Exhibit 2.1

 

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AGREEMENT AND PLAN OF MERGER

 

among

 

DPV PARENT, INC.,

 

DPV MERGERSUB, INC.

 

and

 

LUMOS PHARMA, INC.

 

Dated as of October 22, 2024

 

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TABLE OF CONTENTS

INDEX OF DEFINED TERMS

	Continuing Employee	6.19
	Contract	4.4(a)
	control	9.3(f)
	Costs	6.9(a)
	CTF Agreement	9.3(g)

	Liens	4.2(b)
	Material Adverse Effect	4.1(a)
	Material Contract	4.16(a)
	Materials of Environmental Concern	4.13(b)(iv)
	Merger	Recitals

AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of October 22, 2024, among DPV Parent, Inc., a Delaware corporation (“Parent”), DPV MergerSub, Inc., a Delaware corporation and a wholly-owned Subsidiary of Parent (“Merger Sub”), Lumos Pharma, Inc., a Delaware corporation (the “Company”), and, solely for the purposes of Section 9.17, Double Point Ventures LLC, a Delaware limited liability company (“DPV”).

 

RECITALS

 

WHEREAS, it is proposed that Merger Sub shall commence a tender offer (the “Offer”) to purchase all of the outstanding shares of common stock, par value $0.01 per share, of the Company (the “Shares”) at a price per Share of (i) $4.25 in cash, payable subject to any applicable Tax withholding and without interest, on the terms and subject to the conditions set forth herein (such amount or any greater amount per Share as may be paid pursuant to the Offer, the “Cash Amount”), plus (ii) one contingent value right (a “CVR”), which shall represent the right to receive potential payments, in cash, subject to any applicable Tax withholding and without interest, described in, and subject to and in accordance with the terms and conditions of, the CVR Agreement (such amount, being the “CVR Amount”) (the Cash Amount plus the CVR Amount or any different amount per share paid pursuant to the Offer to the extent permitted under this Agreement, the “Offer Price”);

 

WHEREAS, following the completion of the Offer, Merger Sub shall be merged with and into the Company, with the Company surviving that merger, on the terms and subject to the conditions set forth herein (the “Merger”);

 

WHEREAS, the parties intend that the Merger shall be effected in accordance with Section 251(h) of the General Corporation Law of the State of the Delaware (the “DGCL”) and shall be consummated as soon as practicable following the completion of the Offer;

 

WHEREAS, the Boards of Directors of Parent and Merger Sub have each unanimously approved this Agreement and declared it advisable for Parent and Merger Sub, respectively, to enter into this Agreement;

 

WHEREAS, the Board of Directors of the Company (the “Company Board”) has, upon the terms and subject to the conditions set forth in this Agreement, unanimously (i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement, (ii) approved the execution, delivery and performance by the Company of this Agreement, the CVR Agreement and the consummation of the transactions contemplated hereby, including the Offer and the Merger and (iii) resolved and agreed to recommend that the Company’s stockholders accept the Offer and tender their Shares pursuant to the Offer;

 

WHEREAS, as a condition to and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, simultaneously with the execution of this Agreement, certain of the stockholders of the Company, including all of the members of the Company Board and the Company’s executive officers, are entering into tender and support agreements with Parent and Merger Sub, substantially in the form attached hereto as Exhibit C (the “Support Agreements”);

 

WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, at or prior to the Effective Time, Parent and Rights Agent will enter into the CVR Agreement; and

 

WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe certain conditions to the Offer and the Merger as specified herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

 

ARTICLE I

THE OFFER

 

Section 1.1          The Offer.

 

(a)        As promptly as practicable after the date hereof but in no event later than twenty (20) Business Days following the date of this Agreement, Parent shall cause Merger Sub to commence (within the meaning of Rule 14d‑2 under the Securities Exchange Act of 1934, as amended (including the rules and regulations promulgated thereunder, the “Exchange Act”)) the Offer to purchase all Shares at the Offer Price.  The obligations of Merger Sub, and of Parent to cause Merger Sub, to accept for payment and pay for any Shares tendered and not validly withdrawn pursuant to the Offer shall be subject to (i) the satisfaction of the Minimum Condition (as defined in Exhibit A hereto) and (ii) the satisfaction or waiver by Parent or Merger Sub of each of the other conditions set forth in Exhibit A hereto (together with the Minimum Condition, the “Offer Conditions”).  Each of Parent and Merger Sub expressly reserves the right, in its sole discretion, to (A) increase the Offer Price, (B) waive any Offer Condition or (C) modify any of the other terms or conditions of the Offer that are not inconsistent with the terms of this Agreement, except that, unless otherwise provided by this Agreement, without the consent of the Company, Parent and Merger Sub shall not (1) reduce the Offer Price, (2) change the form of consideration payable in the Offer (other than by adding consideration), (3) reduce the number of Shares subject to the Offer, (4) impose additional conditions to the Offer, (5) waive or change the Minimum Condition, (6) add to the Offer Conditions, (7) terminate the Offer or accelerate, extend or otherwise change the Expiration Date in a manner other than as required or permitted by this Agreement, (8) amend or modify any Offer Condition or any term of the Offer in a manner that is, or would reasonably be expected to be, adverse to the holders of Shares or that would reasonably be expected to, individually or in the aggregate, prevent or materially delay the consummation of the Offer or prevent, materially delay or materially impede the ability of Parent or Merger Sub to consummate the Offer, the Merger or the other transactions contemplated by this Agreement or (9) provide any “subsequent offering period” within the meaning of Rule 14d-11 promulgated under the Exchange Act.

 

(b)        The Offer shall initially be scheduled to expire at one minute after 11:59 p.m. (New York City time) on the date that is twenty (20) Business Days (for this purpose calculated in accordance with Rule 14d-1(g)(3) under the Exchange Act) after the commencement of the Offer (the “Initial Expiration Date”) or, in the event the Initial Expiration Date has been extended pursuant to and in accordance with this Agreement, the date and time to which the Offer has been so extended (the Initial Expiration Date, or such later date and time to which the Initial Expiration Date has been so extended, the “Expiration Date”).

 

(c)         Notwithstanding the foregoing, unless this Agreement has been terminated in accordance with Article VIII (and subject to each party’s right to terminate this Agreement in accordance with Article VIII), the Offer shall be extended from time to time as follows:

 

(i)             If, on or prior to any then scheduled Expiration Date, the Offer Conditions shall not have been satisfied or waived by Parent or Merger Sub if permitted hereunder and to the extent permitted by applicable Law, then Merger Sub shall (and Parent shall cause Merger Sub to) extend the Offer for successive periods of up to ten (10) Business Days each until the Offer Conditions are satisfied or waived; provided, however, that Merger Sub shall not be required to extend the Offer beyond the date that is one hundred twenty days (120) days following the date of this Agreement (the “Outside Date”); provided, further, that Merger Sub shall not extend the Offer beyond the Outside Date without the prior written consent of the Company.

 

(ii)          Merger Sub shall extend the Offer for the minimum period or periods required by applicable Law, interpretation or position of the Securities and Exchange Commission (or its staff) (the “SEC”) or the Nasdaq Global Market (or its staff) (“Nasdaq”).

 

(d)        Merger Sub shall not terminate or withdraw the Offer prior to any scheduled Expiration Date without the prior written consent of the Company, except in the event that this Agreement is terminated in accordance with Article VIII.  In the event that this Agreement is terminated in accordance with Article VIII, Merger Sub shall (and Parent shall cause Merger Sub to) promptly (and in any event within 24 hours of such termination), terminate the Offer.  If the Offer is terminated by Merger Sub, or this Agreement is terminated prior to the purchase of Shares in the Offer, Merger Sub shall promptly return, and shall cause any depository acting on behalf of Merger Sub to return, all tendered Shares to the registered holders thereof.

 

(e)        Subject to the terms of the Offer and this Agreement and the satisfaction of all of the Offer Conditions, Merger Sub will accept for payment (the time of such acceptance, the “Acceptance Time”) and thereafter pay for all Shares validly tendered and not validly withdrawn pursuant to the Offer as soon as practicable after the Expiration Date or as soon as practicable following the valid tender thereof.

 

Section 1.2          Offer Documents.  As promptly as reasonably practicable on the date of commencement of the Offer (subject to Section 1.1), Parent and Merger Sub shall (a) file a Schedule TO (together with all exhibits, amendments and supplements thereto, the “Schedule TO”) with respect to the Offer, which shall contain or shall incorporate by reference an offer to purchase (the “Offer to Purchase”) and forms of the related letter of transmittal and form of summary advertisement (the Schedule TO, the Offer to Purchase and such other documents, together with all exhibits, amendments and supplements thereto, the “Offer Documents”) and (b) cause the Offer Documents to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities Law.  The Company shall promptly supply Parent and Merger Sub in writing, for inclusion in the Offer Documents, all information concerning the Company required under the Exchange Act to be included in the Offer Documents.  Each of Parent, Merger Sub and the Company agrees promptly to correct any information provided by them for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect or as otherwise required by applicable Law, and each of Parent and Merger Sub further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to the holders of Shares, in each case as and to the extent required by applicable federal securities Law.  The Company and its counsel shall be given a reasonable opportunity to review and comment on the Offer Documents and any amendments thereto prior to the filing thereof with the SEC, and Parent and Merger Sub shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Company and its counsel.  In addition, Parent and Merger Sub agree to provide the Company and its counsel any comments, whether written or oral, that Parent may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments, and any written or oral responses thereto.  The Company and its counsel shall be given a reasonable opportunity to review and comment upon such responses and Parent shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Company and its counsel.

 

Section 1.3          Company Actions.

 

(a)        The Company hereby consents to the Offer and to the inclusion in the Offer Documents of the Recommendation, subject to the provisions of Section 6.4.

 

(b)         As promptly as reasonably practicable following the commencement of the Offer and on the date of filing by Parent and Merger Sub of the Schedule TO that is part of the Offer Documents, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D‑9 (such Schedule 14D‑9, together with all exhibits, amendments and supplements thereto, the “Schedule 14D‑9”), which shall reflect that the Merger is governed by Section 251(h) of the DGCL and shall contain the Recommendation, subject to the provisions of Section 6.4.  Without limitation, the Schedule 14D-9 shall include as an exhibit an Information Statement pursuant to Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder and shall include the notice of availability of appraisal rights that Section 262(d)(2) of the DGCL requires the Company to deliver to the Company’s stockholders in connection with the Merger.  The Company shall cause the Schedule 14D‑9 to be disseminated to the holders of Shares, as and to the extent required by applicable federal securities Law.  Each of the Company, Parent and Merger Sub agrees promptly to correct any information provided by it for use in the Schedule 14D‑9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to cause the Schedule 14D‑9 as so corrected to be filed with the SEC and to be disseminated to the holders of Shares, in each case, as and to the extent required by applicable federal securities Law.  Parent, Merger Sub and their counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D‑9 and any amendments thereto prior to the filing thereof with the SEC and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by Parent, Merger Sub and their counsel.  In addition, the Company agrees to provide Parent, Merger Sub and their counsel any comments, whether written or oral, that the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D‑9 promptly after the receipt of such comments, and any written or oral responses thereto.  Parent, Merger Sub and their counsel shall be given a reasonable opportunity to review and comment upon such responses and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by Parent, Merger Sub and their counsel.

 

(c)         In connection with the Offer, the Company shall cause its transfer agent to promptly (and in any event within five (5) Business Days of the date of this Agreement) furnish Parent and Merger Sub with mailing labels, security position listings, any non-objecting beneficial owner lists and any available listings or computer files containing the names and addresses of the record holders of Shares as of the most recent practicable date and shall furnish Parent and Merger Sub with such additional available information (including, but not limited to, periodic updates of such information) and such other assistance as Parent, Merger Sub or their agents may reasonably request in communicating the Offer to the record and beneficial holders of Shares.  Subject to the requirements of applicable Laws, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer, Parent and Merger Sub shall hold in confidence the information contained in any such labels, listings and files, shall use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, shall promptly deliver (and shall cause their agents and Representatives to deliver) to the Company all copies and any extract or summaries of such information.

 

ARTICLE II

THE MERGER

 

Section 2.1          The Merger.  Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL), at the Effective Time, Merger Sub shall be merged with and into the Company.  Following the Merger, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation in the Merger (the “Surviving Corporation”) and a wholly-owned subsidiary of Parent.

 

Section 2.2         Closing.  The closing of the Merger (the “Closing”) shall take place at 9:00 a.m., Eastern Time, no later than the second (2^nd) Business Day following the satisfaction or, to the extent permitted by applicable Law, waiver of the conditions set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted by applicable Law, waiver of those conditions), remotely by electronic exchange of documents or at such other date, time or place as agreed to in writing by Parent and the Company.  The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.”

 

Section 2.3          Effective Time.  Upon the terms and subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the parties shall file a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”), executed in accordance with the relevant provisions of the DGCL.  The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of Delaware or at such other date or time as Parent and the Company shall agree in writing and shall specify in the Certificate of Merger (the time the Merger becomes effective being the “Effective Time”).

 

Section 2.4          Effects of the Merger.  The Merger shall have the effects set forth in this Agreement and in the relevant provisions of the DGCL.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

 

Section 2.5         Merger Without Meeting of Stockholders.  The Merger shall be governed by Section 251(h) of the DGCL.  The parties hereto agree to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable following the consummation of the Offer without a meeting of stockholders of the Company, in accordance with Section 251(h) of the DGCL.

 

Section 2.6          Certificate of Incorporation; Bylaws.

 

(a)         At the Effective Time, the certificate of incorporation of the Company shall be amended and restated so that it reads in its entirety the same as the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, except that all references therein to Merger Sub shall be automatically amended and shall become references to the Surviving Corporation, and, as so amended and restated, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with its terms and as provided by applicable Law.

 

(b)         At the Effective Time, and without any further action on the part of the Company and Merger Sub, the bylaws of the Company shall be amended and restated so that they read in their entirety the same as the bylaws of Merger Sub as in effect immediately prior to the Effective Time, except that all references therein to Merger Sub shall be automatically amended and restated and shall become references to the Surviving Corporation, and, as so amended and restated, shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with their terms, the certificate of incorporation of the Surviving Corporation and as provided by applicable Law.

 

Section 2.7          Directors.  The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified.

 

Section 2.8         Officers.  The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified.

 

ARTICLE III

EFFECT ON THE CAPITAL STOCK OF THE

CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

 

Section 3.1          Conversion of Capital Stock.  At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holders of any shares of capital stock of the Company, Parent or Merger Sub:

 

(a)         Each Share issued and outstanding immediately prior to the Effective Time (other than (i) any Excluded Shares and (ii) any Dissenting Shares) shall thereupon be converted automatically into and shall thereafter represent the right to receive the Offer Price without interest, less any applicable Tax withholding (the “Merger Consideration”).  As of the Effective Time, all Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and shall thereafter only represent the right to receive the Merger Consideration, if any, to be paid in accordance with Section 3.3, without interest.

 

(b)         Each Share held in the treasury of the Company or owned, directly or indirectly, by Parent or Merger Sub immediately prior to the Effective Time (in each case, other than any such Shares held on behalf of third parties) (collectively, “Excluded Shares”) shall automatically be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

 

(c)          Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and non-assessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

 

(d)        If at any time during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of the Company, or securities convertible into or exchangeable into or exercisable for shares of such capital stock, shall occur as a result of any reclassification, recapitalization, stock split (including a reverse stock split) or subdivision or combination, exchange or readjustment of shares, or any stock dividend or stock distribution with a record date during such period, merger or other similar transaction, the Merger Consideration shall be equitably adjusted, without duplication, to reflect such change.

 

Section 3.2          Treatment of Options and Other Equity-Based Awards.

 

(a)         Immediately prior to the Effective Time, each option (each, a “Company Stock Option”) to purchase Shares granted under any employee or director stock option, stock purchase or equity compensation plan, arrangement or agreement of the Company (the “Company Stock Plans”), whether subject to service-based vesting conditions or performance-based vesting conditions, shall become immediately vested and exercisable in full and, as applicable, as if such service-based vesting conditions had been achieved and, in the case of performance-based vesting conditions, as if such performance-based vesting conditions had been achieved at the maximum level of achievement such that the maximum number of shares subject to the Company Stock Option fully vest.

 

(i)          At the Effective Time, each In-the-Money Option that is then outstanding shall be canceled and the holder thereof shall be entitled to receive (A) an amount in cash (without interest, and subject to deduction for any required withholding Tax) equal to the product of (x) the excess of the Cash Amount over the exercise price per Share under such In-the-Money Option and (y) the number of Shares subject to such In-the-Money Option (such amount, the “Company Stock Option Cash Consideration”), which shall be paid in accordance with Section 3.2(c), and (B) one CVR for each Share underlying such In-the-Money Option.

 

(ii)          At the Effective Time, each Out-of-the-Money Option that is then outstanding shall be cancelled without any cash payment or issuance of CVRs being made in respect thereof.

 

(b)        At the Effective Time, each restricted stock unit (each a “Company Stock Right”) granted under any of the Company Stock Plans, whether vested or unvested, that is then outstanding shall be cancelled and the holder thereof shall be entitled to receive (A) an amount in cash (without interest, and subject to deduction for any required withholding Tax) equal to the product of (i) the Cash Amount and (ii) the number of Shares subject to such Company Stock Right (such amount, the “Restricted Stock Unit Cash Consideration”), which shall be paid in accordance with Section 3.2(c), and (B) one CVR for each Share underlying such Company Stock Right.

 

(c)        As soon as reasonably practicable after the Effective Time (but no later than the later of (i) five (5) Business Days after the Effective Time or (ii) the second (2^nd) payroll date after the Effective Time), Parent shall, or shall cause the Surviving Corporation to, pay or cause to be paid through the Surviving Corporation’s payroll or other appropriate account the aggregate Company Stock Option Cash Consideration and the aggregate Restricted Stock Unit Cash Consideration, in either case, held by such current or former employees of the Company (without interest and net of any withholding Taxes required to be deducted and withheld by applicable Laws in accordance with Section 3.6) listed on Section 3.2(c) of the Company Disclosure Letter; provided, however, that to the extent a person is not listed on Section 3.2(c) of the Company Disclosure Letter and is entitled to receive Company Stock Option Cash Consideration or Restricted Stock Unit Cash Consideration, the Company Stock Option Cash Consideration or Restricted Stock Unit Cash Consideration payable pursuant to this Section 3.2 shall be deposited in the Payment Fund for immediate distribution and payment by the Paying Agent in the manner described in Section 3.3. The terms of the CVRs to be issued to any holder of In-the-Money Options and Company Stock Rights, and the circumstances in which any payment is made in respect thereof, shall be governed by the CVR Agreement.

 

(d)         Prior to the Effective Time, the Company shall adopt such resolutions as may be reasonably required to effectuate the provisions of this Section 3.2 and shall deliver all required notices to each holder of Company Stock Options and Company Stock Rights setting forth each holder’s rights pursuant to the respective Company Stock Plan, stating that such Company Stock Options and Company Stock Rights shall be treated in the manner set forth in this Section 3.2.

 

(e)         Prior to the Effective Time, the Company shall adopt resolutions so that the Company Stock Plans, and all Company Stock Options and Company Stock Rights, shall terminate, and all rights under any provision of any other plan, program or arrangement providing for the issuance or grant of any other interest with respect to the capital stock or other voting securities of the Company, or for the issuance or grant of any right of any kind, contingent or accrued, to receive benefits measured by the value of a number of Shares shall be canceled effective as of the Effective Time, without any liability on the part of the Company, the Surviving Corporation, or Parent (except as otherwise contemplated by this Agreement).

 

(f)         The parties hereto intend to treat, for all U.S. federal and applicable state and local income Tax purposes, all payments under this Section 3.2 (including, without limitation, payments in respect of CVRs issued, in part, for the cancelation of In-the-Money Options and Company Stock Rights) as complying with or satisfying an exemption from Section 409A of the Code, including, without limitation, the transaction-based compensation exception under Treasury Regulation Section 1.409A-3(i)(5)(iv) (including, for the avoidance of doubt, as applicable, certain payments made under this Section 3.2 that are treated as being subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulation Section 1.409A-1(d)(1) at the Effective Time) and the short-term deferral exemption under Treasury Regulation Section 1.409A-1(b)(4) ), and the parties agree not to take any inconsistent position, for all U.S. federal and applicable state and local income Tax purposes, with such intended treatment of the payments under this Section 3.2.

 

Section 3.3          Exchange and Payment.

 

(a)          Prior to the Effective Time, Parent and Merger Sub shall enter into an agreement (in a form reasonably acceptable to the Company) with such bank or trust company reasonably acceptable to the Company to act as agent for the stockholders of the Company in connection with the Merger (the “Paying Agent”) to receive the Offer Price and Merger Consideration to which stockholders of the Company shall become entitled pursuant to Section 1.1(e) and Section 3.1(a) and shall act as rights agent (in such capacity, the “Rights Agent”) under the CVR Agreement. Immediately prior to the Acceptance Time, Parent shall deposit (or cause to be deposited) with the Paying Agent cash in an amount sufficient to make all payments pursuant to Section 1.1(e) and Section 3.1(a) (such cash, together with amounts payable pursuant to Section 3.2 with respect to any person not listed on Section 3.2(c) of the Company Disclosure Letter, being hereinafter referred to as the “Payment Fund”); provided that Parent shall not be required to deposit the funds related to the CVRs with the Rights Agent unless and until such deposit is required pursuant to the terms of the CVR Agreement.  The Payment Fund shall not be used for any purpose other than to fund the aggregate Offer Price in the Offer and the aggregate Merger Consideration payable pursuant to Section 1.1(e), Section 3.1(a) and, with respect to any person not listed on Section 3.2(c) of the Company Disclosure Letter, Section 3.2 in the Merger, except as provided in this Agreement.  Parent or the Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, incurred by it in connection with the tender of Shares for the Offer Price and the exchange of Shares for the Merger Consideration and other amounts contemplated by Section 1.1(e) this Article III.

 

(b)         Promptly after the Effective Time and in any event not later than the fifth (5^th) Business Day following the Effective Time, the Surviving Corporation shall cause the Paying Agent (i) in the case of each holder of record of a certificate (“Certificates”) that immediately prior to the Effective Time represented outstanding Shares that were converted into the right to receive the Merger Consideration, to mail (A) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates held by such Person shall pass, only upon proper delivery of the Certificates to the Paying Agent) in customary form and (B) instructions for use in effecting the surrender of such Certificates in exchange for the Merger Consideration and (ii) in the case of each holder of uncertificated Shares represented by book entry (“Book-Entry Shares”), to mail customary provisions regarding delivery of an “agent’s message” with respect to such Book-Entry Shares.  Upon surrender of a Certificate or Book-Entry Shares to the Paying Agent, together with, in the case of certificated Shares, such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as the Paying Agent may reasonably require, the holder of such Certificate or Book-Entry Shares shall be entitled to receive in exchange for the Shares formerly represented by such Certificate or Book-Entry Shares (other than Excluded Shares and Dissenting Shares) the Merger Consideration for each such Share, and the Certificate and Book-Entry Shares so surrendered shall forthwith be cancelled.  No interest will be paid or accrued for the benefit of holders of Certificates or Book-Entry Shares on the Merger Consideration.

 

(c)         If payment of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition of payment that such Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and shall be properly transferred, and that the Person requesting such payment shall have paid any transfer and other Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of such Certificate or shall have established to the satisfaction of Parent that such Tax either has been paid or is not applicable.

 

(d)        Until surrendered as contemplated by this Section 3.3, each Certificate or Book-Entry Share shall be deemed after the Effective Time to represent only the right to receive the Merger Consideration payable in respect thereof, pursuant to this Article III, without any interest thereon.

 

(e)         All cash paid upon the surrender for exchange of Certificates or Book-Entry Shares in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares formerly represented by such Certificates or Book-Entry Shares.  At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of the Shares that were outstanding immediately prior to the Effective Time.  If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for transfer or transfer is sought for Book-Entry Shares, such Certificates or Book-Entry Shares shall be cancelled and exchanged as provided in this Article III, subject to applicable Law in the case of Dissenting Shares.

 

(f)        The Paying Agent shall invest any cash included in the Payment Fund as directed by Parent, on a daily basis.  If for any reason (including investment losses) the cash in the Payment Fund is insufficient to fully satisfy all of the payment obligations to be made in cash by the Paying Agent hereunder (but subject to Section 3.4), Parent shall promptly deposit cash into the Payment Fund in an amount which is equal to the deficiency in the amount of cash required to fully satisfy such cash payment obligations.  Any interest and other income resulting from such investments shall be the property of, and shall be payable to, Parent.

 

(g)         At any time following the date that is twelve (12) months after the Effective Time, Parent shall be entitled to require the Paying Agent to deliver to it or its designee any funds (including any interest received with respect thereto) which have been made available to the Paying Agent and which have not been disbursed to holders of Certificates, and thereafter such holders shall be entitled to look to Parent and the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificate.  Parent shall, or shall cause the Surviving Corporation to, pay all charges and expenses, including those of the Paying Agent, in connection with the exchange of Shares for the Merger Consideration. None of Parent, the Surviving Corporation, the Paying Agent or any other Person shall be liable to any Person in respect of any portion of the Payment Fund properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.  Any amounts remaining unclaimed by the Company’s stockholders at such date as is immediately prior to the time at which such amounts would otherwise escheat to or become property of any Governmental Entity shall, to the extent permitted by applicable Laws, become the property of the Surviving Corporation, free and clear of any claims or interests of any such stockholders or their successors, assigns or personal representatives previously entitled thereto.

 

(h)       If any Certificate shall have been lost, stolen or destroyed, upon the holder’s compliance with the replacement requirements established by the Paying Agent, including, if reasonably required by the Surviving Corporation, the posting by such Person of a bond in customary amount as indemnity against any claim that may be made against it or the Surviving Corporation with respect to such Certificate, the Paying Agent will deliver in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect thereof pursuant to this Agreement.

 

(i)          Notwithstanding anything to the contrary in this Agreement, no holder of uncertificated Shares held through the Depository Trust Company (“DTC”) will be required to provide a Certificate or an executed letter of transmittal to the Paying Agent in order to receive the payment that such holder is entitled to receive pursuant to Section 3.1(a).

 

(j)         Prior to the Effective Time, each of Parent and the Company will cooperate to establish procedures with the Paying Agent and DTC with the objective that the Paying Agent will transmit to DTC or its nominees on the first (1^st) Business Day after the Closing Date an amount in cash, by wire transfer of immediately available funds, equal to (i) the number of Shares (other than Excluded Shares and Dissenting Shares) held of record by DTC or such nominee immediately prior to the Effective Time, multiplied by (ii) the Merger Consideration.

 

(k)          The stock transfer books of the Company shall be closed immediately upon the Effective Time, and there shall be no further registration of transfers of Shares thereafter on the records of the Company.  At or after the Effective Time, the Certificates or Book-Entry Shares shall, subject to compliance with the provisions of this Article III by the holder thereof and subject to Section 3.4, represent only the right to receive the Merger Consideration with respect to the Shares formerly represented thereby.

 

Section 3.4         Dissenting Shares.  Notwithstanding anything in this Agreement to the contrary, to the extent required by the DGCL, Shares issued and outstanding immediately prior to the Effective Time and that are held by any holder who is entitled to demand and properly demands appraisal of such Shares pursuant to, and who complies in all respects with, Section 262 of the DGCL (“Dissenting Shares”) shall not be converted into the right to receive the Merger Consideration, but instead, at the Effective Time, such Dissenting Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and such holder shall cease to have any rights with respect thereto, except the right to receive the fair value of such Dissenting Shares in accordance with the provisions of Section 262 of the DGCL, unless and until such holder shall have failed to perfect, or shall have effectively withdrawn or lost, such holder’s right to appraisal under Section 262 of the DGCL.  If any such holder fails to perfect or withdraws or loses any such right to appraisal, each such Share of such holder shall thereupon be converted into and become exchangeable only for the right to receive, as of the later of the Effective Time and the time that such right to appraisal has been irrevocably lost, withdrawn or expired, the Merger Consideration in accordance with Section 3.1(a), and Parent shall promptly deposit (or cause to be deposited) in the Payment Fund additional cash in an amount sufficient to pay the Merger Consideration in respect of such Shares that are no longer Dissenting Shares.  The Company shall serve prompt notice to Parent of any demands received by the Company for appraisal of any Shares, and Parent shall have the right to participate in and control (provided that, prior to the Acceptance Time, Parent shall not have the right to control such negotiations and proceedings where the interests of the Company or any of its Affiliates are, or would reasonably be expected to be, adverse to those of Parent, Merger Sub or any of their respective Affiliates) all negotiations and proceedings with respect to such demands.  The Company shall not, without the prior consent of Parent (which shall not be unreasonably withheld, conditioned or delayed), make any payment with respect to, or settle, any such demands.

 

Section 3.5         Contingent Value Right.  At or prior to the earlier to occur of the Acceptance Time and the Effective Time, Parent will authorize and duly adopt, execute and deliver, and will ensure that the Rights Agent executes and delivers, a contingent value rights agreement in substantially the form attached as Exhibit B (the “CVR Agreement”), subject to any reasonable revisions to the CVR Agreement that are requested by such Rights Agent (provided that such revisions are not, individually or in the aggregate, materially detrimental to any holder of CVRs). Parent and the Company shall cooperate, including by making changes to the form of CVR Agreement, as necessary to ensure that the CVRs are not subject to registration under the Securities Act, the Exchange Act or any applicable state securities or “blue sky” laws.

 

Section 3.6          Withholding.  Each of the Paying Agent, the Rights Agent, the Surviving Corporation, Merger Sub and Parent shall be entitled to deduct and withhold, or cause to be deducted and withheld, from any portion of the consideration otherwise payable pursuant to this Agreement to any holder of Shares, or other payment otherwise payable pursuant to this Agreement, such amounts as the Paying Agent, the Rights Agent, the Surviving Corporation, Merger Sub or Parent, as the case may be, is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “Code”), or any provision of any other Tax Law, and the amounts so withheld and paid over to the appropriate taxing authority by the Paying Agent, the Rights Agent, the Surviving Corporation, Merger Sub or Parent, as the case may be, shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made by the Paying Agent, the Rights Agent, the Surviving Corporation, Merger Sub or Parent, as the case may be.

 

 ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except (a) as disclosed or reflected in (or incorporated by reference into) the Company SEC Documents filed with the SEC or furnished to the SEC after December 31, 2023 and prior to the date of this Agreement (but excluding disclosure of risks included in any “Risk Factors” section or “forward-looking statements” disclaimer or any other statements that are similarly predictive or forward-looking in nature, in each case, other than any specific factual information contained therein), or (b) as set forth in the disclosure letter delivered by the Company to Parent prior to the execution of this Agreement (the “Company Disclosure Letter”) (it being agreed that disclosure of any information in a particular section or subsection of the Company Disclosure Letter shall be deemed disclosure with respect to any other section or subsection of this Agreement to which the relevance of such information is reasonably apparent), the Company represents and warrants to Parent and Merger Sub as follows:

 

Section 4.1          Organization, Standing and Power.

 

(a)         Each of the Company and its Subsidiaries (i) is an entity duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the Laws of the jurisdiction of its organization, (ii) has all requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for any such failures to be so organized, existing and in good standing, to have such power and authority or to be so qualified or licensed or in good standing as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  For purposes of this Agreement, “Material Adverse Effect” means any event, change, circumstance, occurrence or effect that would have a material adverse effect (A) on the assets (taken as a whole), business, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, other than any event, change, circumstance, occurrence or effect arising out of, attributable to or resulting from, alone or in combination, (1) changes in general economic, financial market, business or geopolitical conditions, (2) general changes or developments in any of the industries in which the Company or its Subsidiaries operate, (3) any epidemic, pandemic, disease outbreak or other public health-related event, natural disasters or calamities, (4) changes in any applicable Laws or applicable accounting regulations or principles or interpretations thereof, (5) any change in the price or trading volume of the Company’s stock, in and of itself (provided, that the facts or occurrences giving rise to or contributing to such change that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect), (6) any failure by the Company to meet any published analyst estimates or expectations of the Company’s revenue, earnings or other financial performance or results of operations for any period, in and of itself, or any failure by the Company to meet its internal or published projections, budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations, in and of itself (provided, that the facts or occurrences giving risk to or contributing to such failure that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect), (7) any outbreak or escalation of hostilities, any acts of war, cyber terrorism, cyber attacks, cyber intrusion, or terrorism or any other national or international calamity, crisis or emergency, (8) the announcement or pendency of this Agreement and the transactions contemplated hereby, including the initiation of litigation by any Person with respect to this Agreement, and including any termination of, reduction in or similar negative impact on relationships, contractual or otherwise, with any customers, suppliers, distributors, partners or employees of the Company and its Subsidiaries due to the announcement and performance of this Agreement or the identity of the parties to this Agreement, or the performance of this Agreement and the transactions contemplated hereby, including compliance with the covenants set forth herein, (9) any action taken by the Company, or which the Company causes to be taken by any of its Subsidiaries, in each case, which is required or expressly contemplated by this Agreement (provided that the exceptions in clause (8) and this clause (9) shall not apply to the representations and warranties in Section 4.4(a)(ii) or (iii) solely with respect to the absence of any conflict with, or violation of, any Law or any breach or violation of, or default under, any Contract) or (10) any actions taken (or omitted to be taken) at the request of Parent; provided, that, solely with respect to clauses (1) through (4) and (7), the impact of such event, change, circumstance, occurrence or effect is not materially disproportionately adverse to the Company and its Subsidiaries, taken as a whole, as compared to other participants in the industries in which the Company and its Subsidiaries operate (provided that (x) in the case of clause (3), such disproportionality shall be considered only to the extent that the economic damages (including damages attributable to business interruption) suffered by the Company and its Subsidiaries as a result of such natural disaster or calamity are not covered in all material respects by insurance (including business interruption insurance), subject to applicable deductibles, and then only with respect to those economic damages that are not covered by insurance, and (y) in the case of clause (7), such disproportionality shall be considered only to the extent that the economic damages (including damages attributable to business interruption) suffered by the Company and its Subsidiaries as a result of such outbreak or escalation of hostilities, acts of war, cyber terrorism, cyber attacks, cyber intrusion, or terrorism or other national or international calamity, crisis or emergency are not covered in all material respects by insurance (including business interruption insurance), subject to applicable deductibles, and then only with respect to those economic damages that are not covered by insurance); or (B) that would prevent or delay beyond the Outside Date, the Company’s ability to perform its obligations under this Agreement necessary to consummate the Offer and the Merger.

 

(b)         The Company has previously furnished or otherwise made available to Parent a true and complete copy of the Company’s certificate of incorporation (the “Company Charter”) and bylaws (the “Company Bylaws”), in each case as amended to the date of this Agreement, and each as so delivered is in full force and effect.  The Company is not in violation of any provision of the Company Charter or Company Bylaws.

 

Section 4.2          Capital Stock.

 

(a)        The authorized capital stock of the Company consists of (a) 75,000,000 Shares and (b) 5,000,000 shares of preferred stock, par value $0.01 per share (the “Preferred Stock”).  As of October 18, 2024, (i) 8,648,243 Shares were issued and outstanding, all of which were validly issued, fully paid and non-assessable and were free of preemptive rights, (ii) 30,810 Shares were held in treasury, (iii) no shares of Preferred Stock were outstanding and (iv) an aggregate of 1,688,721 Shares were subject to or otherwise deliverable in connection with outstanding Company Stock Rights or the exercise of outstanding Company Stock Options issued pursuant to the Company Stock Plans and 30,241 Shares were authorized for issuance under the Company Employee Stock Purchase Plan.  Except as set forth above and except for changes since October 18, 2024, resulting from the exercise or settlement of Company Stock Options or Company Stock Rights outstanding on such date, as of the date of this Agreement, (A) there are not outstanding or authorized any (1) shares of capital stock or other voting securities of the Company, (2) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or (3) options or other rights to acquire from the Company, and no obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company, (B) there are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company and (C) there are no other options, calls, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is a party.  Section 4.2(a) of the Company Disclosure Letter sets forth a true and complete list of all outstanding Company Stock Options and Company Stock Rights (collectively, “Company Stock Awards”), indicating as applicable, with respect to each Company Stock Award then outstanding, the type of award granted, the number of Shares subject to such Company Stock Award, the name of the plan under which such Company Stock Award was granted, the date of grant, exercise or purchase price, the number of shares vested and the expiration dates thereof.

 

(b)         Each of the outstanding shares of capital stock of the Subsidiaries is duly authorized, validly issued, fully paid and non-assessable and all such shares are owned by the Company or another wholly-owned Subsidiary of the Company and are owned free and clear of all security interests, liens, claims, pledges, agreements, limitations in voting rights, charges or other encumbrances (collectively, “Liens”) of any nature whatsoever.  Section 4.2(b) of the Company Disclosure Letter sets forth a true and complete list of each Subsidiary of the Company and its jurisdiction of incorporation or organization.

 

Section 4.3          Authority.

 

(a)        Assuming the transactions contemplated by this Agreement are consummated in accordance with Section 251(h) of the DGCL, the Company has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the Offer, the Merger and the other transactions contemplated hereby.  The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the Offer, the Merger and the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to approve this Agreement or to consummate the Offer, the Merger and the other transactions contemplated hereby.  This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors’ rights generally or by general principles of equity).

 

(b)            The Company Board has unanimously adopted resolutions (i) determining that this Agreement, the Offer, the Merger, the CVR Agreement and the other transactions contemplated hereby are fair to and in the best interests of the Company and its stockholders, (ii) subject to Section 6.4, approving and declaring advisable this Agreement and the transactions contemplated hereby, including the Offer and the Merger, and resolving that the Merger is governed by Section 251(h) of the DGCL, (iii) resolving to recommend that the Company’s stockholders accept the Offer and tender their Shares pursuant to the Offer (this clause (iii), the “Recommendation”) and (iv) approving this Agreement and the transactions contemplated hereby for purposes of Section 203 of the DGCL, which resolutions have not been subsequently rescinded, modified or withdrawn in any way, except as may be permitted by Section 6.4.

(c)            Assuming the transactions contemplated by this Agreement are consummated in accordance with Section 251(h) of the DGCL and assuming the satisfaction of the Minimum Condition, no vote or consent of the holders of any class or series of the Company’s capital stock or other securities is required to authorize this Agreement or consummate the Offer, the Merger and the other transactions contemplated hereby.

 

Section 4.4          No Conflict; Consents and Approvals.

 

(a)        The execution, delivery and performance of this Agreement by the Company does not, and the consummation of the Offer, the Merger and the other transactions contemplated hereby and compliance by the Company with the provisions hereof will not, (i) conflict with or violate the Company Charter or Company Bylaws or the equivalent organizational documents of any of the Company’s Subsidiaries, (ii) assuming that all consents, approvals and authorizations contemplated by clauses (i) through (iv) of subsection (b) below have been obtained and all filings described in such clauses have been made, conflict with or violate any law, statute, treaty, rule, regulation, order, ordinance, writ, ruling, judgment, decree or binding determination of any arbitrator, court or Governmental Entity (collectively, “Law”) applicable to the Company or any of its Subsidiaries or by which any of their respective properties are bound or (iii) result in any breach or violation of, or constitute a default (or an event which with notice or lapse of time or both would become a default), or result in the loss of a benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation (each (but for the sake of clarification, excluding purchase orders), a “Contract”) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties are bound, except, in the case of clauses (ii) and (iii), for any such conflict, breach, violation, default, loss, right or other occurrence that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)        The execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the Offer, the Merger and the other transactions contemplated hereby, do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any governmental or regulatory (including stock exchange) authority, agency, court commission, or other governmental body, which includes, but is not limited to, any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction (each, a “Governmental Entity”), except for (i) such filings as may be required under applicable requirements of the Exchange Act and the Securities Act of 1933, as amended (the “Securities Act”) and the rules and regulations promulgated thereunder, and under state securities, takeover and “blue sky” laws, (ii) such filings as necessary to comply with the applicable requirements of Nasdaq, (iii) the filing with the Delaware Secretary of State of the Certificate of Merger as required by the DGCL and (iv) any such consent, approval, authorization, permit, action, filing or notification with any Governmental Entity or stock exchange the failure of which to make or obtain would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 4.5          SEC Reports; Financial Statements.

 

(a)        The Company has filed with or furnished to the SEC all forms, reports, statements, certifications and other documents (including all exhibits, amendments and supplements thereto) required to be filed or furnished by it with or to the SEC since December 31, 2022 (all such forms, reports, statements, certificates and other documents, together with all exhibits, amendments and supplements thereto, filed or furnished since December 31, 2022 and prior to the date hereof, collectively, the “Company SEC Documents”).  As of their respective dates, or, if amended, as of the date of the last such amendment, each of the Company SEC Documents complied as to form in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002, and the applicable rules and regulations promulgated thereunder, as the case may be, each as in effect on the date so filed.  As of their respective filing dates (or, if amended or superseded by a subsequent filing prior to the date hereof, as of the date of such amendment or superseding filing), none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(b)        The audited consolidated financial statements of the Company (including any related notes thereto) included in the Company’s Annual Report on Form 10‑K for the fiscal year ended December 31, 2023 filed with the SEC complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries at the respective dates thereof and the results of their operations and cash flows for the periods indicated.  The unaudited consolidated financial statements of the Company (including any related notes thereto) included in the Company’s Quarterly Reports on Form 10‑Q filed with the SEC since December 31, 2023 complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or may be permitted by the SEC under the Exchange Act) and fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof and the results of their operations and cash flows for the periods indicated (subject to normal period-end adjustments). Since December 31, 2023, the Company has not made any material change in the accounting practices or policies applied in the preparation of its financial statements, except as required by GAAP, SEC rule or policy or applicable Law.

(c)         The Company has implemented and maintains disclosure controls and procedures (as defined in Rule 13a‑15(e) under the Exchange Act) designed to ensure that material information relating to the Company, including its Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities.  The Company has implemented and maintains internal control over financial reporting (as defined in Rule 13a‑15(f) under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.  The Company has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s auditors and the audit committee of the Company Board and has made available to Parent copies of all such disclosure documents regarding (i) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant roles in the Company’s internal control over financial reporting.

 

(d)          Prior to the date of this Agreement, the Company has made available to Parent copies of all comment letters received by the Company from the SEC since December 31, 2022 relating to the Company SEC Documents, together with all written responses from the Company thereto.  As of the date of this Agreement (i) there are no outstanding or unresolved comments in any such comment letters received from the SEC staff with respect to the Company SEC Documents and (ii) to the knowledge of the Company, none of the Company SEC Documents is subject to ongoing review or outstanding SEC comment or investigation.

 

(e)          No Subsidiary of the Company is required to independently file any form, report, schedule, statement or other document with the SEC.

 

Section 4.6          No Undisclosed Liabilities.  Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by GAAP to be reflected on a consolidated balance sheet (or the notes thereto) of the Company and its Subsidiaries, except for liabilities and obligations (a) reflected or reserved against in the Company’s consolidated balance sheet as of December 31, 2023 (or the notes thereto) included in the Company SEC Documents, (b) incurred in the ordinary course of business since December 31, 2023, (c) which have been discharged or paid in full prior to the date of this Agreement, (d) incurred pursuant to the transactions contemplated by this Agreement and (e) that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 4.7         Certain Information.  The Schedule 14D‑9 will not, at the time it is first filed with the SEC, amended or supplemented or first published, distributed or disseminated to the Company’s stockholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading.  The Schedule 14D‑9 will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder.  Notwithstanding the foregoing, the Company makes no representation or warranty with respect to statements included or incorporated by reference in the Schedule 14D‑9 based on information supplied in writing by or on behalf of Parent or Merger Sub or any of their respective Representatives specifically for inclusion or incorporation by reference therein.  None of the information supplied in writing or to be supplied by or on behalf of the Company specifically for inclusion or incorporation by reference in any of the Offer Documents will, at the respective times they are first filed with the SEC, amended or supplemented or first published, distributed or disseminated to the Company’s stockholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading.

 

Section 4.8          Absence of Certain Changes or Events.  Since December 31, 2023 through the date of this Agreement, except as otherwise contemplated or permitted by this Agreement, the businesses of the Company and its Subsidiaries have been conducted in the ordinary course of business consistent with past practice, and there has not been any event, development or state of circumstances that, individually or in the aggregate, has had a Material Adverse Effect; and none of the Company or any of its Subsidiaries has taken any action that, if taken after the date of this Agreement, would constitute a breach of any of the covenants set forth in Section 6.1(b) (other than subsections (vi), (xv), or (xvii)).

 

Section 4.9          Litigation.  Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (a) there is no suit, claim, action, proceeding, arbitration, mediation or investigation (each, an “Action”) pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or any of their respective properties or assets by or before any Governmental Entity and (b) neither the Company nor any of its Subsidiaries nor any of their respective properties is or are subject to any outstanding judgment, order, injunction, rule or decree of any Governmental Entity. As of the date of this Agreement, there is no action pending or, to the knowledge of the Company, threatened seeking to prevent, hinder, modify, delay or challenge the Offer or the Merger as contemplated by this Agreement.

 

Section 4.10      Compliance with Laws.  The Company and each of its Subsidiaries are in compliance with all Laws applicable to them or their businesses or activities, or by which any of their respective properties or assets are bound, except where any non-compliance would not, individually or the aggregate, reasonably be expected to have a Material Adverse Effect.  The Company and its Subsidiaries have in effect all permits, licenses, exemptions, authorizations, franchises, orders and approvals of all Governmental Entities (collectively, “Permits”) necessary for them to own, lease or operate their properties and to carry on their businesses and operations, inclusive of all pre-clinical and clinical studies, as now conducted, except for any Permits the absence of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  All Permits are in full force and effect, except where the failure to be in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 4.11         Benefit Plans.

 

(a)         Section 4.11(a) of the Company Disclosure Letter sets forth a true and complete list of each Company Plan, other than any employment, termination or severance letter or agreement for non-officer employees of the Company or its Subsidiaries and equity award grant notices and agreements, in each case to the extent documented on the Company’s standard forms made available to Parent and agreements with consultants entered into in the ordinary course of business.  With respect to each Company Plan, the Company has furnished or made available to Parent a current, accurate and complete copy thereof (or a description of any such unwritten Company Plan), including any amendments thereto, and, to the extent applicable: (i) any related trust agreement or other funding instrument, (ii) the most recent determination or advisory letter of the Internal Revenue Service (the “IRS”), if applicable, (iii) any summary plan description, summary of material modifications and other equivalent written communications by the Company or its Subsidiaries to their employees concerning such Company Plan, (iv) any communications with Government Entities concerning such Company Plan during the three (3) most recent years, (v) the nondiscrimination, coverage and other IRS limit testing reports for the three (3) most recent plan years, (vi) any agreements in effect between the Company or Subsidiary and any third party related to the insurance, funding, administration or operation of any Company Plan, including third party administration or professional employer organization agreements and (vii) if applicable, for the two most recent years (A) the Form 5500 and attached schedules, (B) audited financial statements and (C) actuarial valuation reports.  Neither the Company nor its Subsidiaries have received any notice or demand informing the Company or such Subsidiary that it may be liable for an “employer shared responsibility payment” as contemplated by Section 4980H of the Code, the regulations issued thereunder, and the Patient Protection and Affordable Care Act of 2010, as amended, and all regulations issued thereunder and rulings issued with respect thereto (the “Affordable Care Act”).

 

(b)          With respect to the Company Plans, except to the extent that the inaccuracy of any of the representations set forth in this Section 4.11 would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:

 

(i)           each Company Plan has been established, maintained, funded, operated and administered in compliance with, its terms and applicable Laws;

 

(ii)          each Company Plan subject to ERISA has been established, funded, and administered in accordance with its terms and in compliance with the applicable provisions of all applicable Laws, including ERISA and the Code, and no prohibited transaction, as described in Section 406 of ERISA or Section 4975 of the Code, or accumulated funding deficiency, as defined in Section 302 of ERISA and 412 of the Code, has occurred with respect to any Company Plan, and all contributions, premium payments, distributions or other payments required to be made under the terms of any Company Plan have been timely made;

 

(iii)        each Company Plan intended to be qualified under Section 401(a) of the Code has received a currently effective favorable determination, advisory and/or opinion letter, as applicable, from the IRS that it is so qualified and nothing has occurred since the date of such letter that would reasonably be expected to adversely affect the qualified status of such Company Plan;

 

(iv)          there is no Action (including any investigation, audit or other administrative proceeding) by the Department of Labor, the Pension Benefit Guaranty Corporation (the “PBGC”), the IRS or any other Governmental Entity or by any plan participant or beneficiary pending, or to the knowledge of the Company, threatened, relating to the Company Plans, any fiduciaries thereof with respect to their duties to the Company Plans or the assets of any of the trusts under any of the Company Plans (other than routine claims for benefits) nor are there facts or circumstances that exist that would reasonably be expected to give rise to any such Actions;

 

(v)            no Company Plan is subject to Title IV of ERISA or subject to Section 412 of the Code;

 

(vi)           no Company Plan is a “multiemployer plan” (within the meaning of Section 3(37) of ERISA;

 

(vii)         the Company and its Subsidiaries do not maintain any Company Plan that is a “group health plan” (as such term is defined in Section 5000(b)(1) of the Code) that has not been administered and operated in all respects in compliance with the applicable requirements of Section 601 of ERISA and Section 4980B of the Code, similar state Laws and the Affordable Care Act, and the Company and its Subsidiaries are not subject to any material liability, including additional contributions, fines, penalties or loss of tax deduction as a result of such administration and operation;

 

(viii)        none of the Company Plans provides for payment of a benefit, the increase of a benefit amount, the payment of a contingent benefit or the acceleration of the payment or vesting of a benefit determined or occasioned, in whole or in part, by reason of the execution of this Agreement or the consummation of the Offer or Merger contemplated hereby (other than as specifically contemplated by Section 3.2 hereof); and

 

(ix)          no payments or benefits under any Company Plan are, or are expected to be, subject to the disallowance of a deduction under Section 162(m) of the Code.

 

(c)         Neither the execution and delivery of this Agreement and any related documents nor the consummation of the Offer or Merger contemplated hereby will, either alone or in combination with any other event, and other than as specifically contemplated by Section 3.2 hereof: (i) require the Company or any Subsidiary to fund any liabilities or place in trust or otherwise set aside any amounts in respect of any Company Plan, (ii) entitle any current or former service provider of the Company to any compensation or benefits due under any plan, program, agreement or arrangement including any Company Plan, (iii) result in the forfeiture of compensation or benefits under any Company Plan, (iv) accelerate the time at which any compensation, benefits or award may become payable, vested or required to be funded in respect of any current or former service provider of the Company, or (v) limit or restrict the right of the Company or any Subsidiary to merger, amend or terminate any Company Plan. Neither the execution and delivery of this Agreement nor the consummation of the Merger or the Offer, whether alone or in connection with any other event, will result in payments or benefits (including accelerated vesting) to any current or former employee, officer, director or manager or other service provider of the Company or any Subsidiary that would not be deductible to the payor as a result of Section 280G of the Code or would result in any excise tax on any Person (including any such current or former employee, officer, director or manager) under Section 4999 of the Code.

 

(d)         None of the Company, any of its Subsidiaries or any entity within the same “controlled group” as the Company or any of its Subsidiaries within the meaning of Section 4001(a)(14) of ERISA or 414 of the Code (an “ERISA Affiliate”) has ever contributed or been obligated to contribute to (i) a multiemployer plan, as defined in Section 4001(a)(3) of ERISA or 3(37) of ERISA, (ii) a multiple employer plan, as defined in Section 413(c) of the Code, (iii) a multiple employer welfare arrangement, as defined in Section 3(40) of ERISA, (iv) any plan or agreement that provides life, health or other non-pension benefits to any person beyond their retirement or other termination of service, other than coverage mandated by COBRA or other applicable Law (and for which the sole expense is borne by such Person) (v) a plan subject to Title IV of ERISA.

 

 (e)        No event has occurred, and no condition or circumstance exists, that could reasonably be expected to subject the Company, any Subsidiary of the Company or any Company Plan to penalties or excise taxes under Sections 4980D, 4980H, 6721, 6722, 6055 or 6056 of the Code or under any provision of the Affordable Care Act. No Company Plan has been the subject of an application or filing under, or is a participant in, an amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Entity within the last six (6) years.

 

(f)          Neither the Company nor any Subsidiary of the Company is required to provide any gross-up, make-whole or other additional payment with respect to taxes, interests or penalties imposed under any Tax provisions, including Section 409A or Section 4999 of the Code.

 

(g)          Each Company Plan that is a “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) has at all times been operated in all material respects in compliance with its terms and the operational and documentary compliance requirements of Section 409A of the Code and the Treasury Regulations and other applicable guidance thereunder.

 

Section 4.12        Labor Matters.  Neither the Company nor any of its Subsidiaries is a party to, or is bound by, any collective bargaining agreement with any labor union or labor organization.  There is no labor dispute, strike, work stoppage or lockout, or, to the knowledge of the Company, threat thereof, by or with respect to any employees of the Company or any of its Subsidiaries.  To the knowledge of the Company, there has not been any activity on behalf of any labor union, labor organization or similar employee group to organize any employees of the Company or any of its Subsidiaries.  As of the date of this Agreement, there are no (a) unfair labor practice charges or complaints against the Company or any of its Subsidiaries pending before the National Labor Relations Board or any other labor relations tribunal or authority and to the knowledge of the Company no such representations, claims or petitions are threatened, (b) representation claims or petitions pending before the National Labor Relations Board or any other labor relations tribunal or authority or (c) grievances or pending arbitration proceedings against the Company or any of its Subsidiaries that arose out of or under any collective bargaining agreement. There has not been since December 31, 2023, and there is not pending or, to the knowledge of the Company, threatened any proceeding or inquiry asserted or instituted against the Company or any Subsidiary by any Governmental Entity challenging the classification of an individual classified by the Company or any Subsidiary as a non-employee (such as an independent contractor, a leased employee, a consultant or special consultant).

 

Section 4.13        Employee Matters.

 

(a)          Schedule 4.13(a) of the Seller Disclosure Schedule sets forth the following information for each current employee of the Company and any of its Subsidiaries: (i) name or employee identification number; (ii) employing entity, in each case as of the date of this Agreement; (iii) job title; (iv) work location; (v) full time, part time, or temporary status; (vi)annual salary or hourly rate (as applicable); (vii) target annual bonus percentage for calendar year 2024; (viii) exempt or non-exempt status under the Fair Labor Standards Act; (ix) active/inactive status (and if inactive, start date of leave and expected return to work date); (x) balance of accrued, unused paid time off; and (xi) visa status, including visa type and expiration date, if applicable  (the “Employee Census”).

 

(b)        Schedule 4.13(b) of the Disclosure Schedule sets forth a true, correct and complete list of all individual (non-entity) independent contractors that have provided services to the Company in excess of $50,000 in the twelve-month period prior to the date hereof or projected for the 2024 calendar year with the following information: (i) name; (ii) entity to which services are provided; (iii) description of services; (iv) start date and term of services; (v) compensation arrangement; (vii) location (state); and (viii) whether the relationship is governed by a written agreement.

 

(c)         The Company has no material liability arising from the misclassification of any individual who is providing or within the past three years has provided services to the Company and is or was classified and treated as an independent contractor, consultant, leased employee or other non-employee service provider.  There has not been since December 31, 2021, and there is not pending or, to the knowledge of the Company, threatened any proceeding or inquiry asserted or instituted against the Company or any Subsidiary by any Governmental Entity relating to the legal status or classification of an individual classified by the Company or any Subsidiary as a non-employee (such as an independent contractor, a leased employee, a consultant or special consultant).

 

(d)        Since December 31, 2021, the Company is and has been in compliance, in all material respects, with all applicable labor and employment Laws, including those relating to fair employment practices, wage and hour, classification of employees and independent contractors, workers’ compensation, occupational safety and health, immigration, plant closings and mass layoffs.  To the knowledge of the Company, the Company has accurate, completed I-9 forms for all current employees and former employees whose employment terminated within the twelve (12) months preceding the date hereof and all current employees are authorized to work in the United States. There is no pending or, to the knowledge of the Company, threatened action, suit, proceeding, hearing, investigation, charge, complaint or demand of any kind brought by or on behalf of, or otherwise involving, any current or former employee, current or former independent contractor, or involving or relating to the Company’s labor or employment practices, and since December 31, 2021, there has not been any such actions.

 

(e)        The Company has timely paid all earned and accrued wages, salaries, wage premiums, commissions, bonuses, severance and termination payments, fees and other compensation that have come due and payable to current or former employees, or current or former independent under applicable Laws or by Contract.

 

(f)          To the knowledge of the Company, the Company has not hired any employee or retained any independent contractor in violation of any confidential information and/or restrictive covenant agreement to which such employee or independent contractor is a party or is otherwise bound and no Person has made an allegation that the Company has hired any employee or retained any independent contractor in violation of any such confidential information or restrictive covenant agreement.

 

(g)          The Company has, since December 31, 2021, reasonably investigated all sexual harassment, or other harassment, discrimination, retaliation or material policy violation allegations that have been reported or of which any of them is otherwise aware against any executive, managerial, or supervisory-level employee or former employee. With respect to each such allegation (except those it reasonably deemed to not have merit), the Company has taken prompt corrective action reasonably calculated to prevent further improper action. The Company does not reasonably expect any material liabilities with respect to any such allegations.

 

(h)          No Company employee has experienced an “employment loss” under the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar Laws (“WARN Act” ) on or within ninety (90) days prior to the Closing, at any site of employment where a Company employee is located. Within the past three years, the Company has not implemented any plant closing or layoff of employees triggering notice obligations under the WARN Act, nor is there presently any outstanding liability under the WARN Act, and no plant closings or employee layoffs affecting twenty-five (25) or more employees at any site of employment are currently contemplated, planned or announced.

 

Section 4.14          Environmental Matters.

 

(a)          Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) the Company and its Subsidiaries are, and for the past five (5) years have been, in compliance with all applicable Environmental Laws, and possess and are in compliance with all applicable Environmental Permits required under such Environmental Laws to operate as they presently operate; (ii)  there are no Materials of Environmental Concern at any property currently or formerly owned, leased or operated by the Company or any of its Subsidiaries, except under circumstances that are not reasonably likely to result in liability of the Company or its Subsidiaries under any applicable Environmental Law; (iii) neither the Company nor its Subsidiaries has received any written request for information pursuant to section 104(e) of CERCLA or any similar state statute, concerning any release or threatened release of Materials of Environmental Concern at any location, except, to the extent such matter has been resolved with the appropriate Governmental Entity or otherwise; (iv) neither the Company nor its Subsidiaries has received or is presently subject to an Environmental Claim or any other liabilities pursuant to Environmental Laws, and to the knowledge of the Company, no such matters have been threatened; (v) none of the Company or any of its Subsidiaries has assumed, undertaken, or provided an indemnity with respect to, or otherwise become subject to, liability of any other Person relating to Environmental Laws; (vi) neither the Company nor any of its Subsidiaries has treated, stored, handled, transported, Released, recycled, disposed of, or arranged for the disposal of any Materials of Environmental Concern at or to any facility, site, or location: (A) that is not lawfully permitted to accept such materials; (B) that has been listed or designated by any Governmental Authority as requiring or reasonably being expected to require investigation, removal, response, or remediation; or (C) in violation of Environmental Laws, or in a manner which has given rise, or which would reasonably be expected to give rise, to an Environmental Claim; (vii) to the Company’s knowledge, there are no circumstances or conditions that would, or would reasonably be expected to, interfere with or prevent compliance or continued compliance by the Company or any of its Subsidiaries with Environmental Laws or give rise to liability under Environmental Laws; and (viii) the Company and its Subsidiaries have made available to Buyer copies of the following documents, to the extent they are in the custody or reasonable control of the Company or its Subsidiaries and relate to the business or assets of the Company or its Subsidiaries or any real property currently or formerly owned, operated, leased, or otherwise occupied by the Company or its Subsidiaries: any and all environmental reports, studies, audits, records, sampling data, site assessments, risk assessments, economic models, copies of Environmental Permits and related documentation, and any other documents related to compliance with Environmental Laws, Environmental Permits, the Release of Materials of Environmental Concern, or Environmental Claims.

 

(b)          For purposes of this Agreement, the following terms shall have the meanings assigned below:

 

(i)           “Environmental Claim” means any written directive, demand, request for information, notice of violation, notice of inspection, infraction, citation, action, suit, claim, or other legal proceeding by any Person alleging liability of whatever kind or nature (including liability or responsibility for the cost of enforcement proceedings, investigation, cleanup, governmental response, removal, or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, fines, contribution, indemnification, and injunctive relief) arising out of, based on, or resulting from (A) the presence, Release of, or exposure to any Materials of Environmental Concern; or (B) any actual or alleged non-compliance with any Environmental Law or the term or condition of any Environmental Permit

 

(ii)         “Environmental Laws” means all foreign, federal, state, or local statutes, laws (including common law), regulations, ordinances, codes, orders, directives or decrees concerning (A) pollution (or the cleanup thereof) or protection of the environment (including, but not limited to, the quality of the ambient air, soil, soil vapor, surface water or groundwater), natural resources, endangered or threatened species, or human health or safety, and (B) the presence or exposure to, or the management, manufacture, use, disclosure, containment, storage, recycling, reclamation, reuse, treatment, generation, Release, transportation, processing, production, investigation, or remediation of Materials of Environmental Concern,   including, but not limited to, the federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and the federal Resource Conservation and Recovery Act.

 

(iii)          “Environmental Permits” means all Permits, required under applicable Environmental Laws.

 

(iv)        “Materials of Environmental Concern” means any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, vapor, mineral or gas, in each case, whether naturally occurring or man-made: (a) that because of its toxicity, concentration, or quantity, has characteristics that are hazardous or toxic to human health, the environment, or natural resources; (b) that is subject to regulation, investigation, control, or remediation under Environmental Laws; (c) that is defined as hazardous, acutely hazardous, a pollutant, toxic, explosive, corrosive, flammable,  infectious, radioactive, carcinogenic, or words of similar import or regulatory effect under Environmental Laws; and (d) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, per- and polyfluoroalkyl substances, and polychlorinated biphenyls.

 

(v)         “Release” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape, disperse, or migrate into or through the environment (including, without limitation, ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture), whether intentional or unintentional.

 

Section 4.15         Taxes.  Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:

 

(a)         All Tax Returns required to have been filed by or with respect to the Company or its Subsidiaries have been timely filed (taking into account any extension of time to file granted or obtained), and such Tax Returns have been duly and accurately prepared in all material respects. The Company and its Subsidiaries have paid all Taxes due and owing (whether or not shown on such Tax Returns), except to the extent that a reserve for Taxes has been established on the financial statements of the Company.

 

(b)        The Company and its Subsidiaries have timely withheld and paid to the appropriate Governmental Entities all Taxes of the Company and its Subsidiaries that are required to have been withheld and paid, except to the extent that amounts withheld have been properly set aside in accounts for the purpose of making such timely payment.

 

(c)         No deficiency for any amount of Tax has been asserted or assessed by a Governmental Entity in writing against the Company or any of its Subsidiaries that has not been satisfied by payment, settled or withdrawn.

 

(d)        There are no settlement agreements with the IRS and no pending Tax audits, investigations, examinations, administrative or judicial proceedings with respect to any Taxes or Tax Returns of the Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries has received written notice from any taxing authority that it intends to commence such an audit, examination, investigation or proceeding.

 

(e)       No extension or waiver of a statute of limitations relating to Taxes is currently in effect with respect to the Company or any of its Subsidiaries (other than those granted in connection with extensions of time to file Tax Returns obtained in the ordinary course of business).  There are no liens for Taxes outstanding against any assets of the Company or any of its Subsidiaries other than for current Taxes not yet due and payable or being contested in good faith and for which appropriate reserves are established in the financial statements in accordance with GAAP.

 

(f)          Neither the Company nor any of its Subsidiaries has been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code in the three years prior to the date of this Agreement.

 

(g)         Neither the Company nor any of its Subsidiaries has been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code, or a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes, other than a group of which the Company is the common parent.  Neither the Company nor any of its Subsidiaries has any liability for Taxes of any Person other than that of the Company or any Subsidiary under Treasury Regulation Section 1.1502-6 or any corresponding provision of state, local, or foreign income Tax law, as transferee or successor, by contract (other than Taxes imposed under customary provisions of commercial contracts entered into in the ordinary course of business the principal purpose of which is unrelated to Taxes), by operation of law, or otherwise.

 

(h)      Neither the Company nor any of its Subsidiaries have participated in or are currently participating in any “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).

 

(i)         Neither the Company nor any of its Subsidiaries will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any Tax period (or portion thereof) beginning after the Closing Date as a result of any: (A) change in method of accounting (or use of an improper method of accounting) for Tax purposes for a Tax period ending on or prior to the Closing Date; (B) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local, or foreign Tax law) executed on or prior to the Closing Date; (C) prepaid amount received on or prior to the Closing Date outside of the ordinary course of business, (D) use of the installment sale or open transaction method to report a disposition of property made prior to the Closing, or (E) any inclusion under Section 951(a) or Section 951A of the Code of income attributable to a tax period (or portion thereof) ending on or before the Closing Date.

 

(j)          In the three (3) years prior to the date of this Agreement, neither the Company nor any of its Subsidiaries has received any Tax ruling from a Governmental Entity or entered into any closing agreement in respect of Taxes, which ruling or agreement will be binding on the Company or any of its Subsidiaries after the Closing, and no such guidance or agreement has been requested.

 

(k)       The Company and each of its Subsidiaries is and has at all times been resident for Tax purposes in its country of incorporation or formation and is not and has not at any time been resident in any other country for any Tax purposes or been subject to Tax in any country other than the country of incorporation or formation by virtue of having a branch, permanent establishment, place of control and management or other place of business in that country.

 

(l)          Neither the Company nor any Subsidiary owns any stock or other ownership interests in (i) any corporation which is a passive foreign investment company within the meaning of Section 1297 of the Code or a controlled foreign corporation within the meaning of Section 957 of the Code with respect to which such Acquired Company is a “U.S. Shareholder” within the meaning of Section 951(b) of the Code; or (ii) any partnership, joint venture, limited liability company, or other entity taxed as a partnership or other pass through entity for U.S. federal income Tax purposes. No Acquired Company has made any election under Code Section 965(h) to defer the payment of any “net tax liability” as such term is defined in Code Section 965(h)(6).

 

CONTINGENT VALUE RIGHT AGREEMENT

 

This Contingent Value Right Agreement, dated as of [●], 2024 (this “Agreement”), is entered into by and DPV Parent, Inc., a Delaware corporation (“Parent”), and [RIGHTS AGENT], a [●], as Rights Agent (the “Rights Agent”).

 

RECITALS

 

WHEREAS, Parent, DPV Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Purchaser”), Lumos Pharma, Inc., a Delaware corporation (the “Company”) and, solely for the purposes of Section 9.17 thereof, Double Point Ventures LLC, a Delaware limited liability corporation,  have entered into an Agreement and Plan of Merger, dated as of October 22, 2024 (as it may be amended or supplemented from time to time pursuant to the terms thereof, the “Merger Agreement”), pursuant to which Purchaser (a) has agreed to commence a cash tender offer (as it may be extended and amended from time to time as permitted under the Merger Agreement, the “Offer”) to acquire all of the outstanding shares of common stock, par value $0.01 per share, of the Company (“Shares”) and (b) following the consummation of the Offer, will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Parent, in accordance with Section 251(h) of the DGCL and on the terms and subject to the conditions set forth in the Merger Agreement; and

 

WHEREAS, pursuant to the Merger Agreement, (a) in each of the Offer and the Merger, Parent has agreed to provide to the holders of Shares (other than holders of Excluded Shares and Dissenting Shares) and (b) in the Merger, Parent has agreed to provide to holders of In-the-Money Options and Company Stock Rights in the case of each of clauses (a) and (b), the right to receive contingent cash payments as hereinafter described.

 

NOW, THEREFORE, in consideration of the foregoing and the consummation of the transactions referred to above, Parent and the Rights Agent agree, for the equal and proportionate benefit of all Holders (as hereinafter defined), as follows:

 

1.           DEFINITIONS

 

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person.  The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of more than 50% of the voting securities entitled to vote for directors (or similar officials) of a Person or the possession, by contract or otherwise, of the authority to direct the management and policies of a Person.

 

“Annual Global Net Revenue” means, in a given Calendar Year the sum of (a) the aggregate Net Sales and (b) the aggregate Sublicensing Revenue.

 

“Assets” means the Company’s product, product candidate, and pipeline assets acquired in the Merger, including the Product.

 

“Assignee” has the meaning set forth in Section 6.3.

 

“Company Sale” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events: (a) the acquisition of direct or indirect beneficial ownership of more than 50% of the outstanding shares of capital stock of the Company by any Third Party or (b) the sale, assignment, lease, exclusive license or other disposition of all or substantially all of the assets or business of the Company acquired in the Merger to any Third Party, provided, a transaction described in (a) or (b) above whereby the Company is continued to be Controlled directly or indirectly by the shareholders of the Company as of immediately before the transaction, the immediate family of such shareholders or the same family office of such shareholders shall not constitute a “Company Sale” for purposes of this definition.

 

“Company Sale Milestone” means the occurrence of a Company Sale during the period beginning on the Closing Date and ending on the 18-month anniversary of the Closing Date.

 

“Company Sale Milestone Amount” means, with respect to the achievement of the Company Sale Milestone, an amount per CVR equal to $2.00.

 

“Control” means (including the terms “controlled,” “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.  “Covered Milestone Payments” has the meaning set forth in Section 2.4(f).

 

“CVRs” means the rights of Holders to receive contingent cash payments pursuant to the Merger Agreement and this Agreement.

 

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

 

“DTC” means The Depository Trust Company or any successor entity thereto.

 

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

 

“Equity Award CVR” means a CVR received by a Holder in respect of an In-the-Money Option or a Company Stock Right.

 

“First Commercial Sale” means the first sale or distribution of the Product to a Third Party for distribution, use or consumption.

 

“GAAP” means generally accepted accounting principles in the United States, as in effect from time to time.

 

“Holder” means a Person in whose name a CVR is registered in the CVR Register at the applicable time.

 

“LUM-201” means the compound known as LUM-201 or ibutamoren, including any salt, conjugate, polymorph, isomer, form, prodrug, or solvate thereof.

 

“Measurement Period” means, with respect to each Transaction, each of the following periods (a) the period commencing upon the consummation of such Transaction and expiring 60 days thereafter (“Measurement Period 1”), and (b) the period commencing on the expiration of Measurement Period 1 and expiring on the 18-month anniversary of the consummation of such Transaction (“Measurement Period 2”).

 

“Milestone” means each of the Net Revenue Milestones, the Transaction Milestones and the Company Sale Milestone.

 

“Milestone Payment” means each of the Net Revenue Milestone Amounts, the Transaction Milestone Amounts and the Company Sale Milestone Amount.

 

“Milestone Payment Date” means, (a) with respect to each Net Revenue Milestone, and Company Sale Milestone, or a Transaction Milestone 1, the 60^th day following the end of the Calendar Quarter in which such Milestone is achieved, and (b) with respect to each Transaction Milestone 2, the 60^th day following the end of Measurement Period 2 for the corresponding Transaction.

 

(a)          customary trade, cash and quantity discounts given to customers;

 

(b)          rebates, credits and allowances given by reason of rejections returns, damaged or defective product or recalls;

 

(c)          government-mandated rebates, credits and adjustments paid or deducted;

 

(d)      customary price adjustments, allowances, credits, chargeback payments, discounts, rebates, free of charge concessions, fees and reimbursements granted or made to managed care organizations, group purchasing organizations or other buying groups, pharmacy benefit management companies, health maintenance organizations and any other providers of health insurance coverage, health care organizations or other health care institutions (including hospitals), health care administrators, patient assistance or other similar programs, or to federal state/provincial, local and other governments, including their agencies;

 

(e)         reasonable and customary freight, shipping, insurance and other transportation expenses to the extent included in the price and separately itemized on the invoice;

 

(f)         amounts written off as uncollectable debt; provided that the amount of any uncollectable debt deducted pursuant to this exception and actually collected in a subsequent Calendar Quarter shall be included in Net Sales for such subsequent Calendar Quarter;

 

(g)         sales, value-added, and excise taxes, tariffs and duties, and other Taxes directly related to the sale, delivery or use of the Product (but not including Taxes assessed against the net income derived from such sale); and

 

(h)       royalty payments with respect to the Product accrued by the Company during the applicable accounting period pursuant to the agreements listed on Schedule I.

 

“Net Revenue Milestones” means the first achievement of Annual Global Net Revenue during the period beginning on the Closing Date and ending on December 31, 2037 (a) equal to or greater than $500 million (“Net Revenue Milestone 1”), (b) equal to or greater than $1 billion (“Net Revenue Milestone 2”) and/or (c) equal to or greater than $1.5 billion (“Net Revenue Milestone 3”).

 

“Net Revenue Milestone 1 Amount” means, with respect to the achievement of Net Revenue Milestone 1, an amount per CVR equal to $1.00.

 

“Net Revenue Milestone 2 Amount” means, with respect to the achievement of Net Revenue Milestone 2, an amount per CVR equal to $1.50.

 

“Net Revenue Milestone 3 Amount” means, with respect to the achievement of Net Revenue Milestone 3, an amount per CVR equal to $2.00.

 

“Net Revenue Milestone Amounts” means each of the Net Revenue Milestone 1 Amount, the Net Revenue Milestone 2 Amount and Net Revenue Milestone 3 Amount.

 

“Net Revenue Milestone Non-Achievement Certificate” has the meaning set forth in Section 2.4(g).

 

“Officer’s Certificate” means a certificate signed by the chief executive officer, president, chief financial officer, any vice president, the controller, the treasurer or the secretary, in each case of Parent, in his or her capacity as such an officer, and delivered to the Rights Agent.

 

“Parent Contributed R&D Amounts” means, with respect to a given Asset in a given Transaction, all expenses paid, incurred or accrued by the Company after the Closing Date, in accordance with GAAP, with respect to the research and development of such Asset involved in such Transaction that were funded with cash contributed by Parent to the Company in the form of equity investment(s) or loans (including, but not limited to, the CTF Agreement) or otherwise; provided, that Parent Contributed R&D Amounts may only be deducted once from the Transaction Milestone Amounts.  For the avoidance of doubt, any Parent Contributed R&D Amounts that are paid, incurred or accrued subsequent to (i) the expiration of Measurement Period 1 of a Transaction may be deducted from the Transaction Milestone Amounts at the expiration of Measurement Period 2 and (ii) expiration of Measurement Period 2 of a Transaction may be deducted in the next Transaction.

 

“Person” means any natural person, corporation, limited liability company, trust, unincorporated association, partnership, joint venture or other entity.

 

“Permitted Transfer” means a transfer of CVRs (a) upon death of a Holder by will or intestacy; (b) pursuant to a court order; (c) by operation of law (including by consolidation or merger) or without consideration in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other Person; (d) in the case of CVRs held in book-entry or other similar nominee form, from a nominee to a beneficial owner and, if applicable, through an intermediary, as allowable by DTC; (e) if the Holder is a partnership or limited liability company, a pro-rata distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (f) by instrument to an inter vivos or testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee; or (g) as provided in Section 2.6.

 

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent becomes such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

 

“Sublicensee” shall mean an authorized or permitted Third Party licensee or sublicensee of rights to the Product.

 

“Sublicensing Revenue” means any payments or other consideration that Parent or any of its Affiliates (including the Surviving Corporation) receives from a Sublicensee or its Affiliates in connection with the development or exploitation of the Product, including license fees, milestone payments, bonus payments, license maintenance fees, royalty payments, and other payments, other than (a) amounts received as reimbursement for documented direct (internal FTE and out-of-pocket) costs actually incurred by Parent or any of its Affiliates (including the Surviving Corporation) for services rendered to the Sublicensee in connection with the Product as explicitly stipulated to be reimbursed in the applicable agreement with the Sublicensee; (b) amounts received as reimbursement of out-of-pocket costs actually incurred by Parent or any of its Affiliates (including the Surviving Corporation) for payments made to reimburse patent costs as explicitly stipulated to be reimbursed in the applicable agreement with the Sublicensee; (c) consideration received by Parent or any of its Affiliates (including the Surviving Corporation) for the issuance of debt interests in Parent or any of its Affiliates (including the Surviving Corporation) to the extent the amount paid for such debt does not exceed fair market value, provided, that, at the time any such debt becomes due, the amount of such debt that (i) is neither repaid by Parent or any of its Affiliates (including the Surviving Corporation) nor converted to equity at fair market value at the time of conversion, or (ii) is forgiven, shall be included in Sublicensing Revenue; and (d) consideration for the issuance of equity interests in Parent or any of its Affiliates (including the Surviving Corporation) to the extent the amount of such consideration does not exceed fair market value of such equity.  If Parent or any of its Affiliates (including the Surviving Corporation) receives non-cash consideration, including equity, in connection with an applicable agreement with a Sublicensee, Sublicensing Revenue will be calculated based on the fair market value of such consideration, at the time of the transaction, assuming an arm’s length transaction made in the ordinary course of business.

 

“Taxes” shall have the meaning set forth in the Merger Agreement.

 

“Third Party” means any Person other than Parent, Company or their respective Affiliates.

 

“Transaction” the execution of any definitive agreement or series of agreements with any Third Party (excluding any Company Sale) that occurs during the period beginning on the Closing Date and ending on the 18-month anniversary of the Closing Date with respect to the sale, assignment, transfer, license, option, non-assert or other disposition of the Assets (a) for any exploitation in the cardiometabolic field or (b) excluding the Product, in any other field.

 

“Transaction Milestone 1” means, with respect to a given Transaction, the expiration of Measurement Period 1 for such Transaction.

 

“Transaction Milestone 1 Amount” means, with respect to the achievement of Transaction Milestone 1 for a given Transaction, an amount in cash per CVR equal to (1) the difference of: (a) 25% of Transaction Proceeds received during Measurement Period 1 for such Transaction, minus (b) the sum of (i) 50% of the Upfront Cash Consideration (solely to the extent such amount has not been deducted from any other Transaction Milestone Amount), plus (ii) the Parent Contributed R&D Amounts, divided by (2) the total number of outstanding CVRs as of the end of Measurement Period 1, provided that in no event shall the Transaction Milestone 1 Amount be less than zero.

 

“Transaction Milestone 2” means, with respect to a given Transaction, the expiration of Measurement Period 2 for such Transaction.

 

“Transaction Milestone 2 Amount” means, with respect to the achievement of Transaction Milestone 2 for a given Transaction, an amount in cash per CVR equal to (1) the difference of: (a) 25% of Transaction Proceeds received during Measurement Period 2 for such Transaction, minus (b) the sum of (i) 50% of the Upfront Cash Consideration (solely to the extent such amount has not been deducted from any other Transaction Milestone Amount), plus (ii) the Parent Contributed R&D, divided by (2) the total number of outstanding CVRs as of the end of Measurement Period 2, provided that in no event shall the Transaction Milestone 2 Amount be less than zero.

 

“Transaction Milestone Amounts” means, for each Transaction, the Transaction Milestone 1 Amount and the Transaction Milestone 2 Amount.

 

“Transaction Milestones” means, for each Transaction, Transaction Milestone 1 and Transaction Milestone 2.

 

“Transaction Proceeds” means, with respect to a given Transaction, all proceeds actually received in connection with such Transaction, without duplication, by Parent, the Company or any of their respective Affiliates (or any of their respective successors or any Affiliate of such successor).  For the avoidance of doubt, “Transaction Proceeds” shall be net of all reasonable and documented out-of-pocket costs and expenses incurred by the Company or any of its Affiliates in connection with the negotiation, entry into and closing of any Transaction, including, but not limited to, any brokerage fee, attorneys’ fees, finder’s fee, opinion fee, success fee, transaction fee, service fee or other fee, commission or expense owed to any broker, finder, investment bank, auditor, accountant, counsel, advisor or other Third Party in relation thereto.  For non-cash proceeds, the value of such proceeds shall be measured on a GAAP basis and as of the date of receipt.

 

“Upfront Cash Consideration” means $[●].

 

2.           CONTINGENT VALUE RIGHTS

 

2.1.        CVRs.  The CVRs represent the rights of Holders to receive contingent cash payments pursuant to the Merger Agreement and this Agreement.  The initial Holders shall be determined pursuant to the terms of the Merger Agreement and this Agreement, and a list of the initial Holders shall be furnished to the Rights Agent by or on behalf of Parent in accordance with Section 4.1 hereof.  Each CVR represents the right of a Holder to receive the Milestone Payments in accordance with this Agreement.

 

(a)          The CVRs shall not be evidenced by a certificate or other instrument.

 

(b)        The Rights Agent shall keep a register (the “CVR Register”) for the purpose of registering CVRs and transfers of CVRs as herein provided.  The CVR Register will initially show one position for Cede & Co. representing all of the CVRs that are issued to the holders of Shares held by DTC on behalf of the street holders of the Shares.  The Rights Agent will have no responsibility whatsoever directly to the street name holders or DTC participants with respect to transfers of CVRs.  With respect to any payments to be made under Section 2.4 below, the Rights Agent will accomplish the payment to any former street name holders of the Shares by sending a lump sum payment to DTC.  The Rights Agent will have no responsibilities whatsoever with regard to the distribution of payments by DTC to such street name holders. In the case of CVRs to be received by the holders of In-the-Money Options and Company Stock Rights pursuant to the Merger Agreement, such CVRs shall initially be registered in the name and address of the holder of such In-the-Money Options and Company Stock Rights as set forth in the records of the Company at the Effective Time and in a denomination equal to the number of Shares subject to such In-the-Money Options and Company Stock Rights cancelled in connection with the Merger.

 

(c)        Subject to the restrictions on transferability set forth in Section 2.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument of transfer and other documentation reasonably requested by the Rights Agent in form reasonably satisfactory to the Rights Agent pursuant to its guidelines, duly executed by the Holder thereof, the Holder’s attorney duly authorized in writing, the Holder’s personal representative or the Holder’s survivor, as applicable, and setting forth in reasonable detail the circumstances relating to the transfer.  Upon receipt of such written notice, the Rights Agent shall, subject to its reasonable determination that the transfer instrument is in proper form, notify Parent that it has received such written notice.  Upon receipt of such notice from the Rights Agent, Parent shall in good faith reasonably determine whether the transfer otherwise complies with the other terms and conditions of this Agreement (including the provisions of Section 2.2), and if Parent so reasonably determines that it does so comply, Parent shall instruct the Rights Agent in writing to register the transfer of the CVRs in the CVR Register and notify Parent of the same.  No service charge shall be made for any registration of transfer of a CVR, but Parent and the Rights Agent may require payment from the applicable Holder of a sum sufficient to cover any stamp or other Tax or charge that is imposed in connection with any such registration of transfer.  The Rights Agent shall have no duty or obligation to take any action under any section of this Agreement that requires the payment of applicable Taxes or charges unless and until the Rights Agent is satisfied that all such Taxes or charges have been paid.  All duly transferred CVRs registered in the CVR Register shall be the valid obligations of Parent and shall entitle the transferee to the same benefits and rights under this Agreement as those held immediately prior to the transfer by the transferor.  No transfer of a CVR shall be valid unless and until registered in the CVR Register.

 

(d)         A Holder may make a written request to the Rights Agent to change such Holder’s address of record in the CVR Register.  The written request must be duly executed by the Holder.  Upon receipt of such written request, the Rights Agent is hereby authorized to, and shall promptly, record the change of address in the CVR Register.

 

(a)        On each Milestone Payment Date, Parent will deliver to the Rights Agent a certificate (an “Entitlement Certificate”) certifying that either (i) the Holders are entitled to receive the applicable Milestone Payment (and setting forth the calculation of such Milestone Payment) and/or (ii) a Transaction Milestone has been achieved but no Transaction Milestone Amount is payable because the applicable Transaction Milestone Amount is zero (and setting forth the calculation showing the calculation of the Transaction Milestone Amount for the applicable Transaction Milestone).  If the Entitlement Certificate certifies that the Holders are entitled to receive a Milestone Payment, then, concurrent with the delivery of such Entitlement Certificate, Parent will deliver to the Rights Agent cash, by wire transfer of immediately available funds to an account specified by the Rights Agent, equal to the aggregate amount necessary to pay the applicable Milestone Payment to all Holders pursuant to Section 4.2, along with any letter of instruction reasonably required by the Rights Agent.

 

(b)       The Rights Agent shall promptly, and in any event within ten (10) Business Days of receipt of an Entitlement Certificate and, if applicable, cash, by wire transfer of immediately available funds, equal to the aggregate amount necessary to pay the Milestone Payment to all Holders pursuant to Section 4.2 as well as any letter of instruction reasonably required by the Rights Agent, send each Holder at its registered address a copy of such Entitlement Certificate, including, if applicable, detail regarding the ability of a Holder or Holders to dispute or contest such determination that no Milestone Payment is payable pursuant to this Agreement.  If a Milestone Payment is payable to the Holders, then at the time the Rights Agent sends a copy of the Entitlement Certificate to the Holders, the Rights Agent shall also pay the Milestone Payment to each of the Holders in accordance with the corresponding letter of instruction (i) by check mailed to the address of such Holder reflected in the CVR Register as of 5:00 p.m. New York City time on the date of the Entitlement Certificate or (ii) with respect to any such Holder that is due an amount in excess of $100,000 in the aggregate who has provided the Rights Agent wiring instructions in writing as of the close of business on the date of the Entitlement Certificate, by wire transfer of immediately available funds to the account specified on such instructions.

 

(d)        If any funds delivered to the Rights Agent for payment to Holders as Milestone Payments remain undistributed to the Holders on the twelve (12) month anniversary of the applicable Milestone Payment Date, Parent shall be entitled to require the Rights Agent to deliver to Parent or its designee any funds which had been made available to the Rights Agent in connection with such Milestone Payment and not disbursed to the Holders (including, all interest and other income received by the Rights Agent in respect of all funds made available to it), and, thereafter, such Holders shall be entitled to look to Parent (subject to abandoned property, escheat and other similar Laws) only as general creditors thereof with respect to the Milestone Payments that may be payable.

 

(e)         Neither Parent, the Rights Agent nor any of their Affiliates shall be liable to any Holder for any Milestone Payments delivered to a public official pursuant to any abandoned property, escheat or other similar Laws.  Any amounts remaining unclaimed by such Holders at such time at which such amounts would otherwise escheat to or become property of any Governmental Entity shall become, to the extent permitted by applicable Laws, the property of Parent or its designee, free and clear of all claims or interest of any Person previously entitled thereto.  In addition to and not in limitation of any other indemnity obligation herein, Parent agrees to indemnify and hold harmless the Rights Agent with respect to any liability, penalty, cost or expense the Rights Agent may incur or be subject to in connection with transferring such property to Parent.  The indemnification provided by this Section 2.4(e) shall survive the resignation, replacement or removal of the Rights Agent and the termination of this Agreement.

 

(f)          The parties hereto intend to treat, for all U.S. federal and applicable state and local income Tax purposes, except to the extent any portion of any Milestone Payment is required to be treated as imputed interest pursuant to applicable Law, (i) the CVRs received with respect to the Shares, other than the Equity Award CVRs, pursuant to the Merger Agreement as additional consideration paid at the Effective Time for the Shares in connection with the Offer or the Merger, as the case maybe, pursuant to the Merger Agreement, (ii) any Milestone Payments received in respect of such CVRs as amounts realized on the disposition of the applicable CVRs, and (iii) any Milestone Payments paid in respect of each Equity Award CVR (the “Covered Milestone Payments”), as compensation in the year in which the Milestone Payment is made.

 

(g)        Beginning in the Calendar Year in which the First Commercial Sale occurs, if a Net Revenue Milestone is not achieved during a Calendar Year, then on or before the date that is sixty (60) days after the expiration of each such Calendar Year period, Parent shall deliver to the Rights Agent a certificate certifying that such Net Revenue Milestone has not occurred, accompanied by a statement setting forth, in reasonable detail, a calculation of Annual Global Net Revenue for the applicable period (each, a “Net Revenue Milestone Non-Achievement Certificate”).  The Rights Agent shall promptly, and in any event within ten (10) Business Days of receipt of a Net Revenue Milestone Non-Achievement Certificate, send each Holder at its registered address a copy of such Net Revenue Milestone Non-Achievement Certificate, including detail regarding the ability of a Holder or Holders to dispute or contest such determination of non-achievement of a Milestone pursuant to this Agreement.

 

(h)        All funds received by the Rights Agent under this Agreement that are to be distributed or applied by the Rights Agent in the performance of services hereunder (the “Funds”) shall be held by the Rights Agent as agent for Parent and deposited in one or more bank accounts to be maintained by the Rights Agent in its name as agent for Parent.  Until paid pursuant to the terms of this Agreement, the Rights Agent will hold the Funds through such accounts in: deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment grade by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.).  The Rights Agent shall have no responsibility or liability for any diminution of the Funds that may result from any deposit made by the Rights Agent in accordance with this paragraph, including any losses resulting from a default by any bank, financial institution or other third party. The Rights Agent may from time to time receive interest, dividends or other earnings in connection with such deposits.  The Rights Agent shall not be obligated to pay such interest, dividends or earnings to Parent, any Holder or any other Person, unless there is a diminution of the Funds due to a deposit or investment made by the Rights Agent, in which case, the Rights Agent agrees that such interest, dividends or earnings shall accrue to the benefit of Parent to the extent of such diminution of the Funds.

 

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

 

(b)         The CVRs shall not represent any equity or ownership interest in Parent, the Company or in any constituent company to the Merger or any of their respective Subsidiaries or Affiliates.

 

3.           THE RIGHTS AGENT

 

(a)         the Rights Agent may rely and shall be protected and held harmless by Parent in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties;

 

(b)          whenever the Rights Agent shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Rights Agent may rely upon an Officer’s Certificate, which certificate shall be full authorization and protection to the Rights Agent, and the Rights Agent shall, in the absence of gross negligence, bad faith or willful or intentional misconduct (each as determined by a final judgment of a court of competent jurisdiction) on its part, incur no liability and be held harmless by Parent for or in respect of any action taken, suffered or omitted to be taken by it under the provisions of this Agreement in reliance upon such certificate;

 

(c)          the Rights Agent may engage and consult with counsel of its selection and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection and shall be held harmless by Parent in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

 

(d)          the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

 

(e)         the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

 

(f)          the Rights Agent shall not be responsible for any breach by Parent of any covenant or condition contained in this Agreement;

 

(g)         Parent agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, damage, judgement, fine, penalty, claim, demands, suits or expense arising out of or in connection with Rights Agent’s duties under this Agreement, including the reasonable out-of-pocket costs and expenses of counsel in defending Rights Agent against any loss, liability, damage, judgement, fine, penalty, claim, demands, suits or expense, unless such loss has been determined by a court of competent jurisdiction to be a result of Rights Agent’s gross negligence, bad faith or willful or intentional misconduct;

 

(h)        the aggregate liability of the Rights Agent arising in connection with this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed the amounts paid or payable hereunder by Parent to the Rights Agent as fees and charges;

 

(i)         Parent agrees (i) to pay the fees and expenses of the Rights Agent in connection with this Agreement agreed upon in writing by the Rights Agent and Parent prior to the date hereof, and (ii) to reimburse the Rights Agent for all Taxes and governmental charges, reasonable out-of-pocket expenses and other charges of any kind and nature incurred by the Rights Agent in the execution of this Agreement (other than Taxes imposed on or measured by the Rights Agent’s net income and franchise or similar Taxes imposed on it (in lieu of net income Taxes)).  The Rights Agent shall also be entitled to reimbursement from Parent for all reasonable and necessary out-of-pocket expenses paid or incurred by it in connection with the administration by the Rights Agent of its duties hereunder;

 

(j)          The provisions of this Section 3.2 shall survive the termination of this Agreement, the resignation, replacement or removal of the Rights Agent, and the payment, termination and the expiration of the CVRs.

 

(a)         The Rights Agent may resign at any time by giving written notice thereof to Parent specifying a date when such resignation shall take effect, which notice shall be sent at least sixty (60) days prior to the date so specified but in no event shall such resignation become effective until a successor Rights Agent has been appointed and accepted such appointment in accordance with Section 3.4.  Parent has the right to remove the Rights Agent at any time by specifying a date when such removal shall take effect but no such removal shall become effective until a successor Rights Agent has been appointed and accepted such appointment in accordance with Section 3.4.  Notice of such removal shall be given by Parent to the Rights Agent, which notice shall be sent at least sixty (60) days prior to the date so specified.

 

(b)       If the Rights Agent provides notice of its intent to resign, is removed or becomes incapable of acting, Parent shall, as soon as is reasonably practicable, appoint a qualified successor Rights Agent who shall be a stock transfer agent of national reputation or the corporate trust department of a commercial bank.  Notwithstanding the foregoing, if Parent shall fail to make such appointment within a period of sixty (60) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent, then the incumbent Rights Agent may apply to any court of competent jurisdiction for the appointment of a new Rights Agent.  The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with Section 3.4, become the successor Rights Agent.

 

(c)        Parent shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent through the facilities of DTC in accordance with DTC’s procedures and/or by mailing written notice of such event by first-class mail to the Holders as their names and addresses appear in the CVR Register.  Each notice shall include the name and address of the successor Rights Agent.  If Parent fails to send such notice within ten (10) Business Days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause the notice to be transmitted at the expense of Parent.  Failure to give any notice provided for in this Section 3.3, however, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

 

(d)         Notwithstanding anything else in this Section 3.3, unless consented to in writing by the Acting Holders, Parent shall not appoint as a successor Rights Agent any Person that is not a stock transfer agent of national reputation or the corporate trust department of a commercial bank.

 

4.           COVENANTS

 

(a)        Until the termination of this Agreement in accordance with its terms and for a period of six (6) months thereafter, upon reasonable advance written notice from the Acting Holders, Parent shall permit an independent certified public accounting firm of nationally recognized standing selected by such Acting Holders and reasonably acceptable to Parent (the “Independent Accountant”) to have access at reasonable times during normal business hours to the books and records of any Selling Party, as may be reasonably necessary to evaluate and verify Parent’s calculation of the Milestone Payments hereunder, including with respect to the amount of Net Sales, Sublicensing Revenue and Transaction Proceeds; provided that (x) such Acting Holders (and the Independent Accountant) enter into customary confidentiality agreement reasonably satisfactory to Parent with respect to the confidential information of the Selling Parties to be furnished pursuant to this Section 4.5 and (y) such access does not unreasonably interfere with the conduct of the business of the Selling Parties; provided, further, that, for the avoidance of doubt, if an Affiliate of Parent does not meet the definition of a “Selling Party” by virtue of the Affiliate not participating in the invoicing and sales of the Product, then such Affiliate will not be deemed a “Selling Party” for purposes of this Section 4.5(a).  The fees charged by such accounting firm shall be borne by the Acting Holders.  The Independent Accountant shall provide Parent with a copy of all disclosures made to the Acting Holders.  The decision of such Independent Accountant shall be final, conclusive and binding on Parent and the Holders, shall be nonappealable and shall not be subject to further review, absent manifest error.  Parent shall not enter into any transaction constituting a Change of Control unless such agreement contains provisions that would permit such Independent Accountant with such access to the records of the other party in such Change of Control if and to the extent as are reasonably necessary to ensure compliance with this Section 4.5.  The audit rights set forth in this Section 4.5(a) may not be exercised by the Acting Holders more than once in any given twelve (12) month period.  Notwithstanding the foregoing, no audit pursuant to this Section 4.5(a) shall be permitted for any Calendar Year ending on a date more than three years prior to the date of written notice from the Acting Holders of commencement of an audit pursuant to this Section 4.5(a).

 

(b)        If, in accordance with the procedures set forth in Section 4.5(a), the Independent Accountant concludes that any Milestone Payment should have been paid but was not paid when due, Parent shall promptly, and in any event within thirty (30) days of the date the Independent Accountant delivers to Parent the Independent Accountant’s written report, pay each Holder such Milestone Payment (to the extent not paid on a subsequent date), plus interest at the thirty (30) day U.S. dollar “prime rate” effective for the date such payment was due, as reported by Bloomberg, from when such Milestone Payment should have been paid, as applicable, to the date of actual payment, pursuant to Section 2.4(b).

 

5.            AMENDMENTS

 

(a)        Without the consent of any Holders, Parent and the Rights Agent, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes:

 

(i)           subject to Section 3.3(d), to evidence the succession of another Person as a successor Rights Agent and the assumption by any such successor of the covenants and obligations of the Rights Agent herein;

 

(ii)          to add to the covenants of Parent such further covenants, restrictions, conditions or provisions as Parent shall consider to be for the protection of the Holders; provided that, in each case, such provisions do not adversely affect the interests of the Holders;

 

(iii)       to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein or in the Merger Agreement, or to make any other provisions with respect to matters or questions arising under this Agreement; provided that, in each case, such provisions do not adversely affect the interests of the Holders; provided, further, that in the case that such provision does adversely affect the interests of the Holders, but with no more than de minimis effect, such amendment shall not require the consent of any Holders;

 

(iv)       as may be necessary or appropriate to ensure that the CVRs are not subject to registration under the Securities Act, the Exchange Act or any applicable state securities or “blue sky” laws;

 

(v)          to evidence the assignment of this Agreement by Parent as provided in Section 6.3; or

 

(vi)        any other amendments hereto for the purpose of adding, eliminating or changing any provisions of this Agreement, unless such addition, elimination or change is adverse to the interests of the Holders.

 

(b)        Without the consent of any Holders, Parent and the Rights Agent, at any time and from time to time, may enter into one or more amendments hereto to reduce the number of CVRs, in the event any Holder agrees to renounce such Holder’s rights under this Agreement in accordance with Section 6.4 or to transfer CVRs to Parent pursuant to Section 2.6.

 

(c)         Promptly after the execution by Parent and the Rights Agent of any amendment pursuant to the provisions of this Section 5.1, Parent shall mail (or cause the Rights Agent to mail) a notice thereof through the facilities of DTC in accordance with DTC’s procedures and/or by first class mail to the Holders at their addresses as they appear on the CVR Register, setting forth such amendment.

 

(a)         Subject to Section 5.1 (which amendments pursuant to Section 5.1 may be made without the consent of any Holder or the Rights Agent), with the consent of the Holders of not less than a majority of the outstanding CVRs as set forth in the CVR Register, whether evidenced in writing or taken at a meeting of the Holders, Parent and the Rights Agent may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any provisions of this Agreement, even if such addition, elimination or change is materially adverse to the interest of the Holders.

 

(b)         Promptly after the execution by Parent and the Rights Agent of any amendment pursuant to the provisions of this Section 5.2, Parent shall mail (or cause the Rights Agent to mail) a notice thereof through the facilities of DTC in accordance with DTC’s procedures and/or by first class mail to the Holders at their addresses as they appear on the CVR Register, setting forth such amendment.

 

6.           OTHER PROVISIONS OF GENERAL APPLICATION

 

The Rights Agent or Parent may specify a different address or email address by giving notice in accordance with this Section 6.1.

 

6.2.       Notice to Holders.  Where this Agreement provides for notice to Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and transmitted through the facilities of DTC in accordance with DTC’s procedures or mailed, first-class postage prepaid, to each Holder affected by such event, at the Holder’s address as it appears in the CVR Register, not later than the latest date, and not earlier than the earliest date, if any, prescribed for the giving of such notice.  In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.

 

6.3.        Successors and Assigns.  Parent may assign, in its sole discretion and without the consent of any other Person, any or all of its rights, interests and obligations hereunder to one or more Affiliates of Parent (each, an “Assignee”); provided that each such Assignee agrees to assume and be bound by all of the terms and conditions of this Agreement; provided, further, that Parent shall remain liable for the performance by each such Assignee of all covenants, agreements and obligations of Parent hereunder.  This Agreement will be binding upon, inure to the benefit of and be enforceable by Parent’s successors and each Assignee.  Each of Parent’s successors and each Assignee shall, by a supplemental contingent consideration payment agreement or other acknowledgement executed and delivered to the Rights Agent, expressly agree to assume and be bound by all of the terms and conditions of this Agreement.  This Agreement shall not restrict Parent’s or any successor’s ability to merge or consolidate or enter into or consummate any Change of Control; provided, that in the event of a Change of Control, Parent or the Company, as applicable, shall cause the acquirer to assume Parent’s obligations, duties and covenants under this Agreement.  Except as otherwise permitted herein, Parent may not assign this Agreement without the prior written consent of the Acting Holders. Any attempted assignment of this Agreement or any such rights in violation of this Section 6.3 shall be void and of no effect.  Unless a successor or assignee meets the requirements set forth in Section 3.3(b), Rights Agent may not assign this Agreement without Parent’s written consent.  Any attempted assignment of this Agreement or any such rights in violation of this Section 6.3 shall be void and of no effect.

 

6.4.       No Third Party Beneficiaries.  Nothing in this Agreement, express or implied, shall give to any Person (other than the Rights Agent and its permitted successors and assigns, Parent, Parent’s successors and Assignees, and the Holders and the Holders’ successors and assigns pursuant to Permitted Transfers, each of whom is intended to be, and is, a third party beneficiary hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the Rights Agent and its permitted successors and assigns, Parent, Parent’s successors and Assignees, and the Holders and the Holders’ successors and assigns pursuant to Permitted Transfers.  The rights hereunder of Holders and their successors and assigns pursuant to Permitted Transfers are limited to those expressly provided in this Agreement.  Notwithstanding anything to the contrary contained herein, any Holder or Holder’s successor or assign pursuant to a Permitted Transfer may at any time agree to renounce, in whole or in part, whether or not for consideration, its rights under this Agreement by written notice to the Rights Agent and Parent, which notice, if given, shall be irrevocable, and Parent may, in its sole discretion, at any time offer consideration to Holders in exchange for their agreement to irrevocably renounce their rights, in whole or in part, hereunder.

 

6.5.       Governing Law; Jurisdiction.  This Agreement, the CVRs and all actions arising under or in connection herewith and therewith (whether sounding in contract, tort or otherwise) shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Each of the Parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any Party or its Affiliates against any other Party or its Affiliates shall be brought and determined in the Court of Chancery of the State of Delaware, provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then any such legal action or proceeding may be brought in any federal court located in the State of Delaware.  Each of the Parties hereby irrevocably consent to the jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby.  Each of the Parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in Delaware, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described herein.  Each of the Parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient.  Each of the Parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

 

6.6.        Waiver of Jury Trial.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

6.7.         Suits by Holders.  Except for the rights of the Rights Agent set forth herein, the Acting Holders will have the sole right, on behalf of all Holders, by virtue of or under any provision of this Agreement, to institute any action or proceeding with respect to this Agreement, and no individual Holder or other group of Holders will be entitled to exercise such rights.  Notwithstanding the foregoing, in the event of an insolvency proceeding of Parent, individual Holders shall be entitled to assert claims in such insolvency proceeding and take related actions in pursuit of such claims with respect to any payment that may be claimed by or on behalf of Parent or by any creditor of Parent.  Notwithstanding any other provision in this Agreement, the right of any Holder of any CVR to receive payment of the amounts that an Entitlement Certificate indicates are payable in respect of such CVR on or after the applicable due date, shall not be impaired or affected without the consent of such Holder.

 

6.8.       Severability.  In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement shall continue in full force and effect and the application of such provision to other Persons or circumstances shall be interpreted so as reasonably to effect the intent of the parties.  The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.

 

6.9.        Termination.  This Agreement shall be terminated and of no force or effect, the parties hereto shall have no liability hereunder (other than with respect to monies due and owing by Parent to Rights Agent), and no payments shall be required to be made, upon the later to occur of (a) the mailing by the Rights Agent to the address of each Holder as reflected in the CVR Register (or payment by wire transfer, as applicable) the full amount of all Milestone Payments required to be paid under the terms of this Agreement for Milestones that have been achieved on or before December 31, 2037, and (b) December 31, 2037. Notwithstanding the foregoing, no such termination shall affect any rights or obligations accrued prior to the effective date of such termination or Sections 2.4(e), 3.2, 4.5, 6.4 to 6.13, which shall survive the termination of this Agreement, or the resignation, replacement or removal of the Rights Agent.

 

6.10.      Specific Performance.  The Parties agree that irreparable damage would occur in the event that the Parties hereto do not perform the provisions of this Agreement in accordance with its terms or otherwise breach such provisions.  Accordingly, prior to the termination of this Agreement pursuant to Section 6.9, the Parties acknowledge and agree that each Party shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in the Court of Chancery of the State of Delaware, provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then in any federal court located in the State of Delaware, this being in addition to any other remedy to which such Party is entitled at law or in equity.  Each of the Parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief.  Notwithstanding the foregoing, the Parties agree that nothing in this Section 6.10 shall require Parent to comply with its obligations set forth in Section 4.6.

 

6.11.     Entire Agreement; Counterparts.  As it relates to the Rights Agent, this Agreement constitutes the entire agreement of the parties hereto and supersedes all contemporaneous and prior agreements and understandings, both written and oral, among or between any of the parties hereto, with respect to the subject matter hereof.  As between Parent and the Company, this Agreement and the Merger Agreement constitute the entire agreement and supersede all contemporaneous and prior agreements and understandings, both written and oral, among or between any of the Parties, with respect to the subject matter hereof and thereof.  If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling.  This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument.  The exchange of a fully executed Agreement (including pdf or any electronic signature complying with the U.S. ESIGN Act of 2000, e.g., www.docusign.com) shall be sufficient to bind the parties hereto to the terms and conditions of this Agreement.

 

6.12.      No Fiduciary Obligations.  Each of Parent and the Rights Agent acknowledges and agrees that (i) neither party owes any fiduciary duties to the Holders pursuant to this Agreement and (ii) the other party, its Affiliates and their respective officers, directors and controlling Persons do not owe any fiduciary duties to the first party or any of its respective Affiliates, officers, directors or controlling Persons.  The only obligations of Parent and the Rights Agent to each other and their Affiliates and their respective officers, directors and controlling Persons arising out of this Agreement are the contractual obligations expressly set forth in this Agreement.

 

6.13.      Confidentiality.  The Rights Agent and Parent agree that all books, records, information and data pertaining to the business of the other party, including inter alia, personal, non-public Holder information, which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement, including the fees for services set forth in the attached schedule shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by a valid order of an arbitration panel, court or Governmental Entity of competent jurisdiction or is otherwise required by law or regulation, including SEC or NASDAQ rules and regulations, or pursuant to subpoenas from state or federal government authorities (e.g., in divorce and criminal actions).

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, each of the parties has caused this Contingent Value Right Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

 

[Signature Page to Contingent Value Right Agreement]

	DPV PARENT, INC.
	By:
	Name: Christopher Uzpen
	Title: President
	DPV MERGERSUB, INC.
	By:
	Name: Christopher Uzpen
	Title: President

	STOCKHOLDER
	[●]
	By:
	Name:
	Title:

	Name of Stockholder		Number of Shares
	[●]		[●]

Exhibit 10.3

 CLINICAL TRIAL FUNDING AGREEMENT

 

This Clinical Trial Funding Agreement (this “Agreement”) is made as of October 22, 2024 (the “Effective Date”) by and between Double Point Ventures LLC, a Delaware limited liability company (“Lender”) and Lumos Pharma, Inc., a Delaware corporation (“Borrower”).

 

RECITALS

 

 

 

 

 

ARTICLE 1

 

DEFINITIONS

 

Section 1.1           Defined Terms.

 

Capitalized terms used herein without definition shall have the respective meanings ascribed thereto in the Merger Agreement. When used in this Agreement, the following terms shall have the following meanings (such meanings being applicable to both the singular and plural forms of such terms):

 

“Advance” has the meaning assigned in Section 2.1 hereof.

 

“Advance Period” means the period commencing on the Effective Date and ending on the earlier of (i) the Closing Date or (ii) the date on which the Merger Agreement is terminated by any party thereto for any reason (including, without limitation, due to Borrower’s exercise of any “fiduciary out” provision therein).

 

“Agreement” has the meaning assigned in the introductory paragraph hereof.

 

“Article 9” means Article 9 of the UCC.

 

“Borrower” has the meaning assigned in the introductory paragraph hereof.

 

“Collateral” has the meaning assigned in Section 3.1 hereof.

 

“Default” has the meaning assigned in Section 7.1 hereof.

 

“Effective Date” has the meaning assigned in the introductory paragraph hereof.

 

“Event of Default” has the meaning set forth in Article 8 hereof.

 

“Excluded Property” has the meaning assigned in Section 3.1 hereof.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to Lender: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes and branch profits Taxes in each case, (i) imposed as a result of Lender being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of Lender with respect to an applicable interest in an Advance pursuant to a law in effect on the date on which (i) Lender acquires such interest in the Advance or (ii) Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.6, amounts with respect to such Taxes were payable either to Lender’s assignor immediately before Lender became a party hereto or to Lender immediately before it changed its lending office, (c) Taxes attributable to Lender’s failure to comply with Section 2.6(e) and (d) any U.S. federal withholding Taxes imposed under FATCA.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Entities and implementing such Sections of the Code.

 

“Funding Cap” has the meaning assigned in Section 2.1 hereof.

 

“Funding Documents” means this Agreement, the Note, and each other agreement, instrument, or document evidencing, governing, and/or securing the transactions contemplated by this Agreement, the Note, and each other related agreement, instrument, or document, in each case as amended, restated, supplemented, and/or otherwise modified from time to time in accordance with the terms hereof. For the avoidance of doubt, the Merger Agreement and the Merger Documents shall not constitute Funding Documents.

 

“Indemnified Taxes” means (i) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by Borrower under any Funding Document and (ii) to the extent not otherwise described in (i), Other Taxes.

 

“Lender” has the meaning assigned in the introductory paragraph hereof.

 

“Material Adverse Effect” means (i) “Material Adverse Effect” as defined in the Merger Agreement, and (ii) a material adverse effect on (A) the ability of Borrower to perform its obligations under this Agreement or any other Funding Document, (B) the validity, enforceability, or collectability of this Agreement or the other Funding Documents against Borrower, (C) the enforceability or priority of Lender’s Liens with respect to the Collateral, or (D) the value of the Collateral or Lender’s ability to realize upon the Collateral.

 

“Maturity Date” means the earlier of (i) if the Merger Agreement is terminated prior to the occurrence of the Closing by any party thereto for any reason (including, without limitation, due to Borrower’s exercise of any “fiduciary out” provision therein), the date of such termination, or (ii) following the occurrence of the Closing, any date on which Lender demands payment by written notice to Borrower.

 

“Maximum Rate” means the maximum rate of non-usurious interest permitted by applicable law.

 

“Merger Agreement” has the meaning assigned in the recitals hereof.

 

“Merger Documents” means the ancillary documents contemplated under the Merger Agreement, including, but not limited to, the Company Acquisition Agreement, Confidentiality Agreement, CVR Agreement, and Support Agreement, but excluding, for the avoidance of doubt, the Funding Documents.

 

“Note” has the meaning assigned in Section 2.1 hereof.

 

“Other Connection Taxes” means Taxes imposed as a result of a present or former connection between Lender and the jurisdiction imposing such Tax (other than connections arising from Lender having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Funding Document, or sold or assigned an interest in any Funding Document).

 

“Other Taxes” means all present or future stamp, court, recording, filing, intangible, documentary, or similar Taxes that arise from any payment made hereunder or under any other Funding Document or from the execution, delivery, or enforcement or registration of, or performance under, or from the receipt or perfection of a security interest under or otherwise with respect to this Agreement or any other Funding Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

 

“Parent” has the meaning assigned in the recitals hereof.

 

 “Permitted Liens” means (i) “Permitted Liens” in the Merger Agreement, (ii) Liens in favor of financial institutions arising in connection with the Borrower’s letters of credit, deposit and/or securities accounts held at such institutions, and (iii) Liens (including deposits) to secure surety bonds, manufacturing contracts, clinical research organization contracts, leases (including real property leases), in each case, in the ordinary course of business.

 

“Permitted Uses” has the meaning assigned in the recitals hereof.

 

“Secured Obligations” means, collectively, (i) the obligations of Borrower from time to time arising under this Agreement and the other Funding Documents to which it is a party, (ii) the obligations of any other guarantor or other party (other than Lender) from time to time arising under the Funding Documents, if any, and (iii) all other agreements, duties, indebtedness, obligations, and liabilities of any kind of Borrower and any other party (other than Lender) under, out of, or in connection with the Funding Documents or any other document made, delivered, or given in connection with any of the foregoing (excluding, for the avoidance of doubt, the Merger Documents), in each case, whether now existing or hereafter arising, whether evidenced by a note or other writing, whether allowed in any bankruptcy, insolvency, receivership, or other similar proceeding, whether arising from an extension of credit, issuance of a letter of credit, acceptance, loan, guaranty, indemnification, or otherwise, and whether direct or indirect, absolute or contingent, due or to become due, primary or secondary, joint or several or fixed or otherwise, and including reasonable and documented out-of-pocket fees, costs, attorneys' fees, and disbursements, reimbursement obligations, expenses, and indemnities (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership, or other similar proceeding, regardless of whether allowed or allowable in such proceeding).

 

“UCC” means the Uniform Commercial Code as the same may from time to time be in effect in the State of Delaware (and each reference in this Agreement to an Article thereof shall refer to that Article as from time to time in effect in such jurisdiction); provided, however, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of Lender’s Lien in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Delaware, the term “UCC” shall mean the Uniform Commercial Code (including Articles thereof) as in effect at such time in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection, or priority and for purposes of definitions related to such provisions.

 

Section 1.2           UCC Terms.

 

Terms defined in the UCC which are not otherwise defined in this Agreement are used herein as defined in the UCC.

 

ARTICLE 2

 

CREDIT FACILITIES

 

Section 2.1           Advances.

 

From time to time during the Advance Period, subject to the terms and conditions hereof, Lender agrees to lend to Borrower, in one or more borrowings, loans in an aggregate principal amount not to exceed $7,500,000 (the “Funding Cap”). The advances hereunder (each an “Advance” and, collectively, the “Advances”) shall be evidenced by a single promissory note substantially in the form of Exhibit B attached hereto (the “Note”). Subject to the satisfaction of the conditions precedent set forth herein, the disbursement of each Advance hereunder shall be made upon written notice received by Lender not later than three Business Days prior to the date of such requested Advance specifying the date of disbursement (which date shall be a Business Day), the amount of such Advance, and the third-party provider to whom such Advance will be disbursed by Borrower, together with such supporting documentation as Lender may reasonably request. Borrower shall provide Lender with confirmation of such payment to the third-party provider within three Business Days of receipt of the Advance. Amounts borrowed hereunder and repaid or prepaid may not be reborrowed.

 

Section 2.2           Records.

 

Lender shall maintain in Lender’s records an account or accounts evidencing the indebtedness of Borrower hereunder, including the amounts of principal and interest payable and paid to Lender from time to time hereunder. The entries made in such account or accounts shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of Lender to maintain such account or accounts or any error therein shall not in any manner affect the obligation of Borrower to repay all outstanding principal, accrued and unpaid interest, and other amounts payable hereunder in accordance with the terms of this Agreement. In the event of any conflict between such account or accounts maintained by Lender with those maintained by Borrower pursuant to the immediately following paragraph, such account or accounts of Lender shall prevail in the absence of manifest error.

 

Borrower shall maintain in Borrower’s records an account or accounts evidencing the indebtedness of Borrower hereunder, including the amounts of principal and interest payable and paid to Lender from time to time hereunder. The entries made in such account or accounts shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of Borrower to maintain such account or accounts or any error therein shall not in any manner affect the obligation of Borrower to repay all outstanding principal, accrued and unpaid interest, and other amounts payable hereunder in accordance with the terms of this Agreement.

 

Section 2.3           Interest.

 

The outstanding principal amount of all Advances under this Agreement shall accrue interest at a rate equal to fifteen percent (15.0%) simple interest per annum, which accrued interest shall be due and payable in arrears on the Maturity Date. Interest shall be calculated on the basis of a 360-day year and charged for the actual number of days elapsed to, but excluding, the Maturity Date (or such other date on which all principal and accrued and unpaid interest hereunder is paid in full and this Agreement, and all commitments to make Advances hereunder, is terminated). Notwithstanding the foregoing, upon the occurrence, and during the continuation, of an Event of Default, interest shall accrue on all amounts outstanding hereunder at a rate equal to the otherwise applicable interest rate at such time plus an additional two percent (2.0%) simple interest per annum.

 

Section 2.4           Principal Payments.

 

Borrower agrees to duly and punctually pay all outstanding principal and accrued and unpaid interest hereunder on the Maturity Date. Borrower may voluntarily prepay the principal outstanding under this Agreement in whole or in part at any time, without premium or penalty, together with the accrued and unpaid interest on such prepaid principal. Lender shall apply payments and prepayments under this Agreement first to accrued and unpaid interest on the principal repaid or prepaid, then to outstanding principal and thereafter to any other amounts payable under this Agreement or any other Funding Documents.

 

Section 2.5           Payment Mechanics.

 

Borrower shall make each payment hereunder to Lender in immediately available funds on or prior to the day when due, in lawful money of the United States of America, at the location of Lender specified in Section 9.3 below, or at such other place or places as Lender may designate from time to time by written notice to Borrower. If any date upon which payment is due hereunder is not a Business Day, then the payment to be made on such date shall instead be due on the next Business Day.

 

Section 2.6           Taxes.

 

(a)          Any and all payments by or on account of any obligation of Borrower hereunder or under any other Funding Document shall be made free and clear of and without deduction or withholding for any Taxes except as required by applicable Law. If Borrower is required by applicable Law to deduct or withhold any Taxes from such payments, then:

 

(i)     if such Tax is an Indemnified Tax, the amount payable by Borrower shall be increased so that after all such required deductions or withholdings are made (including deductions or withholdings applicable to additional amounts payable under this Section), Lender receives an amount equal to the amount it would have received had no such deduction or withholding been made; and

 

(ii)    Borrower shall make such deductions or withholdings and timely pay the full amount deducted or withheld to the relevant Governmental Entity in accordance with applicable Law.

 

(b)         Without limiting the provisions of Section 2.6(a) above, Borrower shall timely pay any Other Taxes to the relevant Governmental Entity in accordance with applicable Law.

 

(c)          Borrower shall indemnify Lender, within ten days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed on or attributable to amounts payable under this Section) paid or payable by Lender, on or with respect to an amount payable by Borrower in respect of this Agreement or any other Funding Document, together with any reasonable expenses arising in connection therewith and with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Entity. A certificate from Lender as to the amount of such payment or liability delivered to Borrower shall be conclusive absent manifest error. Borrower hereby authorizes Lender to set off and apply any and all amounts at any time owing to Borrower under any Funding Document against any amount due to Lender under this subclause (c).

 

(d)       If Lender determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by Borrower or with respect to which Borrower has paid additional amounts pursuant to this Section, it shall pay over such refund (or the amount of any credit in lieu of refund) to Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by Borrower under this Section with respect to the Taxes giving rise to such refund or credit in lieu of refund), net of all out-of-pocket expenses of Lender and without interest (other than any interest paid by the relevant Governmental Entity with respect to such refund or credit in lieu of refund); provided that, Borrower, upon the request of Lender, agrees to repay the amount paid over to Borrower (plus any interest, penalties, or other charges imposed by the relevant Governmental Entity) to Lender in the event Lender is required to repay such refund or credit in lieu of refund to such Governmental Entity. Notwithstanding anything to the contrary in this subclause (d), in no event will Lender be required to pay any amount to Borrower pursuant to this paragraph if the payment of such amount would place Lender in a less favorable net after-Tax position than it would have been in if the Tax subject to indemnification had not been deducted, withheld, or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. Nothing in this subclause (d) shall be construed to require Lender to make available its tax returns or any other information relating to its taxes that it deems confidential to Borrower or any other Person.

 

(e)         If Lender (including any assignee or successor) is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Funding Document, it shall deliver to Borrower, at the time or times reasonably requested by Borrower, such properly completed and executed documentation reasonably requested by Borrower as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, Lender (including any assignee or successor), if reasonably requested by Borrower, shall deliver such other documentation prescribed by applicable Law or reasonably requested by Borrower as will enable Borrower to determine whether or not Lender (including any assignee or successor) is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in the immediately following sentence) shall not be required if in Lender’s reasonable judgment such completion, execution or submission would subject Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of Lender. Without limiting the generality of the foregoing, Lender (including any assignee or successor) shall deliver to Borrower whichever of IRS Form W-9, IRS Form W-8BEN-E, IRS Form W-8ECI or W-8IMY is applicable, as well as any applicable supporting documentation or certifications.

 

ARTICLE 3

 

SECURITY INTEREST AND COLLATERAL MATTERS

 

Section 3.1           Grant of Security Interest.

 

As collateral security for the full, prompt, complete, and final payment and performance when due (whether at stated maturity, by acceleration, or otherwise) of all of the Secured Obligations and in order to induce Lender to enter into the Funding Documents and make the Advances, Borrower hereby collaterally assigns, conveys, mortgages, pledges, and hypothecates to Lender, and hereby grants to Lender, a security interest and Lien in and on all of Borrower’s right, title, and interest in, to, and under the following, whether now owned or hereafter acquired (collectively, the “Collateral”):

 

(a)          all Accounts;

 

(b)          all Equipment, Goods, Inventory, and Fixtures;

 

(c)          all Documents, Instruments, and Chattel Paper;

 

(d)          all Letters of Credit and Letter-of-Credit Rights;

 

(e)          all Investment Property;

 

(f)          all contracts, intellectual property, and other General Intangibles, including all copyrights, trademarks, service marks, trade names, and patents;

 

(g)          all money and all deposit accounts;

 

(h)          all books and records relating to the Collateral; and

 

(i)          to the extent not covered by clauses (a) through (h) of this sentence, all other assets, personal property, and rights of Borrower, whether tangible or intangible, all Proceeds and products of each of the foregoing, and all accessions to, substitutions and replacements for, and rents, profits, and products of, each of the foregoing, and any and all Proceeds of any insurance, indemnity, warranty, or guaranty payable to Borrower from time to time with respect to any of the foregoing.

 

Notwithstanding the foregoing, the security interest and Lien provided herein shall not extend to, and the term “Collateral” shall not include, any of the following (collectively, “Excluded Property”): (i) any permit or license or any contractual obligation entered into by Borrower, in each case not prohibited to be outstanding under the Merger Agreement, (A) that prohibits or requires the consent of any Person other than Borrower or an Affiliate thereof which has not been obtained as a condition to the creation by Borrower of a Lien on any right, title, or interest in such permit, license, contractual obligation, or other asset or (B) to the extent that any applicable state or federal law prohibits the creation of a Lien thereon, but only, with respect to the prohibition in (A) and (B), to the extent, and for as long as, such prohibition is not terminated or rendered unenforceable or otherwise deemed ineffective by the UCC or any other applicable law; (ii) any “intent to use” trademark applications for which a statement of use has not been filed (but only until such statement is filed) to the extent that the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark application or the resulting trademark registration under applicable United States federal law; and (iii) assets to the extent a security interest in such assets would result in material adverse tax consequences as reasonably determined by Borrower and Lender; provided, however, “Excluded Property” shall not include any proceeds, products, substitutions, or replacements of Excluded Property (unless such proceeds, products, substitutions, or replacements would otherwise themselves constitute Excluded Property).

 

Section 3.2           Financing Statements.

 

Borrower hereby irrevocably authorizes Lender at any time and from time to time to file in any relevant jurisdiction any financing statements (including fixture filings) and amendments thereto that contain the information required by Article 9 of the UCC of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Collateral, including (i) whether Borrower is an organization, the type of organization, and any organizational identification number issued to Borrower, and (ii) any financing or continuation statements or other documents for the purpose of perfecting, confirming, continuing, enforcing, or protecting the security interest granted by Borrower hereunder, without the signature of Borrower where permitted by law, including the filing of a financing statement describing the Collateral as “all assets now owned or hereafter acquired by Borrower or in which Borrower otherwise has rights, and all proceeds of the foregoing”. Borrower agrees to provide all information described in the immediately preceding sentence to Lender promptly upon request by Lender. Borrower hereby further authorizes Lender to file with the United States Patent and Trademark Office and the United States Copyright Office (and any successor office and any similar office in any United States state or other country) this Agreement, an intellectual property security agreement, or other documents for the purpose of perfecting, confirming, continuing, enforcing, or protecting the security interest granted by Borrower hereunder, without the signature of Borrower where permitted by law, and naming Borrower as debtor and Lender as secured party.

 

Section 3.3           Further Assurances as to Security Matters.

 

Borrower shall take such further actions, and execute and/or deliver to Lender such additional financing statements, amendments, assignments, agreements, supplements, powers, and instruments, as Lender may in its reasonable discretion deem necessary or appropriate in order to perfect, preserve, and protect the security interest in the Collateral as provided herein and the rights and interests granted to Lender hereunder, and enable Lender to exercise and enforce its rights, powers, and remedies hereunder with respect to any Collateral, including the filing of any financing statements, continuation statements, and other documents under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interest created hereby, and the filing of intellectual property security agreements with the United States Patent and Trademark Office and the United States Copyright Office, all in form reasonably satisfactory to Lender in such offices wherever required by law to perfect, continue, and maintain a valid, enforceable, first-priority security interest in the Collateral as provided herein, subject to Permitted Liens, and to preserve the other rights and interests granted to Lender hereunder, as against third parties, with respect to the Collateral. Without limiting the generality of the foregoing, but subject to applicable law, Borrower shall make, execute, endorse, acknowledge, file, or refile and/or deliver to Lender from time to time upon request by Lender such lists, schedules, descriptions, and designations of the Collateral, statements, copies of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports, and other assurances or instruments as Lender shall reasonably request. If an Event of Default has occurred and is continuing, Lender may institute and maintain, in its own name or in the name of Borrower, such suits and proceedings as Lender may deem necessary or expedient to prevent any impairment of the security interest in, or the perfection thereof, in the Collateral. All of the foregoing shall be at the sole cost and expense of Borrower.

 

ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES

 

Borrower hereby represents and warrants to Lender on the date hereof and on the date of each Advance made pursuant hereto as follows:

 

Section 4.1         Status and Licensing. Borrower (i) is an entity duly organized, validly existing, and in good standing (with respect to jurisdictions that recognize such concept) under the Laws of the jurisdiction of its organization, (ii) has all requisite corporate or similar power and authority to own, lease, and operate its properties and to carry on its business as now being conducted, and (iii) is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing, or operation of its properties makes such qualification or licensing necessary, except for any such failures to be so organized, existing, and in good standing, to have such power and authority, or to be so qualified or licensed or in good standing as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 4.2           Power and Authority; Enforceability; Consents; No Conflict.

 

Borrower has all necessary corporate power and authority to execute, deliver, and perform its obligations under this Agreement and the other Funding Documents to which it is a party, and has taken all necessary entity action to authorize the execution, delivery, and performance of the Funding Documents to which it is a party. The execution, delivery, and performance of this Agreement and the other Funding Documents by Borrower and the consummation by Borrower of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Borrower and no other corporate proceedings on the part of Borrower are necessary to approve this Agreement or the other Funding Documents or to consummate the transactions contemplated hereby and thereby. This Agreement and the other Funding Documents to be executed and delivered by Borrower on the date hereof have been duly executed and delivered by Borrower and, assuming the due authorization, execution, and delivery by the other parties thereto, constitute valid and binding obligations of Borrower, enforceable against Borrower in accordance with their terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization, or similar Laws affecting the enforcement of creditors’ rights generally or by general principles of equity). No consent or authorization of, filing with, notice to, or other act by or in respect of any Governmental Entity or any other Person is required to be made or obtained in connection with the execution, delivery, performance, validity, or enforceability of this Agreement or any other Funding Document by or against Borrower, other than (i) registrations, consents, approvals, notices, or other actions that have been obtained and that are still in full force and effect, (ii) filings and recordings with respect to the Collateral to be made or otherwise delivered to Lender for filing or recordation from time to time as contemplated by the terms of the Funding Documents, and (iii) such consents, authorizations, filings, notices, or other acts of any Governmental Entity or any other Person the failure of which to make or obtain would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. This Agreement and the other Funding Documents do not violate the terms of or otherwise conflict with, except as would not reasonably be expected to result in a Material Adverse Effect, any other Contract binding on Borrower or any Collateral.

Section 4.3           Actions, Suits, Etc.

 

There is no action, suit, investigation, or proceeding pending or, to the knowledge of Borrower, threatened, against or affecting Borrower or any of its assets which, if adversely determined, would have a Material Adverse Effect.

Section 4.4           Information.

 

No information or report furnished by Borrower to Lender in connection with the negotiation of this Agreement or the other Funding Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading.

Section 4.5           Valid Title.

 

Except for Permitted Liens, Borrower is the sole legal and equitable owner of, or otherwise has the power to transfer, each item of Collateral in which it grants a security interest hereunder, having good and marketable title thereto or the power to transfer such Collateral in each case free and clear of all Liens (other than Permitted Liens).

Section 4.6           Other Liens.

 

No effective security agreement, financing statement, or other Lien or filing in respect thereof covering all or any part of the Collateral exists (other than Permitted Liens).

Section 4.7           Security Interest.

 

This Agreement creates a legal and valid security interest and Lien in and on all of the Collateral. Lender has, or following the filing of any UCC financing statement required to be filed hereunder, and the taking of any other action requested by Lender to be taken pursuant to Section 3.3 in order to perfect security interests in the Collateral, will have, a fully perfected, first-priority security interest in all of the Collateral (subject only to Permitted Liens).

Section 4.8           Filing Information.

 

As of the Effective Date, Borrower’s type of organization, jurisdiction of organization, legal name, organizational identification number (if any), and chief executive office or principal place of business are as follows:

Name: Lumos Pharma, Inc.

Type: Corporation

Jurisdiction: Delaware

Organizational ID: 3051879

Chief Executive Office/Principal Place of Business:

4200 Marathon Blvd #200, Austin, Texas 78756

ARTICLE 5

 

COVENANTS

 

Borrower hereby covenants and agrees with Lender as follows at all times until the payment in full of all of the Secured Obligations hereunder (other than inchoate indemnity obligations and contingent obligations not yet due and payable) and the termination of this Agreement:

 

Section 5.1           Maintenance of Existence.

 

Except for the transactions contemplated under the Merger Agreement, Borrower shall (i) preserve, renew, and keep in full force and effect its entity existence, and (ii) except as would not reasonably be expected to have a Material Adverse Effect, take all commercially reasonable action to obtain and maintain all rights, privileges, authorizations, and franchises necessary or desirable for the conduct of its business as presently conducted.

 

Section 5.2           Use of Proceeds.

 

Borrower shall use the proceeds of all borrowings hereunder solely for and in accordance with the Permitted Uses.

Section 5.3           Insurance.

 

Borrower shall maintain in full force and effect insurance policies, including, without limitation, general liability and commercial property insurance policies insuring the Collateral against loss or damage, in such amounts and against such risks as management has determined to be prudent in accordance with industry practices.

 

Section 5.4           Taxes, Assessments, Etc.

 

Borrower shall pay promptly when due all material Taxes imposed upon, and all material claims (including claims for labor, materials, and supplies) against the Collateral, except to the extent the validity thereof is being contested in good faith by proceedings diligently pursued and adequate reserves are maintained in connection therewith.

Section 5.5           Maintenance of Collateral and Records.

 

Borrower shall, at its own cost and expense, defend title to the Collateral and Lender’s first-priority security interest and Lien, subject to Permitted Liens, with respect thereto against all claims and demands of all Persons at any time claiming any interest therein adverse to Lender (other than Permitted Liens). Except as expressly permitted by this Agreement or the other Funding Documents, there is no agreement, order, judgment, or decree, and Borrower shall not enter into any agreement or take any other action, that could reasonably be expected to restrict the transferability of any of the Collateral or otherwise impair or conflict with Borrower’s obligations or the rights of Lender hereunder without the prior written consent of Lender. Borrower shall keep and maintain at its own cost and expense complete books and records of the Collateral in accordance with GAAP in all material respects, including, without limitation, records of all payments and collections received and credits granted with respect to any Collateral.

 

Section 5.6           Liens; Financing Statements.

 

Borrower shall not (i) create or permit to exist any Liens on the Collateral (other than Permitted Liens) or (ii) execute, authorize, or permit to be filed in any recording office any financing statement or similar instrument covering all or any part of the Collateral or listing Borrower as debtor with respect to all or any part of the Collateral, except financing statements and other instruments filed in respect of Permitted Liens or such instruments filed with the prior written consent of Lender.

Section 5.7           Indebtedness.

 

Borrower shall not create, incur, assume, or suffer to exist any Indebtedness except as expressly permitted by the Merger Agreement.

Section 5.8           Changes in Name, Jurisdiction of Organization, Etc.

 

Except upon 20 days’ prior written notice to Lender (or such lesser time as Lender may agree in its sole discretion), together with delivery to Lender of all additional information, financing statements, and other documents, filings, and instruments requested by Lender to protect and maintain the validity, perfection, and priority of the security interests and Liens provided for in the Funding Documents, Borrower shall not (except, for the avoidance of doubt, as expressly required by the Merger Agreement to consummate the transactions contemplated thereby) change (i) its legal name, type of organization, or corporate structure, (ii) the location of its chief executive office or principal place of business, (iii) its jurisdiction of organization, in each case including, without limitation, by merger, reorganization, dissolution, liquidation, reincorporation, conversion, or operation of law, or (iv) the dates of its fiscal quarter or fiscal year ends.

 

Section 5.9           Compliance with Law; Inspection of Collateral.

 

Borrower shall comply with all material requirements of law applicable to the Collateral. Borrower shall operate its business in compliance with all material provisions of applicable federal, state, and local law. Borrower shall keep the Collateral in good working order and repair, ordinary wear and tear and casualty and condemnation excepted, and will not use the same in violation of applicable law or any policy of insurance thereon unless such violation would not result in a Material Adverse Effect. Borrower shall permit Lender, or its designee, to inspect the Collateral at any reasonable time upon reasonable prior notice, wherever located, in accordance with the procedures set forth in and subject to Section 6.5 of the Merger Agreement.

Section 5.10         Compliance with Merger Agreement.

 

Borrower shall at all times comply with the terms of the Merger Agreement in all material respects.

ARTICLE 6

 

CONDITIONS PRECEDENT

 

Section 6.1          Conditions Precedent to Effectiveness. The effectiveness of this Agreement and the obligation of Lender to make any Advance requested to be made by it hereunder on the Effective Date is subject to the satisfaction of the following conditions precedent:

 

(a)          this Agreement, and each other Funding Document to be delivered as of the Effective Date, has been duly executed and delivered by each of Borrower and Lender;

 

(b)         Borrower shall have provided to Lender evidence reasonably satisfactory to Lender of the existence of insurance satisfying all requirements of Section 5.3 hereof;

 

(c)        the representations and warranties of Borrower contained in this Agreement shall be true and correct in all material respects, before and immediately after giving effect to the making of all requested Advances on the Effective Date, with the same effect as if made on and as of such date (other than any such representation or warranty that, by its terms, speaks as of a particular date, which representation or warranty shall have been true and correct in all material respects as of such date);

 

(d)        no Default or Event of Default shall have occurred and be continuing or shall result from the making of all requested Advances on the Effective Date, if any, or the use of the proceeds thereof;

 

(e)          the total aggregate principal amount of all requested Advances on the Effective Date, if any, shall not exceed the Funding Cap; and

 

(f)         Lender shall have received satisfactory copies of all supporting documentation and other information it reasonably requests in connection with all requested Advances on the Effective Date, including such supporting documentation and other information as Lender may require to determine that such Advances, if any, shall be applied to Permitted Uses.

 

Section 6.2           Conditions Precedent to Advances After Effective Date. The obligation of Lender to make any Advance requested to be made by it hereunder on any date after the Effective Date and prior to the Maturity Date is subject in each case to the satisfaction of the following conditions precedent:

 

(a)          the representations and warranties of Borrower contained in this Agreement shall be true and correct in all material respects on and as of the date of such Advance, before and immediately after giving effect to the making of the relevant Advance on such date, with the same effect as if made on and as of such date (other than any such representation or warranty that, by its terms, speaks as of a particular date, which representation or warranty shall have been true and correct in all material respects as of such date);

 

(b)         no Default or Event of Default shall have occurred and be continuing on the date of such Advance or shall result from the making of the requested Advance on such date or the use of the proceeds thereof;

 

(c)          the requested date of such Advance is during the Advance Period;

 

(d)          the total aggregate principal amount of all Advances made hereunder (together with the principal amount of the requested Advance) shall not exceed the Funding Cap; and

 

(e)         Lender shall have received satisfactory copies of all supporting documentation and other information it reasonably requests in connection with such Advance, including such supporting documentation and other information as Lender may require to determine that such Advance shall be applied to Permitted Uses.

 

ARTICLE 7

 

NOTICES AND OTHER INFORMATION

 

Section 7.1           Required Notices.

 

Borrower shall give, or cause to be given, prompt written notice (and in any event, within three Business Days) to Lender of the occurrence of any act or event that has resulted in any Event of Default or any event that, with or without the giving or receipt of notice or the passage of time (or any combination thereof), would constitute an Event of Default (a “Default”).

 

ARTICLE 8

 

EVENTS OF DEFAULT

 

Each of the following shall constitute an “Event of Default” under this Agreement:

 

(a)        the Merger Agreement is terminated by any party thereto for any reason (including, without limitation, due to Borrower’s exercise of any “fiduciary out” provision therein);

 

(b)         (i) any payment of any principal of any Advance hereunder or any interest thereon shall not be made in full when due, or (ii) Borrower shall default for five Business Days or more in the payment of any other amount whatsoever payable under this Agreement or any other Funding Document after written notice to Borrower from Lender;

 

(c)        Any representation or warranty made or deemed made by Borrower herein or in any other Funding Document shall prove to have been incorrect in any material respect (if not already qualified by materiality, Material Adverse Effect, or language of similar effect) or in any respect (if already qualified by materiality, Material Adverse Effect, or language of similar effect) on or as of any date made or deemed made

 

(d)         Borrower shall default in the observance or performance of any covenant or agreement contained in any Funding Document to which it is a party (other than any covenant or agreement separately addressed in this Article 8) and such default shall continue unremedied for a period of 30 days or more after written notice to Borrower from Lender;

 

(e)        (i) Borrower shall commence any case, proceeding, or other action (A) under any existing or future law of any jurisdiction, domestic, or foreign, relating to bankruptcy, insolvency, reorganization, or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition, or other relief with respect to it or its debts, or (B) in any jurisdiction seeking appointment of a receiver, trustee, custodian, conservator, or other similar official for it or for all or any substantial part of its property, or Borrower shall make a general assignment for the benefit of its creditors; (ii) there shall be commenced against Borrower in any jurisdiction any case, proceeding, or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) to the extent applicable, remains undismissed, undischarged or unbonded for a period of 60 days; (iii) there shall be commenced against Borrower in any jurisdiction any case, proceeding, or other action seeking issuance of a warrant of attachment, execution, distraint, or similar process against all or any substantial part of its property that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; (iv) Borrower shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clauses (i), (ii) or (iii) above; or (v) Borrower shall admit in writing its inability to pay its debts generally as they become due; or

 

(f)          The occurrence of a Material Adverse Effect.

 

Upon the occurrence and during the continuation of an Event of Default, Lender shall be entitled, without limiting its ability to do so at other times, to (i) declare all principal, interest, and other amounts outstanding hereunder to be immediately due and payable and/or (ii) exercise or enforce any one or more of Lender’s rights, powers, privileges, remedies, and interests under this Agreement, the other Funding Documents, and applicable law (including, without limitation, any remedies available to a secured party under the UCC); provided, however, that in the event of the occurrence of any of the Events of Default set forth in clause (e) above, then simultaneously with that event, and without the necessity of any notice or other action by Lender, the principal, interest, and other amounts outstanding hereunder shall automatically become immediately due and payable. In furtherance of and without limiting the foregoing, upon the occurrence of an Event of Default and at any time thereafter, Lender may, in its sole discretion and at Borrower’s sole expense:

 

(i)     require Borrower to, and Borrower hereby agrees that it will upon request of Lender immediately, assemble the Collateral or any part thereof, as directed by Lender, and make it available to Lender at such places and times to be designated by Lender;

 

(ii)    without notice (to the extent permitted by applicable law), sell, resell, assign, and deliver or grant a license to use or otherwise dispose of the Collateral or any part thereof, in one or more parcels at public or private sale, at any of Lender’s offices or elsewhere, for cash, on credit, or for future delivery, and upon such other terms as Lender may deem commercially reasonable;

 

(iii)   occupy any premises owned or leased by Borrower where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to Borrower in respect of such occupation, and Borrower hereby agrees that it will cooperate and cause any necessary third parties to cooperate with such access and assembly; and

 

(iv)    exercise any and all rights and remedies of Borrower under or in connection with the Collateral, or otherwise in respect of the Collateral, including, without limitation, (A) any and all rights of Borrower to demand or otherwise require payment of any amount under, or performance of any provision of, the Collateral, (B) withdraw, or cause or direct the withdrawal, of all funds with respect to any deposit accounts, and (C) exercise all other rights and remedies with respect to the Collateral.

 

ARTICLE 9

 

MISCELLANEOUS

 

Section 9.1           Governing Law.

 

THIS AGREEMENT, THE OTHER FUNDING DOCUMENTS, AND ALL DISPUTES OR CONTROVERSIES ARISING OUT OF OR RELATING TO THE FOREGOING OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE LAWS OF ANY OTHER JURISDICTION THAT MIGHT BE APPLIED BECAUSE OF THE CONFLICTS OF LAWS PRINCIPLES OF THE STATE OF DELAWARE.

Section 9.2           Consent to Jurisdiction.

 

Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement or the other Funding Documents brought by any party or its Affiliates against any other party or its Affiliates shall be brought and determined in the Court of Chancery of the State of Delaware, provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then any such legal action or proceeding may be brought in any federal court located in the State of Delaware. Each of the parties hereby irrevocably consent to the jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement, the other Funding Documents, and the transactions contemplated hereby and thereby. Each of the parties agrees not to commence any action, suit, or proceeding relating thereto except in the courts described above in Delaware, other than actions in any court of competent jurisdiction to enforce any judgment, decree, or award rendered by any such court in Delaware as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim, or otherwise, in any action or proceeding arising out of or relating to this Agreement, the other Funding Documents, or the transactions contemplated hereby and thereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment, or otherwise), and (c) that (i) the suit, action, or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action, or proceeding is improper, or (iii) this Agreement the other Funding Documents, or the subject matter hereof or thereof, may not be enforced in or by such courts.

 

Section 9.3           Notices.

 

All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by e mail, upon written (including electronic) confirmation of receipt by e mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier, or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the address, facsimile number, or e-mail address specified for Borrower or Lender, as the case may be, as set forth on its signature page hereto, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

 

Section 9.4           Successors and Assigns.

 

This Agreement and the other Funding Documents shall be binding upon and inure to the benefit of Borrower, Lender, and their respective successors and permitted assigns, except that no party hereto may assign or delegate (and any such attempted assignment or delegation shall be null and void) any of its rights or obligations under this Agreement or any other Funding Document without the prior written consent of the other party hereto, except that Lender shall be permitted to assign or delegate its rights or obligations under this Agreement or any other Funding Document to any Affiliate without the prior written consent of Borrower.

 

Section 9.5           Further Assurances.

 

Borrower agrees to do such further acts and things and to execute and deliver such agreements, instruments, and other documents as Lender from time to time may reasonably request in connection with the administration, maintenance, enforcement, or adjudication of this Agreement and the other Funding Documents, each in such form and substance as may be reasonably acceptable to Lender.

 

Section 9.6           Interest Rate Limitation.

 

Notwithstanding anything to the contrary contained in this Agreement or any other Funding Document, the interest paid or agreed to be paid under the Funding Documents shall not exceed the Maximum Rate. If Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest promptly shall be either applied to reduce the outstanding principal balance of the Advances or refunded to Borrower, in Lender’s sole discretion.

 

Section 9.7           Counterparts; Facsimile or .pdf Signature.

 

This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party. This Agreement may be executed by facsimile or .pdf signature and a facsimile or .pdf signature shall constitute an original for all purposes.

 

Section 9.8           Severability.

 

Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal, or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed, and enforced in such jurisdiction as if such invalid, illegal, or unenforceable provision or portion of any provision had never been contained herein.

 

Section 9.9           No Waiver; Remedies.

 

No failure on the part of Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

Section 9.10         Entire Agreement; Modifications.

 

As of the date hereof, this Agreement, all schedules and exhibits hereto, and all other Funding Documents constitute the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede all prior or contemporaneous agreements and understandings of such persons and entities, verbal or written, relating to the subject matter hereof and thereof. No amendment or waiver of any provision of this Agreement (including any schedule or exhibit hereto) or any other Funding Document, and no consent to any departure by Borrower therefrom, shall be effective unless in writing signed by Lender and Borrower, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

Section 9.11         Interpretation.

 

When a reference is made in this Agreement to a Section, Article, Exhibit, or Schedule such reference shall be to a Section, Article, Exhibit, or Schedule of this Agreement unless otherwise indicated. The headings contained in this Agreement or in any Exhibit or Schedule are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein shall have the meaning as defined in this Agreement. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein. The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified. The words “hereof,” “herein,” and “hereunder” and words of similar import when used in this Agreement shall refer to the Agreement as a whole and not to any particular provision in this Agreement. The term “or” is not exclusive. The word “will” shall be construed to have the same meaning and effect as the word “shall.” References to days mean calendar days unless otherwise specified.

Section 9.12         Currency.

 

All references to “dollars” or “$” or “US$” in this Agreement refer to United States dollars, which is the currency used for all purposes in this Agreement.

Section 9.13         No Presumption Against Drafting Party.

 

Each of Borrower and Lender acknowledges that each party to this Agreement has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.

Section 9.14         Waiver of Jury Trial.

 

EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER FUNDING DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.

[Signature Page Follows]

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

Clinical Trial Funding Agreement Signature Page

Clinical Trial Funding Agreement Signature Page

EXHIBIT A

 

PERMITTED USES

 

EXHIBIT B

 

SECURED PROMISSORY NOTE

 

FOR VALUE RECEIVED, the undersigned LUMOS PHARMA, INC., a Delaware corporation (together with its successors and permitted assigns, “Borrower”), promises to pay to DOUBLE POINT VENTURES LLC, a Delaware limited liability company (together with its successors and assigns, “Lender”), the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000.00), or so much thereof as shall from time to time be advanced to or for the benefit of Borrower, in lawful tender of the United States of America, pursuant to that certain Clinical Trial Funding Agreement, dated as of the date hereof (as amended, restated, supplemented and/or otherwise modified from time to time, the “Agreement”; capitalized definitional terms used herein and not otherwise defined herein shall have the respective meanings ascribed thereto in the Agreement), between Borrower and Lender, on the dates and in the amounts provided in the Agreement. Borrower further promises to pay interest on the outstanding principal under the Agreement evidenced hereby from time to time at the rate(s), on the date(s), and otherwise as provided in the Agreement. This Secured Promissory Note (this “Note”) and the obligations evidenced hereby are secured by Borrower’s assets as further set forth in the Agreement.

 

Except as otherwise expressly set forth in the Agreement, Borrower hereby expressly waives presentment for payment, notice of nonpayment, protest, notice of protest, diligence in collection, and consent to any and all extensions and renewals hereof without notice.

 

All terms and conditions of the Agreement are incorporated herein by reference as if fully stated herein.

 

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned has caused this Note to be executed as of the date first written above by its officer thereunto duly authorized.

 

Secured Promissory Note Signature Page

B-2

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