in such employee benefit plans and fringe benefits as may be offered or made available by the Company from time to time to its employees. The Board reserves the right from time to time to change or terminate the Company’s employee benefit plans and fringe benefits. Your participation in such employee benefit plans and fringe benefits, and the amount and nature of the benefits to which you shall be entitled thereunder or in connection therewith, shall be subject to the terms and conditions of such employee benefit plans and fringe benefits.
● Expenses. Upon delivery of reasonable documentation, you will be entitled to reimbursement by the Company during the term of your employment for reasonable travel, entertainment and other business expenses incurred by you in the performance of your duties hereunder in accordance with the policies and practices as the Company may from time to time have in effect.
● Signing Bonus. Within ten days of your Start Date, we will pay you a signing bonus in the amount of $58,333.33.
Withholding Taxes
All payments and benefits described in this letter agreement or that you may otherwise be entitled or eligible to receive as a result of your employment with the Company will be subject to applicable federal, state and local tax withholdings.
Nondisclosure, Developments, Non-Compete and Non-Solicitation
Prior to commencing your employment with the Company, you agree to sign a copy of the Company’s standard Employee Confidential Information, Invention Assignment, Non-Compete and Non- Solicitation Agreement, attached as Exhibit A hereto (the “Proprietary Rights Agreement”).
No Conflicting Obligation
You hereby represent and warrant that the execution and delivery of this letter agreement, the performance by you of any or all of the terms of this letter agreement and the performance by you of your duties as an employee of the Company do not and will not breach or contravene (i) any agreement or contract (including, without limitation, any employment or consulting agreement, any agreement not to compete or any confidentiality or nondisclosure agreement) to which you are or may become a party on or at any time after the Start Date or (ii) any obligation you may otherwise have under applicable law to any former employer or to any person to whom you have provided, provide or will provide consulting services. You hereby further represent and warrant to the Company that, prior to the date of this letter agreement, you have provided to the Company a copy of any and all potentially conflicting agreements for the Company’s review.
Termination
You acknowledge that the employment relationship between the Company and you is at-will, meaning that the employment relationship may be terminated by the Company or you for any reason or for no reason. Either party may terminate your employment with the Company at any time and for any or no reason upon thirty (30) days prior written notice; provided that the Company may terminate you for Cause at any time upon written notice. Regardless of the reason your employment with the Company terminates, you will continue to comply with the Proprietary Rights Agreement contemplated hereby.
Work Eligibility
You have provided to the Company sufficient documentation to demonstrate your eligibility to work in the United States and, at the request of the Company, shall provide any additional documentation requested by the Company to demonstrate your eligibility to work in the United States.
Governing Law
This letter agreement shall be governed by and construed in accordance with the internal substantive laws of the Commonwealth of Massachusetts.
Dispute Resolution
To ensure the rapid and economical resolution of disputes that may arise in connection with your employment with the Company, you and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this letter agreement, your employment with the Company, or the termination of your employment from the Company, will be resolved pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16, and to the fullest extent permitted by law, by final, binding and confidential arbitration conducted in Boston, Massachusetts by JAMS, Inc. (“JAMS”) or its successors, under JAMS’ then applicable rules and procedures for employment disputes (which can be found at http://www.jamsadr.com/rules-clauses/, and which will be provided to you on request); provided that the arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision including the arbitrator’s essential findings and conclusions and a statement of the award. You and the Company shall be entitled to all rights and remedies that either would be entitled to pursue in a court of law. Both you and the Company acknowledge that by agreeing to this arbitration procedure, you and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. The Company shall pay all filing fees in excess of those which would be required if the dispute were decided in a court of law, and shall pay the arbitrator’s fee. Nothing in this letter agreement is intended to prevent either the Company or you from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
Entire Agreement; Amendment
This letter agreement (together with the Proprietary Rights Agreement contemplated hereby) sets forth the sole and entire agreement and understanding between the Company and you with respect to the specific matters contemplated and addressed hereby and thereby. No prior agreement, whether written or oral, shall be construed to change or affect the operation of this letter agreement in accordance with its terms, and any provision of any such prior agreement, which conflicts with or contradicts any provision of this letter agreement, is hereby revoked and superseded. Any prior agreement, if any, you may have with the Company regarding your employment, whether written or oral, is hereby, and without any further action on your part or the Company’s, terminated, revoked and superseded by this letter agreement. This letter agreement may be amended or terminated only by a written instrument executed both by you and the Company.
We are excited to have you on board as the Company’s Chief Development Officer. Please acknowledge your acceptance of this offer and the terms of this letter agreement by signing below and returning a copy to me.
Sincerely, | |||
AEROVATE, INC. | |||
By: | /s/ Benjamin T. Dake | ||
Name: | Benjamin T. Dake | ||
Title: | President |
Accepted and Agreed: | |
I hereby acknowledge that I have had a full and adequate opportunity to read, understand and discuss the terms and conditions contained in this letter agreement prior to signing hereunder. | |
/s/ Ralph Niven | |
Ralph Niven | |
Date: May 1st, 2020 |
Exhibit 21.1
LIST OF SUBSIDIARIES
None.
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the use of our report dated May 6, 2021, with respect to the financial statements of Aerovate Therapeutics, Inc., included herein and to the reference to our firm under the heading “Experts” in the prospectus. Our report dated May 6, 2021 contains an explanatory paragraph that states that the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ KPMG LLP
San Diego, California
June 9, 2021
P261Y[3_+3?R]]^N@^7M%NW7GH>U/@ [!3I[^E=
M7UH_5^G8C/&,_P!21<%V 3>];I)FXGQ17RB6(_$MZ>)V!OM1KHD!(U]P*NW_
M +'2O+[<:E?0IPHXCC@HJIU!*(E$2B)1$HB41*(E$2B)1$HB41*(E$2B)1$H
MB41*(E$2B)1$HB41*(E$2B)1$HB41*(E$2B)1$HB41*(E$2B)1$HB41*(E$2
MB)1$HB414LWHRV%@>VF8YG +6;!TD5/K- 6G#'&N>'IJK3MM-UKOMCD)QO(DR&<;=FEF6S(4X@VB;
MHXP%14(/8>:_A