Exhibit 3.1

 

SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COGNITION THERAPEUTICS, INC.

 

(incorporated on August 21, 2007)

 

COGNITION THERAPEUTICS, INC., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware, as it may be amended from time to time (the “General Corporation Law”), hereby certifies as follows:

 

1.              The name of this corporation is Cognition Therapeutics, Inc.

 

2.              The original Certificate of Incorporation of this corporation was filed with the Secretary of State of the State of Delaware on August 21, 2007, amended and restated on January 16, 2009 and further amended on December 17, 2010, November 30, 2011, December 20, 2012, August 6, 2013, March 19, 2014 and July 1, 2015.

 

3.              This Second Amended and Restated Certificate of Incorporation restates, integrates and amends the Amended and Restated Certificate of Incorporation of this corporation, as amended.

 

4.              This Second Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law, and the stockholders of this corporation have given their consent hereto in accordance with Section 228 of the General Corporation Law.

 

5.              The text of this corporation’s Certificate of Incorporation is hereby amended and restated in full so as to read as follows:

 

First: The name of this corporation is Cognition Therapeutics, Inc. (the “Corporation”).

 

Second: The address of the registered office of the Corporation in the State of Delaware is at 2140 South DuPont Highway, in the City of Camden, County of Kent, 19934. The registered agent in charge thereof is Paracorp Incorporated.

 

Third: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

 

Fourth: The total number of shares of all classes of stock, that the Corporation shall have authority to issue is (i) Fifty Million Five Hundred Thousand (50,500,000) shares of Common Stock, $.001 par value per share (“Common Stock”), and (ii) Thirty Seven Million Two Hundred Fifty-Three Thousand Three Hundred Fifty-Eight (37,253,358) shares of Preferred Stock, $.001 par value per share.

 

 

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

 

A.

PREFERRED STOCK

 

Three Million Sixty-Seven Thousand Five Hundred Nineteen (3,067,519) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”); Three Million Nine Hundred Seventy Thousand Seven Hundred Seventy-Six (3,970,776) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-1 Convertible Preferred Stock” (the “Series A-1 Preferred Stock”); Three Million Five Hundred Sixty-Five Thousand Sixty-Three (3,565,063) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-2 Convertible Preferred Stock” (the “Series A-2 Preferred Stock”); and Twenty-Six Million Six Hundred Fifty Thousand (26,650,000) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series B Convertible Preferred Stock” (the “Series B Preferred Stock”). The Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2 Preferred Stock and the Series B Preferred Stock are sometimes referred to herein collectively as the “Preferred Stock.” Unless otherwise indicated, references to “Sections” or “Subsections” in this Part A of this Article Fourth refer to sections and subsections of Part A of this Article Fourth.

 

The Preferred Stock shall have the following rights, preferences, powers, privileges, restrictions, qualifications and limitations.

 

1.              Dividends.

 

1.1.           Accruing Dividends. From and after the date of the issuance of each respective share of the Preferred Stock, dividends at the rate of 8% per annum of the applicable Original Issue Price (as defined herein) compounded annually shall accrue on such share of the Preferred Stock (“Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; provided however, (i) that such Accruing Dividends shall be payable only in connection with a liquidation, dissolution or winding up of the Corporation under Section 2 (including, without limitation, in connection with a Deemed Liquidation Event), a Mandatory Dividend under Section 1.3, or a redemption of the Preferred Stock under Section 6, and the Corporation shall not otherwise pay such Accruing Dividends and (ii) in the event a Mandatory Dividend is paid under Section 1.3, Accruing Dividends shall thereafter accrue only on the unreturned amount of the Original Issue Price after taking into account the payment of each Mandatory Dividend. As used herein, “Original Issue Price” means $.69 per share with respect to the Series A Preferred Stock and Series A-1 Preferred Stock, $.8415 per share with respect to the Series A-2 Preferred Stock and $.923 per share with respect to the Series B Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). After such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount (as defined below), less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Accruing Dividends; provided that the holders of the Preferred Stock

 

 

will share in all dividends and distributions declared by the Board of Directors and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.

 

1.2.           Common Stock Dividends. The holders of the Preferred Stock shall be entitled to share in dividends payable with respect to the Common Stock as if converted and the Corporation shall not declare, pay or set aside any dividends on shares of Common Stock unless (in addition to obtaining any consents required elsewhere in this Amended and Restated Certificate of Incorporation, as amended) each holder of the Preferred Stock then outstanding shall first receive, or simultaneously receive, in each such instance, a dividend on each outstanding share of the Preferred Stock held by such holder as if such share of Preferred Stock had been converted into Common Stock, in an amount at least equal to the product of (a) the dividend payable on a share of Common Stock and (b) the number of shares of Common Stock issuable upon conversion of a share of the Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend.

 

1.3.           Mandatory Dividend(s).

 

(a)            If, prior to such time as the holders of shares of the Preferred Stock receive their full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the Corporation or any subsidiary of the Corporation shall consummate a sale, license or other disposition for value of any or all of the Corporation’s intellectual property, in a single transaction or series of related transactions unrelated to the performance by the Corporation of research and development or other services (as determined in good faith by the Board of Directors of the Corporation, including both Preferred Directors) (a “Strategic Event”), at the written election of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, sent to the Corporation at least 15 days prior to the effective date of a Strategic Event, the Corporation shall distribute to the holders of shares of the Preferred Stock up to 35% of the aggregate payments (including, without limitation, all option and/or milestone payments and/or all success fees) received by the Corporation as consideration in such Strategic Event as soon as reasonably practicable following receipt by the Corporation of such payments (“Mandatory Dividend”). Such Mandatory Dividend shall be distributed to the holders of the Preferred Stock on a pari passu and an as-converted to Common Stock basis until the aggregate amount of all Mandatory Dividends paid to the holders of the Preferred Stock equals the full Preferred Liquidation Amount payable on the Preferred Stock held by such holders.

 

(b)            The Corporation shall give each holder of record of the Preferred Stock written notice of an impending Strategic Event within ten days after the Board of Directors of the Corporation approves such Strategic Event. Such written notice shall describe the material terms and conditions of the impending Strategic Event and the provisions of this Section 1.3, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled to such

 

 

notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.

 

(c)            After such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount for their respective shares of the Preferred Stock, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Mandatory Dividends; provided that the holders of the Preferred Stock will share in all dividends and distributions declared by the Board of Directors and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.

 

1.4.           Order of Dividend Payment. No dividends or other distributions shall be declared and/or paid on any class or series of capital stock, other than the Preferred Stock if any Mandatory Dividends have accrued and are unpaid or if any other dividends are declared and unpaid on the Preferred Stock.

 

2.              Liquidation Preference.

 

2.1.           Preferred Liquidation Amount. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, including, without limitation, any Deemed Liquidation Event (as defined below), each holder of shares of the Preferred Stock then outstanding shall be entitled to receive out of the assets legally available for distribution to its stockholders, whether from capital surplus, earnings or otherwise, on a pari passu and an as converted to Common Stock basis and prior and in preference to any distribution to the holders of any other series or class of the capital stock of the Corporation that is junior to the Preferred Stock, including, without limitation, the Common Stock, by reason of their ownership thereof, an amount per share of Preferred Stock then held by such holder equal to the Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of Preferred Stock. If upon the occurrence of such event, the assets and funds of the Corporation shall be insufficient to permit the payment to such holders of Preferred Stock of the full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of Preferred Stock, required by the preceding sentence, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Preferred Stock in proportion to the Preferred Liquidation Amount each such holder is otherwise entitled to receive on each such share, less any and all Mandatory Dividend(s) previously distributed with respect to each such share. “Preferred Liquidation Amount” means, with respect to a share of Preferred Stock, the applicable Original Issue Price for such share of Preferred Stock plus all Accruing Dividends on such share of Preferred Stock (plus any other dividends or distributions declared but not paid on such share of Preferred Stock).

 

2.2.           Distribution of Remaining Assets. After payment has been made to the holders of the Preferred Stock of their full Preferred Liquidation Amount required by Section 2.1, less any and all Mandatory Dividend(s) previously distributed with respect to each such share, the remaining assets or surplus funds of the Corporation available for distribution to stockholders shall be distributed among the holders of the Common Stock and the holders of the

 

 

Preferred Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all shares of the Preferred Stock into Common Stock).

 

2.3.           Deemed Liquidation Events. At the option of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, the occurrence of each of the following events shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section 2 (each, a “Deemed Liquidation Event”):

 

(a)            either a transaction or series of related transactions in which any individual, corporation, partnership, trust, limited liability company, association or other entity (each, a “Person”), or group of related Persons, acquires from the stockholders of the Corporation, shares representing at least a majority of the outstanding voting power of the Corporation;

 

(b)            a sale and/or issuance (or series of sales and/or issuances) by the Corporation of securities of the Corporation representing, after the issuance of such securities, more than fifty percent (50%) of all voting securities of the Corporation to persons other than stockholders of the Corporation as of immediately prior to such sale(s) and/or issuance(s);

 

(c)            a sale, conveyance or disposition (in one or a series of related transactions) by the Corporation or any subsidiary of the Corporation of all or substantially all of the assets of the Corporation and its subsidiaries taken as a whole;

 

(d)            a grant of an exclusive license or other transfer (in one or a series of related transactions) by the Corporation and/or any subsidiary of the Corporation of a material amount of the technology or intellectual property of the Corporation and its subsidiaries taken as a whole; or

 

(e)            a consolidation or merger of the Corporation with or into any other entity or entities or a reorganization of the Corporation or similar transactions, provided, however, that a consolidation, merger, reorganization or similar transaction involving the Corporation shall not constitute a Deemed Liquidation Event if following completion of the transaction, the holders of shares of the Corporation immediately prior to the transaction own shares that represent a majority of the voting power of the surviving corporation.

 

2.4.           Amount Paid Deemed Paid or Distributed. Whenever the distribution provided for in Subsection 1.3 or in this Section 2 shall be payable in any assets other than cash, the value of the assets to be distributed shall be the fair market value thereof, determined as follows:

 

(a)            Freely traded securities:

 

(i)             If traded on a securities exchange, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;

 

 

(ii)             If actively traded over-the-counter, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three days prior to the closing; and

 

(iii)            If there is no active public market, the value shall be the fair market value thereof, as so determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors).

 

(b)            The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in Subsection 2.4(a) to reflect the approximate fair market value thereof.

 

(c)             In the event the requirements of this Section 2 are not complied with, the Corporation shall forthwith either:

 

(i)              cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or

 

(ii)             cancel such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Subsection 2.4(d).

 

(d)            The Corporation shall give each holder of record of the Preferred Stock written notice of such impending transaction within ten days after the Board of Directors of the Corporation approves such transaction or within ten days after the commencement of any involuntary proceeding, whichever is earlier. Such written notice shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.

 

3.             Voting.

 

3.1.          General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of the Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of the Preferred Stock held by such holder are convertible

 

 

as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Amended and Restated Certificate of Incorporation, as amended, the holders of the Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted to Common Stock basis.

 

3.2.          Election of Directors. For as long as there are any shares of the Preferred Stock outstanding, the holders of record of a majority of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect three directors of the Corporation (the “Preferred Directors”). The holders of record of a majority of the then outstanding shares of Common Stock, voting together as a single class, shall be entitled to elect one director of the Corporation. If the holders of shares of the Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to the first two sentences of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Preferred Stock or Common Stock, as the case may be, elect an individual to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect an individual to fill such directorship. The holders of a majority of the then outstanding shares of Common Stock and/or the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect all remaining members of the Board of Directors of the Corporation. Any director elected as provided in this Subsection 3.2 may be removed without cause, and any vacancy caused by the resignation, death or removal of such director may be filled, by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the then outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.

 

3.3.          Preferred Stock Protective Provisions. At any time when shares of the Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation, as amended) the written consent or affirmative vote of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, pursuant to consent given in writing or by vote at a meeting:

 

(a)             liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event or any recapitalization or reorganization of the Corporation or other transaction in which control of the Corporation is transferred, or sell, transfer, license or encumber the Corporation’s technology or intellectual property, or consent to any of the foregoing, other than licenses of the Corporation’s technology or intellectual property in the ordinary course of business;

 

 

(b)            amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation of the Corporation, as amended, including, without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;

 

(c)             amend, alter or repeal any provision of the By-Laws of the Corporation, including, without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;

 

(d)             increase or decrease the authorized number of shares of the Preferred Stock or Common Stock;

 

(e)             reclassify, alter or amend any existing security of the Corporation in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege (to the extent such rights preferences or privileges are not then currently in effect);

 

(f)             purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Preferred Stock as expressly authorized herein, or (ii) repurchases of stock pursuant to stock restriction agreements or vesting agreements approved by the Board of Directors (including the Preferred Directors) that grant to the Corporation a right of repurchase upon termination of the service or employment of a consultant, director or employee;

 

(g)            borrow or guaranty or otherwise authorize any amount of indebtedness, other than (i) inventory financing in the ordinary course of business, and (ii) any indebtedness in an amount of up to $250,000 in the aggregate that is approved by the Board of Directors, including both Preferred Directors;

 

(h)            increase or decrease the authorized number of directors of the Board of Directors from seven members;

 

(i)             effect a change in the nature of the Corporation’s business from the discovery and development of small molecule therapeutics targeting the toxic proteins that cause the cognitive decline associated with Alzheimer's disease and other neurodegenerative diseases;

 

(j)             enter into any transaction with any person or entity, including, without limitation, any of its founders, officers, directors or employees other than in the ordinary course of business on an arm’s length basis (as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors));

 

(k)            increase the number of shares of Common Stock reserved for issuance under the Corporation’s Amended and Restated 2007 Equity Incentive Plan, as amended from time to time, or any other equity-based incentive or compensation plan;

 

 

(l)             make, or permit any subsidiary to make, any loan or advance to any person or entity, including, without limitation, any founder, officer, employee or director of the Corporation or any subsidiary, except (i) advances in the ordinary course of business or (ii) advances up to $50,000 in the aggregate under the terms of an employment or service arrangement approved by the Board of Directors, including both Preferred Directors;

 

(m)           hire, terminate, or change the compensation in excess of $100,000 of any of its officers, directors or employees, unless such hiring, termination or compensation is approved by the Board of Directors, including both Preferred Directors;

 

(n)            own any stock or other securities of any other corporation, partnership, or other entity, unless approved by the Board of Directors, including both Preferred Directors;

 

(o)            guarantee, or permit any subsidiary to guarantee, any indebtedness except for (i) trade accounts of the Corporation or any subsidiary arising in the ordinary course of business, or (ii) any guarantee approved by the Board of Directors, including both Preferred Directors; or

 

(p)            make any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States bank having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States of America, in each case having a maturity not in excess of one year, unless approved by the Board of Directors, including both Preferred Directors.

 

4.              Optional Conversion.

 

The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

4.1.           Right to Convert.

 

4.1.1        Conversion Ratio. Each share of the Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price applicable to such share of Preferred Stock by the Conversion Price (as defined below) applicable to such share of Preferred Stock in effect at the time of conversion. The “Conversion Price” shall initially be equal to $.69 for the Series A Preferred Stock and Series A-1 Preferred Stock, .$8415 for the Series A-2 Preferred Stock and .$923 for the Series B Preferred Stock. Such initial Conversion Price, and the rate at which shares of the Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

 

4.1.2        Termination of Conversion Rights. In the event of a notice of redemption of any shares of the Preferred Stock pursuant to Section 6, the Conversion Rights of the shares of Preferred Stock designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption of such shares, unless the Redemption Price (as defined below) is not fully paid on such Redemption Date (as defined

 

 

below), in which case the Conversion Rights for such shares of Preferred Stock shall continue until the price is paid in full. The Conversion Rights shall not terminate in connection with a Deemed Liquidation Event.

 

4.2.           Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation (including the Preferred Directors). Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of the Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

4.3.           Mechanics of Conversion.

 

4.3.1        Notice of Conversion. In order for a holder of the Preferred Stock to voluntarily convert shares of the Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of the Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of the Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of the Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and (b) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.

 

4.3.2        Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to

 

 

effect the conversion of all the Preferred Stock then outstanding; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all of the then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Amended and Restated Certificate of Incorporation, as amended. Before taking any action that would cause an adjustment reducing the Conversion Price of any series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of the Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

 

4.3.3        Effect of Conversion. All shares of the Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except with respect to the right of the holders thereof to receive shares of Common Stock in exchange therefor and to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2. Any shares of the Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.

 

4.3.4        No Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

 

4.3.5        Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of the Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of the Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

4.4.           Adjustments to Conversion Price for Diluting Issues.

 

4.4.1        Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

 

(a)            “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

 

(b)            “Original Issue Date” shall mean, with respect to the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2 Preferred Stock and the Series B Preferred Stock, the date on which the first share of such series of Preferred Stock, respectively, was issued.

 

(c)            “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

 

(d)            “Additional Shares of Common Stock” shall mean, with respect to the determination of adjustments to the Conversion Price for each series of Preferred Stock, all shares of Common Stock issued (or, pursuant to Subsection 4.4.3, deemed to be issued) by the Corporation on or after the Original Issue Date of such Series of Preferred Stock, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):

 

(i)              shares of Common Stock, Options or Convertible Securities issued upon the conversion of the Preferred Stock or by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5, 4.6 or 4.7;

 

(ii)             shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

(iii)            shares of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of such Option or Convertible Security;

 

(iv)            shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation, including both Preferred Directors, that do not exceed an aggregate of 1,000,000 shares of Common Stock;

 

(v)             shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

(vi)            shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation (or the assets of another corporation) by the Corporation whether by merger, reorganization or otherwise, provided, that such issuances are approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

 

(vii)           shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

(viii)          shares of Common Stock issued or issuable pursuant to currently outstanding Options granted under the Corporation’s Amended and Restated 2007 Equity Incentive Plan, as amended from time to time, with such amendment as approved by the Board of Directors, including both Preferred Directors;

 

(ix)             shares of Common Stock issued or issuable upon the closing of a public offering of the Corporation’s securities pursuant to the Securities Act of 1933, as amended (the “Securities Act”), in which all shares of the Preferred Stock are automatically converted to Common Stock pursuant to Subsection 5.1(a);

 

(x)              shares of Common Stock issued or issuable upon conversion of any shares of the Series B Preferred Stock issued under that certain Series B Stock Purchase Agreement dated as of March 20, 2014, as amended, and the Series B Preferred Stock Purchase Agreement dated as of November 16, 2016, as it may be amended, among the Corporation and the other parties listed therein;

 

(xi)             shares of Common Stock issued or issuable upon conversion of one or more Convertible Promissory Note(s) or upon exercise of one or more Warrant(s) issued by the Corporation to the Alzheimer Drug Development Foundation, Inc. under that certain Agreement to Accept Conditions for Biotechnology Grant Funding dated as of July 6, 2010;

 

(xii)            shares of Preferred Stock issued or issuable upon conversion of one or more Convertible Promissory Notes (and shares of Common Stock issued upon conversion of such shares of Preferred Stock) and Common Stock Purchase Warrants (and shares of Common Stock issued upon exercise of such Warrants) issued by the Corporation under that certain Note and Warrant Purchase Agreement, among the Corporation and the purchasers named therein, dated as of March 11, 2016, as amended; and

 

(xiii)           shares of Common Stock issued or issuable upon the conversion, exercise or exchange of all other Options and Convertible Securities outstanding as of November 16, 2016.

 

4.4.2        No Adjustment of Conversion Price. No adjustment in the Conversion Price applicable to a share of Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock unless the consideration per share (determined pursuant to Subsection 4.4.5 for an Additional Share of Common Stock issued or deemed to be issued by the Corporation) is less than the Conversion Price for such share of Preferred Stock in effect on the date of, and immediately prior to, the issue of such Additional Shares of Common Stock.

 

 

 

4.4.3        Deemed Issue of Additional Shares of Common Stock.

 

(a)             If the Corporation at any time or from time to time after the Original Issue Date applicable to a series of Preferred Stock shall issue any Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of the issuance of such Convertible Security or Option or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

(b)            If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (hut excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have been obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this Subsection 4.4.3(b) shall have the effect of increasing the Conversion Price of any series of Preferred Stock to an amount that exceeds the lower of (A) such Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (B) such Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

(c)            If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than such Conversion Price then in effect with respect to such series of Preferred Stock, or because such Option or Convertible Security was issued before the Original Issue Date of such series of Preferred Stock), are revised after Original Issue Date of such series of Preferred Stock as a result of an amendment to such terms or any other adjustment pursuant to

 

 

the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

 

(d)            Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, such Conversion Price shall be readjusted to the Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

(e)            If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price of a series of Preferred Stock provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price of a series of Preferred Stock that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to such Conversion Price that such Issuance or amendment took place at the time such calculation can first be made.

 

4.4.4        Adjustment of Conversion Price upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issue Date applicable to a series of Preferred Stock issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share less than Conversion Price of such series of Preferred Stock in effect immediately prior to such issue, then the Conversion Price applicable to each share of such series of Preferred Stock shall be reduced, concurrently with such issue, to a price per share (calculated to the nearest one-hundredth of a cent) in accordance with the following formula:

 

CP₂ = CP₁* (A + B) ÷ (A + C).

 

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(i)             “CP₂” shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of such series of Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock;

 

(ii)             “CP₁” shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of such series of Preferred Stock in effect immediately prior to such issue of Additional Shares of Common Stock;

 

(iii)             “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock, treating for this purpose as outstanding shares of Common Stock underlying only those Options or Convertible Securities that (x) are outstanding immediately prior to such issue and (y) are vested or otherwise exercisable;

 

(iv)             “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP₁ (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP₁); and

 

(v)              “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

 

4.4.5       Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

 

(a)            For cash and property, such consideration shall:

 

(i)               insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

(ii)              insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors); and

 

(iii)             in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration that covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors).

 

(b)            For Options and Convertible Securities, the consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been

 

 

issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing

 

(i)              the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

(ii)             the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

4.4.6        Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

4.5.          Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time on or after the Original Issue Date of any series of Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding, If the Corporation shall at any time or from time to time after the Original Issue Date of any series of Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Subsection 4.5 shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

4.6.           Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time on or after the Original Issue Date of any series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of

 

 

Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation or in cash or other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of such series of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.

 

4.7.           Adjustment for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.5 or 4.6), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of the Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property that a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of the Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors)) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price of each series of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.

 

4.8.           Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of any series of Preferred Stock pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 30 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of the Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of the Preferred Stock (but in any event not later than 15 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Conversion Price of such series of Preferred Stock then in effect, and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property that then would be received upon the conversion of the Preferred Stock.

 

4.9.           Notice of Record Date. In the event:

 

(a)             the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution,

 

 

or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b)             of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

 

(c)             of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock, Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.

 

5.              Mandatory Conversion.

 

5.1.          Trigger Events. Upon the initial closing of the Corporation's first firmly underwritten public offering of its Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission (“SEC”), and declared effective under the Securities Act, in which the Corporation’s Common Stock is listed on a national securities exchange (other than a registration statement relating either to the sale of securities to employees of the Corporation pursuant to its stock option, stock purchase or similar plan or an SEC Rule 145 transaction) covering the offer and sale of Common Stock for the account of the Corporation to the public at a price per share of not less than three times the highest then applicable Conversion Price resulting in offering proceeds to the Corporation of a least $30,000,000 net of underwriting discounts and commissions (the time of such closing is referred to herein as the “Mandatory Conversion Time”), (i) all outstanding shares of the Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Price and (ii) such shares may not be reissued by the Corporation.

 

5.2.          Procedural Requirements. All holders of record of shares of the Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of the Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of the Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such

 

 

certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for the Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of the Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.

 

6.              Redemption.

 

6.1.          Redemption. Shares of the Preferred Stock shall be redeemed by the Corporation out of funds lawfully available therefor at a price equal to the Preferred Liquidation Amount applicable to the shares of Preferred Stock, less all Mandatory Dividend(s) previously distributed with respect to each such share (the “Redemption Price”), in three annual installments commencing not more than 60 days after receipt by the Corporation at any time on or after March 20, 2021, from the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, of written notice requesting redemption of all shares of the Preferred Stock. The date of each such installment shall be referred to as a “Redemption Date.” On each Redemption Date, the Corporation shall redeem, on a pro rata basis in accordance with the number of shares of the Preferred Stock owned by each holder, that number of outstanding shares of the Preferred Stock determined by dividing (a) the total number of shares of the Preferred Stock outstanding immediately prior to such Redemption Date by (b) the number of remaining Redemption Dates (including the Redemption Date to which such calculation applies); provided, however, that Excluded Shares (as such term is defined in Subsection 6.2) shall not be redeemed and shall be excluded from the calculations set forth in this sentence. If the Corporation does not have sufficient funds legally available to redeem on any Redemption Date all shares of the Preferred Stock to be redeemed on such Redemption Date, the Corporation shall redeem a pro rata portion of each holder’s redeemable shares of such capital stock out of funds legally available therefor, based on the respective amounts that would otherwise be payable in respect of the shares to be redeemed if the legally available funds were sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally available therefor. No other capital stock of the Corporation may be redeemed

 

 

or repurchased by the Corporation prior to the redemption of the Preferred Stock without the approval of the holders of at least 60% of the then issued and outstanding shares of Preferred Stock voting as a single class on an as-converted basis. The Corporation shall take all commercially reasonable action to have funds legally available for payment of the Redemption Price.

 

6.2.            Redemption Notice. The Corporation shall send written notice of the mandatory redemption (the “Redemption Notice”) to each holder of record of the Preferred Stock not less than 40 days prior to each Redemption Date. Each Redemption Notice shall state:

 

(a)            the series and number of shares of the Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;

 

(b)            the Redemption Date and the Redemption Price;

 

(c)            the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1); and

 

(d)            that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of the Preferred Stock to be redeemed.

 

If the Corporation receives, on or prior to the 20th day after the date of delivery of the Redemption Notice to a holder of the Preferred Stock, written notice from such holder that such holder elects to be excluded from the redemption provided in this Section 6, then the shares of the Preferred Stock registered on the books of the Corporation in the name of such holder at the time of the Corporation's receipt of such notice shall thereafter be “Excluded Shares.” Excluded Shares shall not be redeemed or redeemable pursuant to this Section 6, whether on such Redemption Date or thereafter.

 

6.3.            Surrender of Certificates; Payment. On or before the applicable Redemption Date, each holder of shares of the Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person or entity whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of the Preferred Stock represented by a certificate are redeemed, a new certificate representing the unredeemed shares of the Preferred Stock shall promptly be issued to such holder.

 

6.4.            Rights Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on the applicable Redemption Date the Redemption Price payable upon redemption of the shares of the Preferred Stock to be redeemed on such Redemption Date is paid

 

 

or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that the certificates evidencing any of the shares of the Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of the Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of their certificate or certificates therefor.

 

6.5.            Redeemed or Otherwise Acquired Shares. Any shares of the Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of the Preferred Stock following redemption.

 

7.            Waiver. Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of the Preferred Stock, the Series B Preferred Stock, the Series A-2 Preferred Stock, the Series A-1 Preferred Stock or the Series A Preferred Stock, as the case may be, by the requisite percentage (as set forth in the applicable provision(s) of this Amended and Restated Certificate of Incorporation, as amended) of such stockholders of the Corporation that are entitled to a vote upon or consent with respect to any such right, power, preference or other term.

 

8.            Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of the Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

 

9.            No Reissuance of Preferred Stock. No share or shares of any series of the Preferred Stock acquired by the Corporation by reason of purchase, conversion, redemption or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation shall be authorized to issue. This Amended and Restated Certificate of Incorporation, as amended, shall be appropriately amended to effect the corresponding reduction in the Corporation’s capital stock.

 

B.

COMMON STOCK

 

1.            General. The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

 

2.            Voting. The holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of the Preferred Stock that may be required by the terms of this Amended and Restated Certificate of Incorporation, as amended) the affirmative vote of the holders of shares of capital

 

 

stock of the Corporation (voting as a single class) representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote (the Preferred Stock voting on an as if converted to Common Stock basis) and without a separate class vote by the holders of the Common Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

 

Fifth: Subject to any additional vote required by the Certificate of Incorporation or By-Laws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the By-Laws of the Corporation.

 

Sixth: Subject to any additional vote required by the Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the By-Laws of the Corporation.

 

Seventh: Elections of directors need not be by written ballot unless the By-Laws of the Corporation shall so provide.

 

Eighth: Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation.

 

Ninth: To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.

 

Any repeal or modification of the foregoing provisions of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

 

Tenth: To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation to provide indemnification) through By-Law provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.

 

Any amendment, repeal or modification of the foregoing provisions of this Article Tenth shall not adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification.

 

 

Eleventh: The Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Series A Preferred Stock or any partner, member, director, stockholder, employee or agent of any such holder, or an Affiliate of any holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation. As used herein, “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by such Person, or solely in the case of Ogden CAP Associates, LLC (“Ogden”): (a) with respect to which investment discretion is exercised by one or more general partners or managing members of, or shares the same management company with, Ogden; or (b) any employee of Ogden or Ogden’s Affiliate who holds (or will by virtue of an immediately succeeding transfer will hold) at least 100,000 shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares).

 

Twelfth: The Corporation expressly elects not to be governed by Section 203 of the General Corporation Law.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, this Second Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of the Corporation on this 1^st day of November, 2016.

 

	COGNITION THERAPEUTICS, INC.
	By:	/s/ Kenneth I. Moch
		Name: Kenneth I. Moch
		Title: President and Chief Executive Officer

 

 

Exhibit 3.2

 

CERTIFICATE OF AMENDMENT

 

OF

 

SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

OF

 

COGNITION THERAPEUTICS, INC.

 

Cognition Therapeutics, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”),

 

DOES HEREBY CERTIFY THAT:

 

FIRST: The Board of Directors (the “Board”) of Cognition Therapeutics, Inc. (the “Corporation”), pursuant to a meeting of the Board held on December 2, 2016, duly adopted the following resolution setting forth a proposed amendment to the Second Amended and Restated Certificate of Incorporation of the Corporation, declaring such amendment to be advisable and calling for consideration thereof by the stockholders of the Corporation. The resolution setting forth the proposed amendment is as follows:

 

RESOLVED, that Article Fourth of the Second Amended and Restated Certificate of Incorporation of the Company (the “Certificate”), shall be amended pursuant to the Certificate of Amendment in the form attached as Exhibit A hereto.

 

SECOND: Thereafter, pursuant to a resolution of the Board, the holders of a majority of the outstanding shares of all classes of capital stock of the Corporation, voting together as a single class, and the holders of at least 60% of the outstanding shares of the Corporation’s Series A Convertible Preferred Stock, Series A-1 Convertible Preferred Stock, Series A-2 Convertible Preferred Stock and Series B Convertible Preferred Stock, voting together as a separate class, voted in favor of the amendment.

 

THIRD: The amendment was duly adopted in accordance with the provisions of Section 242 of the DGCL. With respect to such adoption, written consent has been given by the stockholders of the Corporation in accordance with the provisions of Section 228 of the DGCL and written notice has been given as provided in Section 228 of the DGCL.

 

[Signature follows on next page.]

 

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer, this 10th day of January, 2017.

 

	COGNITION THERAPEUTICS, INC.
	By:	/s/ Kenneth I. Moch
		Kenneth I. Moch
		President and Chief Executive Officer

 

 

EXHIBIT A

 

FOURTH: The total number of shares of all classes of stock that the Corporation shall have authority to issue is (i) Fifty-Six Million (56,000,000) shares of Common Stock, $.001 par value per share (“Common Stock”), and (ii) Thirty-Nine Million Four Hundred Twenty- Three Thousand Three Hundred Fifty-Eight (39,423,358) shares of Preferred Stock, $.001 par value per share.

 

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

 

A. PREFERRED STOCK

 

Three Million Sixty-Seven Thousand Five Hundred Nineteen (3,067,519) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”); Three Million Nine Hundred Seventy Thousand Seven Hundred Seventy-Six (3,970,776) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-1 Convertible Preferred Stock” (the “Series A-1 Preferred Stock”); Three Million Five Hundred Sixty-Five Thousand Sixty-Three (3,565,063) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-2 Convertible Preferred Stock” (the “Series A-2 Preferred Stock”); and Twenty- Eight Million Eight Hundred Twenty Thousand (28,820,000) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series B Convertible Preferred Stock” (the “Series B Preferred Stock”). The Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2 Preferred Stock and the Series B Preferred Stock are sometimes referred to herein collectively as the “Preferred Stock.” Unless otherwise indicated, references to “Sections” or “Subsections” in this Part A of this Article Fourth refer to sections and subsections of Part A of this Article Fourth.

 

The Preferred Stock shall have the following rights, preferences, powers, privileges, restrictions, qualifications and limitations.

 

1.            Dividends.

 

1.1.         Accruing Dividends. From and after the date of the issuance of each respective share of the Preferred Stock, dividends at the rate of 8% per annum of the applicable Original Issue Price (as defined herein) compounded annually shall accrue on such share of the Preferred Stock (“Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; provided however, (i) that such Accruing Dividends shall be payable only in connection with a liquidation, dissolution or winding up of the Corporation under Section 2 (including, without limitation, in connection with a Deemed Liquidation Event), a Mandatory Dividend under Section 1.3, or a redemption of the Preferred Stock under Section 6, and the Corporation shall not otherwise pay such Accruing Dividends and (ii) in the event a Mandatory Dividend is paid under Section 1.3, Accruing Dividends shall thereafter accrue only on the unreturned amount of the Original Issue Price after taking into

 

 

account the payment of each Mandatory Dividend. As used herein, “Original Issue Price” means $.69 per share with respect to the Series A Preferred Stock and Series A-1 Preferred Stock, $.8415 per share with respect to the Series A-2 Preferred Stock and $.923 per share with respect to the Series B Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). After such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount (as defined below), less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Accruing Dividends; provided that the holders of the Preferred Stock will share in all dividends and distributions declared by the Board of Directors and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.

 

1.2.         Common Stock Dividends. The holders of the Preferred Stock shall be entitled to share in dividends payable with respect to the Common Stock as if converted and the Corporation shall not declare, pay or set aside any dividends on shares of Common Stock unless (in addition to obtaining any consents required elsewhere in this Amended and Restated Certificate of Incorporation, as amended) each holder of the Preferred Stock then outstanding shall first receive, or simultaneously receive, in each such instance, a dividend on each outstanding share of the Preferred Stock held by such holder as if such share of Preferred Stock had been converted into Common Stock, in an amount at least equal to the product of (a) the dividend payable on a share of Common Stock and (b) the number of shares of Common Stock issuable upon conversion of a share of the Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend.

 

1.3.         Mandatory Dividend(s).

 

(a)           If, prior to such time as the holders of shares of the Preferred Stock receive their full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the Corporation or any subsidiary of the Corporation shall consummate a sale, license or other disposition for value of any or all of the Corporation’s intellectual property, in a single transaction or series of related transactions unrelated to the performance by the Corporation of research and development or other services (as determined in good faith by the Board of Directors of the Corporation, including both Preferred Directors) (a “Strategic Event”), at the written election of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, sent to the Corporation at least 15 days prior to the effective date of a Strategic Event, the Corporation shall distribute to the holders of shares of the Preferred Stock up to 35% of the aggregate payments (including, without limitation, all option and/or milestone payments and/or all success fees) received by the Corporation as consideration in such Strategic Event as soon as reasonably practicable following receipt by the Corporation of such payments (“Mandatory Dividend”). Such Mandatory Dividend shall be distributed to the holders of the Preferred Stock on a pari passu and an as-converted to Common Stock basis until the aggregate amount of all Mandatory Dividends paid to the holders of the

 

 

Preferred Stock equals the full Preferred Liquidation Amount payable on the Preferred Stock held by such holders.

 

(b)          The Corporation shall give each holder of record of the Preferred Stock written notice of an impending Strategic Event within ten days after the Board of Directors of the Corporation approves such Strategic Event. Such written notice shall describe the material terms and conditions of the impending Strategic Event and the provisions of this Section 1.3, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.

 

(c)           After such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount for their respective shares of the Preferred Stock, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Mandatory Dividends; provided that the holders of the Preferred Stock will share in all dividends and distributions declared by the Board of Directors and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.

 

1.4.          Order of Dividend Payment. No dividends or other distributions shall be declared and/or paid on any class or series of capital stock, other than the Preferred Stock if any Mandatory Dividends have accrued and are unpaid or if any other dividends are declared and unpaid on the Preferred Stock.

 

2.            Liquidation Preference.

 

2.1.         Preferred Liquidation Amount. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, including, without limitation, any Deemed Liquidation Event (as defined below), each holder of shares of the Preferred Stock then outstanding shall be entitled to receive out of the assets legally available for distribution to its stockholders, whether from capital surplus, earnings or otherwise, on a pari passu and an as converted to Common Stock basis and prior and in preference to any distribution to the holders of any other series or class of the capital stock of the Corporation that is junior to the Preferred Stock, including, without limitation, the Common Stock, by reason of their ownership thereof, an amount per share of Preferred Stock then held by such holder equal to the Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of Preferred Stock. If upon the occurrence of such event, the assets and funds of the Corporation shall be insufficient to permit the payment to such holders of Preferred Stock of the full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of Preferred Stock, required by the preceding sentence, then the entire assets and funds of the Corporation legally available for

 

 

distribution shall be distributed ratably among the holders of the Preferred Stock in proportion to the Preferred Liquidation Amount each such holder is otherwise entitled to receive on each such share, less any and all Mandatory Dividend(s) previously distributed with respect to each such share. “Preferred Liquidation Amount” means, with respect to a share of Preferred Stock, the applicable Original Issue Price for such share of Preferred Stock plus all Accruing Dividends on such share of Preferred Stock (plus any other dividends or distributions declared but not paid on such share of Preferred Stock).

 

2.2.         Distribution of Remaining Assets. After payment has been made to the holders of the Preferred Stock of their full Preferred Liquidation Amount required by Section 2.1, less any and all Mandatory Dividend(s) previously distributed with respect to each such share, the remaining assets or surplus funds of the Corporation available for distribution to stockholders shall be distributed among the holders of the Common Stock and the holders of the Preferred Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all shares of the Preferred Stock into Common Stock).

 

2.3.         Deemed Liquidation Events. At the option of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, the occurrence of each of the following events shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section 2 (each, a “Deemed Liquidation Event”):

 

(a)          either a transaction or series of related transactions in which any individual, corporation, partnership, trust, limited liability company, association or other entity (each, a “Person”), or group of related Persons, acquires from the stockholders of the Corporation, shares representing at least a majority of the outstanding voting power of the Corporation;

 

(b)           a sale and/or issuance (or series of sales and/or issuances) by the Corporation of securities of the Corporation representing, after the issuance of such securities, more than fifty percent (50%) of all voting securities of the Corporation to persons other than stockholders of the Corporation as of immediately prior to such sale(s) and/or issuance(s);

 

(c)           a sale, conveyance or disposition (in one or a series of related transactions) by the Corporation or any subsidiary of the Corporation of all or substantially all of the assets of the Corporation and its subsidiaries taken as a whole;

 

(d)           a grant of an exclusive license or other transfer (in one or a series of related transactions) by the Corporation and/or any subsidiary of the Corporation of a material amount of the technology or intellectual property of the Corporation and its subsidiaries taken as a whole; or

 

(e)           a consolidation or merger of the Corporation with or into any other entity or entities or a reorganization of the Corporation or similar transactions, provided, however, that a consolidation, merger, reorganization or similar transaction involving the Corporation shall not constitute a Deemed Liquidation Event if following completion of the

 

 

transaction, the holders of shares of the Corporation immediately prior to the transaction own shares that represent a majority of the voting power of the surviving corporation.

 

2.4.         Amount Paid Deemed Paid or Distributed. Whenever the distribution provided for in Subsection 1.3 or in this Section 2 shall be payable in any assets other than cash, the value of the assets to be distributed shall be the fair market value thereof, determined as follows:

 

(a)           Freely traded securities:

 

(i)            If traded on a securities exchange, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;

 

(ii)           If actively traded over-the-counter, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three days prior to the closing; and

 

(iii)          If there is no active public market, the value shall be the fair market value thereof, as so determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors).

 

(b)          The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in Subsection 2.4(a) to reflect the approximate fair market value thereof.

 

(c)           In the event the requirements of this Section 2 are not complied with, the Corporation shall forthwith either:

 

(i)            cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or

 

(ii)           cancel such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Subsection 2.4(d).

 

(d)           The Corporation shall give each holder of record of the Preferred Stock written notice of such impending transaction within ten days after the Board of Directors of the Corporation approves such transaction or within ten days after the commencement of any

 

 

involuntary proceeding, whichever is earlier. Such written notice shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.

 

3.            Voting.

 

3.1.         General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of the Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of the Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Amended and Restated Certificate of Incorporation, as amended, the holders of the Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted to Common Stock basis.

 

3.2.         Election of Directors. For as long as there are any shares of the Preferred Stock outstanding, the holders of record of a majority of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect three directors of the Corporation (the “Preferred Directors”). The holders of record of a majority of the then outstanding shares of Common Stock, voting together as a single class, shall be entitled to elect one director of the Corporation. If the holders of shares of the Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to the first two sentences of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Preferred Stock or Common Stock, as the case may be, elect an individual to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect an individual to fill such directorship. The holders of a majority of the then outstanding shares of Common Stock and/or the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect all remaining members of the Board of Directors of the Corporation. Any director elected as provided in this Subsection 3.2 may be removed without cause, and any vacancy caused by the resignation, death or removal of such director may be filled, by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the then outstanding

 

 

shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.

 

3.3.         Preferred Stock Protective Provisions. At any time when shares of the Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation, as amended) the written consent or affirmative vote of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, pursuant to consent given in writing or by vote at a meeting:

 

(a)           liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event or any recapitalization or reorganization of the Corporation or other transaction in which control of the Corporation is transferred, or sell, transfer, license or encumber the Corporation’s technology or intellectual property, or consent to any of the foregoing, other than licenses of the Corporation’s technology or intellectual property in the ordinary course of business;

 

(b)           amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation of the Corporation, as amended, including, without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;

 

(c)           amend, alter or repeal any provision of the By-Laws of the Corporation, including, without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;

 

(d)           increase or decrease the authorized number of shares of the Preferred Stock or Common Stock;

 

(e)           reclassify, alter or amend any existing security of the Corporation in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege (to the extent such rights preferences or privileges are not then currently in effect);

 

(f)            purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Preferred Stock as expressly authorized herein, or (ii) repurchases of stock pursuant to stock restriction agreements or vesting agreements approved by the Board of Directors (including the Preferred Directors) that grant to the Corporation a right of repurchase upon termination of the service or employment of a consultant, director or employee;

 

(g)           borrow or guaranty or otherwise authorize any amount of indebtedness, other than (i) inventory financing in the ordinary course of business, and (ii) any

 

 

indebtedness in an amount of up to $250,000 in the aggregate that is approved by the Board of Directors, including both Preferred Directors;

 

(h)           increase or decrease the authorized number of directors of the Board of Directors from seven members;

 

(i)            effect a change in the nature of the Corporation’s business from the discovery and development of small molecule therapeutics targeting the toxic proteins that cause the cognitive decline associated with Alzheimer’s disease and other neurodegenerative diseases;

 

(j)            enter into any transaction with any person or entity, including, without limitation, any of its founders, officers, directors or employees other than in the ordinary course of business on an arm’s length basis (as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors));

 

(k)           increase the number of shares of Common Stock reserved for issuance under the Corporation’s Amended and Restated 2007 Equity Incentive Plan, as amended from time to time, or any other equity-based incentive or compensation plan;

 

(l)            make, or permit any subsidiary to make, any loan or advance to any person or entity, including, without limitation, any founder, officer, employee or director of the Corporation or any subsidiary, except (i) advances in the ordinary course of business or (ii) advances up to $50,000 in the aggregate under the terms of an employment or service arrangement approved by the Board of Directors, including both Preferred Directors;

 

(m)          hire, terminate, or change the compensation in excess of $100,000 of any of its officers, directors or employees, unless such hiring, termination or compensation is approved by the Board of Directors, including both Preferred Directors;

 

(n)           own any stock or other securities of any other corporation, partnership, or other entity, unless approved by the Board of Directors, including both Preferred Directors;

 

(o)           guarantee, or permit any subsidiary to guarantee, any indebtedness except for (i) trade accounts of the Corporation or any subsidiary arising in the ordinary course of business, or (ii) any guarantee approved by the Board of Directors, including both Preferred Directors; or

 

(p)           make any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States bank having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States of America, in each case having a maturity not in excess of one year, unless approved by the Board of Directors, including both Preferred Directors.

 

 

4.            Optional Conversion.

 

The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

4.1.         Right to Convert.

 

4.1.1.              Conversion Ratio. Each share of the Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price applicable to such share of Preferred Stock by the Conversion Price (as defined below) applicable to such share of Preferred Stock in effect at the time of conversion. The “Conversion Price” shall initially be equal to $.69 for the Series A Preferred Stock and Series A-1 Preferred Stock, .$8415 for the Series A-2 Preferred Stock and .$923 for the Series B Preferred Stock. Such initial Conversion Price, and the rate at which shares of the Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

 

4.1.2.              Termination of Conversion Rights. In the event of a notice of redemption of any shares of the Preferred Stock pursuant to Section 6, the Conversion Rights of the shares of Preferred Stock designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption of such shares, unless the Redemption Price (as defined below) is not fully paid on such Redemption Date (as defined below), in which case the Conversion Rights for such shares of Preferred Stock shall continue until the price is paid in full. The Conversion Rights shall not terminate in connection with a Deemed Liquidation Event.

 

4.2.         Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation (including the Preferred Directors). Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of the Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

4.3.         Mechanics of Conversion.

 

4.3.1.              Notice of Conversion. In order for a holder of the Preferred Stock to voluntarily convert shares of the Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of the Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent),

 

 

together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of the Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of the Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and (b) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.

 

4.3.2.              Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all the Preferred Stock then outstanding; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all of the then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Amended and Restated Certificate of Incorporation, as amended. Before taking any action that would cause an adjustment reducing the Conversion Price of any series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of the Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

 

4.3.3.              Effect of Conversion. All shares of the Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except with respect to the right of the holders thereof to receive shares of Common Stock in exchange therefor and to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2. Any shares of the Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need

 

 

for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.

 

4.3.4.            No Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

 

4.3.5.            Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of the Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of the Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

4.4.            Adjustments to Conversion Price for Diluting Issues.

 

4.4.1.      Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

 

(a)            “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

(b)            “Original Issue Date” shall mean, with respect to the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2 Preferred Stock and the Series B Preferred Stock, the date on which the first share of such series of Preferred Stock, respectively, was issued.

 

(c)            “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

 

(d)            “Additional Shares of Common Stock” shall mean, with respect to the determination of adjustments to the Conversion Price for each series of Preferred Stock, all shares of Common Stock issued (or, pursuant to Subsection 4.4.3, deemed to be issued) by the Corporation on or after the Original Issue Date of such Series of Preferred Stock, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):

 

(i)            shares of Common Stock, Options or Convertible Securities issued upon the conversion of the Preferred Stock or by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5, 4.6 or 4.7;

 

 

(ii)          shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

(iii)         shares of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of such Option or Convertible Security;

 

(iv)         shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation, including both Preferred Directors, that do not exceed an aggregate of 1,000,000 shares of Common Stock;

 

(v)          shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

(vi)         shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation (or the assets of another corporation) by the Corporation whether by merger, reorganization or otherwise, provided, that such issuances are approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

(vii)        shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

(viii)       shares of Common Stock issued or issuable pursuant to currently outstanding Options granted under the Corporation’s Amended and Restated 2007 Equity Incentive Plan, as amended from time to time, with such amendment as approved by the Board of Directors, including both Preferred Directors;

 

(ix)           shares of Common Stock issued or issuable upon the closing of a public offering of the Corporation’s securities pursuant to the Securities Act of 1933, as amended (the “Securities Act”), in which all shares of the Preferred Stock are automatically converted to Common Stock pursuant to Subsection 5.1(a);

 

(x)            shares of Common Stock issued or issuable upon conversion of any shares of the Series B Preferred Stock issued under that certain Series B Stock Purchase Agreement dated as of March 20, 2014, as amended, and the Series B Preferred Stock Purchase Agreement dated as of November 16, 2016, as it may be amended, among the Corporation and the other parties listed therein;

 

 

(xi)            shares of Common Stock issued or issuable upon conversion of one or more Convertible Promissory Note(s) or upon exercise of one or more Warrant(s) issued by the Corporation to the Alzheimer Drug Development Foundation, Inc. under that certain Agreement to Accept Conditions for Biotechnology Grant Funding dated as of July 6, 2010;

 

(xii)           shares of Preferred Stock issued or issuable upon conversion of one or more Convertible Promissory Notes (and shares of Common Stock issued upon conversion of such shares of Preferred Stock) and Common Stock Purchase Warrants (and shares of Common Stock issued upon exercise of such Warrants) issued by the Corporation under that certain Note and Warrant Purchase Agreement, among the Corporation and the purchasers named therein, dated as of March 11, 2016, as amended; and

 

(xiii)           shares of Common Stock issued or issuable upon the conversion, exercise or exchange of all other Options and Convertible Securities outstanding as of November 16, 2016.

 

4.4.2.       No Adjustment of Conversion Price. No adjustment in the Conversion Price applicable to a share of Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock unless the consideration per share (determined pursuant to Subsection 4.4.5 for an Additional Share of Common Stock issued or deemed to be issued by the Corporation) is less than the Conversion Price for such share of Preferred Stock in effect on the date of, and immediately prior to, the issue of such Additional Shares of Common Stock.

 

4.4.3.      Deemed Issue of Additional Shares of Common Stock.

 

(a)            If the Corporation at any time or from time to time after the Original Issue Date applicable to a series of Preferred Stock shall issue any Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of the issuance of such Convertible Security or Option or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

(b)            If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of

 

 

such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have been obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this Subsection 4.4.3(b) shall have the effect of increasing the Conversion Price of any series of Preferred Stock to an amount that exceeds the lower of (A) such Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (B) such Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

(c)            If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than such Conversion Price then in effect with respect to such series of Preferred Stock, or because such Option or Convertible Security was issued before the Original Issue Date of such series of Preferred Stock), are revised after Original Issue Date of such series of Preferred Stock as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

 

(d)            Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, such Conversion Price shall be readjusted to the Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

(e)            If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the

 

 

time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price of a series of Preferred Stock provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price of a series of Preferred Stock that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to such Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

 

4.4.4.      Adjustment of Conversion Price upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issue Date applicable to a series of Preferred Stock issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share less than Conversion Price of such series of Preferred Stock in effect immediately prior to such issue, then the Conversion Price applicable to each share of such series of Preferred Stock shall be reduced, concurrently with such issue, to a price per share (calculated to the nearest one-hundredth of a cent) in accordance with the following formula:

 

CP₂ = CP₁* (A + B) ÷ (A + C).

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(i)            “CP₂” shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of such series of Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock;

 

(ii)            “CP₁” shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of such series of Preferred Stock in effect immediately prior to such issue of Additional Shares of Common Stock;

 

(iii)          “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock, treating for this purpose as outstanding shares of Common Stock underlying only those Options or Convertible Securities that (x) are outstanding immediately prior to such issue and (y) are vested or otherwise exercisable;

 

 

(iv)         “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP₁ (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP₁); and

 

(v)           “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

 

4.4.5.      Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

 

(a)            For cash and property, such consideration shall:

 

(i)            insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

(ii)          insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors); and

 

(iii)          in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration that covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors).

 

(b)            For Options and Convertible Securities, the consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing

 

(i)           the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

(ii)          the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible

 

 

Securities and the conversion or exchange of such Convertible Securities.

 

4.4.6.     Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

4.5.        Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time on or after the Original Issue Date of any series of Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date of any series of Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Subsection 4.5 shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

4.6.        Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time on or after the Original Issue Date of any series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation or in cash or other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of such series of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.

 

4.7.        Adjustment for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.5 or 4.6), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of the Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount

 

 

of securities, cash or other property that a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of the Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors)) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price of each series of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.

 

4.8.         Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of any series of Preferred Stock pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 30 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of the Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of the Preferred Stock (but in any event not later than 15 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Conversion Price of such series of Preferred Stock then in effect, and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property that then would be received upon the conversion of the Preferred Stock.

 

4.9.         Notice of Record Date. In the event:

 

(a)           the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b)          of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

 

(c)          of the voluntary or involuntary dissolution, liquidation or winding- up of the Corporation,

 

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or

 

 

securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.

 

5.            Mandatory Conversion.

 

5.1.         Trigger Events. Upon the initial closing of the Corporation’s first firmly underwritten public offering of its Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission (‘‘SEC”), and declared effective under the Securities Act, in which the Corporation’s Common Stock is listed on a national securities exchange (other than a registration statement relating either to the sale of securities to employees of the Corporation pursuant to its stock option, stock purchase or similar plan or an SEC Rule 145 transaction) covering the offer and sale of Common Stock for the account of the Corporation to the public at a price per share of not less than three times the highest then applicable Conversion Price resulting in offering proceeds to the Corporation of a least $30,000,000 net of underwriting discounts and commissions (the time of such closing is referred to herein as the “Mandatory Conversion Time”), (i) all outstanding shares of the Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Price and (ii) such shares may not be reissued by the Corporation.

 

5.2.          Procedural Requirements. All holders of record of shares of the Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of the Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of the Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for the Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates

 

 

for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of the Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.

 

6.            Redemption.

 

6.1.          Redemption. Shares of the Preferred Stock shall be redeemed by the Corporation out of funds lawfully available therefor at a price equal to the Preferred Liquidation Amount applicable to the shares of Preferred Stock, less all Mandatory Dividend(s) previously distributed with respect to each such share (the “Redemption Price”), in three annual installments commencing not more than 60 days after receipt by the Corporation at any time on or after March 20, 2021, from the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, of written notice requesting redemption of all shares of the Preferred Stock. The date of each such installment shall be referred to as a “Redemption Date.” On each Redemption Date, the Corporation shall redeem, on a pro rata basis in accordance with the number of shares of the Preferred Stock owned by each holder, that number of outstanding shares of the Preferred Stock determined by dividing (a) the total number of shares of the Preferred Stock outstanding immediately prior to such Redemption Date by (b) the number of remaining Redemption Dates (including the Redemption Date to which such calculation applies); provided, however, that Excluded Shares (as such term is defined in Subsection 6.2) shall not be redeemed and shall be excluded from the calculations set forth in this sentence. If the Corporation does not have sufficient funds legally available to redeem on any Redemption Date all shares of the Preferred Stock to be redeemed on such Redemption Date, the Corporation shall redeem a pro rata portion of each holder’s redeemable shares of such capital stock out of funds legally available therefor, based on the respective amounts that would otherwise be payable in respect of the shares to be redeemed if the legally available funds were sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally available therefor. No other capital stock of the Corporation may be redeemed or repurchased by the Corporation prior to the redemption of the Preferred Stock without the approval of the holders of at least 60% of the then issued and outstanding shares of Preferred Stock voting as a single class on an as-converted basis. The Corporation shall take all commercially reasonable action to have funds legally available for payment of the Redemption Price.

 

6.2.          Redemption Notice. The Corporation shall send written notice of the mandatory redemption (the “Redemption Notice”) to each holder of record of the Preferred Stock not less than 40 days prior to each Redemption Date. Each Redemption Notice shall state:

 

 

(a)            the series and number of shares of the Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;

 

(b)            the Redemption Date and the Redemption Price;

 

(c)            the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1); and

 

(d)            that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of the Preferred Stock to be redeemed.

 

If the Corporation receives, on or prior to the 20th day after the date of delivery of the Redemption Notice to a holder of the Preferred Stock, written notice from such holder that such holder elects to be excluded from the redemption provided in this Section 6, then the shares of the Preferred Stock registered on the books of the Corporation in the name of such holder at the time of the Corporation’s receipt of such notice shall thereafter be “Excluded Shares.” Excluded Shares shall not be redeemed or redeemable pursuant to this Section 6, whether on such Redemption Date or thereafter.

 

6.3.         Surrender of Certificates; Payment. On or before the applicable Redemption Date, each holder of shares of the Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person or entity whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of the Preferred Stock represented by a certificate are redeemed, a new certificate representing the unredeemed shares of the Preferred Stock shall promptly be issued to such holder.

 

6.4.         Rights Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on the applicable Redemption Date the Redemption Price payable upon redemption of the shares of the Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that the certificates evidencing any of the shares of the Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of the Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of their certificate or certificates therefor.

 

 

6.5.          Redeemed or Otherwise Acquired Shares. Any shares of the Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of the Preferred Stock following redemption.

 

7.            Waiver. Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of the Preferred Stock, the Series B Preferred Stock, the Series A-2 Preferred Stock, the Series A-1 Preferred Stock or the Series A Preferred Stock, as the case may be, by the requisite percentage (as set forth in the applicable provision(s) of this Amended and Restated Certificate of Incorporation, as amended) of such stockholders of the Corporation that are entitled to a vote upon or consent with respect to any such right, power, preference or other term.

 

8.            Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of the Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

 

9.            No Reissuance of Preferred Stock. No share or shares of any series of the Preferred Stock acquired by the Corporation by reason of purchase, conversion, redemption or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation shall be authorized to issue. This Amended and Restated Certificate of Incorporation, as amended, shall be appropriately amended to effect the corresponding reduction in the Corporation’s capital stock.

 

B.           COMMON STOCK

 

1.            General. The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

 

2.            Voting. The holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of the Preferred Stock that may be required by the terms of this Amended and Restated Certificate of Incorporation, as amended) the affirmative vote of the holders of shares of capital stock of the Corporation (voting as a single class) representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote (the Preferred Stock voting on an as if converted to Common Stock basis) and without a separate class vote by the holders of the Common Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

 

Exhibit 3.3

 

SECOND CERTIFICATE OF AMENDMENT

 

OF

 

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

OF

 

COGNITION THERAPEUTICS, INC.

 

Cognition Therapeutics, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”),

 

DOES HEREBY CERTIFY THAT:

 

FIRST: The Board of Directors (the “Board”) of Cognition Therapeutics, Inc. (the “Corporation”), pursuant to a unanimous written consent of the directors dated as of November 10, 2011, duly adopted the following resolution setting forth a proposed amendment to the Amended and Restated Certificate of Incorporation of the Corporation, as amended, declaring such amendment to be advisable and calling for consideration thereof by the stockholders of the Corporation. The resolution setting forth the proposed amendment is as follows:

 

RESOLVED, that Article Fourth of the Amended and Restated Certificate of Incorporation, as amended, of Cognition Therapeutics, Inc. shall be amended and restated in its entirety to provide as set forth on Exhibit A hereto.

 

SECOND: Thereafter, pursuant to a resolution of the Board, the holders of a majority of the outstanding shares of all classes of capital stock of the Corporation, voting together as a single class, and the holders of at least 60% of the outstanding shares of the Corporation’s Series A Preferred Stock and Series A-1 Preferred Stock, voting together as a separate series, voted in favor of the amendment.

 

THIRD: The amendment was duly adopted in accordance with the provisions of Section 242 of the DGCL. With respect to such adoption, written consent has been given by the stockholders of the Corporation in accordance with the provisions of Section 228 of the DGCL and written notice has been given as provided in Section 228 of the DGCL.

 

 

IN WITNESS WHEREOF, the Corporation has caused this Second Certificate of Amendment to be signed by its duly authorized officer, this 30^th day of November 2011.

 

COGNITION THERAPEUTICS, INC.

 

	By:	/s/ Harold T. Safferstein
		Harold T. Safferstein
		President and Chief Executive Officer

 

 

EXHIBIT A

 

FOURTH; The total number of shares of all classes of stock that the Corporation shall have authority to issue is (i) Sixteen Million One Hundred Ninety Four Thousand Four Hundred Sixty Four (16,194,464) shares of Common Stock, $.001 par value per share (“Common Stock”), and (ii) Ten Million Six Hundred Three Thousand Three Hundred Sixty (10,603,360) shares of Preferred Stock, $.001 par value per share.

 

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

 

A.

PREFERRED STOCK

 

Three Million Sixty-Seven Thousand Five Hundred Nineteen (3,067,519) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”); Three Million Nine Hundred Seventy Thousand Seven Hundred Seventy-Six (3,970,776) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-1 Convertible Preferred Stock” (the “Series A-1 Preferred Stock”); and Three Million Five Hundred Sixty Five Thousand Sixty Five (3,565,065) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-2 Convertible Preferred Stock” (the “Series A-2 Preferred Stock”). The Series A Preferred Stock, the Series A-1 Preferred Stock and the Series A-2 Preferred Stock, are sometimes referred to herein collectively as the “Preferred Stock.” Unless otherwise indicated, references to “Sections” or “Subsections” in this Part A of this Article Fourth refer to sections and subsections of Part A of this Article Fourth.

 

The Preferred Stock shall have the following rights, preferences, powers, privileges, restrictions, qualifications and limitations.

 

1.

Dividends.

 

1.1.            Accruing Dividends. From and after the date of the issuance of each respective share of the Preferred Stock, dividends at the rate of 8% per annum of the applicable Original Issue Price (as defined herein) compounded annually shall accrue on such share of the Preferred Stock (“Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; provided however, (i) that such Accruing Dividends shall be payable only in connection with a liquidation, dissolution or winding up of the Corporation under Section 2 (including, without limitation, in connection with a Deemed Liquidation Event), a Mandatory Dividend under Section 1.3, or a redemption of the Preferred Stock under Section 6, and the Corporation shall not otherwise pay such Accruing Dividends and (ii) in the event a Mandatory Dividend is paid under Section 1.3, Accruing Dividends shall thereafter accrue only on the unreturned amount of the Original Issue Price after taking into account the payment of each Mandatory Dividend. As used herein, “Original Issue Price” means $.69 per share with respect to the Series A Preferred Stock and Series A-1 Preferred Stock and $.8415 per share with respect to the Series A-2 Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). After such time as the holders of the Preferred Stock

 

 

receive their full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Accruing Dividends but will share in all dividends and distributions declared by the Board of Directors and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.

 

1.2.            Common Stock Dividends. The holders of the Preferred Stock shall be entitled to share in dividends payable with respect to the Common Stock as if converted and the Corporation shall not declare, pay or set aside any dividends on shares of Common Stock unless (in addition to obtaining any consents required elsewhere in this Amended and Restated Certificate of Incorporation) each holder of the Preferred Stock then outstanding shall first receive, or simultaneously receive, in each such instance, a dividend on each outstanding share of the Preferred Stock held by such holder as if such share of Preferred Stock had been converted into Common Stock, in an amount at least equal to the product of (a) the dividend payable on a share of Common Stock and (b) the number of shares of Common Stock issuable upon conversion of a share of the Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend.

 

1.3.            Mandatory Dividend(s).

 

(a)            If, prior to such time as the holders of shares of the Preferred Stock receive their full Preferred Liquidation Amount (as defined below), less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the Corporation or any subsidiary of the Corporation shall consummate a sale, license or other disposition for value of any or all of the Corporation’s intellectual property, in a single transaction or series of related transactions unrelated to the performance by the Company of research and development or other services (as determined in good faith by the Board of Directors of the Corporation, including both Preferred Directors) (a “Strategic Event”), at the written election of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, sent to the Corporation at least 15 days prior to the effective date of a Strategic Event, the Corporation shall distribute to the holders of shares of the Preferred Stock up to 35% of the aggregate payments (including, without limitation, all option and/or milestone payments and/or all success fees) received by the Corporation as consideration in such Strategic Event as soon as reasonably practicable following receipt by the Corporation of such payments (“Mandatory Dividend”). Such Mandatory Dividend shall be distributed to the holders of the Preferred Stock on a pari passu and an as-converted to Common Stock basis until the aggregate amount of all Mandatory Dividends paid to the holders of the Preferred Stock equals the full Preferred Liquidation Amount payable on the Preferred Stock held by such holders.

 

(b)            The Corporation shall give each holder of record of the Preferred Stock written notice of an impending Strategic Event within ten days after the Board of Directors of the Corporation approves such Strategic Event. Such written notice shall describe the material terms and conditions of the impending Strategic Event and the provisions of this Section 1.3, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of

 

 

any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.

 

(c)            After such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount for their respective shares of the Preferred Stock, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Mandatory Dividends but will share in all dividends and distributions declared by the Board of Directors and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.

 

1.4.            Order of Dividend Payment. No dividends or other distributions shall be declared and/or paid on any class or series of capital stock other than the Preferred Stock if any Mandatory Dividends have accrued and are unpaid or if any other dividends are declared and unpaid on the Preferred Stock.

 

2.            Liquidation Preference.

 

2.1.            Preferential Payments to Holders of the Preferred Stock. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, including, without limitation, any Deemed Liquidation Event (as defined below), each holder of shares of the Preferred Stock then outstanding shall be entitled to receive out of the assets legally available for distribution to its stockholders, whether from capital surplus, earnings or otherwise, on a pari passu and an as-converted to Common Stock basis and prior and in preference to any distribution to the holders of any other series or class of the capital stock of the Corporation that is junior to the Preferred Stock, including, without limitation, the Common Stock, by reason of their ownership thereof, an amount per share of Preferred Stock then held by such holder equal to the Preferred Liquidation Amount (as defined below), less any and all Mandatory Dividend(s) previously distributed with respect to such share of Preferred Stock. If upon the occurrence of such event, the assets and funds of the Corporation shall be insufficient to permit the payment to such holders of the full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of Preferred Stock, on the Preferred Stock required by the preceding sentence, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Preferred Stock in proportion to the Preferred Liquidation Amount each such holder is otherwise entitled to receive on each such share, less any and all Mandatory Dividend(s) previously distributed with respect to each such share. “Preferred Liquidation Amount” means, with respect to a share of Preferred Stock, the applicable Original Issue Price for such share of Preferred Stock plus all Accruing Dividends on such share of Preferred Stock (plus any other dividends or distributions declared but not paid on such share of Preferred Stock).

 

2.2.            Distribution of Remaining Assets. After payment has been made to the holders of the Preferred Stock of their full Preferred Liquidation Amount required by Section 2.1, less any and all Mandatory Dividend(s) previously distributed with respect to each such

 

 

share, the remaining assets or surplus funds of the Corporation available for distribution to stockholders shall be distributed among the holders of the Common Stock and the holders of the Preferred Stock, pro rata based on the number of shares of Common Stock held by each (assuming conversion of all shares of the Preferred Stock into Common Stock).

 

2.3.            Deemed Liquidation Events. At the option of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as- converted to Common Stock basis, the occurrence of each of the following events shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section 2 (each, a “Deemed Liquidation Event”):

 

(a)            either a transaction or series of related transactions in which any individual, corporation, partnership, trust, limited liability company, association or other entity (“each, a “Person”), or group of related Persons, acquires from the stockholders of the Corporation, shares representing at least a majority of the outstanding voting power of the Corporation;

 

(b)            a sale and/or issuance (or series of sales and/or issuances) by the Corporation of securities of the Corporation representing, after the issuance of such securities, more than fifty percent (50%) of all voting securities of the Corporation to persons other than stockholders of the Corporation as of immediately prior to such sale(s) and/or issuance(s);

 

(c)            a sale, conveyance or disposition (in one or a series of related transactions) by the Corporation or any subsidiary of the Corporation of all or substantially all of the assets of the Corporation and its subsidiaries taken as a whole;

 

(d)            a grant of an exclusive license or other transfer (in one or a series of related transactions) by the Corporation and/or any subsidiary of the Corporation of a material amount of the technology or intellectual property of the Corporation and its subsidiaries taken as a whole; or

 

(e)            a consolidation or merger of the Corporation with or into any other entity or entities or a reorganization of the Corporation or similar transactions, provided, however, that a consolidation, merger, reorganization or similar transaction involving the Corporation shall not constitute a Deemed Liquidation Event if following completion of the transaction, the holders of shares of the Corporation immediately prior to the transaction own shares that represent a majority of the voting power of the surviving corporation.

 

2.4.            Amount Paid Deemed Paid or Distributed. Whenever the distribution provided for in Subsection 1.3 or in this Section 2 shall be payable in any assets other than cash, the value of the assets to be distributed shall be the fair market value thereof, determined as follows:

 

(a)            Freely traded securities:

 

(i)            If traded on a securities exchange, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the

 

 

closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;

 

(ii)            If actively traded over-the-counter, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three days prior to the closing; and

 

(iii)            If there is no active public market, the value shall be the fair market value thereof, as so determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors).

 

(b)            The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in Subsection 2.4(a) to reflect the approximate fair market value thereof.

 

(c)            In the event the requirements of this Section 2 are not complied with, the Corporation shall forthwith either:

 

(i)            cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or

 

(ii)            cancel such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Subsection 2.4(d).

 

(d)            The Corporation shall give each holder of record of the Preferred Stock written notice of such impending transaction within ten days after the Board of Directors of the Corporation approves such transaction or within ten days after the commencement of any involuntary proceeding, whichever is earlier. Such written notice shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.

 

3.            Voting.

 

3.1.            General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written

 

 

consent of stockholders in lieu of meeting), each holder of outstanding shares of the Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of the Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Amended and Restated Certificate of Incorporation, the holders of the Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted to Common Stock basis.

 

3.2.            Election of Directors. For as long as there are any shares of the Preferred Stock outstanding, the holders of record of a majority of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect two directors of the Corporation (the “Preferred Directors”). The holders of record of a majority of the then outstanding shares of Common Stock, voting together as a single class, shall be entitled to elect one director of the Corporation. If the holders of shares of the Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to the first two sentences of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Preferred Stock or Common Stock, as the case may be, elect an individual to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect an individual to fill such directorship. The holders of a majority of the then outstanding shares of Common Stock and/or the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect all remaining members of the Board of Directors of the Corporation. Any director elected as provided in this Subsection 3.2, may be removed without cause, and any vacancy caused by the resignation, death or removal of such director may be filled, by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the then outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.

 

3.3.            Preferred Stock Protective Provisions. At any time when shares of the Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, pursuant to consent given in writing or by vote at a meeting:

 

(a)            liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event or any recapitalization or reorganization of the Corporation or other transaction in which control of the Company is transferred, or sell, transfer, license or encumber the Corporation’s technology or intellectual property, or consent to any of the foregoing, other than licenses of the Corporation’s technology or intellectual property in the ordinary course of business;

 

 

(b)            amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation of the Corporation, including, without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;

 

(c)            amend, alter or repeal any provision of the By-Laws of the Corporation, including, without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;

 

(d)            increase or decrease the authorized number of shares of the Preferred Stock or Common Stock;

 

(e)            reclassify, alter or amend any existing security of the Corporation in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege;

 

(f)            purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Preferred Stock as expressly authorized herein, or (ii) repurchases of stock pursuant to stock restriction agreements or vesting agreements approved by the Board of Directors (including the Preferred Directors) that grant to the Corporation a right of repurchase upon termination of the service or employment of a consultant, director or employee;

 

(g)            borrow or guaranty or otherwise authorize any amount of indebtedness, other than (i) inventory financing in the ordinary course of business, and (ii) any indebtedness in an amount of up to $250,000 in the aggregate that is approved by the Board of Directors, including both Preferred Directors;

 

(h)            increase or decrease the authorized number of directors of the Board of Directors from seven members;

 

(i)            effect a change in the nature of the Corporation’s business from the discovery and development of small molecule therapeutics targeting the toxic proteins that cause the cognitive decline associated with Alzheimer’s disease and other neurodegenerative diseases;

 

(j)            enter into any transaction with any person or entity, including, without limitation, any of its founders, officers, directors or employees other than in the ordinary course of business on an arm’s length basis (as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors);

 

(k)            increase the number of shares of Common Stock reserved for issuance under the Corporation’s Amended and Restated 2007 Equity Incentive Plan, as amended from time to time, or any other equity-based incentive or compensation plan;

 

(l)            make, or permit any subsidiary to make, any loan or advance to any person or entity, including, without limitation, any founder, officer, employee or director of

 

 

the Corporation or any subsidiary, except (i) advances in the ordinary course of business or (ii) advances up to $50,000 in the aggregate under the terms of an employment or service arrangement approved by the Board of Directors, including both Preferred Directors;

 

(m)            hire, terminate, or change the compensation in excess of $100,000 of any of its officers, directors or employees, unless such hiring, termination or compensation is approved by the Board of Directors, including both Preferred Directors;

 

(n)            own any stock or other securities of any other corporation, partnership, or other entity, unless approved by the Board of Directors, including both Preferred Directors;

 

(o)            guarantee, or permit any subsidiary to guarantee, any indebtedness except for (i) trade accounts of the Corporation or any subsidiary arising in the ordinary course of business, or (ii) any guarantee approved by the Board of Directors, including both Preferred Directors; or

 

(p)            make any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States bank having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States of America, in each case having a maturity not in excess of one year, unless approved by the Board of Directors, including both Preferred Directors.

 

4.            Optional Conversion.

 

The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

4.1.            Right to Convert.

 

4.1.1.            Conversion Ratio. Each share of the Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price applicable to such share of Preferred Stock by the Conversion Price (as defined below) applicable to such share of Preferred Stock in effect at the time of conversion. The “Conversion Price” shall initially be equal to $.69 for the Series A Preferred Stock and Series A-1 Preferred Stock and .$8415 for the Series A-2 Preferred Stock Such initial Conversion Price, and the rate at which shares of the Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

 

4.1.2.            Termination of Conversion Rights. In the event of a notice of redemption of any shares of the Preferred Stock pursuant to Section 6, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption of such shares, unless the Redemption Price (as defined below) is not fully paid on such Redemption Date (as defined below), in which case the Conversion Rights for such shares shall continue until the price is paid in full. The Conversion Rights shall not terminate in connection with a Deemed Liquidation Event.

 

 

4.2.            Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors). Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of the Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

4.3.            Mechanics of Conversion.

 

4.3.1.            Notice of Conversion. In order for a holder of the Preferred Stock to voluntarily convert shares of the Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of the Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of the Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of the Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and (b) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.

 

4.3.2.            Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all the Preferred Stock then outstanding; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all of the then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common

 

 

Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Amended and Restated Certificate of Incorporation. Before taking any action that would cause an adjustment reducing the Conversion Price of any series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of the Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

 

4.3.3.       Effect of Conversion. All shares of the Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except with respect to the right of the holders thereof to receive shares of Common Stock in exchange therefor and to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2. Any shares of the Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.

 

4.3.4.       No Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

 

4.3.5.       Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of the Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of the Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid,

 

4.4.          Adjustments to Conversion Price for Diluting Issues.

 

4.4.1.       Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

 

(a)            “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

(b)            “Original Issue Date” shall mean, with respect to the Series A Preferred Stock and the Series A-1 Preferred Stock, the date on which the first share of the Series A Preferred Stock was issued and, with respect to the Series A-2 Preferred Stock, the date on which the first share of the Series A-2 Preferred Stock was issued.

 

 

(c)           “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

 

(d)           “Additional Shares of Common Stock” shall mean, with respect to the determination of adjustments to the Conversion Price for each series of Preferred Stock, all shares of Common Stock issued (or, pursuant to Subsection 4.4.3, deemed to be issued) by the Corporation on or after the Original Issue Date of such Series of Preferred Stock, other than (1)  the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):

 

(i)            shares of Common Stock, Options or Convertible Securities issued upon the conversion of the Preferred Stock or by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5, 4.6 or 4.7;

 

(ii)           shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

(iii)          shares of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of such Option or Convertible Security;

 

(iv)          shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation, including both Preferred Directors, that do not exceed an aggregate of 1,000,000 shares of Common Stock;

 

(v)           shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

(vi)          shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation (or the assets of another corporation) by the Corporation whether by merger, reorganization or otherwise, provided, that such issuances are approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

(vii)         shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation, including both Preferred Directors;

 

 

(viii)        shares of Common Stock issued or issuable pursuant to currently outstanding Options granted under the Corporation’s Amended and Restated 2007 Equity Incentive Plan, as amended from time to time, with such amendment as approved by the Board of Directors, including both Preferred Directors;

 

(ix)           shares of Common Stock issued or issuable upon the closing of a public offering of the Corporation’s securities pursuant to the Securities Act of 1933, as amended (the “Securities Act”), in which all shares of the Preferred Stock are automatically converted to Common Stock pursuant to Subsection 5.1(a);

 

(x)            shares of Common Stock issued or issuable upon conversion of any shares of the Series A-1 Preferred Stock issued under that certain Series A-1 Stock Purchase Agreement dated as of December 17, 2010 among the Corporation and the other parties listed therein (the “Series A-1 Purchase Agreement”);

 

(xi)           shares of Common Stock issued or issuable upon conversion of any shares of the Series A-2 Preferred Stock issued under that certain Series A-2 Stock Purchase Agreement dated as of December 1,2011 among the Corporation and the other parties listed therein (the “Series A-2 Purchase Agreement”);

 

(xii)          shares of Common Stock issued or issuable upon conversion of one or more Convertible Promissory Note(s) or upon exercise of one or more Warrant(s) issued by the Corporation to the Alzheimer Drug Development Foundation, Inc. under that certain Agreement to Accept Conditions for Biotechnology Grant Funding dated as of July 6, 2010; and

 

(xiii)         shares of Common Stock issued or issuable upon the conversion, exercise or exchange of all other Options and Convertible Securities outstanding as of December 1, 2011.

 

4.4.2.      No Adjustment of Conversion Price. No adjustment in the Conversion Price applicable to a share of Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock unless the consideration per share (determined pursuant to Subsection 4.4.5 for an Additional Share of Common Stock issued or deemed to be issued by the Corporation) is less than the Conversion Price for such share of Preferred Stock in effect on the date of, and immediately prior to, the issue of such Additional Shares of Common Stock.

 

4.4.3.      Deemed Issue of Additional Shares of Common Stock.

 

(a)           If the Corporation at any time or from time to time after the Original Issue Date applicable to a Series of Preferred Stock shall issue any Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable

 

 

upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of the issuance of such Convertible Security or Option or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

(b)           If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have been obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this Subsection 4.4.3(b) shall have the effect of increasing the Conversion Price of any series of Preferred Stock to an amount that exceeds the lower of (A)  such Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (B) such Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

(c)           If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than such Conversion Price then in effect with respect to such series of Preferred Stock, or because such Option or Convertible Security was issued before the Original Issue Date of such series of Preferred Stock), are revised after Original Issue Date of such series of Preferred Stock as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

 

 

(d)           Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, such Conversion Price shall be readjusted to the Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

(e)           If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price of a series of Preferred Stock provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price of a series of Preferred Stock that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to such Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

 

4.4.4.      Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issue Date applicable to a series of Preferred Stock issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share less than Conversion Price of such Series of Preferred Stock in effect immediately prior to such issue, then the Conversion Price applicable to each share of such series of Preferred Stock shall be reduced, concurrently with such issue, to a price per share (calculated to the nearest one-hundredth of a cent) as follows:

 

(a)           with respect to the Series A Preferred Stock and the Series A-1 Preferred Stock, until the earlier to occur of (i) the receipt by the Corporation of aggregate net proceeds pursuant to any priced debt or equity financing after the Original Issue Date of the Series A-1 Preferred Stock of at least five million dollars ($5,000,000) exclusive of proceeds received in respect of any shares of Series A-1 Preferred Stock issued under the Series A-1 Purchase Agreement, but inclusive of proceeds received in respect of any shares of Series A-2 Preferred Stock issued under the Series A-2 Purchase Agreement and (ii) December 23, 2012 (the “Series A and A-1 Full Ratchet Termination Date”), equal to the consideration per share received or deemed to have been received by the Corporation in such issuance; and

 

(b)           with respect to the Series A-2 Preferred Stock, until the earlier to occur of (i) the receipt by the Corporation of aggregate net proceeds pursuant to any priced debt

 

 

or equity financing after the Original Issue Date of the Series A-2 Preferred Stock of at least five million dollars ($5,000,000) inclusive of proceeds received in respect of any shares of Series A-2 Preferred Stock issued under the Series A-2 Purchase Agreement, and (ii) the second anniversary of the final closing under the Series A-2 Purchase Agreement (the “Series A-2 Full Ratchet Termination Date”), equal to the consideration per share received or deemed to have been received by the Corporation in such issuance; and

 

(c)            (x) after the Series A and A-1 Full Ratchet Termination Date with respect to the Series A Preferred Stock and Series A-1 Preferred Stock and (y) after the Series A- 2 Full Ratchet Termination Date with respect to the Series A-2 Preferred Stock, in accordance with the following formula:

 

CP₂ = CP₁* (A + B) ÷ (A + C).

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(i)            “CP₂” shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of such series of Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock;

 

(ii)           “CP₁” shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of such Series of Preferred Stock in effect immediately prior to such issue of Additional Shares of Common Stock;

 

(iii)          “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock, treating for this purpose as outstanding shares of Common Stock underlying only those Options or Convertible Securities that (x) are outstanding immediately prior to such issue and (y) are vested or otherwise exercisable;

 

(iv)          “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP₁ (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP₁); and

 

(v)           “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

 

4.4.5.      Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

 

(a)           For cash and property, such consideration shall:

 

 

(i)            insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

(ii)           insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors); and

 

(iii)          in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration that covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors).

 

(b)           For Options and Convertible Securities, the consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.43, relating to Options and Convertible Securities, shall be determined by dividing

 

(i)            the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

(ii)           the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

4.4.6.      Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

4.5.         Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time on or after the Original Issue Date of any Series of

 

 

Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date of any series of Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Subsection 4.5 shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

4.6.         Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time on or after the Original Issue Date of any Series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation or in cash or other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of such series of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.

 

4.7.         Adjustment for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.5 or 4.6), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of the Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property that a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of the Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors)) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price of each series of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.

 

4.8.         Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of any series of Preferred Stock pursuant to this Section  4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 30 days thereafter, compute such adjustment or readjustment in accordance with the

 

 

terms hereof and furnish to each holder of the Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of the Preferred Stock (but in any event not later than 15 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Conversion Price of such series of Preferred Stock then in effect, and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property that then would be received upon the conversion of the Preferred Stock.

 

4.9.         Notice of Record Date. In the event:

 

(a)           the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b)           of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

 

(c)           of the voluntary or involuntary dissolution, liquidation or winding- up of the Corporation,

 

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii)  the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.

 

5.            Mandatory Conversion.

 

5.1.         Trigger Events. Upon the initial closing of the Corporation’s first firmly underwritten public offering of its Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission (“SEC”), and declared effective under the Securities Act, in which the Corporation’s Common Stock is listed on a national securities exchange (other than a registration statement relating either to the sale of securities to employees of the Corporation pursuant to its stock option, stock purchase or similar plan or an SEC Rule 145 transaction) covering the offer and sale of Common Stock for the account of the Corporation to the public at a price per share of not less than three times the highest then applicable Conversion

 

 

Price resulting in offering proceeds to the Corporation of a least $25,000,000 net of underwriting discounts and commissions (the time of such closing is referred to herein as the “Mandatory Conversion Time”), (i) all outstanding shares of the Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Price and (ii) such shares may not be reissued by the Corporation.

 

5.2.         Procedural Requirements. All holders of record of shares of the Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of the Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of the Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for the Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of the Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.

 

6.            Redemption.

 

6.1.         Redemption. Shares of the Preferred Stock shall be redeemed by the Corporation out of funds lawfully available therefor at a price equal to the Preferred Liquidation Amount, less all Mandatory Dividend(s) previously distributed with respect to each such share (the “Redemption Price”), in three annual installments commencing not more than 60 days after receipt by the Corporation at any time on or after December 1, 2018, from the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, of written notice requesting redemption of all shares of the Preferred Stock The date of each such installment shall be referred to as a “Redemption Date.”

 

 

On each Redemption Date, the Corporation shall redeem, on a pro rata basis in accordance with the number of shares of the Preferred Stock owned by each holder, that number of outstanding shares of the Preferred Stock determined by dividing (a) the total number of shares of the Preferred Stock outstanding immediately prior to such Redemption Date by (b) the number of remaining Redemption Dates (including fee Redemption Date to which such calculation applies); provided, however, that Excluded Shares (as such term is defined in Subsection 6.2) shall not be redeemed and shall be excluded from the calculations set forth in this sentence. If the Corporation does not have sufficient funds legally available to redeem on any Redemption Date all shares of the Preferred Stock to be redeemed on such Redemption Date, the Corporation shall redeem a pro rata portion of each holder’s redeemable shares of such capital stock out of funds legally available therefor, based on the respective amounts that would otherwise be payable in respect of the shares to be redeemed if the legally available funds were sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally available therefor. No other capital stock of the Corporation may be redeemed or repurchased by the Corporation prior to the redemption of the Preferred Stock without the approval of the holders of at least 60% of the then issued and outstanding shares of Preferred Stock voting as a single class on an as-converted basis. The Corporation shall take all commercially reasonable action to have funds legally available for payment of the Redemption Price.

 

6.2.         Redemption Notice. The Corporation shall send written notice of the mandatory redemption (the “Redemption Notice”) to each holder of record of the Preferred Stock not less than 40 days prior to each Redemption Date. Each Redemption Notice shall state:

 

(a)           the series and number of shares of the Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;

 

(b)           the Redemption Date and the Redemption Price;

 

(c)           the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1); and

 

(d)           that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of the Preferred Stock to be redeemed.

 

If the Corporation receives, on or prior to the 20th day after the date of delivery of the Redemption Notice to a holder of the Preferred Stock, written notice from such holder that such holder elects to be excluded from the redemption provided in this Section 6, then the shares of the Preferred Stock registered on the books of the Corporation in the name of such holder at the time of the Corporation’s receipt of such notice shall thereafter be “Excluded Shares.” Excluded Shares shall not be redeemed or redeemable pursuant to this Section 6, whether on such Redemption Date or thereafter.

 

6.3.         Surrender of Certificates; Payment. On or before the applicable Redemption Date, each holder of shares of the Preferred Stock to be redeemed on such

 

 

Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person or entity whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of the Preferred Stock represented by a certificate are redeemed, a new certificate representing the unredeemed shares of the Preferred Stock shall promptly be issued to such holder.

 

6.4.         Rights Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on the applicable Redemption Date the Redemption Price payable upon redemption of the shares of the Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that the certificates evidencing any of the shares of the Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of the Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of their certificate or certificates therefor.

 

6.5.         Redeemed or Otherwise Acquired Shares. Any shares of the Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of the Preferred Stock following redemption.

 

7.            Waiver. Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of the Preferred Stock, the Series  A-2 Preferred Stock, the Series A-1 Preferred Stock or the Series A Preferred Stock, as the case may be, by the requisite percentage (as set forth in the applicable provision(s) of this Amended and Restated Certificate of Incorporation) of such stockholders of the Corporation that are entitled to a vote upon or consent with respect to any such right, power, preference or other term.

 

8.            Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of the Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

 

9.            No Reissuance of Preferred Stock. No share or shares of any series of the Preferred Stock acquired by the Corporation by reason of purchase, conversion, redemption or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation shall be authorized to issue. This Amended and Restated

 

 

Certificate of Incorporation shall be appropriately amended to effect the corresponding reduction in the Corporation’s capital stock.

 

B.           COMMON STOCK

 

1.            General. The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

 

2.            Voting. The holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of the Preferred Stock that may be required by the terms of this Amended and Restated Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation (voting as a single class) representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote (the Preferred voting on an as if converted to Common Stock basis) and without a separate class vote by the holders of the Common Stock, irrespective of the provisions of Section 242(bX2) of the General Corporation Law.

 

 

 

Exhibit 3.4

 

THIRD CERTIFICATE OF AMENDMENT

 

OF

 

SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

OF

 

COGNITION THERAPEUTICS, INC.

 

Cognition Therapeutics, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, as the same may be amended from time to time (“DGCL”),

 

DOES HEREBY CERTIFY THAT:

 

FIRST:               That the Board of Directors (the “Board”) of the Corporation duly adopted resolutions declaring advisable the following amendment to the Second Amended and Restated Certificate of Incorporation of the Corporation, as amended, that was originally filed with the Secretary of State of the State of Delaware on November 14, 2016, and that this amendment was submitted to the stockholders of the Corporation for approval. The resolution setting forth the proposed amendment is as follows:

 

RESOLVED, that the Second Amended and Restated Certificate of Incorporation of the Corporation, as amended (the “Certificate of Incorporation”), shall be further amended pursuant to the Third Certificate of Amendment to the Certificate of Incorporation in the form attached as Exhibit A hereto.

 

SECOND:          Thereafter, pursuant to a resolution of the Board, the holders of a majority of the outstanding shares of all classes of capital stock of the Corporation, voting together as a single class, and the holders of at least 60% of the outstanding shares of the Corporation’s Series A Convertible Preferred Stock, Series A-1 Convertible Preferred Stock, Series A-2 Convertible Preferred Stock and Series B Convertible Preferred Stock, voting together as a separate class, voted in favor of the amendment.

 

THIRD:              That the foregoing amendment was duly adopted in accordance with the provisions of § 228 and § 242 of the DGCL.

 

[Signature follows on next page]

 

 

IN WITNESS WHEREOF, the undersigned has caused this Third Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation, as amended, to be signed this 28^th day of July, 2020.

 

	COGNITION THERAPEUTICS, INC.
	By:	/s/ Lisa Ricciardi
	Name:	Lisa Ricciardi
	Title:	President and Chief Executive Officer

 

 

Exhibit A

 

FOURTH:          The total number of shares of all classes of stock that the Corporation shall have authority to issue is (i) Fifty-Eight Million (58,000,000) shares of common stock, par value $0.001 par value per share (“Common Stock”), and (ii) Forty-One Million Fifty-Three Thousand Three Hundred Fifty-Eight (41,053,358) shares of preferred stock, $0,001 par value per share.

 

The following is a statement of the designations and the powers, privileges, and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

 

A.            PREFERRED STOCK

 

Three Million Sixty-Seven Thousand Five Hundred Nineteen (3,067,519) shares of the authorized preferred stock of the Corporation are hereby designated as “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”); Three Million Nine Hundred Seventy Thousand Seven Hundred Seventy- Six (3,970,776) shares of the authorized preferred stock of the Corporation are hereby designated as “Series  A-1 Convertible Preferred Stock” (the “Series A-1 Preferred Stock”); Three Million Five Hundred Sixty-Five Thousand Sixty-Three (3,565,063) shares of the authorized preferred stock of the Corporation are hereby designated as “Series A-2 Convertible Preferred Stock” (the “Series A-2 Preferred Stock”); and Thirty Million Four Hundred Fifty Thousand (30,450,000) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series B Convertible Preferred Stock” (the “Series B Preferred Stock”). The Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2 Preferred Stock and the Series B Preferred Stock are sometimes referred to herein collectively as the “Preferred Stock.” Unless otherwise indicated, references to “Sections” or “Subsections” in this Part A of this Article  Fourth refer to sections and subsections of Part A of this Article Fourth.

 

The Preferred Stock shall have the following rights, preferences, powers, privileges, restrictions, qualifications and limitations.

 

1.            Dividends.

 

1.1.            Accruing Dividends. From and after the date of the issuance of each respective share of the Preferred Stock, dividends at the rate of 8% per annum of the applicable Original Issue Price (as defined herein) compounded annually shall accrue on such share of the Preferred Stock (“Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; provided however, (i) that such Accruing Dividends shall be payable only in connection with a liquidation, dissolution or winding up of the Corporation under Section 2 (including, without limitation, in connection with a Deemed Liquidation Event), or a Mandatory Dividend under Section 1.3, and the Corporation shall not otherwise pay such Accruing Dividends and (ii) in the event a Mandatory Dividend is paid under Section 1.3, Accruing Dividends shall thereafter accrue only on the unreturned amount of the Original Issue Price after taking into account the payment of each Mandatory Dividend. As used herein, “Original Issue Price” means $0.69 per share with respect to the Series A Preferred Stock and Series A-1 Preferred Stock, $0.8415 per share with respect to the Series A-2 Preferred Stock, and $0.923 per share with respect to the Series B Preferred Stock (in each case, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). After such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount (as defined below), less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Accruing Dividends; provided that the holders of the Preferred Stock will share in all dividends and distributions

 

 

declared by the Board of Directors of the Corporation and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.

 

1.2.         Common Stock Dividends. The holders of the Preferred Stock shall be entitled to share in dividends payable with respect to the Common Stock as if converted and the Corporation shall not declare, pay or set aside any dividends on shares of Common Stock unless (in addition to obtaining any consents required elsewhere in this Second Amended and Restated Certificate of Incorporation, as amended) each holder of the Preferred Stock then outstanding shall first receive, or simultaneously receive, in each such instance, a dividend on each outstanding share of the Preferred Stock held by such holder as if such share of Preferred Stock had been converted into Common Stock, in an amount at least equal to the product of (a) the dividend payable on a share of Common Stock and (b) the number of shares of Common Stock issuable upon conversion of a share of the Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend.

 

1.3.         Mandatory Dividend(s).

 

(a)            If, prior to such time as the holders of shares of the Preferred Stock receive their full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the Corporation or any subsidiary of the Corporation shall consummate a sale, license or other disposition for value of any or all of the Corporation’s intellectual property, in a single transaction or series of related transactions unrelated to the performance by the Corporation of research and development or other services (as determined in good faith by the Board of Directors of the Corporation, including each of the Preferred Directors) (a “Strategic Event”), at the written election of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, sent to the Corporation at least 15 days prior to the effective date of a Strategic Event, the Corporation shall distribute to the holders of shares of the Preferred Stock up to 35% of the aggregate payments (including, without limitation, all option and/or milestone payments and/or all success fees) received by the Corporation as consideration in such Strategic Event as soon as reasonably practicable following receipt by the Corporation of such payments (“Mandatory Dividend”). Such Mandatory Dividend shall be distributed to the holders of the Preferred Stock on a pari passu and an as-converted to Common Stock basis until the aggregate amount of all Mandatory Dividends paid to the holders of the Preferred Stock equals the full Preferred Liquidation Amount payable on the Preferred Stock held by such holders.

 

(b)            The Corporation shall give each holder of record of the Preferred Stock written notice of an impending Strategic Event within ten days after the Board of Directors of the Corporation approves such Strategic Event. Such written notice shall describe the material terms and conditions of the impending Strategic Event and the provisions of this Section 1.3. and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.

 

(c)            After such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount for their respective shares of the Preferred Stock, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Mandatory Dividends; provided that the holders of the Preferred Stock will share in all dividends and distributions declared by the Board of Directors of the

 

 

Corporation and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.

 

1.4.         Order of Dividend Payment. No dividends or other distributions shall be declared and/or paid on any class or series of capital stock, other than the Preferred Stock if any Mandatory Dividends have accrued and are unpaid or if any other dividends are declared and unpaid on the Preferred Stock.

 

2.            Liquidation Preference.

 

2.1.         Preferred Liquidation Amount. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, including, without limitation, any Deemed Liquidation Event (as defined below), each holder of shares of the Preferred Stock then outstanding shall be entitled to receive out of the assets legally available for distribution to its stockholders, whether from capital surplus, earnings or otherwise, on a pari passu and an as converted to Common Stock basis and prior and in preference to any distribution to the holders of any other series or class of the capital stock of the Corporation that is junior to the Preferred Stock, including, without limitation, the Common Stock, by reason of their ownership thereof, an amount per share of Preferred Stock then held by such holder equal to the Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of Preferred Stock. If upon the occurrence of such event, the assets and funds of the Corporation shall be insufficient to permit the payment to such holders of Preferred Stock of the full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of Preferred Stock, required by the preceding sentence, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Preferred Stock in proportion to the Preferred Liquidation Amount each such holder is otherwise entitled to receive on each such share, less any and all Mandatory Dividend(s) previously distributed with respect to each such share. “Preferred Liquidation Amount” means, with respect to a share of Preferred Stock, the applicable Original Issue Price for such share of Preferred Stock plus all Accruing Dividends on such share of Preferred Stock (plus any other dividends or distributions declared but not paid on such share of Preferred Stock).

 

2.2.         Distribution of Remaining Assets. After payment has been made to the holders of the Preferred Stock of their full Preferred Liquidation Amount required by Section 2.1 less any and all Mandatory Dividend(s) previously distributed with respect to each such share, the remaining assets or surplus funds of the Corporation available for distribution to stockholders shall be distributed among the holders of the Common Stock and the holders of the Preferred Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all shares of the Preferred Stock into Common Stock).

 

2.3.         Deemed Liquidation Events. At the option of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, the occurrence of each of the following events shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section 2 (each, a “Deemed Liquidation Event”):

 

(a)            either a transaction or series of related transactions in which any individual, corporation, partnership, trust, limited liability company, association or other entity (each, a “Person”), or group of related Persons, acquires from the stockholders of the Corporation, shares representing at least a majority of the outstanding voting power of the Corporation;

 

(b)            a sale and/or issuance (or series of sales and/or issuances) by the Corporation of securities of the Corporation representing, after the issuance of such securities, more than

 

 

fifty percent (50%) of all voting securities of the Corporation to persons other than stockholders of the Corporation as of immediately prior to such sale(s) and/or issuance(s);

 

(c)           a sale, conveyance or disposition (in one or a series of related transactions) by the Corporation or any subsidiary of the Corporation of all or substantially all of the assets of the Corporation and its subsidiaries taken as a whole;

 

(d)           a grant of an exclusive license or other transfer (in one or a series of related transactions) by the Corporation and/or any subsidiary of the Corporation of a material amount of the technology or intellectual property of the Corporation and its subsidiaries taken as a whole; or

 

(e)           a consolidation or merger of the Corporation with or into any other entity or entities or a reorganization of the Corporation or similar transactions, provided, however, that a consolidation, merger, reorganization or similar transaction involving the Corporation shall not constitute a Deemed Liquidation Event if following completion of the transaction, the holders of shares of the Corporation immediately prior to the transaction own shares that represent a majority of the voting power of the surviving corporation.

 

2.4.         Amount Paid Deemed Paid or Distributed. Whenever the distribution provided for in Subsection 1.3 or in this Section 2 shall be payable in any assets other than cash, the value of the assets to be distributed shall be the fair market value thereof, determined as follows:

 

(a)           Freely traded securities:

 

(i)           If traded on a securities exchange, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;

 

(ii)          If actively traded over-the-counter, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three days prior to the closing; and

 

(iii)         If there is no active public market, the value shall be the fair market value thereof, as so determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors).

 

(b)           The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in Subsection 2.4(a) to reflect the approximate fair market value thereof.

 

(c)           In the event the requirements of this Section 2 are not complied with, the Corporation shall forthwith either:

 

(i)           cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or

 

 

(ii)          cancel such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Subsection 2.4(d).

 

(d)          The Corporation shall give each holder of record of the Preferred Stock written notice of such impending transaction within ten days after the Board of Directors of the Corporation approves such transaction or within ten days after the commencement of any involuntary proceeding, whichever is earlier. Such written notice shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.

 

3.            Voting.

 

3.1.          General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of the Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of the Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Second Amended and Restated Certificate of Incorporation, as amended, the holders of the Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted to Common Stock basis.

 

3.2.         Election of Directors. For as long as there are any shares of the Preferred Stock outstanding, the holders of record of a majority of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect three directors of the Corporation (the “Preferred Directors”). The holders of record of a majority of the then outstanding shares of Common Stock, voting together as a single class, shall be entitled to elect one director of the Corporation. If the holders of shares of the Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to the first two sentences of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Preferred Stock or Common Stock, as the case may be, elect an individual to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect an individual to fill such directorship. The holders of a majority of the then outstanding shares of Common Stock and/or the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect all remaining members of the Board of Directors of the Corporation. Any director elected as provided in this Subsection 3.2 may be removed without cause, and any vacancy caused by the resignation, death or removal of such director may be filled, by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the then outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.

 

 

3.3.            Preferred Stock Protective Provisions. At any time when shares of the Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Second Amended and Restated Certificate of Incorporation, as amended) the written consent or affirmative vote of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, pursuant to consent given in writing or by vote at a meeting:

 

(a)           liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event or any recapitalization or reorganization of the Corporation or other transaction in which control of the Corporation is transferred, or sell, transfer, license or encumber the Corporation’s technology or intellectual property, or consent to any of the foregoing, other than licenses of the Corporation’s technology or intellectual property in the ordinary course of business;

 

(b)           amend, alter or repeal any provision of this Second Amended and Restated Certificate of Incorporation of the Corporation, as amended, including, without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;

 

(c)           amend, alter or repeal any provision of the By-Laws of the Corporation, including, without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;

 

(d)           increase or decrease the authorized number of shares of the Preferred Stock or Common Stock;

 

(e)           reclassify, alter or amend any existing security of the Corporation in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation or the payment of dividends, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege (to the extent such rights preferences or privileges are not then currently in effect);

 

(f)            purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than repurchases of stock pursuant to stock restriction agreements or vesting agreements approved by the Board of Directors of the Corporation (including each of the Preferred Directors) that grant to the Corporation a right of repurchase upon termination of the service or employment of a consultant, director or employee;

 

(g)           borrow or guaranty or otherwise authorize any amount of indebtedness, other than (i) inventory financing in the ordinary course of business; and (ii) any indebtedness in an amount of up to $250,000 in the aggregate that is approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(h)           increase or decrease the authorized number of directors of the Board of Directors of the Corporation from nine members;

 

(i)            effect a change in the nature of the Corporation’s business from the discovery and development of small molecule therapeutics targeting the toxic proteins that cause the cognitive decline associated with Alzheimer’s disease and other neurodegenerative diseases;

 

 

(j)            enter into any transaction with any person or entity, including, without limitation, any of its founders, officers, directors or employees other than in the ordinary course of business on an arm’s length basis (as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors));

 

(k)            increase the number of shares of Common Stock reserved for issuance under the Corporation’s Amended and Restated 2017 Equity Incentive Plan, as amended from time to time, or any other equity-based incentive or compensation plan;

 

(l)            make, or permit any subsidiary to make, any loan or advance to any person or entity, including, without limitation, any founder, officer, employee or director of the Corporation or any subsidiary, except (i) advances in the ordinary course of business or (ii) advances up to $50,000 in the aggregate under the terms of an employment or service arrangement approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(m)          hire, terminate, or change the compensation in excess of $100,000 of any of its officers, directors or employees, unless such hiring, termination or compensation is approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(n)           own any stock or other securities of any other corporation, partnership, or other entity, unless approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(o)           guarantee, or permit any subsidiary to guarantee, any indebtedness except for (i) trade accounts of the Corporation or any subsidiary arising in the ordinary course of business, or (ii)  any guarantee approved by the Board of Directors of the Corporation, including each of the Preferred Directors; or

 

(p)           make any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States bank having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States of America, in each case having a maturity not in excess of one year, unless approved by the Board of Directors of the Corporation, including each of the Preferred Directors.

 

4.            Optional Conversion.

 

The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

4.1.          Right to Convert.

 

4.1.1.      Conversion Ratio. Each share of the Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price applicable to such share of Preferred Stock by the Conversion Price (as defined below) applicable to such share of Preferred Stock in effect at the time of conversion. The “Conversion Price” shall initially be equal to $0.69 for the Series A Preferred Stock and Series A-1 Preferred Stock, $0.8415 for the Series A-2 Preferred Stock, and $0.923 for the Series B Preferred Stock. Such initial Conversion Price, and the rate at which shares of the Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

 

 

4.1.2.      Termination of Conversion Rights. The Conversion Rights shall not terminate in connection with a Deemed Liquidation Event.

 

4.2.          Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors). Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of the Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

4.3.          Mechanics of Conversion.

 

4.3.1.      Notice of Conversion. In order for a holder of the Preferred Stock to voluntarily convert shares of the Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of the Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of the Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of the Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and (b) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.

 

4.3.2.      Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all the Preferred Stock then outstanding; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all of the then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Second Amended and Restated Certificate of Incorporation, as amended. Before taking any action that would cause an adjustment reducing the Conversion Price of any series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of the Preferred Stock,

 

 

the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

 

4.3.3.      Effect of Conversion. All shares of the Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except with respect to the right of the holders thereof to receive shares of Common Stock in exchange therefor and to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2. Any shares of the Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.

 

4.3.4.      No Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

 

4.3.5.      Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of the Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of the Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

4.4.         Adjustments to Conversion Price for Diluting Issues.

 

4.4.1.      Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

 

(a)           “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

(b)           “Original Issue Date” shall mean, with respect to the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, and the Series B Preferred Stock, the date on which the first share of such series of Preferred Stock, respectively, was issued.

 

(c)           “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

 

(d)           “Additional Shares of Common Stock” shall mean, with respect to the determination of adjustments to the Conversion Price for each series of Preferred Stock, all shares of Common Stock issued (or, pursuant to Subsection 4.4.3, deemed to be issued) by the Corporation on or after the Original Issue Date of such Series of Preferred Stock, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):

 

(i)           shares of Common Stock, Options or Convertible Securities

 

 

issued upon the conversion of the Preferred Stock or by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsections 4.5, 4.6 or 4.7;

 

(ii)          shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or an arrangement approved by the Board of Directors of the Corporation, including each of the Preferred Directors:

 

(iii)         shares of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of such Option or Convertible Security;

 

(iv)         shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation, including each of the Preferred Directors, that do not exceed an aggregate of 1,000,000 shares of Common Stock;

 

(v)          shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of the Corporation, including each of the Preferred Directors:

 

(vi)         shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation (or the assets of another corporation) by the Corporation whether by merger, reorganization or otherwise, provided, that such issuances are approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(vii)        shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(viii)       shares of Common Stock issued or issuable pursuant to currently outstanding Options granted under the Corporation’s Amended and Restated 2017 Equity Incentive Plan, as amended from time to time, with such amendment as approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(ix)          shares of Common Stock issued or issuable upon the closing of a public offering of the Corporation’s securities pursuant to the Securities Act of 1933, as amended (the “Securities Act”), in which all shares of the Preferred Stock are automatically converted to Common Stock pursuant to Subsection 5.1(a);

 

(x)           shares of Common Stock issued or issuable upon conversion of any shares of the Series B Preferred Stock issued under that certain Series B Stock Purchase Agreement dated as of March 20, 2014, as amended, and under that certain Series B Preferred Stock Purchase Agreement dated as of November 16, 2016, as it may be amended, among the Corporation and the other parties listed therein;

 

(xi)          shares of Common Stock issued or issuable upon exercise of one

 

 

or more Warrant(s) issued by the Corporation to the Alzheimer Drug Development Foundation, Inc. under that certain Agreement to Accept Conditions for Biotechnology Grant Funding dated as of July 6, 2010;

 

(xii)         shares of Common Stock issued upon exercise of Common Stock Purchase Warrants issued by the Corporation under that certain Note and Warrant Purchase Agreement, among the Corporation and the purchasers named therein, dated as of March 11, 2016, as amended;

 

(xiii)        shares of Common Stock issued or issuable upon the conversion, exercise or exchange of all other Options and Convertible Securities outstanding as of November 16, 2016; and

 

(xiv)        shares of Series B-1 Convertible Preferred Stock issued or issuable upon conversion of one or more Convertible Promissory Notes (and shares of Common Stock issued upon conversion of such shares of Series B-1 Convertible Preferred Stock) issued by the Corporation under (a) that certain Note Purchase Agreement, among the Corporation and the purchasers named therein, dated as of March 8, 2018, as amended, and (b) that certain Note Purchase Agreement, among the Corporation and the purchasers named therein, dated as of November 15, 2018, as amended.

 

4.4.2.      No Adjustment of Conversion Price. No adjustment in the Conversion Price applicable to a share of Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock unless the consideration per share (determined pursuant to Subsection 4.4.5 for an Additional Share of Common Stock issued or deemed to be issued by the Corporation) is less than the Conversion Price for such share of Preferred Stock in effect on the date of, and immediately prior to, the issue of such Additional Shares of Common Stock.

 

4.4.3.      Deemed Issue of Additional Shares of Common Stock.

 

(a)           If the Corporation at any time or from time to time after the Original Issue Date applicable to a series of Preferred Stock shall issue any Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of the issuance of such Convertible Security or Option or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

(b)           If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have been obtained had such revised terms been in effect upon the original date of issuance of such Option

 

 

or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this Subsection 4.4.3(b) shall have the effect of increasing the Conversion Price of any series of Preferred Stock to an amount that exceeds the lower of (A) such Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (B) such Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

(c)           If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than such Conversion Price then in effect with respect to such series of Preferred Stock, or because such Option or Convertible Security was issued before the Original Issue Date of such series of Preferred Stock), are revised after Original Issue Date of such series of Preferred Stock as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

 

(d)           Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, such Conversion Price shall be readjusted to the Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

(e)           If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price of a series of Preferred Stock provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price of a series of Preferred Stock that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to such Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

 

4.4.4.      Adjustment of Conversion Price upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issue Date applicable

 

 

to a series of Preferred Stock issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share less than Conversion Price of such series of Preferred Stock in effect immediately prior to such issue, then the Conversion Price applicable to each share of such series of Preferred Stock shall be reduced, concurrently with such issue, to a price per share (calculated to the nearest one-hundredth of a cent) in accordance with the following formula:

 

CP₂ = CP₁*(A + B) ÷ (A + C).

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(i)           “CP₂” shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of such series of Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock;

 

(ii)           “CP₁” shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of such series of Preferred Stock in effect immediately prior to such issue of Additional Shares of Common Stock;

 

(iii)          “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock, treating for this purpose as outstanding shares of Common Stock underlying only those Options or Convertible Securities that (x) are outstanding immediately prior to such issue and (y) are vested or otherwise exercisable;

 

(iv)         “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP₁ (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP₁); and

 

(v)          “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

 

4.4.5.      Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

 

(a)           For cash and property, such consideration shall:

 

(i)           insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

(ii)          insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors); and

 

(iii)         in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration that covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors).

 

 

(b)           For Options and Convertible Securities, the consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing

 

(i)           the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration.) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

(ii)          the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

4.4.6.      Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

4.5.          Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time on or after the Original Issue Date of any series of Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date of any series of Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Subsection 4.5 shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

4.6.          Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time on or after the Original Issue Date of any series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation or in cash or other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of such series of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.

 

 

4.7.          Adjustment for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.5 or 4.6), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of the Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property that a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of the Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors)) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price of each series of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.

 

4.8.          Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of any series of Preferred Stock pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 30 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of the Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of the Preferred Stock (but in any event not later than 15 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Conversion Price of such series of Preferred Stock then in effect, and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property that then would be received upon the conversion of the Preferred Stock.

 

4.9.          Notice of Record Date. In the event:

 

(a)           the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b)           of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

 

(c)           of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on. which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities)

 

 

for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least ten days prior to the record date or effective date for the event specified in such notice.

 

5.            Mandatory Conversion.

 

5.1.          Trigger Events. Upon the initial closing of the Corporation’s first firmly underwritten public offering of its Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission (“SEC”), and declared effective under the Securities Act, in which the Corporation’s Common Stock is listed on a national securities exchange (other than a registration statement relating either to the sale of securities to employees of the Corporation pursuant to its stock option, stock purchase or similar plan or an SEC Rule 145 transaction) covering the offer and sale of Common Stock for the account of the Corporation to the public at a price per share of not less than three times the highest then applicable Conversion Price resulting in offering proceeds to the Corporation of a least $30,000,000 net of underwriting discounts and commissions (the time of such closing is referred to herein as the “Mandatory Conversion Time”), (i) all outstanding shares of the Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Price and (ii)  such shares may not be reissued by the Corporation.

 

5.2.          Procedural Requirements. All holders of record of shares of the Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of the Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of the Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for the Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of the Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.

 

6.            Waiver . Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of the Preferred Stock, the Series B Preferred Stock, the Series A-2 Preferred Stock, the Series A-1 Preferred Stock or the Series A Preferred Stock, as the case may be, by the requisite percentage (as set forth in the applicable provision(s) of this Second Amended and

 

 

Restated Certificate of Incorporation, as amended) of such stockholders of the Corporation that are entitled to a vote upon or consent with respect to any such right, power, preference or other term.

 

7.            Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of the Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

 

8.            No Reissuance of Preferred Stock. No share or shares of any series of the Preferred Stock acquired by the Corporation by reason of purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation shall be authorized to issue. This Second Amended and Restated Certificate of Incorporation, as amended, shall be appropriately amended to effect the corresponding reduction in the Corporation’s capital stock.

 

B.            COMMON STOCK

 

1.            General. The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

 

2.            Voting. The holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of the Preferred Stock that may be required by the terms of this Second Amended and Restated Certificate of Incorporation, as amended) the affirmative vote of the holders of shares of capital stock of the Corporation (voting as a single class) representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote (the Preferred Stock voting on an as if converted to Common Stock basis) and without a separate class vote by the holders of the Common Stock, irrespective of the provisions of Section 242(b)(2)  of the General Corporation Law.

 

 

Exhibit 3.5

 

FOURTH CERTIFICATE OF AMENDMENT

 

OF

 

SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

OF

 

COGNITION THERAPEUTICS, INC.

 

Cognition Therapeutics, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, as the same may be amended from time to time (“DGCL”),

 

DOES HEREBY CERTIFY THAT:

 

FIRST:          That the Board of Directors (the “Board”) of the Corporation duly adopted resolutions declaring advisable the following amendment to the Second Amended and Restated Certificate of Incorporation of the Corporation, as amended, that was originally filed with the Secretary of State of the State of Delaware on November 14, 2016, and that this amendment was submitted to the stockholders of the Corporation for approval. The resolution setting forth the proposed amendment is as follows:

 

RESOLVED, that the Second Amended and Restated Certificate of Incorporation of the Corporation, as amended (the “Certificate of Incorporation”), shall be further amended pursuant to the Fourth Certificate of Amendment to the Certificate of Incorporation in the form attached as Exhibit A hereto.

 

SECOND:     Thereafter, pursuant to a resolution of the Board, the holders of a majority of the outstanding shares of all classes of capital stock of the Corporation, voting together as a single class, and the holders of at least 60% of the outstanding shares of the Corporation’s Series A Convertible Preferred Stock, Series A-1 Convertible Preferred Stock, Series A-2 Convertible Preferred Stock and Series B Convertible Preferred Stock, voting together as a separate class, voted in favor of the amendment.

 

THIRD:         That the foregoing amendment was duly adopted in accordance with the provisions of § 228 and § 242 of the DGCL.

 

[Signature follows on next page]

 

 

IN WITNESS WHEREOF, the undersigned has caused this Fourth Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation, as amended, to be signed this 27 day of April, 2021.

 

	COGNITION THERAPEUTICS, INC.
	By:	/s/ Lisa Ricciardi
	Name: Lisa Ricciardi
	Title: President and Chief Executive Officer

 

 

Exhibit A

 

FOURTH:         The total number of shares of all classes of stock that the Corporation shall have authority to issue is (i) Seventy Million (70,000,000) shares of common stock, par value $0,001 par value per share (“Common Stock”), and (ii) Fifty-One Million Nine-Hundred Eighty-One Thousand Five Hundred Thirteen (51,981,513) shares of preferred stock, $0,001 par value per share.

 

The following is a statement of the designations and the powers, privileges, and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

 

A.            PREFERRED STOCK

 

Three Million Sixty-Seven Thousand Five Hundred Nineteen (3,067,519) shares of the authorized preferred stock of the Corporation are hereby designated as “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”); Three Million Nine Hundred Seventy Thousand Seven Hundred Seventy- Six (3,970,776) shares of the authorized preferred stock of the Corporation are hereby designated as “Series A-1 Convertible Preferred Stock” (the “Series A-1 Preferred Stock”); Three Million Five Hundred Sixty-Five Thousand Sixty-Three (3,565,063) shares of the authorized preferred stock of the Corporation are hereby designated as “Series A-2 Convertible Preferred Stock” (the “Series A-2 Preferred Stock”); Thirty Million Four Hundred Fifty Thousand (30,450,000) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series B Convertible Preferred Stock” (the “Series B Preferred Stock”); and Ten Million Nine Hundred Twenty-Eight Thousand One Hundred Fifty-Five (10,928,155) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series B-1 Convertible Preferred Stock” (the “Series B-1 Preferred Stock”). The Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series B Preferred Stock, and the Series B- 1 Preferred Stock are sometimes referred to herein collectively as the “Preferred Stock.” Unless otherwise indicated, references to “Sections” or “Subsections” in this Part A of this Article Fourth refer to sections and subsections of Part A of this Article Fourth.

 

The Preferred Stock shall have the following rights, preferences, powers, privileges, restrictions, qualifications and limitations.

 

1.            Dividends.

 

1.1.            Accruing Dividends. From and after the date of the issuance of each respective share of the Preferred Stock, dividends at the rate of 8% per annum of the applicable Original Issue Price (as defined herein) compounded annually shall accrue on such share of the Preferred Stock (“Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; provided however, (i) that such Accruing Dividends shall be payable only in connection with a liquidation, dissolution or winding up of the Corporation under Section 2 (including, without limitation, in connection with a Deemed Liquidation Event), or a Mandatory Dividend under Section 1.3, and the Corporation shall not otherwise pay such Accruing Dividends and (ii) in the event a Mandatory Dividend is paid under Section 1.3, Accruing Dividends shall thereafter accrue only on the unreturned amount of the Original Issue Price after taking into account the payment of each Mandatory Dividend. As used herein, “Original Issue Price” means $0.69 per share with respect to the Series A Preferred Stock and Series A-1 Preferred Stock, $0.8415 per share with respect to the Series A-2 Preferred Stock, $0,923 per share with respect to the Series B Preferred Stock, and $1,385 per share with respect to the Series B-1 Preferred Stock (in each case, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). After such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount (as defined below), less any and all Mandatory Dividend(s) 

 

 

previously distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Accruing Dividends; provided that the holders of the Preferred Stock will share in all dividends and distributions declared by the Board of Directors of the Corporation and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.

 

1.2.          Common Stock Dividends. The holders of the Preferred Stock shall be entitled to share in dividends payable with respect to the Common Stock as if converted and the Corporation shall not declare, pay or set aside any dividends on shares of Common Stock unless (in addition to obtaining any consents required elsewhere in this Second Amended and Restated Certificate of Incorporation, as amended) each holder of the Preferred Stock then outstanding shall first receive, or simultaneously receive, in each such instance, a dividend on each outstanding share of the Preferred Stock held by such holder as if such share of Preferred Stock had been converted into Common Stock, in an amount at least equal to the product of (a) the dividend payable on a share of Common Stock and (b) the number of shares of Common Stock issuable upon conversion of a share of the Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend.

 

1.3.          Mandatory Dividend(s).

 

(a)            If, prior to such time as the holders of shares of the Preferred Stock receive their full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the Corporation or any subsidiary of the Corporation shall consummate a sale, license or other disposition for value of any or all of the Corporation’s intellectual property, in a single transaction or series of related transactions unrelated to the performance by the Corporation of research and development or other services (as determined in good faith by the Board of Directors of the Corporation, including each of the Preferred Directors) (a “Strategic Event”), at the written election of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, sent to the Corporation at least 15 days prior to the effective date of a Strategic Event, the Corporation shall distribute to the holders of shares of the Preferred Stock up to 35% of the aggregate payments (including, without limitation, all option and/or milestone payments and/or all success fees) received by the Corporation as consideration in such Strategic Event as soon as reasonably practicable following receipt by the Corporation of such payments (“Mandatory Dividend”). Such Mandatory Dividend shall be distributed to the holders of the Preferred Stock on a pari passu and an as-converted to Common Stock basis until the aggregate amount of all Mandatory Dividends paid to the holders of the Preferred Stock equals the full Preferred Liquidation Amount payable on the Preferred Stock held by such holders.

 

(b)            The Corporation shall give each holder of record of the Preferred Stock written notice of an impending Strategic Event within ten days after the Board of Directors of the Corporation approves such Strategic Event. Such written notice shall describe the material terms and conditions of the impending Strategic Event and the provisions of this Section 1.3, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.

 

(c)            After such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount for their respective shares of the Preferred Stock, less any and all Mandatory

 

 

Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Mandatory Dividends; provided that the holders of the Preferred Stock will share in all dividends and distributions declared by the Board of Directors of the Corporation and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.

 

1.4.            Order of Dividend Payment. No dividends or other distributions shall be declared and/or paid on any class or series of capital stock, other than the Preferred Stock if any Mandatory Dividends have accrued and are unpaid or if any other dividends are declared and unpaid on the Preferred Stock.

 

2.            Liquidation Preference.

 

2.1.            Preferred Liquidation Amount. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, including, without limitation, any Deemed Liquidation Event (as defined below), each holder of shares of the Preferred Stock then outstanding shall be entitled to receive out of the assets legally available for distribution to its stockholders, whether from capital surplus, earnings or otherwise, on a pari passu and an as converted to Common Stock basis and prior and in preference to any distribution to the holders of any other series or class of the capital stock of the Corporation that is junior to the Preferred Stock, including, without limitation, the Common Stock, by reason of their ownership thereof, an amount per share of Preferred Stock then held by such holder equal to the Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of Preferred Stock. If upon the occurrence of such event, the assets and funds of the Corporation shall be insufficient to permit the payment to such holders of Preferred Stock of the full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of Preferred Stock, required by the preceding sentence, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Preferred Stock in proportion to the Preferred Liquidation Amount each such holder is otherwise entitled to receive on each such share, less any and all Mandatory Dividend(s) previously distributed with respect to each such share. “Preferred Liquidation Amount” means, with respect to a share of Preferred Stock, the applicable Original Issue Price for such share of Preferred Stock plus all Accruing Dividends on such share of Preferred Stock (plus any other dividends or distributions declared but not paid on such share of Preferred Stock).

 

2.2.            Distribution of Remaining Assets. After payment has been made to the holders of the Preferred Stock of their full Preferred Liquidation Amount required by Section 2.1, less any and all Mandatory Dividend(s) previously distributed with respect to each such share, the remaining assets or surplus funds of the Corporation available for distribution to stockholders shall be distributed among the holders of the Common Stock and the holders of the Preferred Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all shares of the Preferred Stock into Common Stock).

 

2.3.            Deemed Liquidation Events. At the option of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, the occurrence of each of the following events shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section 2 (each, a “Deemed Liquidation Event”):

 

(a)            either a transaction or series of related transactions in which any individual, corporation, partnership, trust, limited liability company, association or other entity (each, a “Person”), or group of related Persons, acquires from the stockholders of the Corporation, shares representing at least a majority of the outstanding voting power of the Corporation;

 

 

(b)            a sale and/or issuance (or series of sales and/or issuances) by the Corporation of securities of the Corporation representing, after the issuance of such securities, more than fifty percent (50%) of all voting securities of the Corporation to persons other than stockholders of the Corporation as of immediately prior to such sale(s) and/or issuance(s);

 

(c)            a sale, conveyance or disposition (in one or a series of related transactions) by the Corporation or any subsidiary of the Corporation of all or substantially all of the assets of the Corporation and its subsidiaries taken as a whole;

 

(d)            a grant of an exclusive license or other transfer (in one or a series of related transactions) by the Corporation and/or any subsidiary of the Corporation of a material amount of the technology or intellectual property of the Corporation and its subsidiaries taken as a whole; or

 

(e)            a consolidation or merger of the Corporation with or into any other entity or entities or a reorganization of the Corporation or similar transactions, provided, however, that a consolidation, merger, reorganization or similar transaction involving the Corporation shall not constitute a Deemed Liquidation Event if following completion of the transaction, the holders of shares of the Corporation immediately prior to the transaction own shares that represent a majority of the voting power of the surviving corporation.

 

2.4.            Amount Paid Deemed Paid or Distributed. Whenever the distribution provided for in Subsection 1.3 or in this Section 2 shall be payable in any assets other than cash, the value of the assets to be distributed shall be the fair market value thereof, determined as follows:

 

(a)            Freely traded securities:

 

(i)            If traded on a securities exchange, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;

 

(ii)            If actively traded over-the-counter, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the 30-day period ending three days prior to the closing; and

 

(iii)            If there is no active public market, the value shall be the fair market value thereof, as so determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors).

 

(b)            The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in Subsection 2.4(a) to reflect the approximate fair market value thereof.

 

(c)            In the event the requirements of this Section 2 are not complied with, the Corporation shall forthwith either:

 

 

(i)            cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or

 

(ii)          cancel such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Subsection 2.4(d).

 

(d)            The Corporation shall give each holder of record of the Preferred Stock written notice of such impending transaction within ten days after the Board of Directors of the Corporation approves such transaction or within ten days after the commencement of any involuntary proceeding, whichever is earlier. Such written notice shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.

 

3.            Voting.

 

3.1.         General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of the Preferred Stock shall be entitled
to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of the Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Second Amended and Restated Certificate of Incorporation, as amended, the holders of the Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted to Common Stock basis.

 

3.2.            Election of Directors. For as long as there are any shares of the Preferred Stock outstanding, the holders of record of a majority of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect three directors of the Corporation (the “Preferred Directors”). The holders of record of a majority of the then outstanding shares of Common Stock, voting together as a single class, shall be entitled to elect one director of the Corporation. If the holders of shares of the Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to the first two sentences of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Preferred Stock or Common Stock, as the case may be, elect an individual to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect an individual to fill such directorship. The holders of a majority of the then outstanding shares of Common Stock and/or the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect all remaining members of the Board of Directors of the Corporation. Any director elected as provided in this Subsection 3.2 may be removed without cause, and any vacancy caused by the resignation, death or removal of such director may be filled, by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing a director,

 

 

the presence in person or by proxy of the holders of a majority of the then outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.

 

3.3.            Preferred Stock Protective Provisions. At any time when shares of the Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Second Amended and Restated Certificate of Incorporation, as amended) the written consent or affirmative vote of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, pursuant to consent given in writing or by vote at a meeting:

 

(a)            liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event or any recapitalization or reorganization of the Corporation or other transaction in which control of the Corporation is transferred, or sell, transfer, license or encumber the Corporation’s technology or intellectual property, or consent to any of the foregoing, other than licenses of the Corporation’s technology or intellectual property in the ordinary course of business;

 

(b)            amend, alter or repeal any provision of this Second Amended and Restated Certificate of Incorporation of the Corporation, as amended, including, without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;

 

(c)            amend, alter or repeal any provision of the By-Laws of the Corporation, including, without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;

 

(d)            increase or decrease the authorized number of shares of the Preferred Stock or Common Stock;

 

(e)            reclassify, alter or amend any existing security of the Corporation in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation or the payment of dividends, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege (to the extent such rights preferences or privileges are not then currently in effect);

 

(f)            purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than repurchases of stock pursuant to stock restriction agreements or vesting agreements approved by the Board of Directors of the Corporation (including each of the Preferred Directors) that grant to the Corporation a right of repurchase upon termination of the service or employment of a consultant, director or employee;

 

(g)            borrow or guaranty or otherwise authorize any amount of indebtedness, other than (i) inventory financing in the ordinary course of business; and (ii) any indebtedness in an amount of up to $250,000 in the aggregate that is approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(h)            increase or decrease the authorized number of directors of the Board of Directors of the Corporation from nine members;

 

 

(i)            effect a change in the nature of the Corporation’s business from the discovery and development of small molecule therapeutics targeting the toxic proteins that cause the cognitive decline associated with Alzheimer’s disease and other neurodegenerative diseases;

 

(j)            enter into any transaction with any person or entity, including, without limitation, any of its founders, officers, directors or employees other than in the ordinary course of business on an arm’s length basis (as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors));

 

(k)            increase the number of shares of Common Stock reserved for issuance under the Corporation’s Amended and Restated 2017 Equity Incentive Plan, as amended from time to time, or any other equity-based incentive or compensation plan;

 

(l)            make, or permit any subsidiary to make, any loan or advance to any person or entity, including, without limitation, any founder, officer, employee or director of the Corporation or any subsidiary, except (i) advances in the ordinary course of business or (ii) advances up to $50,000 in the aggregate under the terms of an employment or service arrangement approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(m)            hire, terminate, or change the compensation in excess of $175,000 of any of its officers, directors or employees, unless such hiring, termination or compensation is approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(n)            own any stock or other securities of any other corporation, partnership, or other entity, unless approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(o)            guarantee, or permit any subsidiary to guarantee, any indebtedness except for (i) trade accounts of the Corporation or any subsidiary arising in the ordinary course of business, or (ii) any guarantee approved by the Board of Directors of the Corporation, including each of the Preferred Directors; or

 

(p)            make any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States bank having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States of America, in each case having a maturity not in excess of one year, unless approved by the Board of Directors of the Corporation, including each of the Preferred Directors.

 

4.            Optional Conversion.

 

The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

4.1.            Right to Convert.

 

4.1.1.            Conversion Ratio. Each share of the Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price applicable to such share of Preferred Stock by the Conversion Price (as defined below) applicable to such share of Preferred Stock in effect at the time of conversion. The “Conversion Price” shall initially be equal to $0.69 for the Series A Preferred Stock and

 

 

Series A-1 Preferred Stock, $0.8415 for the Series A-2 Preferred Stock, $0.923 for the Series B Preferred Stock, and $1.385 for the Series B-1 Preferred Stock. Such initial Conversion Price, and the rate at which shares of the Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

 

4.1.2.            Termination of Conversion Rights. The Conversion Rights shall not terminate in connection with a Deemed Liquidation Event.

 

4.2.            Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors). Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of the Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

4.3.            Mechanics of Conversion.

 

4.3.1.            Notice of Conversion. In order for a holder of the Preferred Stock to voluntarily convert shares of the Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of the Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of the Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of the Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and (b) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.

 

4.3.2.            Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all the Preferred Stock then outstanding; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all of the then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued

 

 

shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Second Amended and Restated Certificate of Incorporation, as amended. Before taking any action that would cause an adjustment reducing the Conversion Price of any series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of the Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

 

4.3.3.            Effect of Conversion. All shares of the Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except with respect to the right of the holders thereof to receive shares of Common Stock in exchange therefor and to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2. Any shares of the Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.

 

4.3.4.            No Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

 

4.3.5.            Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of the Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of the Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

4.4.            Adjustments to Conversion Price for Diluting Issues.

 

4.4.1.            Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

 

(a)            “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

(b)            “Original Issue Date” shall mean, with respect to the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series B Preferred Stock, and the Series B-1 Preferred Stock, the date on which the first share of such series of Preferred Stock, respectively, was issued.

 

(c)            “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

 

(d)            “Additional Shares of Common Stock” shall mean, with respect to the determination of adjustments to the Conversion Price for each series of Preferred Stock, all shares of

 

 

Common Stock issued (or, pursuant to Subsection 4.4.3, deemed to be issued) by the Corporation on or after the Original Issue Date of such Series of Preferred Stock, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):

 

(i)            shares of Common Stock, Options or Convertible Securities issued upon the conversion of the Preferred Stock or by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsections 4.5, 4.6 or 4.7;

 

(ii)            shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or an arrangement approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(iii)            shares of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of such Option or Convertible Security;

 

(iv)            shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation, including each of the Preferred Directors, that do not exceed an aggregate of 1,000,000 shares of Common Stock;

 

(v)            shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(vi)            shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation (or the assets of another corporation) by the Corporation whether by merger, reorganization or otherwise, provided, that such issuances are approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(vii)            shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(viii)            shares of Common Stock issued or issuable pursuant to currently outstanding Options granted under the Corporation’s Amended and Restated 2017 Equity Incentive Plan, as amended from time to time, with such amendment as approved by the Board of Directors of the Corporation, including each of the Preferred Directors;

 

(ix)            shares of Common Stock issued or issuable upon the closing of a public offering of the Corporation’s securities pursuant to the Securities Act of 1933, as amended (the “Securities Act”), in which all shares of the Preferred Stock are automatically converted to Common Stock pursuant to Subsection 5.1(a);

 

(x)            shares of Common Stock issued or issuable upon conversion of

 

 

any shares of the Series B Preferred Stock issued under that certain Series B Stock Purchase Agreement dated as of March 20, 2014, as amended, and under that certain Series B Preferred Stock Purchase Agreement dated as of November 16, 2016, as it may be amended, among the Corporation and the other parties listed therein;

 

(xi)            shares of Common Stock issued or issuable upon exercise of one or more Warrant(s) issued by the Corporation to the Alzheimer Drug Development Foundation, Inc. under that certain Agreement to Accept Conditions for Biotechnology Grant Funding dated as of July 6, 2010;

 

(xii)            shares of Common Stock issued upon exercise of Common Stock Purchase Warrants issued by the Corporation under that certain Note and Warrant Purchase Agreement, among the Corporation and the purchasers named therein, dated as of March 11, 2016, as amended;

 

(xiii)            shares of Common Stock issued or issuable upon the conversion, exercise or exchange of all other Options and Convertible Securities outstanding as of November 16, 2016; and

 

(xiv)            shares of Series B-1 Preferred Stock issued or issuable upon conversion of one or more Convertible Promissory Notes (and shares of Common Stock issued upon conversion of such shares of Series B-1 Preferred Stock) issued by the Corporation under (a) that certain Note Purchase Agreement, among the Corporation and the purchasers named therein, dated as of March 8, 2018, as amended, and (b) that certain Note Purchase Agreement, among the Corporation and the purchasers named therein, dated as of November 15, 2018, as amended.

 

4.4.2.            No Adjustment of Conversion Price. No adjustment in the Conversion Price applicable to a share of Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock unless the consideration per share (determined pursuant to Subsection 4.4.5 for an Additional Share of Common Stock issued or deemed to be issued by the Corporation) is less than the Conversion Price for such share of Preferred Stock in effect on the date of, and immediately prior to, the issue of such Additional Shares of Common Stock.

 

4.4.3.            Deemed Issue of Additional Shares of Common Stock.

 

(a)            If the Corporation at any time or from time to time after the Original Issue Date applicable to a series of Preferred Stock shall issue any Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of the issuance of such Convertible Security or Option or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

(b)            If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4. are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease in the number of shares of Common Stock issuable upon the exercise,

 

 

conversion and/or exchange of any such Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have been obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this Subsection 4.4.3(b) shall have the effect of increasing the Conversion Price of any series of Preferred Stock to an amount that exceeds the lower of (A) such Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (B) such Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

(c)            If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than such Conversion Price then in effect with respect to such series of Preferred Stock, or because such Option or Convertible Security was issued before the Original Issue Date of such series of Preferred Stock), are revised after Original Issue Date of such series of Preferred Stock as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

 

(d)            Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, such Conversion Price shall be readjusted to the Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

(e)            If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price of a series of Preferred Stock provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price of a series of Preferred Stock that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number

 

 

of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to such Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

 

4.4.4.            Adjustment of Conversion Price upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issue Date applicable to a series of Preferred Stock issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4,3), without consideration or for a consideration per share less than Conversion Price of such series of Preferred Stock in effect immediately prior to such issue, then the Conversion Price applicable to each share of such series of Preferred Stock shall be reduced, concurrently with such issue, to a price per share (calculated to the nearest one-hundredth of a cent) in accordance with the following formula:

 

CP₂ = CP₁* (A+ B) ÷ (A+ C).

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(i)            “CP₂” shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of such series of Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock;

 

(ii)            “CP₁” shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of such series of Preferred Stock in effect immediately prior to such issue of Additional Shares of Common Stock;

 

(iii)            “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock, treating for this purpose as outstanding shares of Common Stock underlying only those Options or Convertible Securities that (x) are outstanding immediately prior to such issue and (y) are vested or otherwise exercisable;

 

(iv)            “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP₁ (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP₁); and

 

(v)            “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

 

4.4.5.      Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

 

(a)            For cash and property, such consideration shall:

 

(i)            insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

(ii)            insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors); and

 

 

(iii)            in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration that covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors).

 

(b)            For Options and Convertible Securities, the consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing

 

(i)            the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration.) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

(ii)            the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

4.4.6.       Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

4.5.            Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time on or after the Original Issue Date of any series of Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date of any series of Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Subsection 4.5 shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

4.6.            Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time on or after the Original Issue Date of any series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation or in cash or other

 

 

property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of such series of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.

 

4.7.            Adjustment for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.5 or 4.6), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of the Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property that a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of the Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors)) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price of each series of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.

 

4.8.            Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of any series of Preferred Stock pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 30 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of the Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of the Preferred Stock (but in any event not later than 15 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Conversion Price of such series of Preferred Stock then in effect, and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property that then would be received upon the conversion of the Preferred Stock.

 

4.9.            Notice of Record Date. In the event:

 

(a)            the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b)            of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

 

(c)            of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

 

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on. which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least ten days prior to the record date or effective date for the event specified in such notice.

 

5.            Mandatory Conversion.

 

5.1.            Trigger Events. Upon the initial closing of the Corporation’s first firmly underwritten public offering of its Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission (“SEC”), and declared effective under the Securities Act, in which the Corporation’s Common Stock is listed on a national securities exchange (other than a registration statement relating either to the sale of securities to employees of the Corporation pursuant to its stock option, stock purchase or similar plan or an SEC Rule 145 transaction) covering the offer and sale of Common Stock for the account of the Corporation to the public at a price per share of not less than three times the highest then applicable Conversion Price resulting in offering proceeds to the Corporation of a least $30,000,000 net of underwriting discounts and commissions (the time of such closing is referred to herein as the “Mandatory Conversion Time”), (i) all outstanding shares of the Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Price and (ii) such shares may not be reissued by the Corporation.

 

5.2.            Procedural Requirements. All holders of record of shares of the Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of the Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of the Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for the Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of the Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series,

 

 

and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.

 

6.            Waiver. Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of the Preferred Stock, the Series B-1 Preferred Stock, the Series B Preferred Stock, the Series A-2 Preferred Stock, the Series A-1 Preferred Stock or the Series A Preferred Stock, as the case may be, by the requisite percentage (as set forth in the applicable provision(s) of this Second Amended and Restated Certificate of Incorporation, as amended) of such stockholders of the Corporation that are entitled to a vote upon or consent with respect to any such right, power, preference or other term.

 

7.            Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of the Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

 

8.            No Reissuance of Preferred Stock. No share or shares of any series of the Preferred Stock acquired by the Corporation by reason of purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation shall be authorized to issue. This Second Amended and Restated Certificate of Incorporation, as amended, shall be appropriately amended to effect the corresponding reduction in the Corporation’s capital stock.

 

B.            COMMON STOCK

 

1.            General. The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

 

2.            Voting. The holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of the Preferred Stock that may be required by the terms of this Second Amended and Restated Certificate of Incorporation, as amended) the affirmative vote of the holders of shares of capital stock of the Corporation (voting as a single class) representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote (the Preferred Stock voting on an as if converted to Common Stock basis) and without a separate class vote by the holders of the Common Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

 

 

Exhibit 3.7

 

BY-LAWS
OF
COGNITION THERAPEUTICS, INC.

 

Article 1 OFFICES

 

Section 1.1.      The Corporation shall have and maintain in the State of Delaware a registered office which may, but need not be, the same as its place of business.

 

Section 1.2.      The Corporation may also have offices at such other places as the Board of Directors may from time to time determine or the business of the Corporation may require.

 

Article 2 STOCKHOLDERS

 

Section 2.1.      All meetings of the stockholders shall be held at such place, either within or without the State of Delaware, and at such date and time as may be designated by the Board of Directors and as shall be specified in the notice of the meeting or in a duly executed waiver of notice thereof.

 

Section 2.2.      An annual meeting of the stockholders, for the election of directors and for the transaction of such other business as may properly be brought before the meeting, shall be held at such place, date and time as the Board of Directors may designate and as shall be specified in the notice of the meeting or in a duly executed waiver of notice thereof. In the absence of such a designation by the Board of Directors, the Annual Meeting of Stockholders shall be held during the month of May each year on a date to be determined from year to year by the Board of Directors.

 

Section 2.3.      Special meetings of the stockholders, for any purpose or purposes, may be called by the Board of Directors, the Chief Executive Officer or the President and shall be called by the President or the Secretary at the request in writing of: (i) any director of the Corporation then in office or (ii) stockholders entitled to cast at least a majority of the votes that all stockholders are entitled to cast at the particular meeting. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at all special meetings shall be confined to the purposes stated in the notice thereof.

 

Section 2.4.      Written notice of any annual or special meeting of stockholders shall be mailed to each stockholder entitled to vote thereat at such stockholder’s address as it appears on the records of the Corporation, not fewer than ten nor more than sixty days before the date of such meeting. Such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to each stockholder at such stockholder’s address as it last appears on the records of the Corporation. Such notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, shall state the purpose or purposes for which the meeting is called.

 

Section 2.5.      At any meeting of the stockholders, the holders of a majority of all of the issued and outstanding shares of stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, except to the extent that the presence of a

 

 

larger number of stockholders may be required by law, by the Certificate of Incorporation of the Corporation or by these By-laws. If a quorum shall fail to be present or represented at any meeting, the chairman of the meeting or the holders of a majority of the shares of the stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date or time. When a meeting is so adjourned, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted that might have been transacted at the original meeting.

 

Section 2.6.      At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing or any complete and reliable copy, facsimile telecommunication or other reproduction of the writing executed by such stockholder or by an authorized officer, director, employee or agent of such stockholder, to the extent permitted by law, and submitted to the Secretary at or before such meeting, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Except as otherwise provided herein, in the Certificate of Incorporation or as required by law, each stockholder shall have one vote for each share of stock entitled to vote that is registered in his or her name on the record date for the meeting. Neither the election of directors nor any other voting need be by written ballot, except upon demand therefor by the Board of Directors or the officer of the Corporation presiding at the meeting of stockholders where the vote is to be taken. When a quorum exists at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one for which, by express provision of law or of the Certificate of Incorporation of the Corporation or of these By-laws, a different vote is required.

 

Section 2.7.      At least ten days before every meeting of stockholders, the officer who has charge of the stock ledger of the Corporation shall prepare a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder of the Corporation who is present. The stock ledger of the Corporation shall be the only evidence as to the identities of the stockholders entitled to examine the list of stockholders required by this Section 2.7 or to vote in person or by proxy at any meeting of stockholders.

 

Section 2.8.      The Board of Directors shall appoint either one or three inspectors of election, in advance of any meeting of stockholders, to act at such meeting of the stockholders or any adjournment thereof. Inspectors of election need not be stockholders, and no person who is a candidate for corporate office shall act as an inspector of election. If three inspectors of

 

 

election are appointed, such inspectors of election shall act by majority vote. Each inspector of election shall sign an oath faithfully to execute the duties of inspector with strict impartiality and to the best of the inspector’s ability and shall do all acts as are necessary and proper to conduct the election or vote and all such other acts as may be prescribed by law with fairness to all stockholders. Such inspectors of election shall make a written report of any matter determined by them and shall execute a certificate as to any fact found by them.

 

Section 2.9.      The chairman of any meeting of the stockholders shall determine the order of business and the procedure to be followed at such meeting, including such regulation of the manner of voting and the conduct of discussion as the chairman shall deem to be fair and equitable.

 

Section 2.10.    The stockholders may participate in any meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear one another, and such participation shall constitute presence in person at such meeting.

 

Section 2.11.    Unless otherwise required by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a written consent setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of any corporate action without a meeting by less than unanimous written consent shall be given in conformity herewith to those stockholders who have not consented thereto in writing.

 

Article 3 BOARD OF DIRECTORS

 

Section 3.1.      The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors. In addition to the powers expressly conferred upon the Board of Directors by these By-laws, the Board of Directors may exercise all powers of the Corporation and perform all lawful acts as are not required to be exercised or performed by the stockholders pursuant to law, the Certificate of Incorporation of the Corporation or these By- laws. The Board of Directors may designate a director to serve as Chairman of the Board, who shall preside at all meetings of the Board of Directors. The Chairman of the Board shall serve for such term and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.

 

Section 3.2.      Directors shall be natural persons who need not be stockholders of the Corporation. The initial number of directors shall be three. Except as may otherwise be provided in the Certificate of Incorporation, the specific number of directors shall thereafter be designated from time to time exclusively by the Board of Directors. Each director shall be elected for a term of one year and until his or her successor is duly elected and qualified, subject, however, to such director’s prior death, resignation, retirement, disqualification or removal from office. Except as otherwise provided in the Certificate of Incorporation or any agreement to which the Company is subject or by which it is bound, whenever the authorized number of directors is increased between annual meetings of the stockholders, a majority of the directors

 

 

then in office shall have the power to elect such new directors, who shall serve until the next annual meeting of stockholders and until their successors are duly elected and qualified. Any decrease in the authorized number of directors shall not become effective until the expiration of the term of the directors then in office unless, at the time of such decrease, there shall be vacancies on the Board of Directors that are being eliminated by such decrease.

 

Section 3.3.      Except as otherwise provided in the Certificate of Incorporation or any agreement to which the Company is subject or by which it is bound, any vacancy on the Board of Directors occurring by reason of death, resignation, disqualification, removal or other cause may be filled by a majority of the directors then in office, although less than a quorum, and each director elected to fill a vacancy shall serve for the unexpired term of his or her predecessor and until such director’s successor is duly elected and qualified.

 

Section 3.4.      The organizational meeting of each newly elected Board of Directors may be held immediately following the stockholders meeting at which such directors were duly elected without the necessity of notice to such directors or at such time and place as may be fixed by notice or a duly executed waiver of notice thereof.

 

Section 3.5.      Regular meetings of the Board of Directors shall be held without call or notice at such time and place as shall from time to time be fixed by the Board of Directors.

 

Section 3.6.      Special meetings of the Board of Directors may be called by the Chief Executive Officer, by the President or by the Secretary or upon the written request of any director of the Corporation then in office. Notice of the place, time and date of each such special meeting shall be given to each director by whom it is not waived by mailing written notice to each director not less than two days before the meeting or by giving notice in person or by telephone, telegram or facsimile transmission not less than twenty-four hours before the meeting. Notice of special meetings of the Board of Directors need not state the purpose thereof, except as otherwise expressly provided by law, by the Certificate of Incorporation or by these By-laws. Any and all business may be transacted at a special meeting, unless otherwise indicated in the notice thereof or provided by law, by the Certificate of Incorporation or by these By-laws.

 

Section 3.7.      Members of the Board of Directors or any committee thereof may participate in any meeting of the Board of Directors or such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear one another, and such participation shall constitute presence in person at such meeting.

 

Section 3.8.      At any meeting of the Board of Directors, the presence of a majority of the total number of directors shall constitute a quorum for the transaction of business, and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless otherwise provided by law, by the Certificate of Incorporation of the Corporation or by these By-laws. If a quorum shall not be present at any meeting of the Board of Directors, a majority of the directors present may adjourn the meeting to any place, date or time, without notice other than announcement at the meeting, until a quorum shall be present.

 

 

Section 3.9.      Unless otherwise provided by law, by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing and such consent is filed with the minutes of proceedings of the Board of Directors or committee thereof.

 

Section 3.10.    Directors, in addition to expenses of attendance, shall be allowed such compensation for their services as directors, including, without limitation, their services as members of committees of the Board of Directors, as may be fixed from time to time by the Board of Directors; provided, that nothing contained in these By-laws shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

 

Section 3.11.    A member of the Board of Directors or of any committee thereof shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officers, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any committee thereof, or in relying in good faith upon other records of the Corporation.

 

Article 4 COMMITTEES

 

Section 4.1.      The Board of Directors, by a vote of a majority of the whole Board of Directors, may from time to time designate committees of the Board of Directors, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board of Directors and shall, for those committees and any others provided for herein, appoint at least three directors to serve as members and may designate, if it desires, one or more directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. Any committee so designated may exercise the power and authority of the Board of Directors to declare a dividend or to authorize the issuance of stock if the resolution that designates the committee or a supplemental resolution of the Board of Directors shall so provide. The Board of Directors may, from time to time, suspend, alter, continue or terminate any committee or the powers and functions thereof.

 

Section 4.2.      The Board of Directors may appoint committees consisting of officers or other persons, with chairmanships, vice chairmanships and secretaryships and such duties and powers as the Board of Directors may from time to time designate and prescribe. The Board of Directors may from time to time suspend, alter, continue or terminate any of such committees or the powers and functions thereof.

 

Section 4.3.      Any action that may be taken by a committee at a meeting may be taken without a meeting if all members thereof consent thereto in writing and such writing is filed with the minutes of the proceedings of such committee.

 

Section 4.4.      Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws. Adequate provision shall be made for notice to all members of any committee of all meetings of that committee.

 

 

Article 5 OFFICERS

 

Section 5.1.      The officers of the Corporation shall consist of a Chief Executive Officer, a President, a Secretary and a Treasurer. Officers shall be appointed from time to time by the Board of Directors. No officer except the Chief Executive Officer need be a member of the Board of Directors. Any number of offices may be held by the same person.

 

Section 5.2.      The Board of Directors may appoint one or more Vice Presidents and such other officers, including assistant officers, and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.

 

Section 5.3.      Each officer shall hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation, retirement or removal. Any officer appointed by the Board of Directors may be removed at any time by the Board of Directors without prejudice to his or her contract rights. If the office of any officer becomes vacant for any reason, such vacancy shall be filled by the Board of Directors. Any officer appointed to fill such a vacancy shall hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation, retirement or removal.

 

Section 5.4.      The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision of these By-laws.

 

Section 5.5.      The Chief Executive Officer shall have general management, direction and control of the business and affairs of the Corporation, subject to the direction of the Board of Directors. The Chief Executive Officer shall preside at all meetings of the stockholders and, if no Chairman of the Board shall be designated, of the Board of Directors. Unless otherwise directed by the Board of Directors from time to time, the Chief Executive Officer shall have the power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which the Corporation may hold securities and otherwise to exercise any and all rights and powers which the Corporation may possess by reason of its ownership of securities in such other corporation.

 

Section 5.6.      The President shall be the chief operating officer of the Corporation and shall have such powers and perform such duties as may from time to time be assigned to the President by the Chief Executive Officer or the Board of Directors. In the absence or disability of the Chief Executive Officer, the President shall be the chief executive officer of the Corporation, and, as such, shall have the functions, authority and duties provided for the Chief Executive Officer.

 

Section 5.7.      Each Vice President shall have such powers and perform such duties as may be delegated to such Vice President by the Board of Directors or by the Chief Executive Officer.

 

Section 5.8.      The Secretary shall attend all meetings of the Board of Directors and of the stockholders and shall record all votes and the minutes of all proceedings at such meetings in

 

 

a book to be kept for that purpose and shall perform such other duties as the Board of Directors may from time to time prescribe. The Secretary shall perform the preceding duties for any committee of the Board of Directors upon the request of the Board of Directors or such committee. The Secretary shall give or cause to be given notice of all meetings of the stockholders and the Board of Directors. The Secretary shall have charge of the seal of the Corporation, and, where required, shall have the authority to affix such seal to any instrument. In the absence or disability of the Secretary, any Assistant Secretary shall perform the duties and exercise the powers of the Secretary.

 

Section 5.9.      The Treasurer shall have the custody of the Corporation’s funds and securities and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors. The Treasurer shall make such disbursements of the Corporation’s funds as are authorized by the Board of Directors or by the President, taking proper vouchers for such disbursements, and shall render to the Board of Directors an account of all such transactions and of the financial condition of the Corporation, at such times as the Board of Directors may require. The Treasurer shall also perform such other duties as the Board of Directors may from time to time prescribe. In the absence or disability of the Treasurer, any Assistant Treasurer shall perform the duties and exercise the powers of the Treasurer.

 

Article 6 INDEMNIFICATION

 

Section 6.1.      The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an “Indemnitee”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the fact that such person, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnitee. Notwithstanding the preceding sentence, except as otherwise provided in Section 6.3, the Corporation shall be required to indemnify an Indemnitee in connection with a proceeding (or part thereof) commenced by such Indemnitee only if the commencement of such proceeding (or part thereof) by the Indemnitee was authorized by the Board of Directors.

 

Section 6.2.      The Corporation shall pay the expenses (including attorneys’ fees) incurred by an Indemnitee in defending any proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Indemnitee to repay all amounts advanced if it should be ultimately determined that the Indemnitee is not entitled to be indemnified under this Article 6 or otherwise.

 

Section 6.3.      If a claim for indemnification or payment of expenses under this Article 6 is not paid in full within sixty days after a written claim therefor by the Indemnitee has been received by the Corporation, the Indemnitee may file suit to recover the unpaid amount of such

 

 

claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Indemnitee is not entitled to the requested indemnification or payment of expenses under applicable law.

 

Section 6.4.      The rights conferred on any Indemnitee by this Article 6 shall not be exclusive of any other rights which such Indemnitee may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these By-laws, agreement, vote of stockholders or disinterested directors or otherwise.

 

Section 6.5.      The Corporation’s obligation, if any, to indemnify or to advance expenses to any Indemnitee who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such Indemnitee may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or nonprofit entity.

 

Section 6.6.      Any repeal or modification of the foregoing provisions of this Article 6 shall not adversely affect any right or protection hereunder of any Indemnitee in respect of any act or omission occurring prior to the time of such repeal or modification.

 

Section 6.7.      This Article 6 shall not limit the right of the Corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Indemnitees when and as authorized by appropriate corporate action.

 

Section 6.8.      Any provisions of the Certificate of Incorporation that provide more favorable indemnification rights than those set forth in this Article 6 to the Indemnitees shall take precedence over the provisions of this Article 6.

 

Article 7 STOCK

 

Section 7.1.      The certificates representing shares of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. Each stockholder shall be entitled to a certificate exhibiting such stockholder’s name and the number of shares held by such stockholder, which certificate shall be signed by the Chief Executive Officer or the President or any Vice President, and by the Treasurer or the Secretary or any Assistant Secretary. Any or all of the signatures on such certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

 

Section 7.2.      Transfers of stock shall be made only upon the transfer books of the Corporation maintained in an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation, and only by the person named in the certificate or by such person’s attorney, lawfully constituted in writing, and upon surrender of the certificate therefor.

 

 

Section 7.3.      In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

Section 7.4.      The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware.

 

Section 7.5.      The Board of Directors may authorize the issuance of a new certificate representing shares of stock in place of any certificate previously issued by the Corporation and alleged to have been lost, stolen or destroyed, pursuant to such regulations as the Board of Directors may establish concerning proof or advertisement of such alleged loss, theft or destruction and concerning the giving of a satisfactory bond or bonds sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate.

 

Section 7.6.      The issue, transfer, conversion and registration of certificates of stock of the Corporation shall be governed by such other regulations as the Board of Directors may from time to time establish.

 

Article 8 NOTICES

 

Section 8.1.      Whenever notice is required to be given to any director, committee member, officer, stockholder, employee or agent, whether pursuant to law, the Certificate of Incorporation or these By-laws, it shall not be construed to mean personal notice, but such notice may be given, in the case of stockholders, in writing, by depositing the same in the mail, postage prepaid, or by overnight carrier addressed to such stockholder at such stockholder’s last known address as the same appears on the books of the Corporation, and, in the case of directors, committee members, officers, employees and agents, by telephone, or by mail, postage prepaid, or by prepaid telegram at his or her last known address as the same appears on the books of the Corporation. All notices shall be deemed to be given when mailed, telegraphed or telephoned.

 

Section 8.2.      Whenever notice is required to be given to any stockholder, director, committee member, officer, employee or agent, whether pursuant to law, the Certificate of Incorporation or these By-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except as otherwise provided by law. Neither the business to be transacted at, nor the purpose of, any regular or

 

 

special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation of the Corporation or by these By-laws.

 

Article 9 MISCELLANEOUS

 

Section 9.1.      Any officer of the Corporation shall, if required by the Board of Directors, give the Corporation a bond for the faithful performance of the duties of his or her office, and for the restoration to the Corporation of all corporate books, papers, vouchers, money and property of whatever kind in his or her possession or under his or her control. Such bond shall be for a sum and with such surety or sureties as the Board of Directors may require.

 

Section 9.2.      The corporate seal shall be in the charge of the Secretary and shall have inscribed thereon the name of the Corporation and the words “Incorporated 2007 Delaware.” If and when so directed by the Board of Directors or a committee thereof, the Secretary may have duplicates of such seal made and deposited for use with other officers of the Corporation. It shall not be necessary to the validity of any instrument executed by any authorized officer or officers of the Corporation that the execution of such instrument be evidenced by the corporate seal.

 

Section 9.3.      The fiscal year of the Corporation shall be as determined by the Board of Directors.

 

Section 9.4.      All checks or demands for money and notes of the Corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate.

 

Section 9.5.      The Board of Directors shall determine from time to time whether, when and under what conditions and regulations, the books and records of the Corporation (except such as may by statute be specifically open to inspection) shall be open to the inspection of the stockholders, and the stockholders’ rights in this respect are and shall be restricted and limited accordingly.

 

Section 9.6.      Facsimile signatures of any officer of the Corporation may be used at such time and in such manner as authorized by the Board of Directors or a committee thereof.

 

Article 10 AMENDMENT

 

Section 10.1.     These By-laws may be amended, suspended or repealed and new By-laws may be adopted in a manner consistent with law: (a) if authorized by the Certificate of Incorporation, by the affirmative vote of a majority of the directors then in office, at any meeting of the Board of Directors, or (b) by the affirmative vote of the stockholders at any stockholders meeting called and maintained in accordance with Article 2 of these By-laws; provided, however, that a brief description of such proposed amendment, suspension or repeal and/or adoption of new By-laws is contained in the notice of such meeting of the Board of Directors or of such annual or special meeting of the stockholders.

 

Adopted as of August 21, 2007

 

 

 

Exhibit 10.2

 

Execution Copy

 

COGNITION THERAPEUTICS, INC.

 

 

THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

March 20, 2014

 

 

TABLE OF CONTENTS
(continued)

 

TABLE OF CONTENTS

 

			Page
1.	Definitions		1
2.	Registration Rights		4
	2.1.	Demand Registration	4
	2.2.	Company Registration	6
	2.3.	Underwriting Requirements	6
	2.4.	Obligations of the Company	8
	2.5.	Furnish Information	9
	2.6.	Expenses of Registration	9
	2.7.	Delay of Registration	10
	2.8.	Indemnification	10
	2.9.	Reports Under Exchange Act	12
	2.10.	Limitations on Subsequent Registration Rights	13
	2.11.	“Market Standoff’ Agreement	13
	2.12.	Restrictions on Transfer	13
	2.13.	Termination of Registration Rights	15
3.	Information Rights		15
	3.1.	Delivery of Financial Statements	15
	3.2.	Inspection	16
	3.3.	Termination of Information Rights	17
	3.4.	Confidentiality	17
4.	Rights to Future Stock Issuances		17
	4.1.	Right of First Offer	17
	4.2.	Termination; Waiver	18
5.	Additional Covenants		19
	5.1.	Employee Stock	19
	5.2.	Qualified Small Business Stock	20
	5.3.	Board Matters; Director Compensation	20
	5.4.	Successor Indemnification	20
	5.5.	Termination of Covenants	20
6.	Miscellaneous		20
	6.1.	Successors and Assigns; Assignment of Rights	20
	6.2.	Governing Law	21
	6.3.	Counterparts; Electronic Transmission	21
	6.4.	Titles and Subtitles	21
	6.5.	Notices	21
	6.6.	Amendments and Waivers	22

 

 

TABLE OF CONTENTS
(continued)

 

	6.7.	Severability	22
	6.8.	Aggregation of Stock	22
	6.9.	Additional Investors	23
	6.10.	Entire Agreement	23
	6.11.	Delays or Omissions	23
	6.12.	Acknowledgment	23
	6.13.	Dispute Resolution	23
	6.14.	WAIVER OF JURY TRIAL	23

 

SCHEDULE

 

Schedule A

Schedule of Investors

 

 

COGNITION THERAPEUTICS, INC.

 

THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

THIS THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT is made as of the 20th day of March, 2014, by and among Cognition Therapeutics, Inc., a Delaware corporation (the “Company”), and each of the investors listed on Schedule A hereto, each of whom is referred to in this Agreement as an “Investor” and any Additional Purchaser (as defined in the Purchase Agreement) that becomes a party to this Agreement in accordance with Section 6.9.

 

RECITALS

 

The Company and certain of the Investors are parties to a Second Amended and Restated Investors’ Rights Agreement, dated as of December 5, 2011 (the “Rights Agreement”).

 

The Company and certain of the Investors are purchasing shares of the Company’s Series  B Convertible Preferred Stock, par value $.001 per share (the “Series B Preferred Stock”), pursuant to the Series B Preferred Stock Purchase Agreement of even date herewith (the “Purchase Agreement”).

 

In order to induce the Company to enter into the Purchase Agreement and to induce the Investors to invest funds in the Company pursuant to the Purchase Agreement, the Company and the undersigned Investors, which include the holders of at least 60% of the Registrable Securities (as set forth in the Rights Agreement), hereby agree to enter into this Agreement in order to amend and restate the Rights Agreement in accordance with Section 6.6 of the Rights Agreement and to govern the rights of the Investors to cause the Company to register shares of Common Stock issuable to the Investors upon conversion of the Company’s Series A Convertible Preferred Stock, par value $.001 per share (the “Series A Preferred Stock”), Series A-1 Convertible Preferred Stock, par value $.001 per share (the “Series A-1 Preferred Stock”), Series A-2 Convertible Preferred Stock, par value $.001 per share (the “Series A-2 Preferred Stock”), and Series B Preferred Stock (together with the Series A Preferred Stock , Series A-1 Preferred Stock and Series A-2 Preferred Stock, the “Preferred Stock”), to receive certain information from the Company, and to participate in future equity offerings by the Company, and to govern certain other matters as set forth in this Agreement.

 

NOW, THEREFORE, the parties, intending to be legally bound, hereby agree as follows:

 

1.             Definitions. For purposes of this Agreement:

 

“Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by any such Person, or any partner or retired partner of any Person that is a partnership, or any member or former member of any Person that is a limited liability company, or solely in the case of Ogden CAP Associates, LLC (“Ogden”): (a) with respect to which investment discretion is exercised by one or more

 

 

general partners or managing members of, or shares the same management company with, Ogden; or (b) any employee of Ogden or Ogden’s Affiliate who holds (or will by virtue of an immediately succeeding transfer will hold) at least 100,000 shares of Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares).

 

“Common Stock” means shares of the Company’s common stock, par value $.001 per share.

 

“Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (a) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (b) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (c) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

 

“Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.

 

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

 

“Excluded Registration” means (a) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (b) a registration relating to an SEC Rule 145 transaction; (c) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (d) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

“Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

 

“Form S-2” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

 

“Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.

 

 

“GAAP” means generally accepted accounting principles in the United States.

 

“Holder” means any holder of Registrable Securities who is a party to this Agreement.

 

“Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother- in-law, sister-in-law, including adoptive relationships, of a natural person referred to herein.

 

“Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

 

“IPO” means the Company’s first underwritten public offering of its Common Stock pursuant to a registration statement filed with the SEC under the Securities Act.

 

“Key Employee” means any executive-level employee (including division director and vice president-level positions) as well as any employee who, either alone or in concert with others, develops, invents, programs, or designs any Company Intellectual Property (as defined in the Purchase Agreement).

 

“Major Investor” means any Investor that, individually or together with such Investor’s Affiliates, holds shares representing an investment of at least $100,000 in the Preferred Stock.

 

“New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.

 

“Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

“Preferred Director” means any director of the Company that the holders of record of the Preferred Stock are entitled to elect pursuant to the Certificate (as defined in Section 5.4).

 

“Registrable Securities” means (a) the Common Stock issuable or issued upon conversion of the Preferred Stock; (b) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company, acquired by the Investors after the date hereof; and (c) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clause (a) or (b) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 6.1, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Section 2.13.

 

“Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and

 

 

the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.

 

“Restricted Securities” means the securities of the Company required to bear the legend set forth in Section 2.12(a).

 

“Right of First Refusal and Co-Sale Agreement” means the Third Amended and Restated Right of First Refusal and Co-Sale Agreement among the Company, the Investors and certain other stockholders of the Company, dated as of the date of the Initial Closing (as defined in the Purchase Agreement).

 

“SEC” means the Securities and Exchange Commission.

 

“SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

 

“SEC Rule 144(k)” means Rule 144(k) promulgated by the SEC under the Securities Act.

 

“SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

 

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

 

“Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel (as defined in Section 2.6) borne and paid by the Company as provided in Section 2.6.

 

“Stock Plan” means the Company’s Amended and Restated 2007 Equity Incentive Plan, as amended from time to time.

 

“Voting Agreement” means the Third Amended and Restated Voting Agreement among the Company, the Investors and certain other stockholders of the Company, dated as of the date of the Initial Closing.

 

2.              Registration Rights. The Company covenants and agrees as follows:

 

2.1.           Demand Registration.

 

(a)         If at any time after the earlier of (i) five years after the date of this Agreement and (ii) 180 days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of at least 20% of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement covering the registration of at least 20% of the Registrable Securities then outstanding (or a proportionately lower percentage if the anticipated aggregate offering price, net of Selling Expenses, would exceed $5,000,000), then the Company shall (A) within 10 days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (B) as soon as practicable, and in any event within 60 days after the date such request is given by the

 

 

Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 20 days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c), 2.1(d), 2.l(f) and 2.3.

 

(b)         If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least 10% of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to the Registrable Securities then outstanding of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $1,000,000, then the Company shall (i) within 10 days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within 45 days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 20 days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.l(c), 2.l(e), 2.l(f) and 2.3.

 

(c)         Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (1) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (2) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (3) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing for a period of not more. than 180 days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any 12-month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such 180-day period other than an Excluded Registration.

 

(d)         The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a): (i) during the period that is 60 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 180 days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations pursuant to Section 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made in accordance with Section 2.l(b).

 

 

(e)         The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b): (i) during the period that is 30 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 90 days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two registrations pursuant to Section 2.1 (b) within the 12-month period immediately preceding the date of such request.

 

(f)          A registration shall not be counted as “effected” for purposes of Sections 2.l(d) and 2. l(e) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of Sections 2.1(d) and 2.1(e). Solely for purposes of Sections 2.1(d) and 2.1(e), a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a), fewer than 100% of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

 

2.2.          Company Registration. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its Common Stock or other securities under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within 20 days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6.

 

2.3.          Underwriting Requirements.

 

(a)         If, pursuant to Section 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1, and the Company shall include such information in the Demand Notice. The underwriters will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders (based on the relative number of Registrable Securities owned by the Initiating Holders that are included in such registration). In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.4(e)) enter into an underwriting agreement in customary form with the underwriters

 

 

selected for such underwriting. Notwithstanding any other provision of this Section 2.3, if the underwriters advise the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.

 

(b)            In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.

 

(c)            For purposes of the provision in Section 2.3(a) or 2.3(b)  concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence. Notwithstanding the foregoing (including, without limitation, Sections 2.3(a) and (b)), the number of Registrable Securities included in such registration and underwriting shall not be reduced below 30% of the securities included in such registration unless such offering is the IPO, in which case the selling stockholders may be excluded entirely if the underwriters make the determination described above and no securities other than those of the Company are included in

 

 

such registration. No Registrable Securities or other securities excluded from the underwriting by reason of this Section 2.3 shall be included in such registration statement.

 

(d)            Without limiting the generality of the foregoing, in the event that the underwriters in any offering under Section 2.1 or 2.2 request approval of a modification of the provisions set forth in Section 2.1, 2.2 or 2.3 from the Investors, the Investors’ approval of such modification shall not be unreasonably withheld.

 

2.4.            Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

(a)            prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of at least 60% of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to 120 days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such 120-day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such 120-day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;

 

(b)            prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

 

(c)            furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

 

(d)            use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(e)            in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriters of such offering;

 

(f)            use commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

 

(g)            provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(h)            promptly make available for inspection by the selling Holders, any underwriter participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, subject to reasonable confidentiality obligations, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

 

(i)            notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

 

(j)            after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

 

2.5.            Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

 

2.6.            Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to this Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of at least 60% of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of at least 60% of the Registrable Securities agree to forfeit their right to one registration pursuant to Section 2.l(a) or 2.l(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse

 

 

change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Section 2.l(a) or 2.l(b). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

2.7.            Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

2.8.            Indemnification. If any Registrable Securities are included in a registration statement under this Section 2:

 

(a)            To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

(b)            To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if

 

 

such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Sections 2.8(b) and 2.8(d)  exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

 

(c)            Promptly after receipt by an indemnified party under this Section  2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.

 

(d)            To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (A) no Holder will be required to contribute any amount in excess of the public offering price of all such

 

 

Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (B) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses) paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

 

(e)            Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

(f)            Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.

 

2.9.            Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:

 

(a)            make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;

 

(b)            use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

 

(c)            furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after 90 days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

 

2.10.            Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of at least 60% of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company which would give such holder or prospective holder any registration rights; provided that this limitation shall not apply to any additional Investor who becomes a party to this Agreement in accordance with Section 6.9.

 

2.11.            “Market Standoff” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company for its own behalf of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1, Form S-2, or Form S-3, and ending on the date specified by the Company and the managing underwriter (such period not to exceed (a) 180 days in the case of the IPO, which period may be extended upon the request of the managing underwriter, to the extent required by any NASD rules, for an additional period of up to 15 days if the Company issues or proposes to issue an earnings or other public release within 15 days of the expiration of the 180-day lockup period, or (b) 90 days in the case of any registration other than the IPO, which period may be extended upon the request of the managing underwriter, to the extent required by any NASD rules, for an additional period of up to 15 days if the Company issues or proposes to issue an earnings or other public release within 15 days of the expiration of the 90-day lockup period), (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right, or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock, whether such shares or any such securities are then owned by the Holder or are thereafter acquired, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 2.11 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall be applicable to the Holders only if all officers, directors and all stockholders individually owning more than one percent of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock) are subject to the same restrictions. The underwriters in connection with such registration are intended third party beneficiaries of this Section 2.11 and shall have the right, power, and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2.11 or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply pro rata to all Holders subject to such agreements, based on the number of shares subject to such agreements.

 

2.12.            Restrictions on Transfer. The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which

 

 

conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

 

(a)            Each certificate or instrument representing (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section  2.12(b)) be stamped or otherwise imprinted with a legend substantially in the following form:

 

“THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN INVESTORS’ RIGHTS AGREEMENT BETWEEN THE COMPANYAND THE STOCKHOLDER, AS MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.”

 

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 2.12.

 

(b)            The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 2. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a legal opinion or “no action” letter (A) in any transaction in compliance with SEC Rule 144 or (B) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration;

 

 

provided that each transferee agrees in writing to be subject to the terms of this Section 2.12. Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.12(a), except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

 

2.13.            Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.1 or Section 2.2 shall terminate upon the earliest to occur of:

 

(a)            the closing of a Deemed Liquidation Event, as such term is defined in the Certificate; and

 

(b)            as to particular Registrable Securities owned by such Holder, when such Registrable Securities could be sold without restriction under SEC Rule 144(k); and

 

(c)            the four-year anniversary of the IPO.

 

3.            Information Rights.

 

3.1.            Delivery of Financial Statements.

 

(a)            The Company shall deliver to each Major Investor, in a format specified by Golden Seeds LLC, or any successor entity thereto:

 

(i)            as soon as practicable, but in any event within 90 days after the end of each fiscal year of the Company, (A) a balance sheet as of the end of such year, (B)  statements of income and of cash flows for such year, and a comparison between (1) the actual amounts as of and for such fiscal year and (2) the comparable amounts for the prior year and as included in the Budget (as defined in Section 3.1(v)) for such year, with an explanation of any material differences between such amounts and a schedule as to the sources and applications of funds for such year, and (C) a statement of stockholders’ equity as of the end of such year, all such financial statements audited and certified by independent public accountants of nationally recognized standing selected by the Company, copies of which shall also be provided to ClearMomentum, Inc. (“ClearMomentum”) or any successor thereof, as specified by Golden Seeds LLC and subject to Section 3.4;

 

(ii)            as soon as practicable, but in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Company, (A) unaudited statements of income and of cash flows for such fiscal quarter, and a comparison between (1) the actual amounts as of and for such fiscal quarter and (2) the comparable amounts for such fiscal quarter as included in the Budget for the applicable fiscal year and (B) an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (A) be subject to normal year-end audit adjustments and (B) not contain all notes thereto that may be required in accordance with GAAP), copies of which shall also be provided to ClearMomentum or any

 

 

successor thereof, as specified by Golden Seeds LLC or any successor entity thereto and subject to Section 3.4;

 

(iii)            such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as determined by the Board of Directors;

 

(iv)            as soon as practicable, but in any event within 45 days of the end of each month, (A) an unaudited income statement and statement of cash flows for such month, and a comparison between (1) the actual amounts as of and for such month and (2) the comparable amounts for such month as included in the Budget for the applicable fiscal year and (B) an unaudited balance sheet and statement of stockholders’ equity as of the end of such month, all prepared in accordance with GAAP (except that such financial statements may (A) be subject to normal year-end audit adjustments and (B) not contain all notes thereto that may be required in accordance with GAAP);

 

(v)            as soon as practicable, but in any event 30 days before the end of each fiscal year, a budget and business plan for the next fiscal year (collectively, the “Budget”), which shall include, without limitation, forecasts of the Company’s revenues, expenses and cash position on a month-to-month basis, balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets prepared by the Company; and

 

(vi)            as soon as practicable, but in any event within 45 days of the end of each month, and upon the final closing under the Purchase Agreement and upon each closing of future financings by the Company, the Company’s capitalization table in a format specified by Golden Seeds LLC or any successor entity thereto, a copy of which shall also be provided to ClearMomentum or any successor thereof, as specified by Golden Seeds LLC or any successor entity thereto and subject to Section 3.4.

 

(b)            If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

 

(c)            Notwithstanding anything else in this Section 3.1 to the contrary, the Company may cease providing the information set forth in this Section 3.1 during the period starting with the date 60 days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules  applicable to such registration statement and related offering; provided that the Company’s covenants under this Section 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.

 

3.2.            Inspection. The Company shall permit each Major Investor (provided that such Major Investor is not a competitor of the Company), at such Major Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and

 

 

discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Major Investor upon reasonable advance notice.

 

3.3.            Termination of Information Rights. The covenants set forth in Sections 3.1 and 3.2 shall terminate and be of no further force or effect (a) immediately before the consummation of the IPO, (b) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (c) upon a Deemed Liquidation Event, as such term is defined in the Certificate, whichever event occurs first.

 

3.4.            Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.4 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company, if such professionals agree to be bound by the provisions of this Section 3.4; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Section 3.4; (iii) to any existing or prospective Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, if such prospective purchaser agrees to be bound by the provisions of this Section 3.4; or (iv) as may otherwise be required by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure. For the avoidance of doubt, each Investor shall be responsible for any breach of this Section 3.4 by any other Person to which it is permitted to disclose any Confidential Information pursuant to this Section 3.4.

 

4.            Rights to Future Stock Issuances.

 

4.1.            Right of First Offer. Subject to the terms and conditions of this Section 4.1 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to each Investor.

 

(a)            The Company shall give notice (the “Offer Notice”) to each Investor, stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.

 

(b)            By notification to the Company within 20 days after the Offer . Notice is given, each Investor may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon

 

 

conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by such Investor bears to the total Common Stock of the Company then issued and outstanding (assuming full conversion and/or exercise, as applicable, of all the Preferred Stock and other Derivative Securities, and the full issuance of all shares reserved for issuance under the Stock Plan). At the expiration of such 20-day period, the Company shall promptly notify each Investor that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Investor”) of any other Investor’s failure to do likewise. During the 10-day period commencing after the Company has given such notice, each Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which Investors were entitled to subscribe but that were not subscribed for by the Investors which is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares. The closing of any sale pursuant to this Section  4.1(b) shall occur within the later of 90 days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Section 4.1(c).

 

(c)            If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Section 4.1(b), the Company may, during the 90-day period following the expiration of the periods provided in Section 4.1(b), offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within 60 days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Investors in accordance with this Section 4.1.

 

(d)            The right of first offer in this Section 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Certificate); (ii) shares of Common Stock issued in the IPO; and (iii) the issuance of shares of the Series B Preferred Stock to Additional Purchasers pursuant to Section 1.2 of the Purchase Agreement.

 

4.2.            Termination; Waiver.

 

(a)            The covenants set forth in Section 4.1 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d)  of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as such term is defined in the Certificate, whichever event occurs first and, as to each Investor, in accordance with Section 4.1(e).

 

(b)            Except with respect to Pittsburgh Life Sciences Greenhouse and Innovations Works, Inc., the covenants set forth in Section 4.1 shall terminate and be of no further force or effect with respect to any Investor who is not a Fully Exercising Investor and

 

 

such non-Fully Exercising Investor shall never again be afforded such pre-emptive rights with respect to any New Securities. The provisions of Section 4.1 shall not terminate with respect to Pittsburgh Life Sciences Greenhouse and Innovations Works, Inc. notwithstanding any failure of Pittsburgh Life Sciences Greenhouse or Innovations Works, Inc., as applicable, to be a Fully Exercising Investor.

 

(c)            The right of first offer set forth in Section 4.1 may be waived as to all Investors upon the written agreement of the holders of at least 60% of the Preferred Stock held by all Investors.

 

5.            Additional Covenants.

 

5.1.            Employee Stock. Unless otherwise approved by either (x) the Board of Directors, including both Preferred Directors or (y) the Compensation Committee provided that a Preferred Director is a member thereof, stock options under the Stock Plan to purchase shares of the Company’s capital stock granted to employees and consultants of the Company after the date hereof shall vest as provided in this Section 5.1. In the case of employees and consultants who join the Company after December 17, 2010, such stock options shall vest over a four-year period, with the first 12.5% of the shares underlying such stock options vesting following six months of continued employment or service, and the remaining shares vesting in equal monthly installments over the following 42 months. In the case of employees and consultants of the Company employed or engaged by the Company as of December 17, 2010, such stock options shall vest over a four-year period, with the shares underlying such stock options vesting in equal monthly installments beginning on the first day of the month following the grant date. Upon issuance of any shares under the Stock Plan, the Company will require the holders to enter into the Voting Agreement and the Right of First Refusal and Co-Sale Agreement. In addition, unless otherwise approved by the Board of Directors, including both Preferred Directors, the Company shall have the right to repurchase vested shares at cost upon termination of employment of a holder of restricted stock. Without limiting the generality of the foregoing, upon a Deemed Liquidation Event, as such term is defined in the Certificate, all options to purchase capital stock of the Company held by employees and Key Holders (as defined in the Voting Agreement) will vest as specified by the Board of Directors of the Company (or as may be approved by the stockholders of the Company to the extent such approval is required), which may approve the acceleration of the vesting of such options under the respective option agreements between the Company and the Key Employees; provided that such accelerated vesting does not give rise to adverse tax consequences for the Company, including, without limitation, the lack of deductibility of compensation payments.

 

5.2.            Qualified Small Business Stock. The Company shall use commercially reasonable efforts to cause the shares of the Preferred Stock issued pursuant to the Purchase Agreement, the Series A-1 Preferred Stock Purchase Agreement dated as of December 17, 2010 among the Company and each of the investors listed on Schedule A thereto and the Series A-2 Preferred Stock Purchase Agreement dated as of December 5, 2011 among the Company and each of the investors listed on Schedule A thereto, as well as any shares into which such shares are converted, within the meaning of Section 1202(f) of the Internal Revenue Code (the “Code”), to constitute “qualified small business stock” as defined in Section 1202(c) of the Code; provided, however, that such requirement shall not be applicable if the Board of Directors of the

 

Company determines, in its good-faith business judgment, that such qualification is inconsistent with the best interests of the Company. The Company shall submit to its stockholders (including the Investors) and to the Internal Revenue Service any reports that may be required under Section 1202(d)(1)(C) of the Code and the regulations promulgated thereunder. In addition, within twenty (20) business days after any Investor’s written request therefor, the Company shall, at its option, either (a) deliver to such Investor a written statement indicating whether (and what portion of) such Investor’s interest in the Company constitutes “qualified small business stock” as defined in Section 1202(c) of the Code, or (b) deliver to such Investor such factual information in the Company’s possession as is reasonably necessary to enable such Investor to determine whether (and what portion of) such Investor’s interest in the Company constitutes “qualified small business stock” as defined in Section 1202(c) of the Code.

 

5.3.            Board Matters; Director Compensation. Until otherwise determined by the vote of a majority of the directors then in office, the Board of Directors shall meet at least monthly alternating between in-person meetings and conference calls. The Company shall reimburse the nonemployee directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board of Directors.

 

5.4.            Successor Indemnification. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately before such transaction, whether such obligations are contained in the Company’s By-Laws, its Amended and Restated Certificate of Incorporation, as amended from time to time (the “Certificate”), or elsewhere, as the case may be. Additionally, the Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement to expressly assume the Company’s obligations with respect to indemnification of members of the Board of Directors.

 

5.5.            Termination of Covenants. The covenants set forth in this Section 5, except for Section 5.4, shall terminate and be of no further force or effect (a) immediately before the consummation of the IPO, (b) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (c) upon a Deemed Liquidation Event, as such term is defined in the Certificate, whichever event occurs first.

 

6.            Miscellaneous.

 

6.1.            Successors and Assigns; Assignment of Rights. The rights under this Agreement may be assigned (but only with all related obligations) by any of the Investors to any of their respective Affiliates or any transferee who holds (or will by virtue of an immediately succeeding transfer will hold) at least 10% of any series of the then outstanding shares of the Preferred Stock; provided, however, that (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (b) such

 

 

transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. Golden Seeds LLC (and any successor-in-interest thereof whether by consolidation, merger or otherwise) is an intended third party beneficiary of this Agreement and the parties acknowledge and agree that Golden Seeds LLC (and any successor-in-interest), as an intended third party beneficiary, has an independent and right to enforce the terms of this Agreement.

 

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

 

6.3.            Counterparts; Electronic Transmission. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. A facsimile or electronic transmission of a scanned copy of a signed counterpart signature page hereto shall be deemed to be an originally executed copy for purposes of this Agreement.

 

6.4.            Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

 

6.5.            Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (a) personal delivery to the party to be notified, (b) when sent, if sent by confirmed electronic mail or facsimile transmission during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications to be sent to the Investors shall be sent at their addresses as set forth on Schedule A hereto, or to such email address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 6.5. All communications to be sent to the Company shall be sent to the address set forth below in this Section 6.5, or to such email address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 6.5:

 

Cognition Therapeutics, Inc.

2403 Sidney Street, Suite 261

Pittsburgh, PA 15203

Attention: Chief Executive Officer and President

Facsimile: (412) 481-2216

 

With a copy to:

 

Duane Morris LLP

30 South 17th Street

Philadelphia, PA 19103-4196

Attention: Kathleen M. Shay

Facsimile: 215-689-4382

 

6.6.            Amendments and Waivers. Except as set forth in Section 4.2(c), any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of at least 60% of the Registrable Securities then outstanding; and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in the same fashion (it being agreed that, subject to Section 4.2(c), a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction). The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision. Notwithstanding the foregoing, Schedule A hereto may be amended by the Company from time to time to add or modify information regarding Investors without the consent of the other parties hereto.

 

6.7.            Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

 

6.8.            Aggregation of Stock. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

 

6.9.            Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Series B Preferred Stock after the date hereof, any purchaser of such shares of the Series B Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder. No action or consent by the Investors shall be required for such joinder to this Agreement by such additional Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor” hereunder.

 

6.10.            Entire Agreement. This Agreement amends and restates the Rights Agreement. This Agreement (including any Schedules hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

 

6.11.            Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

6.12.            Acknowledgment. The Company acknowledges that the Investors are in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company. Nothing in this Agreement shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.

 

6.13.            Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware, and (c)  hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

 

6.14.            WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR

 

ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

[SIGNATURE PAGE FOLLOWS]

 

SCHEDULE A

 

INVESTORS

 

Name and Address

 

Dean K. & Margo L. Allen Family Trust

25412 Nellie Gail Road

Laguna Hills, CA 92653-6307

Attn: Dean K. Allen, Trustee

 

Angel Capital Entrepreneur Fund 1, LLC

1430 Glencoe Drive

Arcadia, CA 91006

 

Audrey’s Kitchen L.P.

371 Pearce Mill Road

Wexford, PA 15090

Attn: Alicia McGinnis

 

Breedlove Family Limited 220 7th Avenue

Beaver Falls, PA 15010

Attn: Mark H. Breedlove

 

Howell A. Breedlove

2015 Blairmont Drive

Pittsburgh, PA 15241

 

CogRX-A, LLC

2119 S. Villa Drive

Gibsonia, PA 15044

Attn: Alan M. Breedlove

 

The Connors Family Trust

6085 Greenbrier Drive

Huntington Beach, CA 92648

 

Daniel H. Cosgriff Trust

1900 Preston Road

Box 267-304 Plano, TX 75093

 

Downing Family Trust

Dated October 27, 1993

4899 County Road 222

Durango, CO 81303

Attn: Michael R. Downing, Ph.D.

 

Name and Address

 

Golden Seeds Advisors Fund LP

750 Lexington Avenue, 6th Floor

New York, NY 10022

Attn: Lauren Kane

 

Golden Seeds Cognition Therapeutics LLC

750 Lexington Avenue, 6th Floor

New York, NY 10022

Attn: Lauren Kane

 

Golden Seeds Advisors Fund 2 LP

750 Lexington Avenue, 6th Floor

New York, NY 10022

Attn: Lauren Kane

 

Golden Seeds Fund LP

750 Lexington Avenue, 6th Floor

New York, NY 10022

Attn: Lauren Kane

 

Golden Seeds Fund 2 LP

750 Lexington Avenue, 6th Floor

New York, NY 10022

Attn: Lauren Kane

 

Franz F. Hefti, Ph.D.

121 Boulderwood Drive

Bernardsville, NJ 07924

 

Innovation Works, Inc.

Suite 250

2000 Technology Drive

Pittsburgh, PA 15219

Attn: Deborah Walker

 

Johnson Family Trust

646 Vista Lane

Laguna Beach, CA 92651

Attn: Seth R. Johnson, Trustee

 

Name and Address

 

R & B Kleiest Living Trust

Robert A. Kleist, Trustee

7 Cherbourg

Newport Beach, CA 92660

 

M5Invest Partners

764 Mt. Moro Road

Villanova, PA 19085

Attn: Howard Morgan

 

John M. Murphy

34022 Capistrano By The Sea

Dana Point, CA 92629-2937

 

Michael J. Napoli, Jr.

928 N. Croft Avenue #102

Los Angeles, CA 90069

 

Ogden CAP Associates, LLC

390 Park Avenue

New York, NY 10022

Attn: Robert Gailus

 

Pittsburgh Life Sciences Greenhouse

2425 Sidney Street

Pittsburgh, PA 15203

 

Molly B. Schmid

650 W. 9th Street

Claremont, CA 91711

 

Setzer Family Trust U/D/T 02-02-98

1483 Northridge Drive

Prescott, AZ 86301

Attn: Edwin P. Setzer, Trustee

 

Sudek Family Trust

25 Coronado Pointe

Laguna Niguel, CA 92677

Attn: Richard Sudek, Trustee

 

Name and Address

 

TMC Investment Company, Inc.

TMC Investment Company, Inc.

c/o Stonewood Capital Management, Inc.

Three Gateway Center, 13 East

Pittsburgh, PA 15222

Attn: John H. Tippins

 

Eli Glezer

13 746 Durango Drive

Del Mar, CA 92014

 

PLSG Accelerator Fund, LLC

2425 Sidney Street

Pittsburgh, PA 15203

 

Paul M. Work

501 Marigold Ave.

Corona Del Mar, CA 92625-2408

 

David Schick

4126 Parva Ave.

Los Angeles, CA 90027

 

The Eastlack Family Living Trust

^c/_o Robert Eastlack, Trustee

5265 Amber View Pt.

San Diego, CA 92130

 

Richard and Anne Hallock Family Trust Dated

June 19, 1995

11500 San Vicente Blvd, #406

Los Angeles, CA 90049

 

Michael and Ella Doka Family Trust Dated

July 2nd, 1997

7 Endicott

Coto De Caza, CA 92679

 

Richard S. Falk, Jr.

6921 Neptune Place

La Jolla, CA 92037

 

Name and Address

 

Gary Kostow

14820 Caminito Lorren

Del Mar, CA 92014

 

Frank and Rona Singer Family Trust

3552 Venture Drive

Huntington Beach, CA 92649

 

John Previs

2570 Windgate Road

Bethel Park, Pa 15102-2731

 

Susan Uchitelle And Benjamin Uchitelle, As

Joint Tenants With Right Of Survivorship

41 Crestwood Dr.

Clayton, MO 63105

 

Scott And Christina Worley, JTE

171 El Pueblo Way

Palm Beach, FL 33480

 

Donald R. Rady Trust dated November 26,

1992, Donald R. Rady, Trustor and Trustee

1919 Grand Ave., Suite 2f

San Diego CA 92109

 

Francis L. Sterling Trust dated 9/11/1997 as

Amended

65 Easton Lane

Moreland Hills, OH 44022

 

Deutsch Family Investment Partnership

2 Bridle Court

Oyster Bay Cove, New York 11771

 

Delta G. Corporation

22 Wedgewood Lane

Pittsburgh PA 15215

 

Kramer-Fabre Living Trust

2880 Torito Rd.

Santa Barbara, CA 93108

 

 

IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

		COMPANY:
		By:
		Name:
		Title:
		INVESTOR:
		By:
		Name:
		Title:

 

[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED
INVESTORS’ RIGHTS AGREEMENT]

 

Exhibit 10.3

 

FIRST AMENDMENT TO
THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

THIS FIRST AMENDMENT (the “First Amendment”) to that certain Third Amended and Restated Investors’ Rights Agreement dated as of March 20, 2014, among Cognition Therapeutics, Inc., a Delaware corporation (the “Company”) and its stockholders party thereto (the “Investors’ Rights Agreement”), is entered into as of March 23, 2020, by and among the Company and the undersigned stockholders of the Company constituting the holders of at least 60% of the Registrable Securities (as defined in the Investors’ Rights Agreement) then outstanding (the “Required Investors”). All capitalized terms used but not defined in this First Amendment shall have the meanings assigned to them in the Investors’ Rights Agreement.

 

Recitals

 

WHEREAS, the Company and the Required Investors desire to amend the Investors’ Rights Agreement to remove the ability of the holders of at least 20% of the Registrable Securities then outstanding to demand registration of the Company’s securities on a Form S-1 prior to 180 days after the effective date of an IPO;

 

WHEREAS, pursuant to Section 6.6 of the Investors’ Rights Agreement, with certain exceptions not relevant to this First Amendment, any term of the Investors’ Rights Agreement may be amended with the written consent of the Company and the Required Investors; and

 

WHEREAS, accordingly, the Company and the Required Investors are entering into this First Amendment to make such amendments to the Investors’ Rights Agreement.

 

Agreement

 

NOW, THEREFORE, in consideration of the promises and covenants set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.            Amendment to Section 2.1(a) of the Investors’ Rights Agreement. Section 2.1(a) of the Investors’ Rights Agreement is hereby amended and restated in its entirety to provide as follows:

 

Section 2.1        Demand Registration.

 

(a)         If at any time after 180 days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of at least 20% of the Registrable Securities then outstanding (or a proportionately lower percentage if the anticipated aggregate offering price, net of Selling Expenses, would exceed $5,000,000), then the Company shall (A) within 10 days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (B) as soon as practicable and in any event within 60 days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered

 

 

and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 20 days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c), 2.1(d), 2.1(f) and 2.3.

 

2.            Effect of First Amendment. The parties acknowledge and agree that all of the terms, provisions, covenants and conditions of the Investors’ Rights Agreement shall hereafter continue in full force and effect in accordance with the terms thereof, except to the extent expressly modified, amended or revised herein; provided, however, that if any term or provision of this First Amendment shall conflict with or otherwise be inconsistent with any term or provision of the Investors’ Rights Agreement, the terms and provisions of this First Amendment shall prevail.

 

3.            Governing Law. This First Amendment shall be governed by and construed under the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

 

4.            Effectiveness; Counterparts; Electronic Transmission. In accordance with Section 6.6 of the Investors’ Rights Agreement, this First Amendment shall become effective upon the execution of this First Amendment by the Company and the Required Investors. This First Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This First Amendment may, upon execution by a party, be transmitted by electronic or facsimile transmission with the same effect as if such party had delivered an executed original counterpart of this First Amendment.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the undersigned have executed this First Amendment to the Third Amended and Restated Investors’ Rights Agreement as of the date set forth above.

 

				REQUIRED INVESTORS:
				Individuals Sign Below
Date:		, 2020
				Signature
				Name:
				Corporations, Trusts, Partnerships, Limited Liability Companies, Retirement Plans, Retirement Accounts or Other Entities Sign Below:
Date:		, 2020
				Name of Stockholder (please print)

		By:
		Name:
		Title:

 

[Signature Page to the First Amendment o the
Third Amended and Restated Investors’ Rights Agreement]

 

 

Exhibit 10.4

 

OFFICE LEASE AGREEMENT

 

between

 

RJ EQUITIES LP
(Landlord)

 

and

 

COGNITITION THERAPEUTICS, INC.
(Tenant)

 

Dated: July 1, 2017

 

 

TABLE OF CONTENTS

 

Article 1.	BASIC TERMS	1
Article 2.	PREMISES	2
Article 3.	TERM AND COMMENCEMENT	3
Article 4.	CONSTRUCTION OF PREMISES	3
Article 5.	BASE RENT	3
Article 6.	RENT ESCALATION	4
Article 7.	LATE PAYMENT	7
Article 8.	USE OF PREMISES	7
Article 9.	COMMON AREAS/PARKING	8
Article 10.	ALTERATIONS	8
Article 11.	MECHANIC’S LIENS	9
Article 12.	CONDITION OF PREMISES	9
Article 13.	UTILITIES AND SERVICES	9
Article 14.	ASSIGNMENT AND SUBLETTING	10
Article 15.	RIGHTS RESERVED BY LANDLORD	11
Article 16.	REPAIRS	11
Article 17.	INDEMNIFICATION AND INSURANCE	12
Article 18.	LANDLORD’S LIABILITY	13
Article 19.	COMPLIANCE WITH INSURANCE REQUIREMENTS	14
Article 20.	FIRE OR OTHER CASUALTY	14
Article 21.	SUBORDINATION	14
Article 22.	CONDEMNATION	15
Article 23.	ESTOPPEL CERTIFICATES	15
Article 24.	DEFAULT	15
Article 25.	PROVISIONS RELATED TO LANDLORD’S REMEDIES	16
Article 26.	LANDLORD’S DEFAULT; RIGHT TO CURE	18
Article 27.	WAIVER	18
Article 28.	UTILITY DEREGULATION	19
Article 29.	TELECOMMUNICATIONS	19
Article 30.	SURRENDER	20

 

 

ARTICLE 31.	QUIET ENJOYMENT	20
ARTICLE 32.	HOLDING OVER	20
ARTICLE 33.	ENVIRONMENTAL COVENANTS, REPRESENTATIONS AND WARRANTIES	21
ARTICLE 34.	TENANT’S COMPLIANCE WITH LAWS	22
ARTICLE 35.	DISABILITIES ACT	22
ARTICLE 36.	NOTICE	23
ARTICLE 37.	BROKERS	23
ARTICLE 38.	FORCE MAJEURE	23
ARTICLE 39.	TRANSFER OF LANDLORD’S INTEREST	23
ARTICLE 40.	SUCCESSORS	24
ARTICLE 41.	GOVERNING LAW	24
ARTICLE 42.	SEPARABILITY	24
ARTICLE 43.	CAPTIONS	24
ARTICLE 44.	GENDER	24
ARTICLE 45.	EXECUTION; COUNTERPARTS	24
ARTICLE 46.	ENTIRE AGREEMENT	25
ARTICLE 47.	AUTHORITY	25
ARTICLE 48.	SECURITY DEPOSIT	25
ARTICLE 49.	OFAC CERTIFICATION	25
EXHIBIT “A”	DIAGRAM OF DEVELOPMENT	28
EXHIBIT “B”	OUTLINE OF PREMISES	29
EXHIBIT “C”	RULES AND REGULATIONS	31
EXHIBIT “D”	INTENTIONALLY OMITTED	32
EXHIBIT “E”	ESTOPPEL CERTIFICATE	33
EXHIBIT “F”	SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT	36

 

 

OFFICE LEASE AGREEMENT

 

This Office Lease Agreement (the “Lease”) is made this day of July, 2017, by and between RJ EQUITIES LP, a Pennsylvania limited partnership (“Landlord”) and COGNITION THERAPEUTICS, INC., a Delaware corporation (“Tenant”).

 

Article 1. BASIC TERMS

 

For the purposes of this Lease, the following terms shall have the meanings set forth below:

 

(a)	Landlord:	RJ EQUITIES LP, a Pennsylvania limited partnership
(b)	Tenant:	COGNITION THERAPEUTICS, INC., a Delaware corporation
(c)	Premises:	Suite 242 located on the second floor of the commercial building (the “Building”) situated at 2403 Sidney Street, Pittsburgh, PA 15203 (the “Development”) and as outlined on the Diagram of Development attached hereto as Exhibit “A”. The Premises contains approximately 1,754 rentable square feet as depicted on the floor plan attached hereto as Exhibit “B”.
(d)	Commencement Date:	July 1, 2017
(e)	Lease Term:	Three (3) years
(f)	Termination Date:	June 30, 2020
(g)	Extension Term:	Intentionally omitted.
(h)	Base Rent:	$29,818.00 per year / $2,484.83 per month
(i)	Base Year for Real Estate Taxes:	2017.
(j)	Base Year for Operating Costs:	2017.
(k)	Approximate rentable area of the Premises:	1,754.
(1)	Approximate rentable area of the Building:	221,000.
(m)	Tenant’s Proportionate Share:	0.79%.

 

 

(n)	Security Deposit:	N/A.
(o)	Permitted Uses:	Office use
(p)	Notification Addresses:

 

Landlord:

RJ Equities LP 2403 Sidney Street, Suite 200 Pittsburgh, PA 15203 Attn: Ronald J. Tarquinio

 

Tenant:

Cognition Therapeutics, Inc. 2403 Sidney Street, Suite 261 Pittsburgh, PA 15203 Attn: President

 

Article 2. PREMISES

 

(a)               Office Space. Landlord, for and in consideration of the Rent (as defined below) to be paid and the covenants and agreements to be performed by Tenant, as hereinafter set forth, does hereby lease, demise and let unto Tenant the Premises, together with a non-exclusive license (in common with others), to use the common areas of the Building and the Development. Landlord reserves unto itself, however, the use of the roof, exterior walls and the area above and beneath the Premises, together with the right to install, maintain, use, repair and replace exterior windows and doors, pipes, ducts, conduits, wires and structural elements leading through the Premises in locations and in such a manner which shall not materially or adversely interfere with Tenant’s use or occupancy thereof.

 

(b)               Office Furniture. Landlord herby grants a license to Tenant to use those certain existing cubicles, desks, filing cabinets, chairs and other furniture and equipment which are currently in the Premises as of the date hereof (collectively, the “Office Furniture”). Tenant hereby acknowledges and agrees that: (i) title and ownership of the Office Furniture shall at all times remain with Landlord, and (ii) Tenant shall maintain and repair (and replace, if necessary) the Office Furniture during the Lease Term. Upon the expiration or earlier termination of the Lease Term, Tenant shall return all Office Furniture in substantially the same condition as delivered to Tenant as of the Commencement Date, normal wear and tear and damage from casualty excepted. TENANT HEREBY TAKES THE OFFICE FURNITURE IN ITS “AS-IS, WHERE IS” CONDITION “WITH ALL FAULTS” AND SPECIFICALLY AND EXPRESSLY WITHOUT ANY WARRANTIES, REPRESENTATIONS OR GUARANTEES, EITHER EXPRESS OR IMPLIED, AS TO ITS CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY, OR ANY OTHER WARRANTY OF ANY KIND, NATURE, OR TYPE WHATSOEVER FROM OR ON BEHALF OF LANDLORD.

 

 

Article 3. TERM AND COMMENCEMENT

 

(a)               Term and Confirmation. The term of this Lease shall commence on the Commencement Date set forth in Article 1(d) and end on the Termination Date set forth in Article 1(f), unless extended or sooner terminated as provided herein, subject to adjustment as provided below and the other provisions hereof. If the Commencement Date is postponed as provided below, the Termination Date set forth in Article 1 shall be adjusted accordingly. Tenant shall execute a confirmation of the Commencement Date and other factual matters in such form as Landlord may reasonably request within ten (10) days after requested by Landlord following the Commencement Date; any failure to respond within such time shall be deemed an acceptance of the matters as set forth in Landlord’s confirmation. If Tenant disagrees with Landlord’s adjustment of the Commencement Date, Tenant shall pay Rent and perform all other obligations commencing on the date as determined by Landlord, subject to refund or credit when the matter is resolved.

 

(b)               Commencement Delays. The Commencement Date, Rent and Tenant’s other obligations shall be postponed to the extent Tenant is unable to occupy the Premises because Landlord fails to deliver possession of the Premises for any other reason, including holding over by prior occupants. If Landlord so fails for a ninety (90) day initial grace period, Tenant shall have the right to terminate this Lease by notice within ten (10) days. Any such delay in the Commencement Date shall not subject Landlord to liability for loss or damage resulting therefrom, and Tenant’s sole recourse with respect thereto shall be the postponement of Rent or termination of this Lease in accordance with the preceding sentence.

 

Article 4. CONSTRUCTION OF PREMISES

 

Tenant confirms that (1) it has inspected the Premises and accepts the same in its existing “AS IS” condition, and (2) no repair, work, alterations or remodeling of the Premises is required to be done by Landlord as a condition of this Lease.

 

Article 5. BASE RENT

 

(a)                Base Rent. Tenant shall pay to Landlord Base Rent, payable in advance without demand on the first day of each calendar month throughout the Term; provided, that Tenant shall pay Base Rent for the first full calendar month for which Base Rent shall be due (and any initial partial month) when Tenant executes and delivers this Lease.

 

(b)               Additional Rent. Whenever under the terms of this Lease any sum of money is required to be paid by Tenant to Landlord in addition to the Base Rent herein reserved, and said additional amount so to be paid is not designated as “additional rent”, then said amount shall nevertheless, at the option of Landlord, be deemed “additional rent” and collectible as such, but nothing herein contained shall be deemed to suspend or delay the payment of any sum at the time the same becomes due and payable hereunder, or limit any other remedy of Landlord. Nonpayment of additional rent beyond the expiration of applicable notice and/or cure periods shall constitute a default under this Lease to the same extent, and shall entitle the Landlord to the same remedies, as nonpayment of Base Rent. Where no time limit for payment is otherwise stated in the specific Lease provision applicable thereto, any such obligation shall be due and payable within fifteen (15) days following Tenant’s receipt of a written statement showing in reasonable detail the basis for the amount claimed. Base Rent and additional rent are sometimes hereinafter referred to as “Rent”.

 

(c)               Payments. All payments of Rent shall be paid when due without any deduction, recoupment, set-off or counterclaim (except as otherwise set forth in this Lease) at the principal office of

 

 

the Landlord or at such other place as Landlord may from time to time direct. No delay by Landlord in providing a statement for Rent shall be deemed a default by Landlord or a waiver of Landlord’s right to require payment of Tenant’s obligations for any Rent due under the terms of this Lease.

 

Article 6. RENT ESCALATION

 

(a)                Real Estate Tax Increases, Commencing on January 1, 2018, and thereafter through the term of this Lease, Tenant shall pay to Landlord, as additional rent, Tenant’s Proportionate Share of the amount by which Real Estate Taxes incurred by Landlord during any calendar year following the Base Year for Real Estate Taxes shall exceed the Real Estate Taxes incurred by Landlord during such Base Year.

 

“Real Estate Taxes” shall be deemed to mean the aggregate amount of taxes and assessments levied, assessed or imposed upon the Development in which the Premises are located. For purposes hereof, Real Estate Taxes shall include, without limitation, real estate taxes, sewer rents, water rents, assessments (special or otherwise), transit taxes, any tax or excise on rentals or any other tax (however described) on account of rental received for use and occupancy of all or any part of the Premises, whether such taxes are imposed by the United States of America, the Commonwealth of Pennsylvania, the county in which the Premises is located or any local governmental municipality, authority or agency, or any other political subdivision of any of the foregoing. Real Estate Taxes shall also include all reasonable costs and expenses (including, without limitation, legal fees and court costs) incurred in connection with the protest or the reduction of any of the aforesaid taxes and or assessments, up to an amount equal to the reduction of any of the aforesaid taxes resulting from such protest. If at any time during the term hereof, a tax or excise on rents or any other tax, however described, is levied or assessed by any governmental authority on account of the rents hereunder or the interest of Landlord or Landlord’s beneficiaries under this Lease, then such additional tax shall be included in Real Estate Taxes. Further, any tax assessed or levied by any governmental authority in lieu of the foregoing Real Estate Taxes shall also be included. For the purpose of determining Real Estate Taxes for any given calendar year, the amount to be paid for such calendar year shall be (a) with respect to assessments, the amount of the installments (and any interest) due and payable during such calendar year and (b) with respect to all other Real Estate Taxes, the amount due and payable during such calendar year, but only to the extent properly allocable to such calendar year. Notwithstanding anything in this Lease to the contrary, “Real Estate Taxes” shall not include (i) any capital stock, net income, profit tax, succession, transfer, franchise, gift, estate or inheritance tax, (ii) any transfer tax or recording charge resulting from a transfer of the Development or the Building or any interest in the Development or the Building or (iii) any penalties, interest or fines incurred by Landlord due to nonpayment or late payment of taxes.

 

(b)               Operating Cost Increases. Commencing on January 1, 2018, and thereafter through the term of this Lease, Tenant shall pay to Landlord, as additional rent, Tenant’s Proportionate Share of the amount by which Operating Costs incurred by Landlord during any calendar year following the Base Year for Operating Costs shall exceed the Operating Costs incurred by Landlord during such Base Year.

 

“Operating Costs” shall be deemed to mean all costs and expenses of any kind or nature incurred by Landlord in any calendar year in operating, policing, protecting, lighting, heating, air conditioning, insuring, repairing and maintaining the Building, other structures and improvements and the land constituting or supporting the Development, all in accordance with accepted principles of sound management of similar properties, and shall include (without limitation) all costs and expenses of operation, replacement, replacement and maintenance, including by way of illustration and not limitation: personal property taxes and any tax in addition to or in lieu thereof, assessed against Landlord or to be collected by

 

 

Landlord; utilities; supplies; materials; tools; insurance (including, but not limited to, commercial general liability, casualty, business interruption, rent loss insurance and flood and earthquake insurance); licenses, permits and inspection fees; cost of services of independent contractors (including property management fees); any tax, assessment, cost or fee incurred by Landlord in connection with the Development from any neighborhood improvement district or similar program or initiative; cost of compensation (including employment taxes and fringe benefits) of all persons who perform regular and recurring duties connected with day-to-day operation, maintenance and repair of the Development, its equipment and the component interior and exterior common areas, ceilings, floors, walks, stairs, stairwells, elevators, loading docks, trash compactor, malls and landscaped areas including janitorial, gardening, security, parking, operating engineer, painting, plumbing, electrical, carpentry, heating, ventilation, air conditioning, window washing, signage and advertising; rental expense or a reasonable allowance for depreciation of personal property used in such maintenance, operation and repair of the Development; those variable costs, expenses and disbursements which Landlord reasonably determines Landlord would have incurred had the Development been 100% occupied at all times during such calendar year; and amortization of Permitted Capital Expenditures (as hereinafter defined).

 

Notwithstanding anything in this Lease to the contrary, “Operating Costs” shall not include the following: costs to benefit, or relating to, a specific tenant, such as legal and other related expenses associated with the negotiation or enforcement of leases, and any penalties or damages from such lawsuits; costs associated with the financing or refinancing of debt or selling of the Building, the Development or any interest therein, such as points, broker’s fees and attorney’s fees; executive salaries and compensation of employees of Landlord above the grade of regional property manager; repairs and/or replacements which are covered by insurance claim or condemnation proceeds; leasing commissions, legal fees, tenant allowances or fit outs (including permit, license and inspection fees), advertising costs, space planning costs and promotional material; costs incurred by Landlord in connection with the original construction of the Building or the correction of latent defects in construction of the Building; depreciation and amortization (except for amortization of Permitted Capital Expenditures); costs paid to subsidiaries or affiliates of Landlord, to the extent that the costs exceed the reasonable costs that would have been paid had the services, supplies or materials been provided by unaffiliated parties on a reasonable basis; interest on debt or amortization payments on any mortgage or deeds of trust or any other borrowings and any ground rent; ground rents or rentals payable by Landlord pursuant to any over-lease or any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord; costs incurred in managing or operating any “pay for” parking facilities within the Development; expenses resulting from the gross negligence or willful misconduct of Landlord or its agents, employees or contractors; any fines or fees for Landlord’s failure to comply with governmental, quasi-governmental, or regulatory agencies’ rules and regulations, or any costs or expenses incurred by Landlord due to violation by Landlord, or Landlord’s agents, contractors or employees, of either the payment terms and conditions of any lease or, service contract or other agreement covering the Development or Landlord’s obligations as owner of the Development; costs for sculpture, decorations, painting or other objects of art in excess of amounts typically spent for such items in office buildings of comparable quality in the competitive area of the Building; costs of any political, charitable or civic contribution or donations; Capital Items, except for Permitted Capital Expenditures; costs that are properly chargeable to particular tenants in the Development, including, without limitation, costs and expenses for providing heating and air conditioning service outside of normal business hours and damages to the Development or any part thereof caused by the act or neglect of another tenant; costs relating to utilities or other services to tenant spaces for which Tenant pays for such utilities or other services directly; costs properly attributable (applying generally accepted accounting principles) to other calendar years; costs paid by Landlord if and to the extent such costs are incurred by Landlord for any work or service furnished to any other tenant in the Development (other than Tenant) to a materially greater extent and in a materially more favorable manner than furnished generally to the remaining tenants in the Project (including Tenant); costs incurred with respect to preparation of income tax returns; and costs incurred in

 

 

cleaning up any environment hazard or condition in violation of any environmental law. “Permitted Capital Expenditures” means capital expenditures and capital repairs and replacements (“Capital Items”), provided such Capital Items (x) are necessitated by a change in law or regulation occurring after the Commencement Date; or (y) are reasonably intended to have cost-saving benefits over the Term of the Lease. The foregoing provision is for definitional purposes only and shall not be construed to impose any obligation upon Landlord to incur such expenses. No item of Operating Cost shall be included more than once in any given time period and no item of expense charged to Tenant as an Operating Cost shall be charged to Tenant as Real Estate Taxes or any other type of chargeable expense or cost. The property management fees incurred by Landlord shall only be chargeable to Tenant to the extent such property management fees do not exceed the property management fees incurred by other buildings of similar size and quality and located within the geographic area in which the Development is located.

 

(c)               Method of Payment. Within sixty (60) days after the end of each calendar year (including the last calendar year of the term of this Lease), Landlord shall furnish Tenant a written statement showing in reasonable detail Landlord’s Real Estate Taxes and Operating Costs for the Base Year and the preceding calendar year and showing Tenant’s Proportionate Share of the amount of any increase in such Real Estate Taxes and/or Operating Costs over the amount thereof for the respective Base Year. Coincidentally with the monthly rent payment due following Tenant’s receipt of such statement, Tenant shall pay to Landlord an amount equal to the sum of (1) Tenant’s Proportionate Share of the increase in Real Estate Taxes and Operating Costs for the preceding calendar year over the amount thereof for the applicable Base Year; and (2) one-twelfth (1/12th) of such increases for the current calendar year multiplied by the number of rent payments (including the current one) then elapsed in such calendar year. Thereafter such one-twelfth (l/12th) amount shall be paid monthly with the Base Rent until subsequently adjusted in accordance with the terms of this Article.

 

(d)               Tenant’s Proportionate Share. “Tenant’s Proportionate Share” of Taxes and Operating Costs shall be the percentages set forth in Article 1, but if the rentable area of the Premises or Building shall change, Tenant’s Proportionate Share shall thereupon become the rentable area of the Premises divided by the rentable area of the Building, subject at all times to adjustment as provided in this Article. Tenant acknowledges that the “rentable area of the Premises” under this Lease includes the usable area, without deduction for columns or projections, multiplied by a load or conversion factor, to reflect a share of certain areas, which may include lobbies, corridors, mechanical, utility, janitorial, boiler and service rooms and closets, restrooms, and other public, common and service areas. Except as provided expressly to the contrary herein, the “rentable area of the Building” shall include all rentable area of all space leased or available for lease at the Building, which Landlord may reasonably re-determine from time to time, to reflect re-configurations, additions or modifications to the Building.

 

(e)               Tax Refunds, Protest Costs, and Expense Adjustments For Prior Years. Landlord shall each year: (i) credit against Real Estate Taxes any refunds received during such year, (ii) include in Real Estate Taxes any additional amount paid during such year, involving an adjustment to Real Estate Taxes for a prior year, due to error by the taxing authority, supplemental assessment, or other reason, (iii) include, in either Real Estate Taxes or Operating Costs, any fees for attorneys, consultants and experts, and other costs paid during such year in attempting to protest, appeal or otherwise seek to reduce or minimize Real Estate Taxes, by the terms of this Article, (iv) credit against Operating Costs the cost of any item previously included in Operating Costs, to the extent that Landlord receives reimbursement from insurance proceeds or a third party during such year (excluding tenant payments for Real Estate Taxes and Operating Expenses), and (v) make any other appropriate changes to reflect adjustments to Real Estate Taxes or Operating Expenses for prior years.

 

(f)           Payments After Lease Term Ends. Tenant’s obligations to pay Tenant’s Proportionate Share of Real Estate Taxes and Operating Costs (or any other amounts) accruing during, or relating to, the

 

 

period prior to expiration or earlier termination of this Lease shall survive the expiration or termination of this Lease for a period of two (2) years. Tenant shall pay the full amount of such estimate and any additional amount due after the actual amounts are determined, in each case within thirty (30) days after Landlord sends a statement therefore. If the actual amount is less than the amount Tenant pays as an estimate, Landlord shall refund the difference within thirty (30) days after such determination is made.

 

(g)          Audit Rights. In the event of any dispute as to the amount of Tenant’s Proportionate Share of Operating Costs and Real Property Taxes, Tenant may, by prior written notice (“Audit Notice”) given ninety (90) days following receipt of a Landlord’s reconciliation statement (“Audit Period”), audit Landlord’s accounting records with respect to Operating Expenses and Real Property Taxes relative to the year to which such statement relates. The audit shall be conducted by Tenant, or an accounting firm engaged by Tenant and reasonably satisfactory to Landlord (billing hourly and not on a contingency fee basis) (“Third Party Auditor”), and shall be conducted at the office of Landlord at which its records are kept or, at Landlord’s election, the office of Landlord’s property manager (if any). The audit shall be conducted at reasonable times during normal business hours. In no event will Landlord or its property manager be required to (i) photocopy any accounting records or other items or contracts, (ii) create any ledgers or schedules not already in existence, (iii) incur any costs or expenses relative to such inspection, or (iv) perform any other tasks other than making available such accounting records as aforesaid. Neither Tenant nor its auditor may leave the office of Landlord with originals of any materials supplied by Landlord. Tenant must pay Tenant’s Proportionate Share of Operating Costs and Real Property Taxes when due pursuant to the terms of this Lease and may not withhold payment of Operating Costs, Real Property Taxes or any other Rent pending results of the audit or during a dispute regarding Operating Costs and Real Property Taxes. The audit must be completed within ninety (90) days of the date of Tenant’s Audit Notice and the results of such audit shall be delivered to Landlord within forty-five (45) days of the date of Tenant’s Audit Notice. If Tenant does not substantially comply with any of the aforementioned time frames, then the Landlord’s statement will be conclusively binding on Tenant. If such audit or review correctly reveals that Landlord has overcharged Tenant, then within thirty (30) days after the results of such audit are made available to Landlord, the amount of such overcharge shall be deducted from the installments of Tenant’s Share of Operating Costs and Real Property Taxes next becoming due. If the audit reveals that Tenant was undercharged, then within thirty (30) days after the results of the audit are made available to Tenant, Tenant agrees to reimburse Landlord the amount of such undercharge. Tenant agrees to keep the results of the audit confidential and will cause its agents, employees and contractors to keep such results confidential. To that end, Landlord may require Tenant and its auditor to execute a commercially reasonable confidentiality agreement provided by Landlord.

 

Article 7.       LATE PAYMENT

 

A late charge of five (5%) percent shall be due and payable forthwith on the amount of Base Rent and additional rent not received by Landlord from Tenant on or before the tenth (10^th) day after such payment was due. In addition, Tenant shall pay interest at the Lease Interest Rate (as defined below) on any sum which is not paid when due, interest to run from the due date until such sum is paid. The “Lease Interest Rate” means four (4) percentage points per annum above the prime rate per annum announced from time to time by PNC Bank, N.A, or its successors.

 

Article 8.       USE OF PREMISES

 

Tenant shall occupy and use the Premises only for the Permitted Uses set forth in Article 1. Tenant shall not occupy or use the Premises for any other purpose or business without the prior written consent of Landlord. Landlord has promulgated reasonable Rules and Regulations (“Rules and

 

 

Regulations”), which are attached hereto, made part hereof and marked as Exhibit “C”. Tenant acknowledges receipt of and shall observe and comply with such Rules and Regulations. Tenant further acknowledges that Landlord, in Landlord’s reasonable discretion, may from time to time adopt, amend, establish, modify, proscribe or restate such rules and regulations with regard to the operation of the Premises, the Building, and common areas of the Development; provided that such rules and regulations are generally applicable to all tenants, do not materially increase the financial burdens of Tenant and do not materially adversely affect Tenant’s rights under this Lease. In the event of any conflict between the provisions of such rules and regulations and this Lease, the provisions of this Lease shall control.

 

Article 9.       COMMON AREAS/PARKING

 

All parking areas, driveways, alleys, public corridors and fire escapes, and other areas, facilities and improvements as may be approved by Landlord from time to time for the general use, in common, of Tenant and other tenants, their employees, agents, invitees and licensees, shall at all times be subject to the exclusive control and management of Landlord, and Landlord shall have the right from time to time to establish, modify and enforce reasonable rules and regulations with respect to all such areas, facilities and improvements.

 

Landlord reserves the right to designate certain parking areas for non-exclusive permitted parking for tenant’s employees, for general visitor parking, and for other designated uses. Landlord agrees to enforce its parking regulations for the mutual benefit of Landlord and tenants of the Development. Except for claims resulting from Landlord’s intentional or grossly negligent acts, Landlord shall not be responsible or liable for damage or loss sustained to motor vehicles (including any contents) parked in the Development.

 

Article 10.    ALTERATIONS

 

(a)          Tenant shall not make any alterations, improvements or additions to the Premises or attach any fixtures or equipment thereto, without the Landlord’s prior written approval, not to be unreasonably withheld. All alterations, improvements or additions made to the Premises or the attachment of any fixtures or equipment thereto shall be performed at Tenant’s sole cost and expense. Tenant may affix pictures and shelving to the walls without Landlord’s consent.

 

(b)          All alterations, improvements or additions to the Premises made by Tenant shall be deemed to have been attached to the Premises and to have become the property of Landlord upon such attachment, and upon expiration of this Lease or renewal term thereof, Tenant shall not remove any of such alterations, improvements or additions; provided, however, that Landlord may designate by written notice to Tenant at the time Tenant requests consent those alterations and additions which shall be removed by Tenant at the expiration or termination of this Lease, and Tenant shall properly remove the same and repair any damage to the Premises caused by such removal. Notwithstanding anything in this Lease to the contrary, all furniture, trade fixtures and equipment installed by or for Tenant may be removed by Tenant at any time.

 

(c)           In performing such alterations, improvements or additions, or in the removal thereof, Tenant shall use due care to cause as little damage or injury as possible to the Premises and the Building and shall repair all damage or injury that may occur to the Premises or the Building as a result thereof.

 

(d)          Tenant agrees in doing any such work in or about the Premises to engage only such labor as will not conflict with or cause strikes or other labor disturbances among the Development service employees of Landlord. Any contractors employed by Tenant shall be subject to Landlord’s prior written

 

 

approval, not to be unreasonably withheld. All such contractors shall be required to carry worker’s compensation insurance, commercial general liability insurance and property damage insurance in amounts, form and content, and with companies reasonably satisfactory to Landlord.

 

(e)          Prior to the commencement by Tenant of any work as set forth in this Article, Tenant shall obtain, at Tenant’s sole cost and expense, all necessary permits, authorizations and licenses required by the various governmental authorities having jurisdiction over the Premises.

 

Article 11.    MECHANIC’S LIENS

 

If any mechanics’ or other lien shall be filed against the Premises or the Development purporting to be for labor or material furnished or to be furnished at the request of Tenant, then Tenant shall at its expense cause such lien to be discharged by payment, bond or otherwise within thirty (30) days after notice of filing thereof. As an alternative to causing the lien to be discharged of record, Tenant shall have the right to contest the validity of any lien or claim if Tenant shall first have posted a bond or other security reasonably satisfactory to Landlord (such as an undertaking with Landlord’s title company to insure that, upon final determination of the validity of such lien or claim, Tenant shall immediately pay any judgment rendered against Tenant). If Tenant shall fail to take such action within such thirty (30) day period, Landlord may cause such lien to be discharged by payment, bond or otherwise, without investigation as to the validity thereof or as to any offsets or defenses thereto and Tenant shall, upon demand, reimburse Landlord for all amounts paid and costs incurred including reasonable attorney’s fees, in having such lien discharged of record. Tenant shall indemnify and hold Landlord harmless from and against any and all claims, costs, damages, liabilities and expenses (including reasonable attorney’s fees) which may be brought or imposed against or incurred by Landlord by reason of any such lien or its discharge.

 

Article 12.    CONDITION OF PREMISES

 

Tenant acknowledges and agrees that, except as expressly set forth in this Lease, there have been no representations or warranties made by or on behalf of Landlord with respect to the Building, the Office Furniture, Premises or the Development or with respect to the suitability of any of them for the conduct of Tenant’s business. The taking of possession of the Premises by Tenant shall conclusively establish that the Premises were at such time in satisfactory condition, order and repair, subject to latent defects which a reasonable inspection of the Premises would not disclose.

 

Article 13.    UTILITIES AND SERVICES

 

(a)           Utilities: Separately metered electric and gas service shall be made available to the Premises. Tenant shall pay for the cost of such utility services directly to the utility provider or to the Landlord, as the case may be.

 

(b)           Building Services: Landlord shall provide the following to the Premises, the Building or the Development, as applicable:

 

1)             Water and sewage for the Permitted Use;

 

2)             Replacement standard light globes and/or standard fluorescent tubes and ballasts in the standard ceiling lighting fixtures;

 

 

3)             HVAC, including maintenance of HVAC equipment and systems;

 

4)             Passenger and freight elevator service and maintenance and repair;

 

5)            Hot and cold water for drinking, lavatory and toilet purposes at those points of supply provided for nonexclusive general use of tenants of the Building, and points of supply in the Premises installed by or with Landlord’s consent for the exclusive use of Tenant;

 

6)             Maintenance and repair of interior common areas of the Building, including the public restrooms in the Building; and

 

7)            Maintenance and repair of exterior common areas of the Development, including but not limited to cleaning of outside exterior windows and doors, snow removal and landscaping.

 

(c)          Landlord does not warrant that the utilities or services provided for in this Article shall be free from slow-down, interruption or stoppage pursuant to voluntary agreement by and between Landlord and governmental bodies and regulatory agencies, or caused by the maintenance, repair, substitution, renewal, replacement or improvements of any of the equipment involved in the furnishing of any such utilities or services or caused by strikes, lockouts, labor controversies, fuel shortages, accidents, acts of God or the elements or any other cause beyond the reasonable control of Landlord; and specifically, no such slow-down, interruption or stoppage of any of such services shall be construed as an eviction, actual or constructive, of Tenant, nor shall same cause any abatement of Base Rent or additional rent payable hereunder or in any manner or for any purpose relieve Tenant from any of Tenant’s obligations hereunder, unless same shall make a material portion of the Premises untenantable for a period of three (3)  consecutive business days at which point Base Rent shall be abated until such time as the Premises are no longer untenantable, and in no event shall Landlord be liable for damages to persons or property or be in default hereunder as a result of such interruption or stoppage of service. Should said disruption of service or utilities cause significant interference with Tenant’s business for a period of sixty (60) days, Tenant shall have the right to terminate this Lease by written notice to Landlord. Landlord shall provide Tenant with reasonable advance notice of any anticipated interruptions in utility or Building services, and Landlord shall use reasonable efforts to minimize disruption of Tenant’s use and occupancy in connection therewith.

 

Article 14.    ASSIGNMENT AND SUBLETTING

 

Tenant shall not assign this Lease or sublet the Premises, (whether by operation of law or voluntary agreement) in whole or in part, without the Landlord’s prior written consent, not to be unreasonably withheld. In case of any assignment or subletting, Tenant shall remain primarily liable on this Lease and shall not be released from the performance of any of the terms, covenants and conditions hereof.

 

Notwithstanding the foregoing, Tenant may assign this Lease, or sublet the Premises or any portion thereof to an affiliate controlling, controlled by or under common control with Tenant, without Landlord consent, but with notice thereof to Landlord. Tenant may sublet all or a portion of the Premises without prior consent to third parties and entities related to Tenant either through affiliated or commercial relationships for office use. Any license, assignment, subleasing or other occupancy agreement shall be subject to all terms, covenants and conditions of this Lease and no license, assignment, subleasing or other occupancy agreement shall relieve Tenant of any liability hereunder. Upon Landlord’s request, Tenant shall provide Landlord with copies of all reasonable documentation related to any license, assignment, sublease, or other occupancy agreement and Tenant shall require any permitted licensee, assignee, sublicensee, or other

 

 

occupant to obtain and maintain commercially reasonable insurance naming Landlord as additional insured. Tenant shall provide copies evidencing such insurance to Landlord upon Landlord’s request.

 

Article 15.    RIGHTS RESERVED BY LANDLORD

 

Except to the extent expressly limited herein, Landlord reserves full rights to control the Development, the Building and the Premises (which rights may be exercised without subjecting Landlord to claims for constructive eviction, abatement of Rent, damages or other claims of any kind), including more particularly, but without limitation, the following rights for Landlord, its employees or agents; provided however, Landlord shall use commercially reasonable efforts to exercise such rights in a manner that will first attempt to minimize interference with Tenant’s use and occupancy of the Premises:

 

(a)          Access to Premises. To enter the Premises in order to inspect, supply cleaning service or other services to be provided Tenant hereunder, show the Premises to current and prospective lenders, insurers, purchasers, tenants, brokers and governmental authorities, and perform any work or take any other actions reserved to Landlord under this Lease or applicable laws. However, Landlord shall: (i) provide reasonable advance written or oral notice to Tenant’s on-site manager or other appropriate person (except in emergencies), (ii) take reasonable steps to minimize any significant disruption to Tenant’s business, and following completion of any work, return Tenant’s leasehold improvements, fixtures, property and equipment to the original locations and condition to the fullest extent reasonably possible, and (iii) take reasonable steps to avoid materially changing the configuration or reducing the square footage of the Premises, unless required by laws or other causes beyond Landlord’s reasonable control (and in the event of any permanent reduction, the Rent and other rights and obligations of the parties based on the square footage of the Premises shall be proportionately reduced). Tenant shall not place partitions, furniture or other obstructions in the Premises which may prevent or impair Landlord’s access to the systems and equipment for the Building or the systems and equipment for the Premises. If Tenant requests that any such access occur before or after Landlord’s regular business hours and Landlord approves, Tenant shall pay all overtime and other additional costs in connection therewith.

 

(b)          Changes to the Development. To: (i) paint and decorate, (ii) perform repairs or maintenance, and (iii) make replacements, restorations, renovations, alterations, additions and improvements, structural or otherwise in and to the Development or any part thereof, including any adjacent building, structure, facility, land, street or alley, or change the uses thereof (including changes, reductions or additions of corridors, entrances, doors, lobbies, parking facilities and other areas, structural support columns and shear walls, utility lines, pipes, duct work, cables, installations, docks, walks, elevators, stairs, solar tint windows or film, planters, sculptures, displays, and other amenities and features therein, and changes relating to the connection with or entrance into or use of the Building or any other adjoining or adjacent building or buildings, now existing or hereafter constructed). In connection with such matters, Landlord may among other things erect scaffolding, barricades and other structures, open ceilings, close entry ways, restrooms, elevators, stairways, corridors, parking and other areas and facilities, and take such other actions as Landlord deems appropriate.

 

Article 16.    REPAIRS

 

(a)           Subject to the provisions of Article 6 hereof, Landlord shall perform all maintenance and make all repairs or replacement necessary to maintain the structural, plumbing, HVAC and electrical systems (including replacement of light bulbs, ballasts and fixtures), exterior doors and windows, roof, exterior walls, demising walls and floor (but excluding interior ceiling, wall and floor finishes), common areas and utility lines and connections servicing the Premises, the Building or the Development in good

 

 

order and condition. Landlord shall commence such repairs as promptly as the circumstances reasonably permit and thereafter shall diligently pursue the same to completion with reasonable promptness. Notwithstanding anything contained in this Lease to the contrary, Tenant shall be responsible, at its sole cost and expense, for any maintenance, repairs and replacements made by the Landlord which are necessitated by the negligent acts, misuse or willful misconduct of Tenant, its agents, contractors, employees or invitees.

 

(b)          Except as the Landlord is obligated for repairs as provided hereinabove, Tenant shall make at Tenant’s sole cost and expense, all repairs necessary to maintain the Premises and shall keep the Premises and the fixtures therein in neat, clean, safe and orderly condition. In addition, and notwithstanding anything contained in this Lease to the contrary, the Tenant shall, at its sole cost and expense, maintain, repair and replace all lab equipment contained in the lab space portion of the Premises, including without limitation all water treatment systems and vacuum equipment. If the Tenant refuses or neglects to make such repairs, or fails to diligently prosecute the same to completion, after written notice from Landlord of the need therefore, Landlord may make such repairs at the expense of Tenant and such expense, along with a fifteen (15%) percent service charge, shall be collectible as additional rent.

 

(c)          Landlord shall not be liable by reason of any injury to or interference with Tenant’s business arising from the making of any repairs in accordance with this Article 16 in or to the Premises or the Building and Development or to any appurtenances or equipment therein; provided that Landlord shall interfere as little as reasonably practicable with the conduct of Tenant’s business in the performance of the foregoing. There shall be no abatement of Rent because of such repairs, except as provided in Article 20 hereof.

 

Article 17.    INDEMNIFICATION AND INSURANCE

 

(a)           Indemnification.

 

(i)            Tenant shall indemnify, hold harmless and defend Landlord from and against any and all costs, expenses (including reasonable counsel fees), liabilities, losses, damages, suits, actions, fines, penalties, claims or demands of any kind and asserted by or on behalf of any person or governmental authority, arising out of or in any way connected with, and Landlord shall not be liable to Tenant on account of, (i) any failure by Tenant to perform any of the agreements, terms, covenants or conditions of this Lease required to be performed by Tenant, (ii) any failure by Tenant to comply with any statutes, ordinances, regulations or orders of any governmental authority applicable to Tenant’s occupancy and use of the Premises, or (iii) any accident, death or personal injury, or damage to or loss or theft of property, which shall occur in or about the Premises, except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees or contractors.

 

(ii)           Landlord shall indemnify, hold harmless and defend Tenant from and against any and all costs, expenses (including reasonable counsel fees), liabilities, losses, damages, suits, actions, fines, penalties, claims or demands of any kind and asserted by or on behalf of any person or governmental authority, arising out of or in any way connected with, (i) any failure by Landlord to perform any of the agreements, terms, covenants or conditions of this Lease required to be performed by Landlord, or (ii) the negligence or willful misconduct of Landlord or its agents, employees or contractors.

 

(b)          Required Insurance. Tenant shall maintain at its expense during the term with respect to the Premises and Tenant’s use thereof and of the Building:

 

 

(i)            Worker’s compensation insurance in the amounts required by statute, and Employer Liability Insurance in at least the following amounts: (a) Bodily Injury by Accident - $500,000 per accident, (b) Bodily Injury by Disease - $500,000 per employee and (c) Aggregate Limit - $1,000,000 per policy year.

 

(ii)           Property Damage Insurance for the protection of Tenant and Landlord, as their interest may appear, covering all risks of physical loss to Tenant’s alterations or improvements, personal property, business records, fixtures and equipment in amounts not less than the full insurable replacement cost of such property and full insurable value of such other interests of Tenant, such policies to be in form reasonably satisfactory to Landlord.

 

(iii)          Commercial general liability insurance in form reasonably satisfactory to Landlord with limits of at least the following amounts: (a) death or bodily injury - $2,000,000, (b) property damage or destruction (including loss of use thereof) - $2,000,000 per policy year. Such policy shall include endorsements: (1) for contractual liability covering Tenant’s indemnity obligations under this Lease, and (2) for adding Landlord, Landlord’s mortgagee, the management company for the Development, and other parties designated by Landlord, as additional insureds.

 

(c)           Certificates, Subrogation and Other Matters. Tenant shall provide Landlord with certificates evidencing the coverage required hereunder prior to the Commencement Date, or Tenant’s entry to the Premises for construction of improvements or any other purpose (whichever first occurs). Such certificates shall state that such insurance coverage may not be changed, canceled or non-renewed without at least thirty (30) days’ prior written notice to Landlord. Tenant shall provide renewal certificates to Landlord at least ten (10) days prior to expiration of such policies. Tenant’s insurance policies shall be primary to all policies of Landlord and any other additional insureds (whose policies shall be deemed excess and noncontributory). All insurance required hereunder shall be provided by responsible insurers licensed in the Commonwealth of Pennsylvania, and shall have a general policy holder’s rating of at least A and a financial rating of at least X in the then current edition of Best’s Insurance Reports. The parties mutually hereby waive all rights and claims against each other for all losses covered by their respective insurance policies, and waive all rights of subrogation for their respective insurers. The parties agree that their respective insurance policies are now, or shall be, endorsed such that said waiver of subrogation shall not affect the right of the insured to recover thereunder. Landlord disclaims any representations as to whether the foregoing coverages will be adequate to protect Tenant.

 

(d)           Landlord Insurance. At all times during the Lease Term, Landlord agrees to maintain in force and effect (i) all-risk fire and extended coverage insurance on the Building, and (ii) commercial general liability insurance with limits and deductibles consistent with those maintained by owners of similarly situated buildings in the vicinity of the Building.

 

Article 18.    LANDLORD’S LIABILITY

 

Except for claims arising from the negligent acts or willful misconduct of Landlord or its agents, employees or contractors, Tenant waives all claims against Landlord and Landlord’s partners, members, agents and employees for injury or death to persons, damage to property or any other interest of Tenant sustained by Tenant or a party claiming by or through Tenant resulting from: (a) any defect in or failure of structural, plumbing, sprinkling, electrical, heating or air conditioning systems or equipment, or any other systems and equipment of the Premises or the Building or from the drains, pipes, plumbing or sewer; (b) broken glass; (c) any acts or omissions of the other tenants or occupants of the Building or of nearby buildings; (d) any acts or omissions of other persons; (e) damage or loss sustained to motor vehicles (including any contents) parked at or operating within the Development, from any cause; and (f) theft, Act of God, public enemy,

 

 

injunction, riot, strike, insurrection, war, court order, or any order of any governmental authorities having jurisdiction over the Premises.

 

Article 19.    COMPLIANCE WITH INSURANCE REQUIREMENTS

 

Tenant agrees that Tenant will not do or suffer to be done, any act, matter or thing, objectionable to the fire insurance companies whereby the fire insurance or any other insurance now in force or hereafter to be placed on the Premises or any part thereof, or on the Building of which the Premises may be a part, shall become void or suspended, or whereby the same shall be rated as a more hazardous risk than at the date when Tenant receives possession hereunder. In case of a breach of this covenant, in addition to all other remedies of Landlord hereunder, Tenant agrees to pay to Landlord as additional rent, any and all increases in premiums on insurance carried by Landlord on the Premises or any part thereof, or on the Building of which the Premises may be a part, caused in any way by the occupancy of Tenant. Notwithstanding the foregoing, Landlord acknowledges that the Permitted Use shall not constitute a breach of this Article 19.

 

Article 20.   FIRE OR OTHER CASUALTY

 

(a)           If the Building and/or Premises are damaged by fire or any other cause to such extent that the same cannot be restored, as reasonably estimated by Landlord, within one hundred twenty (120) days after the date of such damage or destruction, then Landlord shall, no later than the sixtieth (60th) day following the damage, give Tenant notice of Landlord’s election either to (a) restore the Building and Premises or (b) terminate this Lease. In the event Landlord elects to terminate this Lease, the Lease shall terminate on the earlier of the date of such notice or the date upon which Tenant surrenders possession of the Premises. In such event, the Rent and other charges due hereunder shall be apportioned as of the date of such casualty, and any Rent paid for any period beyond said date shall be repaid to Tenant. If the time of restoration as estimated by Landlord shall be less than one hundred twenty (120) days, or if Landlord does not elect to terminate this Lease, as hereinabove provided, Landlord shall restore the Building and the Premises, and Tenant shall have not right to terminate this Lease except as herein provided. Tenant shall, in such event, restore fixtures and improvements owned by Tenant to the original condition. Notwithstanding the foregoing, however, if the time of restoration as reasonably estimated by Landlord exceeds one hundred twenty (120) days, Tenant shall have the right to terminate this Lease upon written notice given to Landlord within thirty (30) days after the date of Landlord’s notice of the estimated restoration period. Landlord shall deliver notice of the estimated restoration period within sixty (60) days after the date of the casualty.

 

(b)           In any such case in which use of the Premises is affected by any damage thereto, there shall be an abatement or an equitable reduction in Rent, depending on the period for which, and the extent to which, the Premises is not reasonably usable for the purposes for which it is leased hereunder. If the damage results from the fault of Tenant, or Tenant’s agents, servants, visitors or licensees, Tenant shall not be entitled to any abatement or reduction of Rent up to the amount of the deductible paid by Landlord.

 

Article 21.    SUBORDINATION

 

This Lease shall be subject and subordinate to the lien of any mortgage, or renewals, modifications, consolidations, replacements or extensions thereof, which now or hereafter may affect the Premises. Tenant shall, at Landlord’s request, execute such agreements and other instruments as Landlord or any mortgagee of the Premises reasonably shall deem necessary or desirable to subordinate this Lease to the lien of any

 

 

present or future mortgage, mortgages or construction loans against the Premises. The subordination of this Lease shall be subject to any current or future mortgage holder(s) agreement not to disturb Tenant’s occupancy so long as Tenant is not then in default of this Lease. Tenant specifically approves and, upon Landlord’s request, agrees to execute an Estoppel Certificate and a Subordination, Nondisturbance and Attornment Agreement substantially in the forms attached hereto as Exhibits “E” and “F”, respectively.

 

Article 22.    CONDEMNATION

 

(a)           In the event the Premises, or any part thereof, shall be taken or condemned permanently or temporarily for any public or quasi-public use or purpose by any competent authority in appropriation proceedings or by any right of eminent domain, the entire compensation award therefore, including leasehold, reversion and fee, shall belong to the Landlord without any deduction therefrom for any present or future estate of Tenant. Tenant shall, however, be entitled to claim, prove and receive in such condemnation proceedings such award as may be allowed for fixtures and other equipment installed by it, and for moving expenses, but only if such award shall be in addition to the award to Landlord.

 

(b)           If the entire Building shall be so taken by virtue of eminent domain, this Lease shall terminate on the date when title vests pursuant to such taking, and the Rent and other charges hereunder shall be apportioned as of said date, and any Rent paid for any period beyond said date shall be repaid to Tenant.

 

(c)           If more than twenty percent (20%) of the floor area comprising the Premises shall be so taken, or if a portion of the Building or Development is taken which materially interferes with Tenant’s use of the Premises, either party shall have the right to cancel and terminate this Lease as of the date of such taking, upon giving notice to the other party within thirty (30) days after notice to Tenant from Landlord or the condemning authority that such Premises are to be appropriated or taken. In the event that this Lease is not terminated as herein provided, this Lease shall continue, with an equitable and proportionate adjustment, effective on the date of taking, in Rent and other charges due hereunder based upon the reduction in floor area.

 

Article 23.    ESTOPPEL CERTIFICATES

 

Tenant shall, at any time and from time to time, upon thirty (30) days written request by Landlord, execute, acknowledge and deliver to Landlord a statement in writing duly executed by Tenant (i) certifying that this Lease is in full force and effect without modification or amendment (or, if there have been any modifications or amendments, that this Lease is in full force and effect as modified and amended and setting forth in full all modifications and amendments), (ii) certifying the dates to which Base Rent and additional rent have been paid, and (iii) either certifying that to the knowledge of Tenant no default exists under this Lease or specifying each such default, and (iv) certifying such other matters as Landlord and/or any lender may reasonably request; it being the intention and agreement of Landlord and Tenant that any such statement by Tenant may.be relied upon by a prospective purchaser or a prospective mortgagee of the Building, or current mortgagee of the Building, or by others, in any matter affecting the Premises.

 

Article 24.    DEFAULT

 

The occurrence of any of the following events shall constitute a default by Tenant under this Lease:

 

 

(a)           Failure of Tenant to take possession of the Premises within thirty (30) days following the Commencement Date;

 

(b)           A failure by Tenant to pay any installment of Base Rent hereunder within seven (7) days after the due date or a failure to pay any such other sum herein required to be paid by Tenant within thirty (30) days after written notice thereof;

 

(c)           An abandonment of the Premises by Tenant;

 

(d)           An assignment of this Lease or subletting of the Premises in violation of this Lease;

 

(e)           A failure by Tenant to pay, when due, any installment of Rent hereunder on two (2) or more occasions within any period of twelve (12) consecutive months;

 

(f)           The failure by Tenant to maintain insurance as required by the provisions of Article 17 hereof;

 

(g)           A failure by Tenant to observe and perform any other material provision or covenant of this Lease to be observed or performed by Tenant, where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant;

 

 

(h)           The filing of a petition by or against Tenant for adjudication as a bankrupt or insolvent or for reorganization or for the appointment pursuant to any local, state or federal bankruptcy or insolvency law of a receiver or trustee of Tenant’s property; or an assignment by Tenant for the benefit of creditors; or the taking possession of the property of Tenant by any local, state or federal governmental officer or agency or court-appointed official for the dissolution or liquidation of Tenant or for the operating, either temporary or permanently, of Tenant’s business, provided, however, that if any such action is commenced against Tenant the same shall not constitute a default if Tenant causes the same to be dismissed within sixty (60) days after the filing of same; or

 

(i)           A default or breach by Tenant beyond the expiration of applicable notice and/or cure periods under any other lease with Landlord in connection with the Building.

 

Article 25.    PROVISIONS RELATED TO LANDLORD’S REMEDIES

 

(a)           Remedies. Upon the occurrence of any event of default set forth above and the expiration of any applicable notice and grace period, Landlord shall have the rights and remedies hereinafter set forth to the extent permitted by law, which shall be distinct, separate and cumulative with and in addition to any other right or remedy allowed under law or any other provision of this Lease:

 

(1)           Landlord may terminate this Lease and Tenant’s right of possession, reenter and repossess the Premises by detainer suit, summary proceedings or other lawful means, and recover from Tenant: (i) any unpaid Rent as of the termination date; (ii) the amount by which: (a) any unpaid Rent which would have accrued after the termination date during the balance of the term exceeds (b) the reasonable rental value of the Premises under a lease substantially similar to this Lease, taking into account among other things the condition of the Premises, market conditions and the period of time the Premises may reasonably remain vacant before Landlord is able to re-lease the same to a suitable replacement tenant, and Costs of Reletting (as defined in Paragraph (g) below) that Landlord may incur in order to enter such replacement lease, (iii) any other amounts necessary to compensate Landlord for all damages proximately caused by Tenant’s failure to perform its obligations under this Lease, but excluding consequential, indirect

 

 

or special damages. For purposes of computing the amount of rent herein that would have accrued after the termination date, Tenant’s obligations for Real Estate Taxes and Operating Costs shall be projected based upon the average rate of increase in such items from the Commencement Date through the termination date (or if such period shall be less than three years, then based on Landlord’s reasonable estimates). The amounts computed in accordance with the foregoing subclauses (a) and (b) shall both be discounted in accordance with accepted financial practice at the rate of four (4%) percent per annum to the then present value.

 

(2)           Landlord may terminate Tenant’s right of possession, reenter and repossess the Premises by detainer suit, summary proceedings or other lawful means, without terminating this Lease, and recover from Tenant: (i) any unpaid Rent as of the date possession is terminated, (ii) any unpaid rent which thereafter accrues during the term from the date possession is terminated through the time of judgment (or which may have accrued from the time of any earlier judgment obtained by Landlord), less any consideration received from replacement tenants as further described and applied pursuant to Paragraph (g) below, and (iii) any other amounts necessary to compensate Landlord for all damages proximately caused by Tenant’s failure to perform its obligations under this Lease, including all Costs of Reletting, but excluding consequential, indirect or special damages. Tenant shall pay any such amounts to Landlord as the same accrue or after the same have accrued from time to time upon demand. At any time after terminating Tenant’s right to possession as provided herein, Landlord may terminate this Lease as provided in clause (1) above by notice to Tenant, and Landlord may pursue such other remedies as may be available to Landlord under this Lease or applicable law.

 

(b)           Reletting. If this Lease or Tenant’s right to possession is terminated or Tenant abandons the Premises, Landlord may: (i) enter and secure the Premises, change the locks, install barricades, remove any improvements, fixtures or other property of Tenant therein, perform any decorating, remodeling, repairs, alterations, improvements or additions and take such other actions as Landlord shall determine in Landlord’s sole discretion to prevent damage or deterioration to the Premises or prepare the same for reletting, and (ii) relet all or any portion of the Premises (separately or as part of a larger space), for any rent, use or period of time (which may extend beyond the term hereof), and upon any other terms as Landlord shall determine in Landlord’s sole discretion, directly or as Tenant’s agent. The consideration received from such reletting shall be applied pursuant to the terms of Paragraph (g) hereof, and if such consideration, as so applied, is not sufficient to cover all Rent and damages to which Landlord may be entitled hereunder, Tenant shall pay any deficiency to Landlord as the same accrues or after the same has accrued from time to time upon demand, subject to the other provisions hereof.

 

(c)           Specific Performance. Landlord shall at all times have the right without prior demand or notice except as required by applicable law to: (i) seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease or restrain or enjoin a violation of any provision hereof, and Tenant hereby waives any right to require that Landlord post a bond or other security in connection therewith, and (ii) sue for and collect any unpaid Rent which has accrued.

 

(d)           Returned Checks. If Landlord receives two (2) or more checks from Tenant which are returned by Tenant’s bank for insufficient funds, Landlord may require that all checks thereafter be bank certified or cashier’s checks (without limiting Landlord’s other remedies). All bank service charges resulting from any returned checks shall be borne by Tenant.

 

(e)           Landlord’s Cure of Tenant Defaults. If Tenant fails to perform any obligation under this Lease for five (5) days after notice thereof by Landlord (except that no notice shall be required in emergencies), Landlord shall have the right (but not the duty), to perform such obligation on behalf and for the account of Tenant. In such event, Tenant shall reimburse Landlord upon demand, as additional rent, for all expenses reasonably incurred by Landlord in performing such obligation together with an amount equal

 

 

to fifteen (15%) percent thereof for Landlord’s overhead, and interest thereon at the Lease Interest Rate from the date of demand. Landlord’s performance of Tenant’s obligations hereunder shall not be deemed a waiver or release of Tenant therefrom.

 

(f)            Intentionally Omitted.

 

(g)           Other Matters. No re-entry or repossession, repairs, changes, alterations and additions, reletting, or any other action or omission by Landlord shall be construed as an election by Landlord to terminate this Lease or Tenant’s right to possession, nor shall the same operate to release Tenant in whole or in part from any of Tenant’s obligations hereunder, unless express notice of such intention is sent by Landlord to Tenant. Landlord may bring suits for amounts owed by Tenant hereunder or any portions thereof, as the same accrue or after the same have accrued, and no suit or recovery of any portion due hereunder shall be deemed a waiver of Landlord’s right to collect all amounts to which Landlord is entitled hereunder, nor shall the same serve as any defense to any subsequent suit brought for any amount not therefor reduced to judgment. Landlord may pursue one or more remedies against Tenant and need not make an election of remedies except as required by applicable law. All rent and other consideration paid by any replacement tenants shall be applied at Landlord’s option: (i) first, to the Costs of Reletting, (ii) second, to the payment of all costs of enforcing this Lease against Tenant or any guarantor, (iii) third, to the payment of all interest and service charges accruing hereunder, (iv) fourth, to the payment of Rent theretofore accrued, and (v) with the residue, if any, to be held by Landlord and applied to the payment of Rent and other obligations of Tenant as the same become due (and with any remaining residue to be retained by Landlord). “Costs of Reletting” shall include without limitation, all costs and expenses incurred by Landlord for any repairs or other matters described in Paragraph (b) above, brokerage commissions, advertising costs, attorneys’ fees, any economic incentives given to enter leases with replacement tenants, and costs of collecting rent from replacement tenants. Landlord shall be under no obligation to observe or perform any provision of this Lease on its part to be observed or performed which accrues while Tenant is in default hereunder. The times set forth herein for the curing of defaults by Tenant are of the essence of this Lease.

 

Article 26.    LANDLORD’S DEFAULT; RIGHT TO CURE

 

(a)           If Landlord shall fail to perform any obligation under this Lease required to be performed by Landlord, Landlord shall not be deemed to be in default hereunder nor subject to any claims for damages of any kind, unless such failure shall have continued for a period of thirty (30) days after written notice thereof by Tenant (provided, if the nature of Landlord’s failure is such that more time is reasonably required in order to cure, Landlord shall not be in default if Landlord commences to cure within such thirty (30) day period and thereafter diligently seeks to cure such failure to completion).

 

(b)           Upon the occurrence of any event of default by Landlord after the expiration of any applicable cure and grace period, Tenant shall have all rights and remedies to the extent permitted by law or in equity, which be distinct, separate and cumulative to the extent permitted by law.

 

Article 27.    WAIVER

 

The failure or delay on the part of Landlord or Tenant to enforce or exercise at any time any of the provisions, rights or remedies in the Lease shall in no way be construed to be a waiver thereof, nor in any way to affect the validity of this Lease or any part hereof, or the right of the Landlord or Tenant to thereafter enforce each and every such provision, right or remedy. No waiver of any breach of this Lease shall be held to be a waiver of any other or subsequent breach. The receipt by Landlord of lesser amount than the Rent

 

 

due at a time when the rent is in default under this Lease shall not be construed as a waiver of such default. The receipt by Landlord of a lesser amount than the Rent due shall not be construed to be other than a payment on account of the Rent then due, nor shall any statement on Tenant’s check or any letter accompanying Tenant’s check be deemed an accord and satisfaction and Landlord may accept such payment without prejudice to Landlord’s right to recover the balance of the rent due or to pursue any other remedies provided in this Lease. No act or thing done by Landlord or Landlord’s agents or employees during the term of this Lease shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept such a surrender shall be valid unless in writing and signed by Landlord.

 

Article 28.    UTILITY DEREGULATION

 

Landlord has advised Tenant that various utility companies (each to be referred to herein as a “Current Service Provider”) are the utility companies selected by Landlord to provide service for the Development. Notwithstanding the foregoing, if permitted by law, Landlord shall have the right at any time and from time to time during the term of this Lease to either contract for service from a different company or companies providing service (each such company shall hereinafter be referred to as an “Alternate Service Provider”) or continue to contract for service from the Current Service Provider.

 

Tenant shall cooperate with Landlord, the Current Service Providers, and any Alternate Service Provider as reasonably necessary, and shall allow Landlord, the Current Service Providers, and any Alternate Service Provider reasonable access to the Building’s lines, feeders, risers, wiring, and other machinery within the Premises.

 

Unless caused by the willful misconduct or negligence of Landlord, its agents or employees, Landlord shall in no way be liable or responsible for any loss, damage, or expense that Tenant may sustain or incur by reason of any failure, interference, disruption, or defect in the supply of utility services furnished to the Premises, or of any change in the quality or character of the utility services supplied by the Current Service Providers or any Alternate Service Provider, and no such change, failure, defect, unavailability, or unsuitability shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease.

 

Article 29.    TELECOMMUNICATIONS

 

(a)           Telephone Lines. Subject to Landlord’s continuing right of supervision and approval (not to be unreasonably withheld), and the other provisions hereof, Landlord shall: (i) install telephone lines (“Lines”) connecting the Premises to Landlord’s terminal block on the floor or floors on which the Premises are located, or (ii) use such Lines as may currently exist and already connect the Premises to such terminal block. Landlord’s predecessor or independent contractor has heretofore connected such terminal block through riser system Lines to Landlord’s main distribution frame (“MDF”) for the Property. Landlord disclaims any representations, warranties or understandings concerning the capacity, design or suitability of Landlord’s riser Lines, MDF or related equipment. If there is, or will be, more than one tenant on any floor, at any time, Landlord may allocate, and periodically reallocate, connections to the terminal block based on the proportion of square feet each tenant occupies on such floor, or the type of business operations or requirements of such tenants, in Landlord’s reasonable discretion. Landlord may arrange for an independent contractor to review Tenant’s request for approval hereunder, monitor or supervise Tenant’s installation, connection and disconnection of Lines, and provide other such services, or Landlord may provide the same.

 

 

(b)           Installation. Landlord shall install Tenant’s Lines and make connections and disconnection at the terminal blocks as described above, and Landlord shall use an experienced and qualified contractor.

 

(c)           Limitation of Liability. Unless due solely to Landlord’s intentional misconduct or negligent acts, Landlord shall have no liability for damages arising, and Landlord does not warrant that the Tenant’s use of the Lines will be free, from the following (collectively called “Line Problems”): (i) any eavesdropping, wire-tapping or theft of long distance access codes by unauthorized parties, (ii) any failure of the Lines to satisfy Tenant’s requirements, or (iii) any capacitance, attenuation, cross-talk or other problems with the Lines, any misdesignation of the Lines in the MDF room or wire closets, or any shortages, failures, variations, interruptions, disconnections, loss or damage caused by or in connection with the installation, maintenance, replacement, use or removal of any other Lines or equipment at the Development by or for other tenants at the Development, by any failure of the environmental conditions at or the power supply for the Development to conform to any requirements of the Lines or any other problems associated with any Lines or by any other cause. Unless due solely to Landlord’s willful misconduct or negligent acts, under no circumstances shall any Line Problems be deemed an actual or constructive eviction of Tenant, render Landlord liable to Tenant for abatement of any rent or other charges under the Lease, or relieve Tenant from performance of Tenant’s obligations under the Lease. Landlord in no event shall be liable for damages by reason of loss of profits, business interruption or other consequential damage arising from any Line Problems.

 

Article 30.    SURRENDER

 

The Lease shall terminate and Tenant shall deliver up and surrender possession of the Premises on the last day of the term hereof, and Tenant waives the right to any notice of termination or notice to quit and Tenant hereby waives all right to any such notice as may be provided under any laws now or hereafter in effect in Pennsylvania, including but not limited to the Landlord and Tenant Act of 1951, as amended. Tenant covenants that upon the expiration or sooner termination of this Lease Tenant shall deliver up and surrender possession of the Premises in the same condition in which Tenant has agreed to keep the same during the continuance of this Lease and in accordance with the terms hereof, ordinary wear and tear and damage from casualty or condemnation excepted.

 

Article 31.    QUIET ENJOYMENT

 

Landlord covenants and agrees that Tenant, upon paying the Rent herein provided for and observing and keeping the covenants, agreements and conditions on its part to be kept, shall lawfully and quietly hold, occupy and enjoy the Premises during the Lease without hindrance or interruption by Landlord or anyone claiming by, through or under Landlord.

 

Article 32.    HOLDING OVER

 

Unless Landlord expressly agrees otherwise in writing, Tenant shall pay Landlord 150% of the amount of Rent then applicable prorated on a per diem basis for each day Tenant shall fail to vacate or surrender possession of the Premises or any part thereof after expiration or earlier termination of this Lease as required under Article 30, together with all damages sustained by Landlord on account thereof. Tenant shall pay such amounts on demand, and, in the absence of demand, monthly in advance. The foregoing provisions, and Landlord’s acceptance of any such amounts, shall not serve as permission for Tenant to hold-over, nor serve to extend the term (although Tenant shall remain a tenant at sufferance bound to comply with all provisions of this Lease until Tenant properly vacates the Premises.

 

 

Article 33.    ENVIRONMENTAL COVENANTS, REPRESENTATIONS AND WARRANTIES

 

(a)           Tenant shall comply with all laws, regulations, ordinances and other governmental standards applicable to Tenant’s use of the Premises with respect to hazardous waste, hazardous substances and any and all other environmental matters. Furthermore, Tenant shall procure and maintain all licenses and permits required by such applicable laws, ordinances or regulations. Tenant covenants and agrees that it shall not release, emit, or discharge at or from the Premises any hazardous or toxic substances consisting of any hazardous or toxic chemical, waste, byproduct, pollutants, contamination, compound, product or substance, including, without limitation, asbestos, polychlorinated byphenyls, petroleum (including crude oil or any fraction thereof), and any material the exposure to, or manufacture, possession, presence, use, generation, storage, transportation, treatment, release, disposal, abatement, cleanup, removal, remediation or handling of which, is prohibited, controlled or regulated by federal, state, regional, county, local, governmental, public or private statute, law, regulation, ordinance, order, consent decree, judgment, permit, license, code, covenant, deed restrictions, common law, treaty, convention or other requirement, pertaining to protection of the environmental, health or safety of persons, natural resources, conservation, wildlife, waste management, any hazardous material activity, and pollution (including, without limitation, regulation of releases and disposals to air, land, water and ground water). These requirements include, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. 9601 et seq., Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. 6901 et seq., Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. 1251, et seq., Clean Air Act of 1966, as amended, 42 U.S.C. 7401 et seq., Toxic Substances Control Act of 1976, 15 U.S.C. 2601 et seq., Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. 651 et seq., Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. 11001 et seq., National Environmental Policy Act of 1975, 42 U.S.C. 300(f) et seq., and any similar or implementing Pennsylvania laws, and all amendments, rules, regulations, guidance documents and publications promulgated thereunder.

 

(b)           In the event Tenant receives any notice of the happening of: (1) any event arising from Tenant’s use or occupancy of the Premises involving an emission, spill, release or discharge at or from the Premises into or upon (i) the air; (ii) soils (whether on the Premises or neighboring property) or any improvements located thereon; (iii) surface water or ground water; (iv) the sewer system servicing the Premises, except as allowed under current law, regulation or permit, of any regulated quantities of toxic or hazardous substances or wastes (intended hereby and hereafter to include any and all such materials listed in any federal, state or local law, code and ordinances and all rules and regulations promulgated thereunder, as hazardous) (any of which is hereinafter referred to as “Hazardous Discharge”); or (2) any complaint, order, directive, claim, citation or notice by any governmental authority or any other person or entity arising from Tenant’s use or occupancy of the Premises with respect to (i) air emissions; (ii) spills, releases or discharges to soils or any improvements located thereon, surface water, ground water or the sewer, septic system or waste treatment, storage or disposal system servicing the Premises; (iii) solid or liquid waste disposal; (iv) the use, generation, storage, transportation or disposal of toxic or hazardous substances or wastes; or (v) any other environmental, health or safety matter relating to any of Tenant’s activity upon the Premises, including any improvements located thereon or neighboring property (any of which is hereinafter referred to as an “Environmental Complaint”), then Tenant shall give immediate notice of same to Landlord, detailing all relevant facts and circumstances. Tenant shall, upon receipt of notice of a Hazardous Discharge or Environmental Complaint, and at its sole cost and expense, promptly and completely take all actions necessary to remove, resolve or minimize the impact of such Hazardous Discharge or Environmental Complaint on or from the Premises, and restore the affected property to its prior condition.

 

Without limitation on the foregoing, and in the event Tenant fails to take the actions set forth herein, Landlord shall have the right, but not the obligation, to enter onto the Premises and take any actions as it

 

 

deems necessary or advisable to clean up, remove, resolve or minimize the impact or otherwise deal with any Hazardous Discharge or Environmental Complaint upon Landlord’s receipt of any notice from any person or entity asserting the happening of a Hazardous Discharge or Environmental Complaint on or from or pertaining to the Premises and arising from Tenant’s use or occupancy of the Premises. All reasonable costs and expenses incurred by Landlord in the exercise of any such rights shall be deemed to be additional rent hereunder and shall be immediately payable by Tenant to Landlord upon demand.

 

(c)           Tenant, its successors and assigns, shall forever indemnify, defend and hold harmless Landlord, its partners, members, directors, officers, employees and agents, and successors and assigns from and against all damages, punitive damages, liabilities, losses, demands, claims, cost recovery actions, lawsuit, administrative proceedings, orders, response costs, compliance costs, investigation expenses, consultant fees, attorneys’ fees and litigation expenses, arising from Tenant’s use of the Premises, including (1) possession, use and storage of any hazardous material at the Premises; (2) the operation of any applicable environmental law against the Tenant, Landlord or the Premises, based on Tenant’s activities during the term of this Lease; or (3) the violation at the Premises or by the Tenant of any applicable environmental law. Tenant and its successors or assigns shall pay all costs and expenses incurred by Landlord, its successors and assigns, to enforce the provisions of this indemnification, including, without limitation, reasonable attorneys’ fees and litigation expenses. This indemnification shall survive the termination of this Lease.

 

(d)           As between Landlord and Tenant, Landlord shall be responsible for (i) the remediation of any hazardous materials or substances located on the Development, the Building, or any part thereof (including the Premises), existing as of the Commencement Date (except to the extent caused by Tenant or its agents, employees or contractors), (ii) any violations of environmental laws existing as of the Commencement Date (except to the extent caused by Tenant or its agents, employees or contractors), (iii) the remediation of any hazardous materials or substances located on the Development, the Building, or any part thereof (including the Premises), existing as of the Commencement Date after the Commencement Date to the extent caused by Landlord or its agents, employees or contractors, or (iv) any violations of environmental laws arising on or after the Commencement Date to the extent caused by Landlord or its agents, employees or contractors.

 

(e)           Landlord represents and warrants to Tenant, to the best of its knowledge, as of the Commencement Date, it has received no written notice from any applicable governmental authority regarding the existence of hazardous materials on or about the Premises or the Development.

 

Article 34.    TENANT’S COMPLIANCE WITH LAWS

 

Tenant shall comply with all governmental laws, ordinances and regulations applicable to Tenant’s occupancy and use of the Premises.

 

Article 35.    DISABILITIES ACT

 

Tenant shall comply, at Tenant’s sole cost and expense, with the Americans with Disabilities Act of 1990 and similar state and local laws and ordinances, as well as all regulations issued thereunder, but only if the need for compliance is caused in whole or material part by reason of the specific nature of Tenant’s business operations in the Premises or specific accommodation to Tenant’s employees. Except as set forth in the preceding sentence, Landlord shall cause the common areas of the Development to comply, at Landlord’s sole cost, or at another tenant’s sole cost, or as an Operating Cost subject to pass-through hereunder, with the Americans with Disabilities Act of 1990 and similar state

 

 

and local laws and ordinances, as well as all regulations issued thereunder. Tenant shall promptly advise Landlord in writing, and provide Landlord with copies of any notice received by Tenant alleging violation of any such law, regulation or ordinance relating to the Premises or the Building or any use thereof or activity therein, or any governmental or regulatory action or investigation instituted or threatened regarding noncompliance with any such law, regulation or ordinance.

 

Article 36.    NOTICE

 

Wherever in this Lease it shall be required or permitted that notice or demand be given or served by either party to this Lease to or on the other party, such notice or demand shall be deemed to have been duly given or served if in writing and either personally served or forwarded by Federal Express or comparable delivery service or by registered or certified mail, charges prepaid, and addressed as set forth in Article 1 to the applicable Notification Addresses.

 

Each such mailed notice shall be deemed to have been given to or served upon the party to which addressed (i) on the date of delivery if personally served, (ii) one business day after the date the same is deposited with the express service, or (iii) three business days after the date the same is deposited with the postal service, properly addressed in the manner above provided. Either party hereto may change the address to which such notices shall be delivered or mailed by giving written notice of such change to the other party hereto, as herein provided.

 

Article 37.    BROKERS

 

Each party represents and warrants to the other that TARQUINCoRE, LLC has acted as the only broker or agent in connection with the finding and negotiation of this Lease. Landlord shall be responsible for payment of commissions or fees due such brokers in accordance with the terms of Landlord’s written listing agreement with such agent. Each party agrees to indemnify and hold harmless the other from and against any claims, suits, liabilities and expenses incurred by or assessed by reason of any undisclosed brokerage or agency arrangement.

 

Article 38.    FORCE MAJEURE

 

Neither party shall be required to perform any term, condition or covenant of this Lease as long as such performance is delayed or prevented by force majeure, which shall mean Acts of God, strikes, lockouts, material or labor restrictions imposed by governmental authority, civil riot, floods and other causes not reasonably within the control of such party and which, by the exercise of due diligence, such party is unable, wholly or in part, to prevent or overcome; provided, however, that such party shall be required to commence and thereafter diligently prosecute performance of completion to the extent reasonably permitted under the circumstances. Notwithstanding anything herein to the contrary, the foregoing shall not excuse either party from the payment of any monies due pursuant to the terms of this Lease.

 

Article 39.    TRANSFER OF LANDLORD’S INTEREST

 

Landlord’s obligations hereunder shall be binding upon Landlord only for the period of time that Landlord is in ownership of the Building; and, upon termination of that ownership, Tenant, except as to any obligations which have then matured or relate to an event occurring prior to the transfer, any breach

 

 

occurring prior to the transfer, or any tort or fraud committed prior to the transfer, shall look solely to Landlord’s successor in interest in the Building for the satisfaction of each and every obligation of Landlord hereunder. Tenant agrees to attorn to any transferee of Landlord.

 

Article 40.    SUCCESSORS

 

The respective rights and obligations provided in this Lease shall bind and shall inure to the benefit of the parties hereto and their respective successors and assigns, provided, however, that no rights shall inure to the benefit of any successors of Tenant whenever, by the express terms of this Lease, Landlord’s written consent for the transfer to such successor is required under Article 14 hereof, unless Landlord shall have granted such consent.

 

Article 41.    GOVERNING LAW

 

This Lease shall be construed, governed and enforced in accordance with the laws of the Commonwealth of Pennsylvania and the exclusive venue for any action shall be in the Court of Common Pleas of Allegheny County, Pennsylvania.

 

Article 42.    SEPARABILITY

 

If any provisions of this Lease shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall in no way be affected or impaired and such remaining provisions shall remain in full force and effect.

 

Article 43.    CAPTIONS

 

Any headings preceding the text of the several paragraphs and subparagraphs hereof are inserted solely for convenience of reference and shall not constitute a part of this Lease, nor shall they affect its meaning, construction or effect.

 

Article 44.    GENDER

 

As used in this Lease, the word “person” shall mean and include, where appropriate, any individual, corporation, partnership or other entity; the plural shall be substituted for the singular, and the singular for the plural, where appropriate; and words of any gender shall mean to include any other gender.

 

Article 45.    EXECUTION; COUNTERPARTS

 

This Lease shall become effective when it has been signed by a duly authorized officer or representative of each of the parties and delivered to the other party. This Lease may be executed in any number of counterparts, each of which when taken together shall be deemed to be one and the same instrument. The parties acknowledge and agree that notwithstanding any law or presumption to the contrary, the exchange of copies of this Lease and signature pages by electronic transmission shall constitute effective execution and delivery of this Lease for all purposes, and signatures of the parties hereto transmitted electronically shall be deemed to be their original signature for all purposes.

 

 

Article 46.    ENTIRE AGREEMENT

 

This Lease, including the Exhibits hereto, contains all the agreements, conditions, understandings, representations and warranties made between the parties hereto with respect to the subject matter hereof, and may not be modified orally or in any manner other than by an agreement in writing signed by both parties hereto or their respective successors in interest.

 

Article 47.    AUTHORITY

 

If Tenant is a corporation, association, partnership or similar legal entity, the Tenant represents and warrants that the individual signing this Lease is duly authorized to execute and deliver this Lease on behalf of such entity in accordance with the duly adopted authorizing instruments of such entity which have been adopted or approved in accordance with all legal requirements and the internal bylaws, agreements, or other organizing documents of the entity, and that this Lease is binding upon such entity in accordance with its terms.

 

If Landlord is a corporation, association, partnership or similar legal entity, The Landlord represents and warrants that the individual signing this Lease is duly authorized to execute and deliver this Lease on behalf of such entity in accordance with the duly adopted authorizing instruments of such entity which have been adopted or approved in accordance with all legal requirements and the internal bylaws, agreements, or other organizing documents of the entity, and that this Lease is binding upon such entity in accordance with its terms.

 

Article 48.    SECURITY DEPOSIT

 

Upon execution of this Lease, Tenant shall deposit with Landlord the Security Deposit in the amount set forth in Article 1. The Security Deposit shall be held by Landlord as security for the full and faithful performance by Tenant of all of the terms, covenants and provisions of this Lease during the term hereof. In no event shall Landlord be obligated to pay, or Tenant is entitled to receive, any interest or other earnings on the security deposit. Landlord shall not be obligated to hold the Security Deposit in trust or in a separate account but may freely commingle the security deposit with Landlord’s other funds.

 

In the event Tenant fails to keep and perform any of the terms, covenants or provisions of this Lease, then Landlord, at Landlord’s option, may appropriate and apply the Security Deposit, or so much thereof as may be necessary to pay any Rent or other sums due hereunder for which Tenant shall be in default of payment. Tenant, upon notice from Landlord, immediately shall remit to Landlord an amount sufficient to restore this Security Deposit to the amount required to be maintained in accordance with this Article. Upon Tenant’s full and complete performance and compliance with all of the terms, covenants and provisions of this Lease during the lease term, upon the expiration of the term and Tenant’s proper surrender of the Premises, the Security Deposit shall be returned to Tenant.

 

In the event of a sale of the Building, Landlord may deliver the Security Deposit to the purchaser, and upon such delivery, Landlord shall be discharged from any further liability with respect to the Security Deposit.

 

Article 49.    OFAC CERTIFICATION

 

Tenant certifies that: (i) it is not acting, directly or indirectly, for or on behalf of any person, group, entity, or nation named by any Executive Order or the United States Treasury Department as a terrorist, “Specially

 

 

Designated National and Blocked Person,” or other banned or blocked person, entity, nation, or transaction pursuant to any law, order, rule, or regulation that is enforced or administered by the Office of Foreign Assets Control; and (ii) it is not engaged in this transaction, directly or indirectly on behalf of, or instigating or facilitating this transaction, directly or indirectly on behalf of, any such person, group, entity, or nation.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, the parties, intending to be legally bound, have executed this Lease as of the day and year first written above.

 

ATTEST:

COGNITION THERAPEUTICS, INC.

 

/s/ Anita Marocci

By:

/s/ Harold Safferstein

	Name:	Harold Safferstein
	Title:	SVP

 

 

ATTEST:

RJ EQUITIES LP

 

By:

RD Equities, LLC, its General Partner

 

/s/ Anita Marocci

By:

/s/ Ronald J. Tarquinio

	Name:	Ronald J. Tarquinio
	Title:	Member

 

 

Exhibit “A”

 

Diagram of Development

 

 

Exhibit “B”

 

Outline of Premises

 

 

RPC Executive Office Suites Floor Plan

 

 

 

Exhibit “C”

 

Rules and Regulations

 

GENERAL:

 

1.       OBSTRUCTIONS:

The streets, driveways, parking lots, sidewalks, entrances, passages and other common areas provided by Landlord shall not be obstructed by Tenant, its employees, agents, representatives, vendors and guests or used for any other purpose than ingress and egress.

2.       BATHROOMS:

The bathrooms, toilet rooms and other plumbing apparatus shall not be used for any other purposes other than those for which they are constructed.

3.       GENERAL PROHIBITIONS:

·

No cooking, grilling, smoking, gas or other type of flame in the common areas;

·

No animals or birds are permitted anywhere on the premises;

·

No use of the premises as sleeping rooms;

·

No loitering or congregating in the entrances or hallways;

·

No making improper loud noises or disturbances of any kind;

·

Doing anything to unreasonably disturb or disrupt other tenants in the complex;

·

Doing anything to change, damage or destroy the landscaping around the premises;

4.       SMOKING:

The complex’s buildings are maintained as smoke free environments. This means no smoking in the building. Smoking is permitted outside of the buildings where several smoking boxes are provided in four designated areas for cigarette butts. Please use the smoking boxes for your butts, not the grounds or parking areas.

5.       DOORS:

Exterior doors are not to be held open. Holding or propping these doors open for 30 seconds or more will sound off an alarm and automatically notify police.

 

PARKING:

 

To insure that adequate parking spaces are available for our tenants, a specific number of parking passes are provided to each tenant for a specific parking zone. The passes are to be placed on the rear view mirror of each vehicle and can be transferred from one vehicle to another. The parking lots are patrolled daily. Vehicles that lack a parking pass or are parked in the wrong zone will be considered in violation of the parking regulations. Violations are handled as follows:

First Violation:        A yellow sticker will be placed under the windshield wiper;

Second Violation:    An adhesive yellow sticker will be placed on the windshield;

Third Violation:       The police will be called and the car will be towed, at the owner’s expense.

 

These rules and regulations are subject to change from time to time at the discretion of the Landlord.

 

 

Exhibit “D”

 

Intentionally Omitted

 

 

Exhibit “E”

 

ESTOPPEL CERTIFICATE

 

{See Attached Form of Estoppel}

 

 

 

TENANT ESTOPPEL

 

Ladies and Gentlemen:

 

The undersigned certifies to                          (together with its successors and assigns, the “Bank”) and the Landlord (as defined below) as of the date hereof as follows:

 

1. It is the tenant under a certain Office Lease Agreement dated July , 2017 (the “Lease”) with RJ Equities, LP, a Pennsylvania limited partnership,as landlord (together with its successors and assigns, “Landlord”), and the undersigned, as tenant (“Tenant”), for premises located at and known as Suite 242 located on the second floor of the commercial building situated at 2403 Sidney Street, Pittsburgh, PA 15203 (the “Leased Premises”).

 

2.

The Lease is in full force and effect. There are no amendments, modifications or supplements to the Lease except the following (if none, indicate “None”):

.

 

3.

The Lease does not contain any provisions regarding options to purchase and/or lease additional space, rights of first refusal to purchase and/

or lease additional space or any similar provisions regarding acquisition of ownership interests or additional leases space in the building. If such provisions

are contained in the Lease please specify:

 

4.

The term of the Lease commenced on July I, 2017 and terminates on June 30, 2020. Tenant has taken possession of the Leased Premises.

 

5.      The monthly base rent payments currently payable pursuant to the Lease are in the amount of $2,484.83. Rent has been paid through_______. In addition to the monthly base rent payments, the following amounts are also payable on a monthly basis for the following purposes, all of which have been paid through                                                                                                                                                                                                                     (if none, indicate “None”):

.

 

6.    All improvements, if any, required to be made by Landlord under the Lease have been completed and accepted by Tenant. Landlord has not agreed to grant Tenant any free rent or rent rebate or to make any contribution to tenant improvements.

 

7.     Tenant will deliver to the Bank a copy of all notices Tenant serves on or receive from Landlord.

 

8.     No advance rent has been paid, and to Tenant’s knowledge, Tenant has no unsatisfied claims against Landlord, no uncured default exists under the Lease, and no event has occurred that but for the giving of notice would constitute a default.

 

9.     No cancellation, modification, assignment, renewal, extension, or amendment of the Lease or prepayment of more than one month’s rent shall be made without the Bank’s written consent and approval.

 

 

10.      Tenant has all licenses and permits which Tenant must have to operate its business from the Leased Premises, and all are current and have not been revoked. Since taking possession of the Leased Premises, Tenant has not received any notice that the Leased Premises or Tenant’s use of the Leased Premises violates any applicable law, regulation, ordinance or directive of any governmental authority or agency or insurance company.

 

11.      The amount of the security deposit is $0.00.

 

The undersigned individual hereby certifies that he or she is duly authorized to sign, acknowledge and deliver this letter on behalf of Tenant. The statements herein contained may be relied upon by the Bank and the Landlord and their respective successors and assigns.

 

	Very truly yours,
	Cognition Therapeutics, Inc.

 

	By:
	Title:

 

 

EXHIBIT “F”

 

SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

 

{See Attached Form of SNDA}

 

 

 

SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT

 

This Subordination, Non-Disturbance and Attornment Agreement (this “Agreement”) is made as of the ________ day of ______, 20____, among (the “Lender”), having a place of business at ____________, RJ Equities LP (the “Landlord” or “Borrower”), a Pennsylvania limited partnership having a place of business at 2403 Sidney Street, Suite 200, Pittsburgh, PA 15203, and Cognition Therapeutics, Inc. (the “Tenant”), having a place of business at 2403 Sidney Street, Suite 261, Pittsburgh, PA 15203.

 

Introductory Provisions

 

A.       Lender is relying on this Agreement as an inducement to Lender in making and maintaining a loan (the “Loan”) secured by, among other things, a Mortgage and Security Agreement dated as of (the “Mortgage”) given by Borrower covering property commonly known as and numbered 2403 Sidney Street, Pittsburgh, PA 15203 (the “Property”). Lender is also the “Assignee” under an Assignment of Leases, Rents and Profits (the “Assignment”) dated as of from Borrower with respect to the Property.

 

B.       Tenant is the tenant under that certain lease (the “Lease”) dated July __, 2017, made with Landlord covering certain premises (the “Premises”) at the Property as more particularly described in the Lease.

 

C.       Lender requires, as a condition to the making and maintaining of the Loan, that the Mortgage be and remain superior to the Lease and that its rights under the Assignment be recognized.

 

D.       Tenant requires as a condition to the Lease being subordinate to the Mortgage that its rights under the Lease be recognized.

 

E.        Lender, Landlord, and Tenant desire to confirm their understanding with respect to the Mortgage and the Lease.

 

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements contained in this Agreement, and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, and with the understanding by Tenant that Lender shall rely hereon in making and maintaining the Loan, Lender, Landlord, and Tenant agree as follows:

 

1.

Subordination. The Lease and the rights of Tenant thereunder is subordinate and inferior to the Mortgage and any amendment, renewal, substitution, extension or replacement thereof and each advance made thereunder as though the Mortgage, and each such amendment, renewal, substitution, extension or replacement were executed and recorded, and the advance made, before the execution of the Lease.

 

2.

Non-Disturbance. So long as Tenant is not in default (beyond any notice and/or cure period expressed in the Lease within which Tenant may cure such default) in the payment of rent or in the performance or observance of any of the terms, covenants or conditions of the Lease on Tenant’s part to be performed or observed: (a) Tenant’s occupancy of the Premises shall not be disturbed by Lender in the exercise of any of its rights under the Mortgage during the term of the Lease, or any extensions or renewals thereof made in accordance with the terms of the Lease, and (b) Lender will not join Tenant as a party defendant in any action or proceeding for the purpose of terminating Tenant’s interest and estate under the Lease because of any default under the Mortgage.

 

 

3.

Attornment and Certificates. In the event Lender succeeds to the interest of Borrower as Landlord under the Lease, or if the Property or the Premises are sold pursuant to the power of sale under the Mortgage, Tenant shall attorn to Lender, or a purchaser upon any such foreclosure sale, and shall recognize Lender, or such purchaser, thereafter as the Landlord under the Lease. Such attornment shall be effective and self-operative without the execution of any further instrument. Tenant agrees, however, to execute and deliver at any time and from time to time, upon the request of any holder(s) of any of the indebtedness or other obligations secured by the Mortgage, or upon request of any such purchaser, (a) any instrument or certificate which, in the reasonable judgment of such holder(s), or such purchaser, may be necessary or appropriate in any such foreclosure proceeding or otherwise to evidence such attornment and (b) an instrument or certificate regarding the status of the Lease, consisting of statements, if true (and if not true, specifying in what respect): (i) that the Lease is in full force and effect, (ii) the date through which rentals have been paid, (iii) the duration and date of the commencement of the term of the Lease, (iv) the nature of any amendments or modifications to the Lease, (v) that to Tenant’s knowledge no default, or state of facts, which with the passage of time or notice, or both, would constitute a default, exists on the part of either party to the Lease, and (vi) the dates on which payments of additional rent, if any, are due under the Lease.

 

4.

Limitations. If Lender exercises any of its rights under the Assignment or the Mortgage, or if Lender shall succeed to the interest of Landlord under the Lease in any manner, or if any purchaser acquires the Property, or the Premises, upon or after any foreclosure of the Mortgage, or any deed in lieu thereof, Lender or such purchaser, as the case may be, shall have the same remedies by entry, action or otherwise in the event of any default by Tenant (beyond any notice and/or cure period expressed in the Lease within which Tenant may cure such default) in the payment of rent or in the performance or observance of any of the terms, covenants and conditions of the Lease on Tenant’s part to be paid, performed or observed that Landlord had or would have had if Lender or such purchaser had not succeeded to the interest of the present Landlord. From and after any such attornment, Lender or such purchaser shall be bound to Tenant under all the terms, covenants and conditions of the Lease, and Tenant shall, from and after such attornment to Lender, or to such purchaser, have the same remedies against Lender, or such purchaser, for the breach of an agreement contained in the Lease that Tenant might have had under the Lease against Landlord, if Lender or such purchaser had not succeeded to the interest of Landlord; provided, however, that Lender or such purchaser shall only be bound during the period of its ownership, and that in the case of the exercise by Lender of its rights under the Mortgage, or the Assignment, or any combination thereof, or a foreclosure, or deed in lieu of foreclosure, all Tenant claims shall be satisfied only out of the interest, if any, of Lender, or such purchaser, in the Property, and Lender and such purchaser shall not be: (a) liable for any act or omission of any prior landlord (including Landlord); or (b) liable for or incur any obligation with respect to the construction of the Property or any improvements of the Premises or the Property; or (c) subject to any offsets or defenses which Tenant might have against any prior landlord (including Landlord), or (d) bound by any rent or additional rent which Tenant might have paid for more than the then current rental period to any prior landlord (including Landlord); or (e) bound by any amendment or modification of the Lease, or any consent to any assignment or sublease, made without Lender’s prior written consent; or (f) bound by or responsible for any security deposit not actually received by Lender; or (g) liable for any obligation with respect to any breach of warranties or representations of any nature under the Lease or otherwise, including without limitation, any warranties or representations respecting use, compliance with zoning, Landlord’s title, Landlord’s authority, habitability and/or fitness for any purpose, or possession; or (h) liable for consequential damages.

 

5.

Rights Reserved. Nothing herein contained is intended, nor shall it be construed, to abridge or adversely affect any right or remedy of: (a) Landlord under the Lease, or any subsequent Landlord,

 

 

against Tenant in the event of any default by Tenant (beyond any notice and/or cure period expressed in the Lease within which Tenant may cure such default) in the payment of rent or in the performance of observance of any of the terms, covenants or conditions of the Lease on Tenant’s part to be performed or observed; or (b) Tenant to pursue claims under the Lease against any prior landlord (including Landlord) in the event of any default by prior landlord whether or not such claim is barred against Lender or a subsequent purchaser.

 

6.

Notice and Right to Cure. Tenant agrees to provide Lender with a copy of each notice of default given to Landlord under the Lease at the same time such notice of default is given to Landlord. In the event of any default by Landlord under the Lease, Tenant will take no action to terminate the Lease unless the default remains uncured for a period of sixty (60) days after written notice thereof shall have been given, postage prepaid, to Landlord at Landlord’s address, and to Lender at the address provided in Section 7 below; provided, however, that if any such default is such that it reasonably cannot be cured within such sixty (60) day period, such period shall be extended for such additional period of time as shall be reasonably necessary (including, without limitation, a reasonable period of time to obtain possession of the Property and to foreclose the Mortgage), if Lender gives Tenant written notice within such sixty (60) day period of Lender’s election to undertake the cure of the default and if curative action (including, without limitation, action to obtain possession and foreclosure) is instituted within thirty (30) days thereafter and is thereafter diligently pursued. Notwithstanding the foregoing, Lender shall have no obligation to cure any default under the Lease.

 

7.

Notices. Any notice or communication required or permitted hereunder shall be in writing, and shall be given or delivered: (a) by United States mail, registered or certified, postage fully prepaid, return receipt requested, or (b) by recognized courier service or recognized overnight delivery service; and in any event addressed to the party for which it is intended at its address set forth below:

 

To Lender:
To Landlord:		RJ Equities LP
		2403 Sidney Street, Suite 200
		Pittsburgh, PA 15203
		Attention: Ronald J. Tarquinio
To Tenant:		Cognition Therapeutics, Inc.
		2403 Sidney Street, Suite 261
		Pittsburgh, PA 15203
		Attn: President

 

or such other address as such party may have previously specified by notice given or delivered in accordance with the foregoing. Any such notice shall be deemed to have been given and received on the date delivered or tendered for delivery during normal business hours as herein provided.

 

8.

No Oral Change. This Agreement may not be modified orally or in any manner other than by an agreement in writing signed by the parties hereto or their respective successors in interest.

 

9.

Payment of Rent To Lender. Tenant acknowledges that it has notice that the Lease and the rent and all sums due thereunder have been assigned to Lender as part of the security for the obligations

 

 

secured by the Mortgage. In the event Lender notifies Tenant of a default under the Loan and demands that Tenant pay its rent and all other sums due under the Lease to Lender, Tenant agrees that it will honor such demand and pay its rent and all other sums due under the Lease to Lender, or Lender’s designated agent, until otherwise notified in writing by Lender. Landlord unconditionally authorizes and directs Tenant to make rent payments directly to Lender following receipt of such notice without any obligation to further inquire as to whether or not any default exists under the Mortgage or the Assignment and that Landlord shall have no right or claim against Tenant for or by reason of any payments of rent or other charges made by Tenant to Lender following receipt of such notice.

 

10.

No Amendment or Cancellation of Lease. So long as the Mortgage remains undischarged of record, Tenant shall not amend, modify, cancel or terminate the Lease, or consent to an amendment, modification, cancellation or termination of the Lease, or agree to subordinate the Lease to any other mortgage, without Lender’s prior written consent in each instance; provided however, the foregoing shall not be construed to require Lender’s consent for Tenant to exercise any right to terminate expressly granted in the Lease.

 

11.

Options. With respect to any options for additional space provided to Tenant under the Lease, Lender agrees to recognize the same if Tenant is entitled thereto under the Lease after the date on which Lender succeeds as landlord under the Lease by virtue of foreclosure or deed in lieu of foreclosure or Lender takes possession of the Premises; provided, however, Lender shall not be responsible for any acts of any prior landlord (including Landlord) under the Lease, or the act of any tenant, subtenant or other party which prevents Lender from complying with the provisions hereof and Tenant shall have no right to cancel the Lease or to make any claims against Lender on account thereof.

 

12.

Captions. Captions and headings of sections are not parts of this Agreement and shall not be deemed to affect the meaning or construction of any of the provisions of this Agreement.

 

13.

Counterparts. This Agreement may be executed in several counterparts each of which when executed and delivered is an original, but all of which together shall constitute one instrument.

 

14.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state where the Property is located.

 

15.

Parties Bound. The provisions of this Agreement shall be binding upon and inure to the benefit of Tenant, Lender and Landlord and their respective successors and assigns; provided, however, reference to successors and assigns of Tenant shall not constitute a consent by Landlord or Lender to an assignment or sublease by Tenant, but has reference only to those instances in which such consent is not required pursuant to the Lease or for which such consent has been given.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

ATTEST:		COGNITION THERAPEUTICS, INC.
/s/ Anita Marocci		By:	/s/ Harold Safferstein
			Name:   Harold Safferstein
			Title:     SVP
ATTEST:		RJ EQUITIES LP
/s/ Anita Marocci		By:	RD Equities, LLC, its General Partner
		By:	/s/ Ronald J. Tarquinio
			Name:   Ronald J. Tarquinio
			Title:     Member
ATTEST:
		LENDER:

 

 

STATE OF	)
	) ss:
COUNTY OF	)

 

The foregoing instrument was acknowledged before me this____day of____________, 20_____, 20_______, by___________________of_______, a______, on behalf of the corporation.

 

	Notary Public
	My Commission Expires:

 

STATE OF	)
	) ss:
COUNTY OF	)

 

The foregoing instrument was acknowledged before me this____day of___________, 20_____, 20_______, by__________________of_______, a______, on behalf of the corporation.

 

	Notary Public
	My Commission Expires:

 

STATE OF	)
	) ss:
COUNTY OF	)

 

The foregoing instrument was acknowledged before me this____day of____________, 20_____, 20_______, by__________________of_______, a______, on behalf of the corporation.

 

	Notary Public
	My Commission Expires:

 

 

 

Exhibit 10.5

 

FIRST AMENDMENT TO OFFICE LEASE AGREEMENT

 

This First Amendment to Office Lease Agreement (“Amendment”) is made this 1st day of July, 2017, and is by and between RJ EQUITIES LP, a Pennsylvania limited partnership (“Landlord”), and COGNITION THERAPEUTICS, INC., a Delaware corporation (“Tenant”).

 

Article I- AMENDMENT OF BASIC TERMS

 

The parties, intending to be legally bound, do hereby agree to the amendment, ratification and restatement of certain terms of the Lease (as defined below) as follows:

 

a)	Lease:	That certain Office Lease Agreement dated January 20, 2015, as amended by this Amendment.
b)	Premises:	Suites 261, 263, and certain shared lab space all of which is located on the second floor of the commercial building (the “Building”) situated at 2403 Sidney Street, Pittsburgh, PA 15203 (the “Development”), and all as more particularly described in the Lease.
c)	Term:	The term of the Lease is hereby extended from February 1, 2018, until June 30, 2020 (the “Extended Term”). Any reference in the Lease to the Termination Date shall hereafter mean June 30, 2020.
d)	Base Rent:	Base Rent during the Extended Term shall be Seven Thousand One Hundred Three and 17/100ths Dollars ($7,103.17) per month.
e)	Options:	The parties hereby acknowledge and agree that Article 3(c) of the Lease is hereby deleted in its entirety-the intent being that Tenant shall have no further extension options to extend the term of the Lease.
f)	Defaults:	The parties acknowledge and agree that the following shall constitute a default under the Lease: “a default or breach by Tenant beyond the expiration of applicable notice and/or cure periods under any other lease with Landlord in connection with the Building”.
g)	Sublease:	Landlord has consented to the subleasing by Tenant, as sublessor, to Sharp Edge Labs, Inc. (the “Sublessee”) of a portion of the lab space comprising the Premises, upon the condition that neither anything contained in the sublease nor Landlord’s consent thereto shall (i) release Tenant

 

from any of its liabilities and obligations to Landlord under the Lease, (ii) constitute a novation, (iii) increase or modify Landlord’s obligations under the Lease, or (iv) create any rights or remedies in Sublessee under the Lease itself. It is understood and agreed that Landlord shall have no obligation or liability under the terms of the sublease.

 

Article II - TENANT REPRESENTATION

 

By the execution of this Amendment, Tenant represents and warrants to Landlord as follows as of the date hereof:

 

a)

That the Lease is in full force and effect and that, to Tenant’s knowledge, there are no Landlord defaults and that the Lease has not been assigned, modified, supplemented or amended (except as expressly set forth above).

 

b)

That there are no defenses or offsets against the Landlord’s enforcement of the Lease that may be claimed by Tenant.

 

Article III - MISCELLANEOUS

 

a)

Landlord and Tenant each represents and warrants to the other that it has had no dealings, negotiations or consultations with respect to the Premises, this Amendment or the transactions contemplated under the Lease with any broker or finder, except that Landlord was represented by TARQUINCoRE LLC (the “Broker”). Landlord shall pay all commissions and fees, if any, due to Broker in connection with this Amendment.

 

b)

Except as expressly modified by this Amendment, all other terms and provisions of the Lease shall remain in full force and effect. Tenant accepts the Premises in its current “as- is, where-is” condition. All capitalized terms used herein shall have the meaning ascribed to such term in the Lease unless otherwise defined herein. This Amendment supersedes any prior discussions, proposals, negotiations and discussions between the parties and the Lease, as amended hereby, contains all of the agreements, conditions, understandings, representations and warranties made between the parties hereto with respect to the subject matter hereof.

 

c)

This Amendment may be executed in any number of counterparts, each of which when taken together shall be deemed to be one and the same instrument. The parties acknowledge and agree that notwithstanding any law or presumption to the contrary, the exchange of copies of this Amendment and signature pages by electronic transmission shall constitute effective execution and delivery of this Amendment for all purposes, and signatures of the parties hereto transmitted electronically shall be deemed to be their original signature for all purposes.

 

 

d)

Landlord and Tenant each represents and warrants to the other that the individual signing this Amendment on behalf of such party is duly authorized to execute and deliver this Amendment on behalf of such entity in accordance with the duly adopted authorizing instruments of such entity which have been adopted or approved in accordance with all legal requirements and the internal bylaws, agreements, or other organizing documents of the entity, and that this Amendment is binding upon such entity in accordance with its terms.

 

e)

Each party shall indemnify and hold the other harmless from and against all liability, cost and expense, including attorney's fees and court costs, arising out of any misrepresentation or breach of warranty made in this Amendment.

 

{remainder of page intentionally left blank}

 

 

Witness the due execution of this Amendment the date first set forth above.

 

ATTEST:			COGNITION THERAPEUTICS, INC.
			By:	/s/ Harold T. Safferstein
By:	/s/ Anita Marcocci		Name:   Harold T. Safferstein
Anita Marcocci			Title:     SVP
WITNESS:			RJ EQUITIES LP
			By:	RD Equities, LLC, its General Partner
By:	/s/ Anita Marcocci		By:	/s/ Ronald J. Tarquinio
Anita Marcocci				Name: Ronald J. Tarquinio
				Title: Managing Member

 

 

 

Exhibit 10.6

 

Effective Date: October 1, 2007

Amended and Restated: January 16, 2009

Amended and Restated: December 14, 2010

Amended and Restated: March 25, 2011

Amended and Restated: November 27, 2011

Amended and Restated: March 20, 2014

Amended and Restated: February 22, 2016

Amended and Restated: October 28, 2016

Amended and Restated: January 10, 2017

 

COGNITION THERAPEUTICS, INC.

 

AMENDED AND RESTATED
2007 EQUITY INCENTIVE PLAN

 

The purpose of the Cognition Therapeutics, Inc. Amended and Restated 2007 Equity Incentive Plan (this “Plan”) is to provide (i) designated employees of Cognition Therapeutics, Inc. (the “Company”) and its parents and subsidiaries, (ii) certain consultants and advisors who perform services for the Company or its parents or subsidiaries and (iii) non-employee members of the Board of Directors of the Company (the “Board”) with the opportunity to receive grants of incentive stock options, nonqualified stock options and stock awards. The Company believes that the Plan will encourage the participants to contribute materially to the growth of the Company, thereby benefitting the Company’s stockholders, and will align the economic interests of the participants with those of the stockholders.

 

1.            Administration.

 

(a)            Committee. This Plan shall be administered and interpreted by the Board or by a committee consisting of members of the Board, which shall be appointed by the Board. After an initial public offering of the Company’s stock as described in Section 17(b) (a “Public Offering”), this Plan shall be administered by a committee of Board members, which may consist of “outside directors” as defined under section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and related Treasury regulations, and “non-employee directors” as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, the Board may ratify or approve any grants as it deems appropriate, and the Board shall approve and administer all grants made to non-employee directors. The committee may delegate authority to one or more subcommittees as it deems appropriate. To the extent that a committee or subcommittee administers this Plan, references in this Plan to the “Board” shall be deemed to refer to the committee or subcommittee.

 

(b)            Board Authority. The Board shall have the sole authority to (i) determine the individuals to whom grants shall be made under this Plan, (ii) determine the type, size and terms of the grants to be made to each such individual, (iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, (iv) amend the terms of any previously issued grant, and (v) deal with any other matters arising under this Plan.

 

 

(c)            Board Determinations. The Board shall have full power and authority to administer and interpret this Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing this Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Board’s interpretations of this Plan and all determinations made by the Board pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in this Plan or in any awards granted hereunder. All powers of the Board shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of this Plan and need not be uniform as to similarly situated individuals.

 

2.            Grants. Awards under this Plan may consist of grants of incentive stock options as described in Section 5 (“Incentive Stock Options”), nonqualified stock options as described in Section 5 (“Nonqualified Stock Options”) (Incentive Stock Options and Nonqualified Stock Options are collectively referred to as “Options”) and stock awards as described in Section 6 (“Stock Awards”) (hereinafter collectively referred to as “Grants”). All Grants shall be subject to the terms and conditions set forth herein and to such other terms and conditions consistent with this Plan as the Board deems appropriate and as are specified in writing by the Board to the individual in a grant instrument or an amendment to the grant instrument (the “Grant Instrument”). All Grants shall be made conditional upon the Grantee’s acknowledgement, in writing or by acceptance of the Grant, that all decisions and determinations of the Board shall be final and binding on the Grantee, his or her beneficiaries and any other person having or claiming an interest under such Grant. The Board shall approve the form and provisions of each Grant Instrument. Grants under a particular Section of this Plan need not be uniform as among the grantees.

 

3.            Shares Subject to This Plan.

 

(a)            Shares Authorized. Subject to adjustment as described below, the aggregate number of shares of common stock of the Company (“Company Stock”) that may be issued under this Plan is 11,189,392 shares, all of which may be issued as incentive stock options. After a Public Offering, the maximum aggregate number of shares of Company Stock that shall be subject to Grants made under this Plan to any individual during any calendar year shall be 3,900,000 shares, subject to adjustment as described below. Shares issued under this Plan may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the Company on the open market for purposes of this Plan. If and to the extent Options granted under this Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised or if any Stock Awards (including restricted Stock Awards received upon the exercise of Options) are forfeited, the shares subject to such Grants shall again be available for purposes of this Plan.

 

(b)            Adjustments. If there is any change in the number or kind of shares of Company Stock outstanding (i) by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, (ii) by reason of a merger, reorganization or consolidation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of any other extraordinary or unusual event affecting the outstanding Company Stock as a class without the Company’s receipt of consideration, or if the value of outstanding shares of Company Stock is substantially reduced as a result of a spinoff or the Company’s payment of an extraordinary

 

 

dividend or distribution, the maximum number of shares of Company Stock available for Grants, the maximum number of shares of Company Stock that any individual participating in this Plan may be granted in any year, the number of shares covered by outstanding Grants, the kind of shares issued under this Plan, and the price per share of such Grants may be appropriately adjusted by the Board to reflect any increase or decrease in the number of, or change in the kind or value of, issued shares of Company Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such Grants; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. Any adjustments determined by the Board shall be final, binding and conclusive.

 

4.            Eligibility for Participation.

 

(a)            Eligible Persons. All employees of the Company and its parents or subsidiaries (“Employees”), including Employees who are officers or members of the Board, and members of the Board who are not Employees (“Non-Employee Directors”) shall be eligible to participate in this Plan. Consultants and advisors who perform services for the Company or any of its parents or subsidiaries (“Key Advisors”) shall be eligible to participate in this Plan if the Key Advisors render bona fide services to the Company or its parents or subsidiaries, the services are not in connection with the offer and sale of securities in a capital-raising transaction, and the Key Advisors do not directly or indirectly promote or maintain a market for the Company’s securities.

 

(b)            Selection of Grantees. The Board shall select the Employees, Non-Employee Directors and Key Advisors to receive Grants and shall determine the number of shares of Company Stock subject to a particular Grant in such manner as the Board determines. Employees, Key Advisors and Non-Employee Directors who receive Grants under this Plan shall hereinafter be referred to as “Grantees.”

 

5.            Granting of Options.

 

(a)            Number of Shares. The Board shall determine the number of shares of Company Stock that will be subject to each Grant of Options to Employees, Non-Employee Directors and Key Advisors.

 

(b)            Type of Option and Price.

 

(i)            The Board may grant Incentive Stock Options that are intended to qualify as “incentive stock options” within the meaning of section 422 of the Code or Nonqualified Stock Options that are not intended so to qualify or any combination of Incentive Stock Options and Nonqualified Stock Options, all in accordance with the terms and conditions set forth herein. Incentive Stock Options may be granted only to employees of the Company or its parents or subsidiaries, as defined in Section 424 of the Code. Nonqualified Stock Options may be granted to Employees, Non-Employee Directors and Key Advisors.

 

(ii)            The purchase price (the “Exercise Price”) of Company Stock subject to an Option shall be determined by the Board and may be equal to or greater than the Fair Market Value (as defined below) of a share of Company Stock on the date the Option is granted; provided, however, that (x) the Exercise Price of an Incentive Stock Option shall be equal to, or

 

 

greater than, the Fair Market Value of a share of Company Stock on the date the Incentive Stock Option is granted and (y) an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any parent or subsidiary of the Company, unless the Exercise Price per share is not less than 110% of the Fair Market Value of Company Stock on the date of grant.

 

(iii)            If the Company Stock is publicly traded, then the Fair Market Value per share shall be determined as follows: (x) if the principal trading market for the Company Stock is a national securities exchange or the Nasdaq National Market, the last reported sale price thereof on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, or (y) if the Company Stock is not principally traded on such exchange or market, the mean between the last reported “bid” and “asked” prices of Company Stock on the relevant date, as reported on Nasdaq or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Board determines. If the Company Stock is not publicly traded or, if publicly traded, is not subject to reported transactions or “bid” or “asked” quotations as set forth above, the Fair Market Value per share shall be as determined by the Board.

 

(c)            Option Term. The Board shall determine the term of each Option. The term of any Option shall not exceed ten years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, or any parent or subsidiary of the Company, may not have a term that exceeds five years from the date of grant.

 

(d)            Exercisability of Options.

 

(i)            Options shall become exercisable in accordance with such terms and conditions, consistent with this Plan, as may be determined by the Board and specified in the Grant Instrument. The Board may accelerate the exercisability of any or all outstanding Options at any time for any reason.

 

(ii)            The Board may provide in a Grant Instrument that the Grantee may elect to exercise part or all of an Option before it otherwise has become exercisable. Any shares so purchased shall be restricted shares and shall be subject to a repurchase right in favor of the Company during a specified restriction period, with the repurchase price equal to the lesser of (i) the Exercise Price or (ii) the Fair Market Value of such shares at the time of repurchase, or such other restrictions as the Board deems appropriate.

 

(e)            Grants to Non-Exempt Employees. Notwithstanding the foregoing, Options granted to persons who are non-exempt employees under the Fair Labor Standards Act of 1938, as amended, shall have an Exercise Price not less than the Fair Market Value of the Company Stock on the date of grant, and may not be exercisable for at least six months after the date of grant (except that such Options may become exercisable, as determined by the Board, upon the Grantee’s death, Disability or retirement, or upon a Change of Control or other circumstances permitted by applicable regulations).

 

 

(f)            Termination of Employment, Disability or Death.

 

(i)            Except as provided below, an Option may only be exercised while the Grantee is employed by, or providing service to, the Employer (as defined below) as an Employee, Key Advisor or member of the Board. In the event that a Grantee ceases to be employed by, or provide service to, the Employer for any reason other than Disability, death, or termination for Cause, any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within 90 days after the date on which the Grantee ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Board, any of the Grantee’s Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

 

(ii)            In the event the Grantee ceases to be employed by, or provide service to, the Employer on account of a termination for Cause by the Employer, any Option held by the Grantee shall terminate as of the date the Grantee ceases to be employed by, or provide service to, the Employer. In addition, notwithstanding any other provisions of this Section 5, if the Board determines that the Grantee has engaged in conduct that constitutes Cause at any time while the Grantee is employed by, or providing service to, the Employer or after the Grantee’s termination of employment or service, any Option held by the Grantee shall immediately terminate, and the Grantee shall automatically forfeit all shares underlying any exercised portion of an Option for which the Company has not yet delivered the share certificates, upon refund by the Company of the Exercise Price paid by the Grantee for such shares. Upon any exercise of an Option, the Company may withhold delivery of share certificates pending resolution of an inquiry that could lead to a finding resulting in a forfeiture.

 

(iii)            In the event the Grantee ceases to be employed by, or provide service to, the Employer because the Grantee is Disabled, any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Board, any of the Grantee’s Options which are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

 

(iv)            If the Grantee dies while employed by, or providing service to, the Employer or within 90 days after the date on which the Grantee ceases to be employed or provide service on account of a termination specified in Section 5(f)(i) above (or within such other period of time as may be specified by the Board), any Option that is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Board, any of the Grantee’s Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

 

 

(v)            For purposes of this Section 5(f) and Section 6:

 

(A)            The term “Employer” shall include the Company and its parent and subsidiary corporations or other entities, as appropriate and as determined by the Board.

 

(B)            “Employed by, or provide service to, the Employer” shall mean employment or service as an Employee, Key Advisor or member of the Board (so that, for purposes of exercising Options and satisfying conditions with respect to Stock Awards, a Grantee shall not be considered to have terminated employment or service until the Grantee ceases to be an Employee, Key Advisor or member of the Board), unless the Board determines otherwise.

 

(C)            “Disability” shall mean a Grantee’s becoming disabled within the meaning of section 22(e)(3) of the Code, within the meaning of the Employer’s long-term disability plan applicable to the Grantee, or as otherwise determined by the Board.

 

(D)            “Cause” shall mean, except to the extent specified otherwise by the Board, a finding by the Board that the Grantee (i) has breached his or her employment or service contract with the Employer, (ii) has engaged in disloyalty to the Company, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty, (iii) has disclosed trade secrets or confidential information of the Employer to persons not entitled to receive such information, (iv) has breached any written noncompetition or nonsolicitation agreement between the Grantee and the Employer or (v) has engaged in such other behavior detrimental to the interests of the Employer as the Board determines.

 

(g)            Exercise of Options. A Grantee may exercise an Option that has become exercisable, in whole or in part, by delivering a notice of exercise to the Company with payment of the Exercise Price. The Grantee shall pay the Exercise Price for an Option as specified by the Board (w) in cash, (x) with the approval of the Board, by delivering shares of Company Stock owned by the Grantee (including Company Stock acquired in connection with the exercise of an Option, subject to such restrictions as the Board deems appropriate) and having a Fair Market Value on the date of exercise equal to the Exercise Price or by attestation (on a form prescribed by the Board) to ownership of shares of Company Stock having a Fair Market Value on the date of exercise equal to the Exercise Price, (y) after a Public Offering, payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, or (z) by such other method as the Board may approve. The Board may authorize loans by the Company to Grantees in connection with the exercise of an Option, upon such terms and conditions as the Board, in its sole discretion, deems appropriate. Shares of Company Stock used to exercise an Option shall have been held by the Grantee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option. The Grantee shall pay the Exercise Price and the amount of any withholding tax due (pursuant to Section 7) at the time of exercise.

 

(h)            Limits on Incentive Stock Options. Each Incentive Stock Option shall provide that, if the aggregate Fair Market Value of the stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Grantee during any calendar

 

 

year, under this Plan or any other stock option plan of the Company or a parent or subsidiary, exceeds $100,000, then the Option, as to the excess, shall be treated as a Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any person who is not an Employee of the Company or a parent or subsidiary (within the meaning of section 424(f) of the Code) of the Company.

 

6.            Stock Awards. The Board may issue shares of Company Stock to an Employee, Non-Employee Director or Key Advisor under a Stock Award, upon such terms as the Board deems appropriate. The following provisions are applicable to Stock Awards:

 

(a)            General Requirements. Shares of Company Stock issued pursuant to Stock Awards may be issued for consideration or for no consideration, and subject to restrictions or no restrictions, as determined by the Board. The Board may establish conditions under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Board deems appropriate. The period of time during which the Stock Award will remain subject to restrictions will be designated in the Grant Instrument as the “Restriction Period.”

 

(b)            Number of Shares. The Board shall determine the number of shares of Company Stock to be issued pursuant to a Stock Award and the restrictions applicable to such shares.

 

(c)            Requirement of Employment or Service. If the Grantee ceases to be employed by, or provide service to, the Employer (as defined in Section 5(f)) during a period designated in the Grant Instrument as the Restriction Period, or if other specified conditions are not met, the Stock Award shall terminate as to all shares covered by the award as to which the restrictions have not lapsed, and those shares of Company Stock must be immediately returned to the Company. The Board may, however, provide for complete or partial exceptions to this requirement as it deems appropriate.

 

(d)            Restrictions on Transfer and Legend on Stock Certificate. During the Restriction Period, a Grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of the Stock Award except to a successor under Section 8(a). Each certificate for Stock Awards shall contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall be entitled to have the legend removed from the stock certificate covering the shares subject to restrictions when all restrictions on such shares have lapsed. The Board may determine that the Company will not issue certificates for Stock Awards until all restrictions on such shares have lapsed, or that the Company will retain possession of certificates for Stock Awards until all restrictions on such shares have lapsed.

 

(e)            Right to Vote and to Receive Dividends. During the Restriction Period, the Grantee shall have the right to vote shares subject to Stock Awards and to receive any dividends or other distributions paid on such shares, subject to any restrictions deemed appropriate by the Board.

 

(f)            Lapse of Restrictions. All restrictions imposed on Stock Awards shall lapse upon the expiration of the applicable Restriction Period and the satisfaction of all conditions imposed by the Board. The Board may determine, as to any or all Stock Awards, that the restrictions shall lapse without regard to any Restriction Period.

 

 

7.            Withholding of Taxes.

 

(a)            Required Withholding. All Grants under this Plan shall be subject to applicable federal (including FICA), state and local tax withholding requirements. The Employer may require that the Grantee or other person receiving or exercising Grants pay to the Employer the amount of any federal, state or local taxes that the Employer is required to withhold with respect to such Grants, or the Employer may deduct from other wages paid by the Employer the amount of any withholding taxes due with respect to such Grants.

 

(b)            Election to Withhold Shares. If the Board so permits, a Grantee may elect to satisfy the Employer’s income tax withholding obligation with respect to a Grant by having shares withheld up to an amount that does not exceed the Grantee’s minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form and manner prescribed by the Board and may be subject to the prior approval of the Board.

 

8.            Transferability of Grants.

 

(a)            Nontransferability of Grants. Except as provided below, only the Grantee may exercise rights under a Grant during the Grantee’s lifetime. A Grantee may not transfer those rights except (i) by will or by the laws of descent and distribution or (ii) with respect to Grants other than Incentive Stock Options, if permitted in any specific case by the Board, pursuant to a domestic relations order or otherwise as permitted by the Board. When a Grantee dies, the personal representative or other person entitled to succeed to the rights of the Grantee may exercise such rights. Any such successor must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Grantee’s will or under the applicable laws of descent and distribution.

 

(b)            Transfer of Nonqualified Stock Options. Notwithstanding the foregoing, the Board may provide, in a Grant Instrument, that a Grantee may transfer Nonqualified Stock Options to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with applicable securities laws, according to such terms as the Board may determine; provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer.

 

9.            Right of First Refusal; Repurchase Right.

 

(a)            Offer. Prior to a Public Offering, if at any time an individual desires to sell, encumber, or otherwise dispose of shares of Company Stock that were distributed to him or her under this Plan and that are transferable, the individual may do so only pursuant to a bona fide written offer, and the individual shall first offer the shares to the Company by giving the Company written notice disclosing: (i) the name of the proposed transferee of the Company Stock; (ii) the certificate number and number of shares of Company Stock proposed to be transferred or encumbered; (iii) the proposed price; (iv) all other terms of the proposed transfer; and (v) a written copy of the proposed offer. Within 60 days after receipt of such notice, the Company shall have the option to purchase all or part of such Company Stock at the price and on

 

 

the terms described in the written notice; provided that the Company may pay such price in installments over a period not to exceed four years, at the discretion of the Board.

 

(b)            Sale. In the event the Company (or a stockholder, as described below) does not exercise the option to purchase Company Stock, as provided above, the individual shall have the right to sell, encumber, or otherwise dispose of the shares of Company Stock described in subsection (a) at the price and on the terms of the transfer set forth in the written notice to the Company, provided such transfer is effected within 15 days after the expiration of the option period. If the transfer is not effected within such period, the Company must again be given an option to purchase, as provided above.

 

(c)            Assignment of Rights. The Board, in its sole discretion, may waive the Company’s right of first refusal and repurchase right under this Section 9. If the Company’s right of first refusal or repurchase right is so waived, the Board may, in its sole discretion, assign such right to the remaining stockholders of the Company in the same proportion that each stockholder’s stock ownership bears to the stock ownership of all the stockholders of the Company, as determined by the Board. To the extent that a stockholder has been given such right and does not purchase his or her allotment, the other stockholders shall have the right to purchase such allotment on the same basis.

 

(d)            Purchase by the Company. Prior to a Public Offering, if a Grantee ceases to be employed by, or provide service to, the Employer, the Company shall have the right to purchase all or part of any Company Stock distributed to him or her under this Plan at its then current Fair Market Value (as defined in Section 5(b)) (or at such other price as may be established in the Grant Instrument); provided, however, that such repurchase shall be made in accordance with applicable accounting rules to avoid adverse accounting treatment.

 

(e)            Public Offering. On and after a Public Offering, the Company shall have no further right to purchase shares of Company Stock under this Section 9.

 

(f)            Stockholders Agreement. Notwithstanding the provisions of this Section 9, if the Board requires that a Grantee execute a Stockholders Agreement (or other agreement containing first refusal or repurchase rights) with respect to any Company Stock distributed pursuant to this Plan, such Grantee shall execute such Stockholders Agreement (or other such agreement) as a condition to retaining his or her rights to such Company Stock. If such Stockholders Agreement (or other such agreement) contains a right of first refusal or repurchase right, the provisions of this Section 9 shall not apply to such Company Stock for as long as those provisions of the Stockholders Agreement (or other agreement) are in effect, unless the Board determines otherwise.

 

10.            Change of Control of the Company.

 

(a)            Definitions.

 

As used in this Plan, a “Change of Control” shall mean:

 

(i)            any merger or consolidation in which voting securities of the Company possessing more than 50% of the total combined voting power of the Company’s outstanding

 

 

securities are Transferred to a person or persons different from the person holding those securities immediately prior to such transaction and the composition of the Board following such transaction is such that the directors of the Company prior to the transaction constitute less than 50% of the Board membership following the transaction;

 

(ii)            any acquisition, directly or indirectly, by a person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership of voting securities of the Company possessing more than 50% of the total combined voting power of the Company’s outstanding securities; provided, however, that, no Change of Control shall be deemed to occur by reason of the acquisition of shares of the Company’s capital stock by an investor in the Company in a capital-raising transaction;

 

(iii)            any acquisition, directly or indirectly, by a person or related group of persons of the right to appoint a majority of the directors of the Company or otherwise directly or indirectly control the management, affairs and business of the Company;

 

(iv)            any sale transfer or other disposition of all or substantially all of the assets of the Company; or

 

(v)            a complete liquidation or dissolution of the Company.

 

As used in this Section 10, “Transfer” shall include any sale, exchange, assignment, gift, bequest, disposition, mortgage, charge, pledge, encumbrance, grant of a security interest or other arrangement by which possession, legal title or beneficial ownership passes from one Person to another, or to the same Person in a different capacity, whether or not voluntarily and whether or not for value, and including without limitation any merger or amalgamation and any agreement to effect any of the foregoing.

 

(b)            Assumption of Grants. Upon a Change of Control where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Board determines otherwise, all outstanding Options that are not exercised shall be assumed by, or replaced with comparable options by the surviving corporation (or a parent or subsidiary of the surviving corporation), and outstanding Stock Awards shall be converted to Stock Awards of the surviving corporation (or a parent or subsidiary of the surviving corporation).

 

(c)            Other Alternatives. Notwithstanding the foregoing, in the event of a Change of Control, the Board may take any of the following actions with respect to any or all outstanding Grants: the Board may (i) determine that outstanding Options shall accelerate and become exercisable, in whole or in part, upon the Change of Control or upon such other event as the Board determines, (ii) determine that the restrictions and conditions on outstanding Stock Awards shall lapse, in whole or in part, upon the Change of Control or upon such other event as the Board determines, (iii) require that Grantees surrender their outstanding Options in exchange for a payment by the Company, in cash or stock as determined by the Board, in an amount equal to the amount by which the then Fair Market Value of the shares of Company Stock subject to the Grantee’s unexercised Options exceeds the Exercise Price of the Options or (iv) after giving Grantees an opportunity to exercise their outstanding Options, terminate any or all unexercised

 

 

Options at such time as the Board deems appropriate. Such surrender or termination shall take place as of the date of the Change of Control or such other date as the Board may specify. The Board shall have no obligation to take any of the foregoing actions, and, in the absence of any such actions, outstanding Options and Stock Awards shall continue in effect according to their terms (subject to any assumption pursuant to subsection (b)).

 

11.            Requirements for Issuance of Shares.

 

(a)            Stockholders Agreement/Voting Agreement. The Board may require that a Grantee execute a stockholders agreement and/or a voting agreement, in each case, with such terms as the Board deems appropriate, with respect to any Company Stock issued pursuant to this Plan.

 

(b)            Limitations on Issuance of Shares. No Company Stock shall be issued in connection with any Grant hereunder unless and until all legal requirements applicable to the issuance of such Company Stock have been complied with to the satisfaction of the Board. The Board shall have the right to condition any Grant made to any Grantee hereunder on such Grantee’s undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares of Company Stock as the Board shall deem necessary or advisable, and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing shares of Company Stock issued under this Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon.

 

(c)            Lock-Up Period. If so requested by the Company or any representative of the underwriters (the “Managing Underwriter”) in connection with any underwritten offering of securities of the Company under the Securities Act of 1933, as amended (the “Securities Act”), a Grantee (including any successor or assigns) shall not sell or otherwise transfer any shares or other securities of the Company during the 30-day period preceding and the 180-day period following the effective date of a registration statement of the Company filed under the Securities Act for such underwriting (or such shorter period as may be requested by the Managing Underwriter and agreed to by the Company) (the “Market Standoff Period”). If so requested, the Grantee shall enter into a separate written agreement to such effect in form and substance requested by the Company or the Managing Underwriter. The Company may impose stoptransfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period. Notwithstanding the foregoing, the Company may require that a Grantee execute a Stockholders Agreement or other agreement containing lock-up provisions. If such Stockholders Agreement or other agreement contains any lock-up or market standoff provisions that differ from the provisions of this Section 11(c), for as long as the provisions of such other agreement are in effect, the provisions of this Section 11(c) shall not apply to such Company Stock, unless the Board determines otherwise.

 

12.            Amendment and Termination of This Plan.

 

(a)            Amendment. The Board may amend or terminate this Plan at any time; provided, however, that the Board shall not amend this Plan without stockholder approval if such

 

 

approval is required in order to comply with the Code or other applicable laws, or, after a Public Offering, to comply with applicable stock exchange requirements.

 

(b)            Termination of This Plan. This Plan shall terminate on the day immediately preceding the tenth anniversary of its effective date, unless this Plan is terminated earlier by the Board or is extended by the Board with the approval of the stockholders.

 

(c)            Termination and Amendment of Outstanding Grants. A termination or amendment of this Plan that occurs after a Grant is made shall not materially impair the rights of a Grantee unless the Grantee consents or unless the Board acts under Section 18(b). The termination of this Plan shall not impair the power and authority of the Board with respect to an outstanding Grant. Whether or not this Plan has terminated, an outstanding Grant may be terminated or amended under Section 18(b) or may be amended by agreement of the Company and the Grantee consistent with this Plan.

 

(d)            Governing Document. This Plan shall be the controlling document. No other statements, representations, explanatory materials or examples, oral or written, may amend this Plan in any manner. This Plan shall be binding upon and enforceable against the Company and its successors and assigns.

 

13.            Funding of This Plan. This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. In no event shall interest be paid or accrued on any Grant, including unpaid installments of Grants.

 

14.            Rights of Participants. Nothing in this Plan shall entitle any Employee, Key Advisor, Non-Employee Director or other person to any claim or right to be granted a Grant under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employ of the Employer or any other employment rights.

 

15.            No Fractional Shares. No fractional shares of Company Stock shall be issued or delivered pursuant to this Plan or any Grant. The Board shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

 

16.            Headings. Section headings are for reference only. In the event of a conflict between a title and the content of a Section, the content of the Section shall control.

 

17.            Effective Date of this Plan.

 

(a)            Effective Date. The 2007 Equity Incentive Plan of the Company was originally effective as of October 1, 2007. This Plan shall be effective as of January 10, 2017.

 

(b)            Public Offering. The provisions of this Plan that refer to a Public Offering, or that refer to, or are applicable to persons subject to, section 16 of the Exchange Act or section 162(m) of the Code, shall be effective, if at all, upon the initial registration of the Company

 

 

Stock under section 12(g) of the Exchange Act, and shall remain effective thereafter for as long as such stock is so registered.

 

18.            Miscellaneous.

 

(a)            Grants in Connection with Corporate Transactions and Otherwise. Nothing contained in this Plan shall be construed to (i) limit the right of the Board to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who become Employees, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other awards outside of this Plan. Without limiting the foregoing, the Board may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company, the Parent or any of their subsidiaries in substitution for a stock option or Stock Awards grant made by such corporation. The terms and conditions of the substitute grants may vary from the terms and conditions required by this Plan and from those of the substituted stock incentives. The Board shall prescribe the provisions of the substitute grants.

 

(b)            Compliance with Law. This Plan, the exercise of Options and the obligations of the Company to issue shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to section 16 of the Exchange Act, after a Public Offering it is the intent of the Company that this Plan and all transactions under this Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is the intent of the Company that this Plan and applicable Grants under this Plan comply with the applicable provisions of section 162(m) of the Code, after a Public Offering, and section 422 of the Code. To the extent that any legal requirement of section 16 of the Exchange Act or section 162(m) or 422 of the Code as set forth in this Plan ceases to be required under section 16 of the Exchange Act or section 162(m) or 422 of the Code, that Plan provision shall cease to apply. The Board may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Board may also adopt rules regarding the withholding of taxes on payments to Grantees. The Board may, in its sole discretion, agree to limit its authority under this Section.

 

(c)            Employees Subject to Taxation Outside the United States. With respect to Grantees who are subject to taxation in countries other than the United States, the Board may make Grants on such terms and conditions as the Board deems appropriate to comply with the laws of the applicable countries, and the Board may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws.

 

(d)            Governing Law. The validity, construction, interpretation and effect of this Plan and Grant Instruments issued under this Plan shall be governed and construed by and determined in accordance with the laws of the State of Delaware, without giving effect to the conflict of laws provisions thereof.

 

 

 

Exhibit 10.7

 

Effective Date: September 20, 2017

 

COGNITION THERAPEUTICS, INC.

 

2017 EQUITY INCENTIVE PLAN

 

The purpose of the Cognition Therapeutics, Inc. 2017 Equity Incentive Plan (this “Plan”) is to provide (i) designated employees of Cognition Therapeutics, Inc. (the “Company”) and its parents and subsidiaries, (ii) certain consultants and advisors who perform services for the Company or its parents or subsidiaries and (iii) non-employee members of the Board of Directors of the Company (the “Board”) with the opportunity to receive grants of incentive stock options, nonqualified stock options and stock awards. The Company believes that this Plan will encourage the participants to contribute materially to the growth of the Company, thereby benefitting the Company's stockholders, and will align the economic interests of the participants with those of the stockholders.

 

This Plan is intended as the successor to the Company's Amended and Restated 2007 Equity Incentive Plan (the “Prior Plan”). Following the effective date of this Plan set forth above (the “Effective Date”), no additional grants of options or stock awards shall be granted under the Prior Plan. Any shares remaining available for issuance pursuant to the exercise of options or settlement of stock awards under the Prior Plan shall become available for issuance under this Plan pursuant to Grants (as defined in Section 2) granted hereunder, as provided in Section 3(a). Any shares subject to outstanding stock options or stock awards granted under the Prior Plan that expire or terminate or are repurchased by the Company for any reason prior to exercise, settlement or vesting shall become available for issuance under this Plan pursuant to stock options and stock awards granted hereunder. All outstanding stock options and stock awards granted under the Prior Plan shall remain subject to the terms of the Prior Plan with respect to which they were originally granted.

 

1.            Administration.

 

(a)            Committee. This Plan shall be administered and interpreted by the Board or by a committee consisting of members of the Board, which shall be appointed by the Board. After an initial public offering of the Company's stock as described in Section 17(b) (a “Public Offering”), this Plan shall be administered by a committee of Board members, which may consist of “outside directors” as defined under section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and related Treasury regulations, and “non-employee directors” as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, the Board may ratify or approve any grants as it deems appropriate, and the Board shall approve and administer all grants made to non-employee directors. The committee may delegate authority to one or more subcommittees as it deems appropriate. To the extent that a committee or subcommittee administers this Plan, references in this Plan to the “Board” shall be deemed to refer to the committee or subcommittee; provided, however, that the Board of Directors itself may, at any time, exercise any and all rights and authority granted by it to a committee or subcommittee.

 

 

(b)            Board Authority. The Board shall have the sole authority to (i) determine the individuals to whom grants shall be made under this Plan, (ii) determine the type, size and terms of the grants to be made to each such individual, (iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, (iv) amend the terms of any previously issued grant, and (v) deal with any other matters arising under this Plan.

 

(c)            Board Determinations. The Board shall have full power and authority to administer and interpret this Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing this Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Board's interpretations of this Plan and all determinations made by the Board pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in this Plan or in any awards granted hereunder. All powers of the Board shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of this Plan and need not be uniform as to similarly situated individuals.

 

(d)            Delegation to Officers. To the extent permitted by applicable law, the Board may delegate to one or more officers of the Company the power to grant Options and Stock Awards (as each such term is defined in Section 2) to employees or officers of the Company or any of its present or future subsidiary corporations and to exercise such other powers under this Plan as the Board may determine, provided that the Board shall fix the terms of the Options and Stock Awards to be granted by such officers (including the exercise price of such Options, and the consideration, if any, for the Stock Awards, which may include a formula by which the exercise price or purchase price, if any, will be determined) and the maximum number of shares subject to Options and Stock Awards that the officers may grant; provided further, however, that no officer shall be authorized to grant any Options or Stock Awards to himself or herself.

 

2.            Grants. Awards under this Plan may consist of grants of incentive stock options as described in Section 5 (“Incentive Stock Options”), nonqualified stock options as described in Section 5 (“Nonqualified Stock Options”) (Incentive Stock Options and Nonqualified Stock Options are collectively referred to as “Options”) and stock awards as described in Section 6 (“Stock Awards”) (hereinafter collectively referred to as “Grants”). All Grants shall be subject to the terms and conditions set forth herein and to such other terms and conditions consistent with this Plan as the Board deems appropriate and as are specified in writing by the Board to the individual in a grant instrument or an amendment to the grant instrument (the “Grant Instrument”). All Grants shall be made conditional upon the Grantee's acknowledgement, in writing or by acceptance of the Grant, that all decisions and determinations of the Board shall be final and binding on the Grantee, his or her beneficiaries and any other person having or claiming an interest under such Grant. The Board shall approve the form and provisions of each Grant Instrument. Grants under a particular Section of this Plan need not be uniform as among the grantees.

 

3.             Shares Subject to This Plan.

 

(a)            Shares Reserved. Subject to adjustment as described below, the aggregate number of shares of common stock of the Company (“Company Stock”) that may be issued

 

 

under this Plan is equal to (i) the 798,908 shares remaining available for issuance under the Prior Plan as of the Effective Date, and (ii) the number of shares that may be added to this Plan pursuant to Section 3(b) (collectively the “Share Reserve”), each of which may be granted as an Incentive Stock Option, up to the maximum limit set forth in Section 3(d) below. After a Public Offering, the maximum aggregate number of shares of Company Stock that shall be subject to Grants made under this Plan to (i) any employee during any calendar year shall be 3,900,000 shares and (ii) any non-employee member of the Board during any calendar year shall be 600,000 shares, subject to adjustment as described below. Shares issued under this Plan may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the Company on the open market for purposes of this Plan.

 

(b)            Additions to the Share Reserve. The Share Reserve also shall be increased from time to time by a number of shares equal to the number of shares of Company Stock that (i) are issuable pursuant to options outstanding under the Prior Plan as of the Effective Date and (ii) but for the termination of the Prior Plan as of the Effective Date, would otherwise have reverted to the share reserve of the Prior Plan pursuant to the provisions thereof.

 

(c)            Reversion of Shares to the Share Reserve. If and to the extent Options granted under this Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised or if any Stock Awards (including restricted Stock Awards received upon the exercise of Options) are forfeited, the shares subject to such Grants shall again be available for purposes of this Plan.

 

(d)            Incentive Stock Option Limit. Notwithstanding anything to the contrary in this Section 3, subject to the provisions of Section 3(e) relating to capitalization adjustments, the aggregate maximum number of shares of Company Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be 798,908 shares of Company Stock plus the amount of any increase in the number of shares that may be available for issuance pursuant to Grants pursuant to Section 3(b), but in no event shall greater than 11,189,392 shares of Company Stock be issued as Incentive Stock Options (the “Maximum Incentive Stock Option Limit”). Any additional shares added to the Plan pursuant to the Share Reserve in excess of the Maximum Incentive Stock Option Limit shall not be issued as Incentive Stock Options but may be issued as Nonqualified Stock Options or Stock Awards.

 

(e)            Adjustments. If there is any change in the number or kind of shares of Company Stock outstanding (i) by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, (ii) by reason of a merger, reorganization or consolidation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of any other extraordinary or unusual event affecting the outstanding Company Stock as a class without the Company's receipt of consideration, or if the value of outstanding shares of Company Stock is substantially reduced as a result of a spinoff or the Company's payment of an extraordinary dividend or distribution, the maximum number of shares of Company Stock available for Grants, the maximum number of shares of Company Stock that any individual participating in this Plan may be granted in any year, the number of shares covered by outstanding Grants, the kind of shares issued under this Plan, and the price per share of such Grants shall be appropriately adjusted by the Board to reflect any increase or decrease in the number of, or change in the kind or value of, issued shares of Company Stock to preclude, to the extent practicable, the

 

 

enlargement or dilution of rights and benefits under such Grants; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. Any adjustments determined by the Board shall be final, binding and conclusive.

 

4.             Eligibility for Participation.

 

(a)            Eligible Persons. All employees of the Company and its parents or subsidiaries (“Employees”), including Employees who are officers or members of the Board, and members of the Board who are not Employees (“Non-Employee Directors”) shall be eligible to participate in this Plan. Consultants and advisors who perform services for the Company or any of its parents or subsidiaries (“Key Advisors”) shall be eligible to participate in this Plan if the Key Advisors render bona fide services to the Company or its parents or subsidiaries, the services are not in connection with the offer and sale of securities in a capital-raising transaction, and the Key Advisors do not directly or indirectly promote or maintain a market for the Company's securities.

 

(b)            Selection of Grantees. The Board shall select the Employees, Non-Employee Directors and Key Advisors to receive Grants and shall determine the number of shares of Company Stock subject to a particular Grant in such manner as the Board determines. Employees, Key Advisors and Non-Employee Directors who receive Grants under this Plan shall hereinafter be referred to as “Grantees.”

 

5.             Granting of Options.

 

(a)            Number of Shares. The Board shall determine the number of shares of Company Stock that will be subject to each Grant of Options to Employees, Non-Employee Directors and Key Advisors.

 

(b)            Type of Option and Price.

 

(i)            The Board may grant Incentive Stock Options that are intended to qualify as “incentive stock options” within the meaning of section 422 of the Code or Nonqualified Stock Options that are not intended so to qualify or any combination of Incentive Stock Options and Nonqualified Stock Options, all in accordance with the terms and conditions set forth herein. Incentive Stock Options may be granted only to employees of the Company or its parents or subsidiaries, as defined in section 424 of the Code. Nonqualified Stock Options may be granted to Employees, Non-Employee Directors and Key Advisors. The date of grant of an Option shall be the date on which the Board makes the determination to grant such Option unless a later date is otherwise specified by the Board.

 

(ii)            The purchase price (the “Exercise Price”) of Company Stock subject to an Option shall be determined by the Board and may be equal to or greater than the Fair Market Value (as defined below) of a share of Company Stock on the date the Option is granted; provided, however, that (x) the Exercise Price of an Incentive Stock Option shall be equal to, or greater than, the Fair Market Value of a share of Company Stock on the date the Incentive Stock Option is granted and (y) an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary of the Company, unless the

 

 

Exercise Price per share is not less than 110% of the Fair Market Value of Company Stock on the date of grant.

 

(iii)            If the Company Stock is publicly traded, then the Fair Market Value per share shall be determined as follows: (x) if the principal trading market for the Company Stock is a national securities exchange, the last reported sale price thereof on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, or (y) if the Company Stock is not principally traded on such exchange or market, the mean between the last reported “bid” and “asked” prices of Company Stock on the relevant date, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Board determines. If the Company Stock is not publicly traded or, if publicly traded, is not subject to reported transactions or “bid” or “asked” quotations as set forth above, the Fair Market Value per share shall be as determined by the Board.

 

(c)            Option Term. The Board shall determine the term of each Option. The term of any Option shall not exceed ten years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, or any parent or subsidiary of the Company, may not have a term that exceeds five years from the date of grant.

 

(d)            Exercisability of Options.

 

(i)            Options shall become exercisable in accordance with such terms and conditions, consistent with this Plan, as may be determined by the Board and specified in the Grant Instrument. The Board may accelerate the exercisability of any or all outstanding Options at any time for any reason.

 

(ii)            The Board may provide in a Grant Instrument that the Grantee may elect to exercise part or all of an Option before it otherwise has become exercisable. Any shares so purchased shall be restricted shares and shall be subject to a repurchase right in favor of the Company during a specified restriction period, with the repurchase price equal to the lesser of (i) the Exercise Price or (ii) the Fair Market Value of such shares at the time of repurchase, or such other restrictions as the Board deems appropriate.

 

(e)            Grants to Non-Exempt Employees. Notwithstanding the foregoing, Options granted to persons who are non-exempt employees under the Fair Labor Standards Act of 1938, as amended, shall have an Exercise Price not less than the Fair Market Value of the Company Stock on the date of grant, and may not be exercisable for at least six months after the date of grant (except that such Options may become exercisable, as determined by the Board, upon the Grantee's death, Disability or retirement, or upon a Change of Control or other circumstances permitted by applicable regulations).

 

(f)            Termination of Employment, Disability or Death.

 

(i)            Except as provided below, an Option may only be exercised while the Grantee is employed by, or providing service to, the Employer (as defined below) as an Employee, Key Advisor or member of the Board. In the event that a Grantee ceases to be

 

 

employed by, or provide service to, the Employer for any reason other than Disability, death, or termination for Cause, any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within three months after the date on which the Grantee ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Board, any of the Grantee's Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

 

(ii)            In the event the Grantee ceases to be employed by, or provide service to, the Employer on account of a termination for Cause by the Employer, any Option held by the Grantee shall terminate as of the date the Grantee ceases to be employed by, or provide service to, the Employer. In addition, notwithstanding any other provisions of this Section 5, if the Board determines that the Grantee has engaged in conduct that constitutes Cause at any time while the Grantee is employed by, or providing service to, the Employer or after the Grantee's termination of employment or service, any Option held by the Grantee shall immediately terminate, and the Grantee shall automatically forfeit all shares underlying any exercised portion of an Option for which the Company has not yet delivered the share certificates, upon refund by the Company of the Exercise Price paid by the Grantee for such shares. Upon any exercise of an Option, the Company may withhold delivery of share certificates pending resolution of an inquiry that could lead to a finding resulting in a forfeiture.

 

(iii)            In the event the Grantee ceases to be employed by, or provide service to, the Employer because the Grantee is Disabled, any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Board, any of the Grantee's Options which are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

 

(iv)            If the Grantee dies while employed by, or providing service to, the Employer or within three months after the date on which the Grantee ceases to be employed or provide service on account of a termination specified in Section 5(f)(i) (or within such other period of time as may be specified by the Board), any Option that is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Board, any of the Grantee's Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

 

(v)            For purposes of this Section 5(f) and Section 6:

 

(A)            The term “Employer” shall include the Company and its parent and subsidiary corporations or other entities, as appropriate and as determined by the Board.

 

 

(B)            “Employed by, or provide service to, the Employer” shall mean employment or service as an Employee, Key Advisor or member of the Board (so that, for purposes of exercising Options and satisfying conditions with respect to Stock Awards, a Grantee shall not be considered to have terminated employment or service until the Grantee ceases to be an Employee, Key Advisor or member of the Board), unless the Board determines otherwise.

 

(C)            “Disability” shall mean a Grantee's becoming disabled within the meaning of section 22(e)(3) of the Code, within the meaning of the Employer's long-term disability plan applicable to the Grantee, or as otherwise determined by the Board.

 

(D)            “Cause” shall mean, except to the extent specified otherwise by the Board, a finding by the Board that the Grantee (i) has breached his or her employment or service contract with the Employer, (ii) has engaged in disloyalty to the Company, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty, (iii) has disclosed trade secrets or confidential information of the Employer to persons not entitled to receive such information, (iv) has breached any written noncompetition or nonsolicitation agreement between the Grantee and the Employer or (v) has engaged in such other behavior detrimental to the interests of the Employer as the Board determines.

 

(g)            Exercise of Options. A Grantee may exercise an Option that has become exercisable, in whole or in part, by delivering a notice of exercise to the Company with payment of the Exercise Price: provided, however, that the Committee shall have the power to permit: (i) the exercise of unvested Options, or portions thereof, for the purchase of shares of restricted Common Stock subject to a repurchase right in favor of the Company, with the repurchase price being equal to the lesser of (x) the original purchase price or (y) the Fair Market Value of the shares on the date of repurchase, or to any other restrictions as the Committee deems to be appropriate, and (ii) the acceleration of previously established exercise terms, in each case upon such circumstances and subject to such terms and conditions as the Committee shall determine. The Grantee shall pay the Exercise Price for an Option as specified by the Board (I) in cash, (II) with the approval of the Board, by delivering shares of Company Stock owned by the Grantee (including Company Stock acquired in connection with the exercise of an Option, subject to such restrictions as the Board deems appropriate) and having a Fair Market Value on the date of exercise equal to the Exercise Price or by attestation (on a form prescribed by the Board) to ownership of shares of Company Stock having a Fair Market Value on the date of exercise equal to the Exercise Price, (III) after a Public Offering, payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, or (IV) by such other method as the Board may approve. The Board may authorize loans by the Company to Grantees in connection with the exercise of an Option, upon such terms and conditions as the Board, in its sole discretion, deems appropriate. Shares of Company Stock used to exercise an Option shall have been held by the Grantee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option. The Grantee shall pay the Exercise Price and the amount of any withholding tax due (pursuant to Section 7) at the time of exercise.

 

(h)            Limits on Incentive Stock Options. Each Incentive Stock Option shall provide that, if the aggregate Fair Market Value of the stock on the date of the grant with respect to

 

 

which Incentive Stock Options are exercisable for the first time by a Grantee during any calendar year, under this Plan or any other stock option plan of the Company or a parent or subsidiary, exceeds $100,000, then the Option, as to the excess, shall be treated as a Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any person who is not an Employee of the Company or a parent or subsidiary (within the meaning of section 424(f) of the Code) of the Company.

 

6.             Stock Awards. The Board may issue shares of Company Stock to an Employee, Non-Employee Director or Key Advisor under a Stock Award, upon such terms as the Board deems appropriate. The following provisions are applicable to Stock Awards:

 

(a)            General Requirements. Shares of Company Stock issued pursuant to Stock Awards may be issued for consideration or for no consideration, and subject to restrictions or no restrictions, as determined by the Board. The Board may establish conditions under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Board deems appropriate. The period of time during which the Stock Award will remain subject to restrictions will be designated in the Grant Instrument as the “Restriction Period.”

 

(b)            Number of Shares. The Board shall determine the number of shares of Company Stock to be issued pursuant to a Stock Award and the restrictions applicable to such shares.

 

(c)            Requirement of Employment or Service. If the Grantee ceases to be employed by, or provide service to, the Employer (as defined in Section 5(f)) during a period designated in the Grant Instrument as the Restriction Period, or if other specified conditions are not met, the Stock Award shall terminate as to all shares covered by the award as to which the restrictions have not lapsed, and those shares of Company Stock must be immediately returned to the Company. The Board may, however, provide for complete or partial exceptions to this requirement as it deems appropriate.

 

(d)            Restrictions on Transfer and Legend on Stock Certificate. During the Restriction Period, a Grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of the Stock Award except to a successor under Section 8(a). Each certificate for Stock Awards shall contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall be entitled to have the legend removed from the stock certificate covering the shares subject to restrictions when all restrictions on such shares have lapsed. The Board may determine that the Company will not issue certificates for Stock Awards until all restrictions on such shares have lapsed, or that the Company will retain possession of certificates for Stock Awards until all restrictions on such shares have lapsed.

 

(e)            Right to Vote and to Receive Dividends. During the Restriction Period, the Grantee shall have the right to vote shares subject to Stock Awards and to receive any dividends or other distributions paid on such shares, subject to any restrictions deemed appropriate by the Board.

 

(f)            Lapse of Restrictions. All restrictions imposed on Stock Awards shall lapse upon the expiration of the applicable Restriction Period and the satisfaction of all conditions

 

 

imposed by the Board. The Board may determine, as to any or all Stock Awards, that the restrictions shall lapse without regard to any Restriction Period.

 

7.            Withholding of Taxes.

 

(a)            Required Withholding. All Grants under this Plan shall be subject to applicable federal (including FICA), state and local tax withholding requirements. The Employer may require that the Grantee or other person receiving or exercising Grants pay to the Employer the amount of any federal, state or local taxes that the Employer is required to withhold with respect to such Grants, or the Employer may deduct from other wages paid by the Employer the amount of any withholding taxes due with respect to such Grants.

 

(b)            Election to Withhold Shares. If the Board so permits, a Grantee may elect to satisfy the Employer's income tax withholding obligation with respect to a Grant by having shares withheld up to an amount that does not exceed the Grantee's minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form and manner prescribed by the Board and may be subject to the prior approval of the Board.

 

8.            Transferability of Grants.

 

(a)            Nontransferability of Grants. Except as provided below, only the Grantee may exercise rights under a Grant during the Grantee's lifetime. A Grantee may not transfer those rights except (i) by will or by the laws of descent and distribution or (ii) with respect to Grants other than Incentive Stock Options, if permitted in any specific case by the Board, pursuant to a domestic relations order or otherwise as permitted by the Board. When a Grantee dies, the personal representative or other person entitled to succeed to the rights of the Grantee may exercise such rights. Any such successor must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Grantee's will or under the applicable laws of descent and distribution.

 

(b)            Transfer of Nonqualified Stock Options. Notwithstanding the foregoing, the Board may provide, in a Grant Instrument, that a Grantee may transfer Nonqualified Stock Options to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with applicable securities laws, according to such terms as the Board may determine; provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer.

 

9.             Right of First Refusal; Repurchase Right.

 

(a)            Offer. Prior to a Public Offering, if at any time an individual desires to sell, encumber, or otherwise dispose of shares of Company Stock that were distributed to him or her under this Plan and that are transferable, the individual may do so only pursuant to a bona fide written offer, and the individual shall first offer the shares to the Company by giving the Company written notice disclosing: (i) the name of the proposed transferee of the Company Stock; (ii) the certificate number and number of shares of Company Stock proposed to be transferred or encumbered; (iii) the proposed price; (iv) all other terms of the proposed transfer;

 

 

and (v) a written copy of the proposed offer. Within 60 days after receipt of such notice, the Company shall have the option to purchase all or part of such Company Stock at the price and on the terms described in the written notice; provided that the Company may pay such price in installments over a period not to exceed four years, at the discretion of the Board.

 

(b)            Sale. In the event the Company (or a stockholder, as described below) does not exercise the option to purchase Company Stock, as provided above, the individual shall have the right to sell, encumber, or otherwise dispose of the shares of Company Stock described in Section 9(a) at the price and on the terms of the transfer set forth in the written notice to the Company, provided such transfer is effected within 15 days after the expiration of the option period. If the transfer is not effected within such period, the Company must again be given an option to purchase, as provided above.

 

(c)            Assignment of Rights. The Board, in its sole discretion, may waive the Company's right of first refusal and repurchase right under this Section 9. If the Company's right of first refusal or repurchase right is so waived, the Board may, in its sole discretion, assign such right to the remaining stockholders of the Company in the same proportion that each stockholder's stock ownership bears to the stock ownership of all the stockholders of the Company, as determined by the Board. To the extent that a stockholder has been given such right and does not purchase his or her allotment, the other stockholders shall have the right to purchase such allotment on the same basis.

 

(d)            Purchase by the Company. Prior to a Public Offering, if a Grantee ceases to be employed by, or provide service to, the Employer, the Company shall have the right to purchase all or part of any Company Stock distributed to him or her under this Plan at its then current Fair Market Value (as defined in Section 5(b)) (or at such other price as may be established in the Grant Instrument); provided, however, that such repurchase shall be made in accordance with applicable accounting rules to avoid adverse accounting treatment.

 

(e)            Public Offering. On and after a Public Offering, the Company shall have no further right to purchase shares of Company Stock under this Section 9.

 

(f)            Stockholders Agreement. Notwithstanding the provisions of this Section 9, if the Board requires that a Grantee execute a Stockholders Agreement (or other agreement containing first refusal or repurchase rights) with respect to any Company Stock distributed pursuant to this Plan, such Grantee shall execute such Stockholders Agreement (or other such agreement) as a condition to retaining his or her rights to such Company Stock. If such Stockholders Agreement (or other such agreement) contains a right of first refusal or repurchase right, the provisions of this Section 9 shall not apply to such Company Stock for as long as those provisions of the Stockholders Agreement (or other agreement) are in effect, unless the Board determines otherwise.

 

10.            Change of Control of the Company.

 

(a)            Definitions.

 

As used in this Plan, a “Change of Control” shall mean:

 

 

(i)            any merger or consolidation in which voting securities of the Company possessing more than 50% of the total combined voting power of the Company's outstanding securities are Transferred to a person or persons different from the person holding those securities immediately prior to such transaction and the composition of the Board following such transaction is such that the directors of the Company prior to the transaction constitute less than 50% of the Board membership following the transaction;

 

(ii)            any acquisition, directly or indirectly, by a person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership of voting securities of the Company possessing more than 50% of the total combined voting power of the Company's outstanding securities; provided, however, that, no Change of Control shall be deemed to occur by reason of the acquisition of shares of the Company's capital stock by an investor in the Company in a capital-raising transaction;

 

(iii)            any acquisition, directly or indirectly, by a person or related group of persons of the right to appoint a majority of the directors of the Company or otherwise directly or indirectly control the management, affairs and business of the Company;

 

(iv)            any sale, transfer or other disposition of all or substantially all of the assets of the Company; or

 

(v)            a complete liquidation or dissolution of the Company.

 

As used in this Section 10, “Transfer” shall include any sale, exchange, assignment, gift, bequest, disposition, mortgage, charge, pledge, encumbrance, grant of a security interest or other arrangement by which possession, legal title or beneficial ownership passes from one Person to another, or to the same Person in a different capacity, whether or not voluntarily and whether or not for value, and including without limitation any merger or amalgamation and any agreement to effect any of the foregoing.

 

(b)            Assumption of Grants. Upon a Change of Control where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Board determines otherwise, all outstanding Options that are not exercised shall be assumed by, or replaced with comparable options by the surviving corporation (or a parent or subsidiary of the surviving corporation), and outstanding Stock Awards shall be converted to Stock Awards of the surviving corporation (or a parent or subsidiary of the surviving corporation).

 

(c)            Other Alternatives. Notwithstanding the foregoing, in the event of a Change of Control, the Board may take any of the following actions with respect to any or all outstanding Grants: the Board may (i) determine that outstanding Options shall accelerate and become exercisable, in whole or in part, upon the Change of Control or upon such other event as the Board determines, (ii) determine that the restrictions and conditions on outstanding Stock Awards shall lapse, in whole or in part, upon the Change of Control or upon such other event as the Board determines, (iii) require that Grantees surrender their outstanding Options in exchange for a payment by the Company, in cash or stock as determined by the Board, in an amount equal to the amount by which the then Fair Market Value of the shares of Company Stock subject to

 

 

the Grantee's unexercised Options exceeds the Exercise Price of the Options or (iv) after giving Grantees an opportunity to exercise their outstanding Options, terminate any or all unexercised Options at such time as the Board deems appropriate. Such surrender or termination shall take place as of the date of the Change of Control or such other date as the Board may specify. The Board shall have no obligation to take any of the foregoing actions, and, in the absence of any such actions, outstanding Options and Stock Awards shall continue in effect according to their terms (subject to any assumption pursuant to subsection (b)).

 

11.            Requirements for Issuance of Shares.

 

(a)            Stockholders Agreement/Voting Agreement. The Board may require that a Grantee execute a stockholders agreement and/or a voting agreement, in each case, with such terms as the Board deems appropriate, with respect to any Company Stock issued pursuant to this Plan.

 

(b)            Limitations on Issuance of Shares. No Company Stock shall be issued in connection with any Grant hereunder unless and until all legal requirements applicable to the issuance of such Company Stock have been complied with to the satisfaction of the Board. The Board shall have the right to condition any Grant made to any Grantee hereunder on such Grantee's undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares of Company Stock as the Board shall deem necessary or advisable, and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing shares of Company Stock issued under this Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon.

 

(c)            Lock-Up Period. If so requested by the Company or any representative of the underwriters (the “Managing Underwriter”) in connection with any underwritten offering of securities of the Company under the Securities Act of 1933, as amended (the “Securities Act”), a Grantee (including any successor or assigns) shall not sell or otherwise transfer any shares or other securities of the Company during the 30-day period preceding and the 180-day period following the effective date of a registration statement of the Company filed under the Securities Act for such underwriting (or such shorter period as may be requested by the Managing Underwriter and agreed to by the Company) (the “Market Standoff Period”). If so requested, the Grantee shall enter into a separate written agreement to such effect in form and substance requested by the Company or the Managing Underwriter. The Company may impose stoptransfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period. Notwithstanding the foregoing, the Company may require that a Grantee execute a Stockholders Agreement or other agreement containing lock-up provisions. If such Stockholders Agreement or other agreement contains any lock-up or market standoff provisions that differ from the provisions of this Section 11(c), for as long as the provisions of such other agreement are in effect, the provisions of this Section 11(c) shall not apply to such Company Stock, unless the Board determines otherwise.

 

 

12.           Amendment and Termination of This Plan.

 

(a)            Amendment. The Board may amend or terminate this Plan at any time; provided, however, that the Board shall not amend this Plan without stockholder approval if such approval is required in order to comply with the Code or other applicable laws, or, after a Public Offering, to comply with applicable stock exchange requirements.

 

(b)            Termination of This Plan. This Plan shall terminate on the day immediately preceding the tenth anniversary of the Effective Date, unless this Plan is terminated earlier by the Board or is extended by the Board with the approval of the stockholders.

 

(c)            Termination and Amendment of Outstanding Grants. A termination or amendment of this Plan that occurs after a Grant is made shall not materially impair the rights of a Grantee unless the Grantee consents or unless the Board acts under Section 18(b). The termination of this Plan shall not impair the power and authority of the Board with respect to an outstanding Grant. Whether or not this Plan has terminated, an outstanding Grant may be terminated or amended under Section 18(b) or may be amended by agreement of the Company and the Grantee consistent with this Plan.

 

(d)            Governing Document. This Plan shall be the controlling document. No other statements, representations, explanatory materials or examples, oral or written, may amend this Plan in any manner. This Plan shall be binding upon and enforceable against the Company and its successors and assigns.

 

13.            Funding of This Plan. This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. In no event shall interest be paid or accrued on any Grant, including unpaid installments of Grants.

 

14.           Rights of Participants. Nothing in this Plan shall entitle any Employee, Key Advisor, Non-Employee Director or other person to any claim or right to be granted a Grant under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employ of the Employer or any other employment rights.

 

15.           No Fractional Shares. No fractional shares of Company Stock shall be issued or delivered pursuant to this Plan or any Grant. The Board shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

 

16.           Headings. Section headings are for reference only. In the event of a conflict between a title and the content of a Section, the content of the Section shall control.

 

17.           Effective Date of This Plan.

 

(a)            Effective Date. This Plan shall be effective on the Effective Date set forth on the first page above.

 

 

(b)            Public Offering. The provisions of this Plan that refer to a Public Offering, or that refer to, or are applicable to persons subject to, section 16 of the Exchange Act or section 162(m) of the Code, shall be effective, if at all, upon the initial registration of the Company Stock under section 12(b) or 12(g) of the Exchange Act, and shall remain effective thereafter for as long as such stock is so registered.

 

18.            Miscellaneous.

 

(a)            Grants in Connection with Corporate Transactions and Otherwise. Nothing contained in this Plan shall be construed to (i) limit the right of the Board to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who become Employees, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other awards outside of this Plan. Without limiting the foregoing, the Board may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company, the Parent or any of their subsidiaries in substitution for a stock option or Stock Awards grant made by such corporation. The terms and conditions of the substitute grants may vary from the terms and conditions required by this Plan and from those of the substituted stock incentives. The Board shall prescribe the provisions of the substitute grants.

 

(b)            Compliance with Law. This Plan, the exercise of Options and the obligations of the Company to issue shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to section 16 of the Exchange Act, after a Public Offering it is the intent of the Company that this Plan and all transactions under this Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is the intent of the Company that this Plan and applicable Grants under this Plan comply with the applicable provisions of section 162(m) of the Code, after a Public Offering, and section 422 of the Code. To the extent that any legal requirement of section 16 of the Exchange Act or section 162(m) or 422 of the Code as set forth in this Plan ceases to be required under section 16 of the Exchange Act or section 162(m) or 422 of the Code, that Plan provision shall cease to apply. The Board may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Board may also adopt rules regarding the withholding of taxes on payments to Grantees. The Board may, in its sole discretion, agree to limit its authority under this Section.

 

(c)            Employees Subject to Taxation Outside the United States. With respect to Grantees who are subject to taxation in countries other than the United States, the Board may make Grants on such terms and conditions as the Board deems appropriate to comply with the laws of the applicable countries, and the Board may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws.

 

(d)            Governing Law. The validity, construction, interpretation and effect of this Plan and Grant Instruments issued under this Plan shall be governed and construed by and determined

 

 

in accordance with the laws of the State of Delaware, without giving effect to the conflict of laws provisions thereof.

 

 

Exhibit 10.8

 

AMENDMENT TO
THE COGNITION THERAPEUTICS, INC.
2017 EQUITY INCENTIVE PLAN

 

WHEREAS, Cognition Therapeutics, Inc. (the “Company”) has adopted the Cognition Therapeutics, Inc. 2017 Equity Incentive Plan (the “Plan”);

 

WHEREAS, Section 12(a) of the Plan permits the Board of Directors of the Company (the “Board”) to amend the Plan from time to time;

 

WHEREAS, pursuant to Section 3 of the Plan, a total of 798,908 shares of Common Stock of the Company, par value $.001 per share (“Common Stock”), plus any share of Common Stock that would otherwise revert to the share reserve of the Company’s Amended and Restated 2007 Equity Incentive Plan, have been reserved for issuance under the Plan;

 

WHEREAS, the Company desires to increase the number of shares issuable under the Plan by 2,000,000 shares of Common Stock.

 

NOW, THEREFORE, the following amendments and modifications are hereby made a part of the Plan subject to, and effective as of the date of, the approval of shareholders of the Plan as amended:

 

1.

Section 3(a) of the Plan is hereby amended by revising the first sentence of such section in its entirety to read as follows:

 

“Subject to adjustment as described below, the aggregate number of shares of common stock of the Company (“Company Stock”) that may be issued under this Plan is equal to (i) 2,798,908 and (ii) the number of shares that may be added to this Plan pursuant to Section 3(b) (collectively the “Share Reserve”), each of which may be granted as an Incentive Stock Option, up to the maximum limit set forth in Section 3(d) below.”

 

2.

Section 3(d) of the Plan is hereby amended by revising the first sentence of such section in its entirety to read as follows:

 

“Notwithstanding anything to the contrary in this Section 3, subject to the provisions of Section 3(e) relating to capitalization adjustments, the aggregate maximum number of shares of Company Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be 2,798,908 shares of Company Stock plus the amount of any increase in the number of shares that may be available for issuance pursuant to Grants pursuant to Section 3(h), but in no event shall greater than 13,189,392 shares of Company Stock be issued as Incentive Stock Options (the “Maximum Incentive Stock Option Limit”).”

 

3.

In all other respects, the Plan, as amended, is hereby ratified and confirmed and shall remain in full force and effect.

 

 

 

Exhibit 10.9

 

AMENDMENT TO
THE COGNITION THERAPEUTICS, INC.
2017 EQUITY INCENTIVE PLAN

 

WHEREAS, Cognition Therapeutics, Inc. (the “Company”) has adopted the Cognition Therapeutics, Inc. 2017 Equity Incentive Plan (the “Plan”);

 

WHEREAS, Section 12(a) of the Plan permits the Board of Directors of the Company (the “Board”) to amend the Plan from time to time;

 

WHEREAS, pursuant to Section 3 of the Plan, as amended, a total of 2,798,908 shares of Common Stock of the Company, par value $.001 per share (“Common Stock”), plus any share of Common Stock that would otherwise revert to the share reserve of the Company’s Amended and Restated 2007 Equity Incentive Plan, have been reserved for issuance under the Plan;

 

WHEREAS, the Company desires to increase the number of shares issuable under the Plan by 1,224,597 shares of Common Stock.

 

NOW, THEREFORE, the following amendments and modifications are hereby made a part of the Plan subject to, and effective as of the date of, the approval of shareholders of the Plan as amended:

 

1.

Section 3(a) of the Plan is hereby amended by revising the first sentence of such section in its entirety to read as follows:

 

“Subject to adjustment as described below, the aggregate number of shares of common stock of the Company (“Company Stock”) that may be issued under this Plan is equal to (i) 4,023,505 and (ii) the number of shares that may be added to this Plan pursuant to Section 3(b) (collectively the “Share Reserve”), each of which may be granted as an Incentive Stock Option, up to the maximum limit set forth in Section 3(d) below.”

 

2.

Section 3(d) of the Plan is hereby amended by revising the first sentence of such section in its entirety to read as follows:

 

“Notwithstanding anything to the contrary in this Section 3, subject to the provisions of Section 3(e) relating to capitalization adjustments, the aggregate maximum number of shares of Company Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be 4,203,505 shares of Company Stock plus the amount of any increase in the number of shares that may be available for issuance pursuant to Grants pursuant to Section 3(h), but in no event shall greater than 14,413,989 shares of Company Stock be issued as Incentive Stock Options (the “Maximum Incentive Stock Option Limit”).”

 

3.

In all other respects, the Plan, as amended, is hereby ratified and confirmed and shall remain in full force and effect.

 

 

Exhibit 10.14

 

Execution Version

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT effective as of June 1, 2020 (this “Agreement”) between Cognition Therapeutics, Inc. (the “Company”), a Delaware corporation, and Lisa Ricciardi (the “Executive”).

 

Background:

 

Executive and the Company entered into an employment agreement dated March 30, 2020 (the “Interim CEO Contract”) for Executive to serve as Interim Chief Executive Officer of the Company for a term specified therein.

 

The parties desire to terminate the Interim CEO Contract and enter into this Agreement to provide for the employment of the Executive by the Company as CEO and for certain other matters in collection with such employment, all as set forth more fully in this Agreement. Certain capitalized terms used in this Agreement have the respective meanings given to them in Exhibit A hereto.

 

Terms:

 

NOW, THEREFORE, in consideration of the premises and covenants set forth herein, and intending to be legally bound hereby, the parties to this Agreement hereby agree as follows:

 

1.            Termination of Interim CEO Contract; Position and Duties; Board Seat.

 

(a)            Termination of Interim CEO Contract. The parties acknowledge and agree that the Interim CEO Contract shall terminate on the Effective Date and all matters related to Executive’s employment shall be governed by this Agreement.

 

(b)            Position and Duties. The Company agrees that the Executive shall be employed by the Company to serve as Chief Executive Officer and President of the Company. The Executive shall report directly to the Board of Directors of the Company (the “Board”). The Executive agrees to be so employed by the Company and agrees to devote substantially all of her business time, attention, skill and efforts to perform services for the Company and to faithfully and diligently discharge and fulfill her duties hereunder to the best of her abilities. In so doing, the Executive shall perform such executive, managerial, administrative and financial functions as are required to develop the Company’s business and to perform other duties assigned to the Executive by the Board that are consistent with the Executive’s title as Chief Executive Officer and President. The Executive shall perform her duties hereunder primarily at the Company’s principal offices, currently located in Pittsburgh, Pennsylvania. In the performance of her duties, the Executive shall travel to such other places at the Company’s expense at such times as the needs of the Company may from time-to-time dictate or be desirable.

 

(c)            Other Activities. Notwithstanding Section 1(a), nothing shall preclude the Executive from engaging in professional, education, religious, civic, charitable or similar types of activities, community affairs and/or managing her personal investments and affairs,

 

 

provided that these activities do not interfere or conflict with the performance of her duties and responsibilities hereunder. The Executive may continue to serve on up to five boards of directors of other enterprises.

 

(d)            Board Seat. Promptly after the date hereof, the Executive will be nominated for election to a seat on the Board, which the Executive shall occupy for as long as the Executive continues to serve as Chief Executive Officer. The Executive will automatically be deemed to have resigned the Executive’s position as a member of the Board if the Executive resigns or is terminated as the Chief Executive Officer for any reason, and, without limiting the foregoing, the Executive agrees to submit the Executive’s written resignation in such event upon the Company’s request.

 

2.            Term. The Executive’s employment under this Agreement shall commence on the Commencement Date and shall end when terminated pursuant to Section 4.

 

3.            Compensation.

 

(a)            Base Salary. The Executive shall initially be paid an annual salary at the rate of $386,000 (the “Base Salary”), payable in accordance with the Company’s payroll practices and policies in effect from time to time and subject to applicable withholding of income taxes, social security taxes and other such payroll deductions as are required by law or applicable employee benefit programs; provided, however, Executive’s Base Salary shall be evaluated when similarly situated executives are evaluated for raises. Notwithstanding the above, Executive’s Base Salary shall be increased to $425,000 upon a successful raise of an additional $50,000,000 in the Series C at a share price of $1.25 per share or higher. The Board shall review the Executive’s Base Salary for annual increases beyond the set increase noted above.

 

(b)            Cash Bonus. With respect to each fiscal year of the Company during the continued full-time employment of the Executive hereunder, commencing with the 2020 fiscal year, the Executive will be eligible to an annual performance bonus (the “Cash Bonus”) in an amount up to 40% of the Executive’s Base Salary; provided, however, that the Cash Bonus for the 2020 fiscal year shall be prorated based on the portion of such fiscal year during with the Executive is actually employed by the Company pursuant to the Interim CEO Contract and this Agreement. For the avoidance of doubt, the prorated bonus for the 2020 fiscal year shall be calculated using Executive’s start date under the Interim CEO Contract. The Cash Bonus, if any, will be awarded by the Board in its reasonable discretion based on the achievement of Company and personal performance metrics established by the Board on an annual basis, and in any event not later than the 60^th day of the applicable fiscal year, following good faith consultation with the Executive. Except as set forth in Section 4 of this Agreement, any Cash Bonus allocable to the Executive hereunder shall be earned by the Executive if and only if the Executive actively employed on a full-time basis with the Company and is otherwise in compliance with the Executive’s obligations under this Agreement through the end of the fiscal year to which such Cash Bonus relates and, subject to sub-sections (a) and (b) of Section 4, on the payment date therefor. Any Cash Bonus awarded to the Executive hereunder will be payable in a single lump sum cash payment, less applicable taxes and withholdings, not later than two and one-half months after the end of the

 

 

fiscal year to which it relates in accordance with the Company’s customary practices for annual bonus payments.

 

(c)            Equity Incentives. Subject to the approval of the Board, the Executive shall be granted stock options under the Equity Incentive Plan as specified on Exhibit B hereto. In addition, the Executive shall be eligible to participate in equity incentive programs established by the Company from time to time in accordance with the terms of those programs.

 

(d)            Participation in Employee Benefit Plans. The Executive shall be eligible to continue to participate in any and all employee benefit plans from time to time in effect for employees of the Company generally. Such participation shall be subject to (i) the terms of the applicable plan documents, and (ii) generally applicable Company policies.

 

(e)            Vacation and Fringe Benefits. The Executive shall be entitled to participate in all vacation and other fringe benefit programs of the Company to the extent and on the same terms and conditions as are accorded to other senior management employees of the Company.

 

(f)            Reimbursement of Other Expenses.

 

(i)           The Company will directly pay for the attorneys’ fees incurred by the Executive in connection with the review and negotiation of this Agreement, as well as all other documents in connection with the commencement of her employment with the Company in an aggregate amount up to $15,000. Upon receiving a summary invoice and Form W9 from Outten & Golden LLP, the Company shall issue payment to Outten & Golden LLP no later than 10 business days following the Executive’s submission of such documentation.

 

(ii)           The Company shall reimburse the Executive for the reasonable and necessary out-of-pocket business expenses incurred by the Executive for or on behalf of the Company in furtherance of the performance of the Executive’s duties hereunder in accordance with the Company’s policies as approved by the Board from time to time, subject in all cases to the Company’s requirements with respect to reporting and documentation of such expenses.

 

(g)            Section 409A. If any reimbursement under this Section 3 is not exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) then (i) any reimbursement in one calendar year shall not affect the amount that may be reimbursed in any other calendar year; (ii) a reimbursement (or right thereto) may not be exchanged or liquidated for another benefit or payment; and (iii) a reimbursement shall be made no later than the end of the calendar year following the calendar year in which the Executive incurred the related expense.

 

4.            Termination.

 

(a)            Death. The Executive’s employment with the Company shall automatically terminate effective as of the date of the Executive’s death, in which event the Company shall not have any further obligation or liability under this Agreement except that the Company shall pay to the Executive’s estate: (i) any portion of the Executive’s Base

 

 

Salary for the period up to the Executive’s date of death that has been earned but remains unpaid; (ii) any expenses properly incurred but not yet reimbursed, including, without limitation, the reimbursements provided for in sub-sections (d) and (f) of Section 3; (iii) any benefits that have accrued to the Executive under the terms of the employee benefit plans of the Company, which benefits shall be paid in accordance with the terms of those plans (the payments in clauses (i) through (iii) collectively, the “Accrued Obligations”); (iv) the Cash Bonus awarded pursuant to Section 3(b), if any, with respect to the fiscal year prior to the fiscal year of termination, to the extent unpaid (the “Earned Bonus”). The Accrued Obligations shall be paid on the first payroll date following the last date of employment to the extent administratively feasible and, if not, then on the second payroll date following the last date of employment. The Earned Bonus, if any, will be paid when it would have been paid had Executive remained employed with the Company.

 

(b)            Disability. The Company may terminate the employment of the Executive immediately upon written notice to the Executive in the event of the Disability of the Executive, in which event the Company shall not have any further obligation or liability under this Agreement except for the Accrued Obligations and the Earned Bonus. The Accrued Obligations shall be paid on the first payroll date following the last date of employment to the extent administratively feasible and, if not, then on the second payroll date following the last date of employment. The Earned Bonus, if any, will be paid when it would have been paid had Executive remained employed with the Company.

 

(c)            Termination of the Executive’s Employment for Cause. The Company may terminate the employment of the Executive for Cause immediately upon providing written notice of such termination to the Executive. If the Executive’s employment with the Company is terminated by the Company for Cause, the Company shall not have any further obligation or liability under this Agreement except for the Accrued Obligations. The Accrued Obligations shall be paid on the first payroll date following the last date of employment to the extent administratively feasible and, if not, then on the second payroll date following the last date of employment.

 

(d)            Other Termination by the Company. The Company may terminate the employment of the Executive for any reason other than one specified in Section 4(b) or Section 4(c) immediately upon written notice of termination to the Executive. If the Executive’s employment with the Company is terminated by the Company for any reason other than one specified in Section 4(b) or Section 4(c), in addition to the Accrued Obligations and the Earned Bonus, and subject to the execution by the Executive of a release in the form of Exhibit C hereto (the “Release”) and the compliance by the Executive with the Release and all terms and provisions of this Agreement and the Invention Assignment Agreement (as defined in Section 5(b)) that survive the termination of the Executive’s employment by the Company the Executive shall be entitled to receive (i) severance payments in an amount equal to the Base Salary for the for the twelve (12) month period following the termination date; (ii) direct payment by the Company of COBRA premiums at the same level of employer subsidization as was in effect on the termination date until the earlier of the end of the twelve (12) month period following the termination date or (2) the date the Executive becomes eligible for group health insurance through another employer and (iii) with regard to any of the Executive’s awarded and outstanding options to purchase shares of the Company’s Common Stock that are subject to

 

 

time-based vesting, a number of option shares equal to the number of shares that would have vested if Executive continued to be employed for a period equal to 9 months after the date of termination shall become vested and exercisable. Notwithstanding the foregoing, if the Executive’s employment with the Company is terminated by the Company (or its successor) for any reason other than one specified in Section 4(b) or Section 4(c) within the twelve (12) month period following a Change of Control, then, in addition to the Accrued Obligations and the Earned Bonus, and subject to the execution by the Executive of the Release and the compliance by the Executive with the Release and all terms and provisions of this Agreement and the Invention Assignment Agreement (as defined in Section 5(b)) that survive the termination of the Executive s employment by the Company, the Executive shall be entitled to (A) receive severance payments in the form of continued payment of the Base Salary for the eighteen (18) month period following the termination date, (B) direct payment by the Company of COBRA premiums at the same level of employer subsidization as was in effect on the termination date until the earlier of (1) the date that is eighteen (18) months following the termination date or (2) the date the Executive becomes eligible for group health insurance through another employer, (C) an amount equal to the target Cash Bonus and (D) with regard to any of the Executive’s awarded and outstanding options to purchase shares of the Company’s Common Stock that are subject to time-based vesting, a number of option shares equal to the number of shares that would have vested if Executive continued to be employed for a period equal to 9 months after the date of termination shall become vested and exercisable. Any payments and benefits due pursuant to this Section 4(d), other than the Accrued Obligations and Earned Bonus, shall be paid or commence as soon as administratively feasible within 60 days, but no earlier than 30 days, after the date of the Executive’s termination of employment, provided the Executive has timely executed and returned the Release and, if a revocation period is applicable, the Executive has not revoked the Release; provided however, that if the 60-day period begins in one calendar year and ends in a second calendar year, the severance payments shall begin to be paid in the second calendar year. On the date that payments pursuant to this Section 4(d) commence, the Company will pay the Executive in a single lump sum payment, less applicable taxes and withholding, the payments that the Executive would have received on or prior to such date but for the delay imposed by the immediately preceding sentence, with the balance of the payments to be paid as originally scheduled. The Accrued Obligations will be paid on the first payroll date following last date of employment to the extent administratively feasible and, if not, then on the second payroll date following the last date of employment. The Earned Bonus will be paid when it would have been paid had Executive remained employed with the Company. If the Executive’s employment with the Company is terminated by the Company pursuant to this Section 4(d), the Company shall not have any further obligation or liability under this Agreement except for the payments specified in this Section 4(d) and payment of the Accrued Obligations and the Earned Bonus.

 

(e)            Termination by the Executive for Good Reason. The Executive may terminate her employment with the Company for Good Reason immediately upon providing written notice of such termination to the Company. If the Executive shall terminate the Executive’s employment with the Company for Good Reason, the Executive shall be entitled to receive the same payments and benefits on the same terms and conditions as would be applicable upon a termination of the Executive’s employment by the Company as provided in Section 4(d) and subject to the satisfaction of the other provisions of such Section 4(d) and this Section 4(e). If the Executive’s employment with the Company is terminated by the

 

 

Executive for Good Reason pursuant to this Section 4(e), the Company shall not have any further obligation or liability under this Agreement except for the payments specified in Section 4(d) and payment of the Accrued Obligations and the Earned Bonus. The Executive may not terminate her employment with the Company for Good Reason pursuant to this Section 4(e), and shall not be considered to have done so for any purpose of this Agreement, unless (A) the Executive, within 60 days after the initial existence of the act or failure to act by the Company that constitutes “Good Reason” within the meaning of this Agreement, provides the Company with written notice that describes in particular detail, the act or failure to act that the Executive believes to constitute “Good Reason” and identifies the particular clause of this Section 4(e) that the Executive contends is applicable to such act or failure to act; (B) the Company, within 30 days after its receipt of such notice, fails or refuses to rescind such act or remedy such failure to act so as to eliminate “Good Reason” for the termination by the Executive of the Executive’s employment relationship with the Company; and (C) the Executive actually resigns from the employ of the Company on or before that date that is 12 calendar months after the initial existence of the act or failure to act by the Company that constitutes “Good Reason.” If the requirements of the immediately preceding sentence are not fully satisfied on a timely basis, then the resignation by the Executive from the employ of the Company shall not be deemed to have been for “Good Reason,” the Executive shall not be entitled to any of the benefits to which the Executive would have been entitled if the Executive had resigned from the employ of the Company for “Good Reason,” and the Company shall not be required to pay any amount or provide any benefit that would otherwise have been due to the Executive under this Section 4(e) had the Executive resigned with “Good Reason.”

 

(f)            Other Termination by the Executive. The Executive may terminate the Executive’s employment for any reason other than one specified in Section 4(e) upon 30 days’ prior written notice of termination to the Company. In the event the Executive shall terminate the Executive’s employment pursuant to this Section 4(f), the Company shall not have any further obligation or liability under this Agreement, except for the Accrued Obligations, which shall be paid on the first payroll date following last date of employment to the extent administratively feasible and if not, then on the second payroll date following the last date of employment. The Company shall not have the right following Executive’s provision of notice to terminate the Executive’s employment prior to the end of the notice period unless the Company pays the Executive for the full notice period.

 

(g)          Base Salary Continuation. The Base Salary continuation set forth in Sections 4(d) and (e) above shall be intended either (i) to satisfy the safe harbor set forth in the Treas. Regs. 1.409A-1(b)(9)(iii), or (ii) be treated as a Short-term Deferral as that term is defined Treas. Regs. 1.409A-1(b)(4). To the extent such continuation payments exceed the applicable safe harbor amount or do not constitute a Short-term Deferral, the excess amount shall be treated as deferred compensation under Code section 409A and as such shall be payable pursuant to the following schedule: such excess amount shall be paid via standard payroll in periodic installments in accordance with the Company’s usual practice for its senior executives. Solely for the purposes of Code section 409A, each installment payment is considered a separate payment. Notwithstanding any provision in this Agreement to the contrary, in the event that the Executive is a “specified employee” as defined in Code section 409A, any continuation payment, continuation benefits or other amounts payable under this Agreement that would be subject to the special rule regarding payments to “specified employees” under Section 409(A)(a)(2)(B) of the

 

 

Code shall not be paid before the expiration of a period of six months following the date of the Executive’s termination of employment or before the date of the Executive’s death, if earlier.

 

(h)           Parachute Provisions. In the event a Change of Control occurs, the Company will engage an independent accounting firm (the “Accounting Firm”) at its expense to determine whether the Executive received, is entitled to receive or will become entitled to receive any benefits or payments in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) (the “Total Payments”) and whether the Total Payments will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code. If the Total Payments will be subject to the Excise Tax, at the Executive’s election, (i) the Company shall use reasonable efforts to obtain the approval of Company’s stockholders in the manner contemplated by Q&A 7 of Treas. Reg. Section 1.280G such that the Excise Tax shall not apply to any portion of the Total Payments, or (ii) the aggregate present value of the Total Payments shall be reduced (but not below $1) if reducing the Total Payments will provide the Executive with a greater net after-tax amount than would be the case if no reduction was made. Any reduction shall be done in accordance with Section 409A of the Code.

 

5.            Restrictive Covenants.

 

(a)            Non-Competition and Non-Solicitation. The Executive shall not, and shall not permit any person or entity directly or indirectly controlled by the Executive (alone or together with others) (the “Executive Affiliates”) to, directly or indirectly (including, without limitation, through ownership, management, operation or control of any other person or entity, or participation in the ownership, management, operation or control of any other person or entity, or by having any interest, as a stockholder, lender, investor, agent, consultant, employee, partner or otherwise, in or with respect to any other person or entity) do any of the following:

 

(i)            During the period of the Executive’s employment with the Company and for 12 months following the date of termination of the Executive’s employment for any reason (the “Restricted Period”), own, manage, operate, control, invest in, participate in, provide consulting services to, or be involved or associated with in any capacity, any person or entity that is engaged in a Competitive Business anywhere in the world; provided that the foregoing shall not prohibit the Executive and Executive Affiliates from owning in the aggregate less than one percent of any class of securities listed on a national securities exchange or traded publicly in the over-the-counter market;

 

(ii)           During the Restricted Period: (A) solicit, encourage or entice any client, customer, vendor, licensee, licensor, consultant or supplier of or to the Company to cease to do business with, or to reduce or modify the business such person or entity has done with or intends to do with, or to end, reduce or modify any relationship or proposed relationship of such person or entity with, the Company, or (B) interfere with, disrupt or attempt to disrupt or otherwise jeopardize any relationship of the Company with any client, customer, vendor, licensee, licensor, consultant or supplier or any other person or entity with whom the Company has a business relationship; and

 

 

(iii)            During the Restricted Period, solicit, hire, contract for services or otherwise employ any person who at the time of the Executive’s termination of employment or at any time during the six-month period immediately preceding such termination is or was an employee of, or a consultant to, the Company, or otherwise encourage any such individual to leave the employ of, or to terminate any such consulting arrangement with, the Company, or, with respect to any such employee or consultant who is then an employee of or consultant to the Company, to become an employee of, or consultant to, any other person or entity, or employ or retain any such person.

 

(b)            Invention Assignment Agreement. The Executive and the Company have entered into that certain Employment Confidentiality and Invention Agreement dated as of the date hereof (the “Invention Assignment Agreement”) and attached hereto as Exhibit D, the terms and conditions of which are incorporated by reference herein and made a part hereof.

 

(c)            Injunctive Relief. The Executive acknowledges that the Executive’s compliance with the agreements in this Section 5 is necessary to protect the good will and other proprietary interests of the Company and that the Executive is one of the principal executives of the Company and conversant with its affairs, its trade secrets and other proprietary information. The Executive acknowledges that a breach of any of the Executive’s agreements in this Section 5 may result in irreparable and continuing damage to the Company for which there may be no adequate remedy at law; and the Executive agrees that in the event of any material breach of the aforesaid agreements, the Company and its successors and assigns shall be entitled to seek injunctive relief and to such other and further relief as may be proper.

 

(d)           Tolling. The Restricted Period and any additional periods thereafter under this Section 5 shall be tolled and shall cease to run during the period of any violation by the Executive of any of the Restrictive Covenants.

 

6.            No Conflicts. The Executive represents and warrants that the Executive is not party to any agreement, contract or understanding, whether of employment, consultancy or otherwise, in conflict with this Agreement or which would in any way restrict or prohibit the Executive from undertaking or performing services for the Company or otherwise from entering into or performing this Agreement or the Invention Assignment Agreement.

 

7.            Full Agreement. This Agreement (including the Exhibits hereto), constitutes the entire agreement of the parties concerning its subject matter and supersedes all other oral or written understandings, discussions, and agreements, and may be modified only in a writing signed by both parties. The parties acknowledge that they have read and fully understand the contents of this Agreement and execute it after having an opportunity to consult with legal counsel.

 

8.            Amendments. Any amendment to this Agreement shall be made in writing and signed by the parties hereto.

 

9.            Enforceability. If any provision of this Agreement shall be invalid or unenforceable, in whole or in part, then such provision shall be deemed to be modified or restricted to the extent and in the manner necessary to render the same valid and enforceable,

 

 

or shall be deemed excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum extent permitted by law as if such provision had been originally incorporated herein as so modified or restricted or as if such provision had not been originally incorporated herein, as the case may be.

 

10.            Construction. This Agreement shall be construed and interpreted in accordance with the internal laws of the Commonwealth of Pennsylvania.

 

11.            Assignment.

 

(a)            By the Company. The rights and obligations of the Company under this Agreement shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. This Agreement may be assigned to the Company without the consent of the Executive.

 

(b)            By the Executive. This Agreement and the obligations created hereunder may not be assigned by the Executives, but all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive’s heirs, devisees, legatees executors, administrators and personal representatives. Any attempted assignment in violation of this Section 11(b) shall be null and void.

 

12.            Notice. All notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been given when mailed by certified mail, return receipt requested, or delivered by a national overnight delivery service addressed to the intended recipient as follows:

 

If to the Company:

 

Cognition Therapeutics, Inc.

2403 Sidney St # 261

Pittsburgh, PA 15203

Attention: Chairman of the Board

 

If to the Executive:

 

Lisa Ricciardi

40 Old Post Road

Rye, NY 10580

 

With a copy to:

 

Wendi S. Lazar, Esq.

Outten & Golden, LLP

685 Third Avenue, Floor 25

New York, NY 10017

 

 

Any party may from time to time change its address for the purpose of notices to that party by a similar notice specifying a new address, but no such change shall be deemed to have been given until it is actually received by the party sought to be charged with its contents.

 

13.         Waivers. No claim or right arising out of a breach or default under this Agreement shall be discharged in whole or in part by a waiver of that claim or right unless the waiver is supported by consideration and is in writing and executed by the aggrieved party hereto or such party’s duly authorized agent. A waiver by any party hereto of a breach or default by the other party hereto of any provision of this Agreement shall not be deemed a waiver of future compliance therewith, and such provisions shall remain in full force and effect.

 

14.          Survival of Covenants. The provisions of Section 4 through this Section 14 shall survive the termination of the Executive’s employment shall continue in effect thereafter.

 

(Signature page follows)

 

Execution Version

 

IN WITNESS WHEREOF, this Agreement has been executed by the parties on the date(s) indicated below first above written.

 

	COGNITION THERAPEUTICS, INC.
	By:	/s/ Robert Gailus
	Title:	Chairman of the Board
	Date:	6/6/20
	/s/ Lisa Ricciardi
	Lisa Ricciardi
	Date:	6/9/20

 

 

Exhibit A

 

Certain Definitions

 

The following terms have the meaning set forth below wherever they are used in this Agreement.

 

“Cause” for the Company (or a successor, if appropriate) to terminate the Executive’s employment will exist upon the occurrence of any of the following events: (i) the Executive’s material breach of this Agreement or any material violation of the Company’s written policies or rules; (ii) the Executive’s having committed willful fraud or willful misconduct, in any such case which is materially injurious to the Company; (iii) the Executive’s having been convicted of a felony involving moral turpitude that results in material harm to the standing or reputation of the Company; or (iv) the Executive’s material breach of the terms of the Invention Assignment Agreement; provided, however, that no Cause shall exist unless the Company has provided written notice to Executive describing in detail such Cause conduct and, to the extent an at or omission giving rise to Cause is reasonably susceptible to cure, Executive shall be given a reasonable opportunity, not to exceed thirty (30) days, after written notice by the Company to cure such act or omission.

 

“Change of Control” shall have the meaning set forth in the Equity Incentive Plan.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Commencement Date” means May ___, 2020.

 

“Competitive Business” means a business that is engaged in the research, development, marketing, manufacturing, sale or other commercialization of any compound or other agent that targets the sigma-2/PGRMC1 receptor for the prevention and/or treatment of Alzheimer’s Disease or any other neurodegenerative indication or condition.

 

“Disability means a condition entitling the Executive to benefits under the Company’s long term disability plan, policy or arrangement; provided, however, that if no such plan, policy or arrangement is then maintained by the Company and applicable to the Executive, “Disability” will mean an illness, incapacity or a mental or physical condition that renders the Executive unable or incompetent, with or without a reasonable accommodation, to carry out the job responsibilities that the Executive held or the tasks that the Executive was assigned at the time the disability commenced, as determined in good faith by a physician mutually acceptable to the Company and the Executive, for a period of 90 consecutive days, or 180 non-consecutive days in any rolling 12-month period.

 

“Equity Incentive Plan” means the Cognition Therapeutics, Inc. 2017 Equity Incentive Plan, as amended from time to time, and any successor thereto.

 

 

“Full Diluted Equity” means the issued and outstanding shares of the Company’s Common Stock, determined on a fully-diluted, as-converted basis as of the date of grant of the applicable stock options.

 

“Good Reason” for the Executive to resign from the employ of the Company will exist upon the occurrence of any of the following events, subject to compliance with the other provisions of Section 4(e): (a) a reduction in the Base Salary, as then in effect; (b) a material reduction of the Executive’s authority, position, responsibilities or duties, except that, following a Change of Control, a reduction in authority, position, responsibilities or duties solely by virtue of the Company being acquired and becoming part of a larger entity or operated as a subsidiary shall not constitute Good Reason; (c) a change in title or reporting line; (d) Executive no longer holding a board seat in accordance with Section 1(c); (c) the Company’s material breach of this Agreement; or (d) a relocation of the Executive’s principal workplace by more than 30 miles from the Company’s principal offices as of the Commencement Date.

 

 

Execution Version

 

Exhibit B

 

Stock Option Terms

 

Initial Stock Option. In addition to the options granted to Executive under the Interim CEO Contract, the Executive will be granted additional stock options under the Equity Incentive Plan exercisable for the purchase of shares of the Company’s Common Stock (“Share”) representing 5% of the Company’s Fully Diluted Equity (the “Initial Stock Options”). The Initial Stock Options will vest over a four-year period as follows: (i) 25% vesting on the first anniversary of the Commencement Date; and (ii) 75% vesting in equal monthly installments over the following 36 months.

 

The Executive will be granted additional stock options upon completion of the Series C if completed as an up round at $1.15 per share to maintain her Fully Diluted Equity position at a minimum of 5%. Notwithstanding the above, if the Executive’s performance exceeds expectation, but does not reach the specified share price hurdle noted above, the Board will not unreasonably withhold the additional stock options grant to maintain her Fully Diluted Equity position at a minimum of 5%. Notwithstanding anything to the contrary, the Executive shall be entitled to the immediate vesting of any unvested Shares subject to the Initial Stock Options if the Company undergoes a Change of Control and the Executive is still actively employed by the Company on the closing of such Change of Control.

 

Additional Stock Option. If the Company closes an offering of its equity securities at a price per share of the Company’s Preferred Stock of at least $1.75, and the Executive is actively employed by the Company on the date of such closing, the Company shall grant the Executive an additional stock option (“Additional Option”) to purchase Shares representing 1% of the Company’s Fully Diluted Equity, taking into account the securities issued in the applicable offering), after giving effect to such grant. The Additional Option will vest as follows: (i) 25% of the Shares underlying the Additional Option shall vest and become exercisable on the date of grant (“Grant Date”); and (ii) the remaining 75% of the Shares underlying the Additional Option shall vest and become exercisable in 36 substantially equal monthly installments, with each such installment vesting on the first day of every calendar month commencing on the first day of the first full calendar month following the Grant Date, subject to the Executive’s continued employment by the Company through each such date.

 

Notwithstanding anything to the contrary, if the Company undergoes a Change of Control at a price per share of the Company’s Preferred Stock of at least $1.75 but less than $3.50, and the Executive is still actively employed by the Company on the closing of such Change of Control, the Executive shall be entitled to the immediate vesting of any unvested Shares subject to the Additional Option, then held by the Executive.

 

Second Additional Option. If the Company closes an offering of its equity securities at a price per share of the Company’s Preferred Stock of at least $3.50, and the Executive is actively employed by the Company on the date of such closing, the Company shall grant the Executive an additional stock option (“Second Additional Option”) to

 

 

purchase Shares representing 1% of the Company’s Fully Diluted Equity, taking into account the securities issued in the applicable offering), after giving effect to such grant. The Second Additional Option will vest as follows: (i) 25% of the Shares underlying the Second Additional Option shall vest and become exercisable on the date of grant (the “Second Grant Date”); and (ii) the remaining 75% of the Shares underlying the Second Additional Option shall vest and become exercisable in 36 substantially equal monthly installments, with each such installment vesting on the first day of every calendar month commencing on the first day of the first full calendar month following the Second Grant Date, subject to the Executive’s continued employment by the Company through each such date.

 

Notwithstanding anything to the contrary, if the Company undergoes a Change of Control at a price per share of the Company’s Preferred Stock of at least $3.50, and the Executive is still actively employed by the Company on the closing of such Change of Control, the Executive shall be entitled to the immediate vesting of any unvested Shares subject to the Additional Option and Second Additional Option then held by the Executive.

 

The exercise price of all stock options will be the fair market value per share of Common Stock as determined by the Board, and the grant thereof will be subject to the execution of a stock option agreement in the form approved by the Company. In addition, the following terms shall apply to all such stock option grants: (i) the stock options shall have a 10-year terms, (ii) the stock options shall remain exercisable, to the extent vested, for a period equal to the lesser of three years plus 90 days (or 2 years plus 90 days in the event that Executive is terminated for Cause) after the date of termination or until the end of the 10-year term, regardless of the Executive’s employment status with the Company, (iii) the definition of “Cause” for purposes of the stock options shall have the meaning set forth in this Agreement and not the Equity Incentive Plan and (iv) subject to applicable legal requirements and limitations with respect to vesting, exercisability and other applicable terms, it is intended that all stock options granted to the Executive be treated as incentive stock options under Section 422 of the Code, with any portion that does not so qualify being treated as nonqualified stock options.

 

 

Execution Version

 

EXHIBIT C

 

RELEASE OF CLAIMS

 

1.          Termination of Employment. Lisa Ricciardi (“Executive”) hereby agrees and recognizes that, as of ________, 20__, Executive’s employment relationship with Cognition Therapeutics, Inc., a Delaware corporation (the “Company”), will be permanently and irrevocably severed.

 

2.          Release of Claims. In consideration of the payments and benefits described in Section 4(d) and Section 4(e) of the employment agreement (the “Employment Agreement”), effective May ___, 2020, by and between Executive and the Company, to which Executive agrees Executive is not entitled until and unless Executive executes and does not revoke this Release, Executive, for and on behalf of herself and her heirs, executors, administrators and assigns, hereby waives and releases any and all complaints, claims, suits, controversies, and actions, whether known or unknown, suspected or claimed, which Executive, or any of the Executive’s heirs, executors, administrators or assigns ever had, now has or may have against the Company and/or its respective predecessors, successors, past or present parents or subsidiaries, affiliates, investors, branches or related entities, in their respective capacities as such (collectively, including the Company, the “Entities”) and/or the Entities’ past or present stockholders, insurers, assigns, trustees, directors, officers, limited and general partners, managers, joint venturers, members, employees or agents in their respective capacities as such (collectively with the Entities, the “Releasees”) by reason of circumstances, acts or omissions which have occurred on or prior to the date that this Release becomes effective, including, without limitation, (a) any complaint, charge or cause of action arising under (i) federal, state or local laws pertaining to employment or termination of employment, including the Age Discrimination in Employment Act of 1967 (the “ADEA,” a law which prohibits discrimination on the basis of age), the National Labor Relations Act, as amended, the Civil Rights Act of 1991, as amended, the Americans with Disabilities Act of 1990, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1963, as amended, the Family and Medical Leave Act of 1993, as amended, the Worker Adjustment Restraining and Notification Act, as amended, the Executive Retirement Income Security Act of 1974, as amended, any applicable Executive Order Programs, the Fair Labor Standards Act, or their state or local counterparts (including, but not limited to, the Pennsylvania Human Relations Act); (ii) any other federal, state or local civil or human rights law; (iii) any other local, state, or federal law, regulation or ordinance; (iv) any public policy, contract and/or quasi-contract or tort (including, but not limited to, claims of breach of the Employment Agreement, an expressed or implied contract, tortious interference with contract or prospective business advantage, breach of the covenant of good faith and fair dealing, promissory estoppel, detrimental reliance, invasion of privacy, nonphysical injury, personal injury or sickness or any other harm, wrongful or retaliatory discharge, fraud, defamation, slander, libel, false imprisonment, negligent or intentional infliction of emotional distress); (v) common law; or (vi) any policies, practices or procedures of the Company; or (b) any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters (the “Released Claims”). By signing this Release, Executive acknowledges that she intends to waive and release any rights known or unknown that she may have against the Releasees under these and any other laws. Notwithstanding the foregoing, Executive does not release, discharge or waive: any rights to indemnification

 

 

 

that she may have under the certificate of incorporation, the by-laws or equivalent governing documents of the Company or its subsidiaries or affiliates, the laws of the State of Delaware or any other state of which any such subsidiary or affiliate is a domiciliary, the Employment Agreement or any indemnification agreement between Executive and the Company, including those that cannot be released as a matter of law, such as her rights to COBRA, workers compensation, and unemployment insurance; any rights to insurance coverage under any directors’ and officers’ personal liability insurance or fiduciary insurance policy; any rights she may have in her capacity as a stockholder of the Company; any rights she may have to enforce the vested terms of any equity or other incentive agreement previously provided to her; any rights she may have to severance benefits and payment of Accrued Obligations or the Earned Bonus under the Employment Agreement (the “Excluded Claims”). The Executive acknowledges that she has made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by this Section 1.

 

3.          Proceedings. Executive acknowledges that she has not filed any complaint charge, claim or proceeding, if any, or assigned to any other person the right to bring any such complaint, charge, claim, or proceeding, relating to the Related Claims against any of the Releasees before any local, state or federal agency, court or other body (each individually a “Proceeding”). Executive (i) acknowledges that she will not initiate or cause to be initiated on her behalf any Proceeding and will not participate in any Proceeding, in each case, except as required by law and (ii) waives any right she may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding, including any Proceeding conducted by the Equal Employment Opportunity Commission (the “EEOC”). Further, Executive understands that, by executing this Release, she will be limiting the availability of certain remedies that she may have against the Releasees and limiting also her ability to pursue certain claims against the Releasees. Notwithstanding the above, nothing in Section 1 of this Release shall prevent Executive from (i) initiating or causing to be initiated on her behalf any complaint, charge, claim or proceeding against any Releasee before any local, state or federal agency, court or other body challenging the validity of the waiver of her claims under the ADEA contained in Section 1 of this Release (but no other portion of such waiver), (ii) initiating or participating in an investigation or proceeding conducted by the EEOC or (iii) reporting possible violations of federal, state or local law, ordinance or regulation to any governmental agency or entity, including, but not limited to, the Department of Justice, the U.S. Securities and Exchange Commission (the “SEC”), the Congress and any agency Inspector General, or otherwise taking action or making disclosures that are protected under the whistleblower provisions of any federal, state or local law, ordinance or regulation, including, but not limited to, Rule 21F-17 promulgated under the Securities Exchange Act of 1934, as amended, or (iv) receiving a monetary award for information provided to the SEC pursuant to Rule 21F-17 promulgated under the Securities Exchange Act of 1934, as amended. The Executive acknowledges and agrees that the Executive’s separation from employment with the Company in compliance with the terms of the Employment Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).

 

 

4.          Time to Consider. Executive acknowledges that she has been advised that she has twenty-one (21)/forty-five(45) days from the date of receipt of this Release to consider all the provisions of this Release and, further, that if Executive signs this Release prior to the expiration of such twenty-one(21)/forty-five (45) day period, she does hereby knowingly and voluntarily waive said given twenty-one(21)/forty-five (45) day period. EXECUTIVE FURTHER ACKNOWLEDGES THAT SHE HAS RELEASE THIS RELEASE CAREFULLY, HAS BEEN ADVISED BY THE COMPANY TO, AND HAS IN FACT, CONSULTED AN ATTORNEY, AND FULLY UNDERSTANDS THAT BY SIGNING BELOW SHE IS GIVING UP CERTAIN RIGHTS WHICH SHE MAY HAVE TO SUE OR ASSERT A CLAIM AGAINST ANY OF THE RELEASEES, AS DESCRIBED IN SECTION 1 OF THIS RELEASE AND THE OTHER PROVISIONS HEREOF. EXECUTIVE ACKNOWLEDGES THAT SHE HAS NOT BEEN FORCED OR PRESSURED IN ANY MANNER WHATSOEVER TO SIGN THIS RELEASE, AND EXECUTIVE AGREES TO ALL OF ITS TERMS VOLUNTARILY. [EXECUTIVE ALSO ACKNOWLEDGES THAT SHE HAS RECEIVED ALL INFORMATION REQUIRED TO BE DISCLOSED IN CONNECTION WITH AN EXIT INCENTIVE OR OTHER EMPLOYMENT TERMINATION PROGRAM.]

 

5.          Revocation. Executive hereby acknowledges and understands that Executive shall have seven (7) days from the date of her execution of this Release to revoke this Release (including, without limitation, any and all claims arising under the ADEA) and that neither the Company nor any other person is obligated to provide any benefits to Executive pursuant to Section 4(d) or Section 4(e) of the Employment Agreement until eight (8) days have passed since Executive’s signing of this Release without Executive having revoked this Release, in which event the Company immediately shall arrange and/or pay for any such benefits otherwise attributable to said eight (8) day period, consistent with the term of the Employment Agreement. If Executive revokes this Release, Executive will be deemed not to have accepted the terms of this Release, no action or forbearance of action will be required of the Company under any section of this Release, and Executive shall not be entitled to receive any portion of the severance compensation and benefits which are conditioned on the delivery of this Release.

 

6.          No Admission. This Release does not constitute an admission of liability or wrongdoing of any kind by Executive or the Company.

 

7.          Confidentiality. Executive agrees that Executive will not communicate or disclose the terms of this Release to any persons with the exception of members of Executive’s immediate family and Executive’s attorney and financial advisor, or as permitted by Section 3 above.

 

8.          Return of Company Property. Executive represents that all equipment and other property of the Company, including any documents and files, whether electronically stored or maintained in hard copy, have been returned to the Company, and that Executive has

 

 

not retained any copies of the same. Notwithstanding anything to the contrary in this Agreement, Executive may retain her contact lists, whether in electronic or paper form (e.g. rolodex, Outlook contacts, etc.) and copies of documents related to Executive’s compensation and benefits.

 

9.          Non-Disparagement. Executive will not disparage any Releasee or otherwise take any action which could reasonably be expected to adversely affect the personal or professional reputation of any Releasee. The Company’s directors, officers and senior executives shall not disparage or otherwise take any action which could reasonably be expected to adversely affect the personal or professional reputation of the Executive.

 

10.        Post-Employment Obligations. Executive reaffirms that she will comply with all of her post-employment obligations as set forth in Section 5 of the Employment Agreement.

 

11.        Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes any and all prior representations, agreements, written or oral, expressed or implied, except for Section 5 of the Employment Agreement, which survives the termination of Executive’s employment and is incorporated herein by reference, and except for any agreements with respect to Executive’s options to acquire Common Stock of the Company. This Agreement may not be modified or amended other than by an agreement in writing signed by an officer of the Company.

 

12.        Acknowledgement. Executive acknowledges and agrees that, subsequent to the termination of Executive’s employment, Executive shall not be eligible for any payments from the Company or Company-paid benefits, except as expressly set forth in this Agreement. Executive also acknowledges and agrees that Executive has been paid for all time worked and has received all other compensation owed to her.

 

13.        Assignment. This Agreement shall be binding upon and be for the benefit of the parties as well as Executive’s heirs and the Company’s successors and assigns.

 

14.        General Provisions. A failure of any of the Releasees to insist on strict compliance with any provision of this Release shall not be deemed a waiver of such provision or any other provision hereof. If any provision of this Release is determined to be so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable, and in the event that any provision is determined to be entirely unenforceable, such provision shall be deemed severable, such that all other provisions of this Release shall remain valid and binding upon Executive and the Releasees.

 

15.        Governing Law. The validity, interpretations, construction and performance of this Release shall be governed by the laws of the Commonwealth of Pennsylvania without giving effect to conflict of laws principles.

 

IN WITNESS WHEREOF, Executive has hereunto set Executive’s hand as of the day and year set forth opposite her signature below.

 

 

 

Exhibit 10.15

 

SEPARATION AND RELEASE AGREEMENT

 

THIS SEPARATION AND RELEASE AGREEMENT (this “Agreement”) is made by and between Kenneth I. Moch (the “Executive”) and Cognition Therapeutics, Inc. (the “Company”).

 

WHEREAS, the Company and the Executive entered into an Employment Agreement, effective October 11, 2016 and subsequently amended (the “Employment Agreement”), which governs the Executive’s employment with the Company; and

 

WHEREAS, the Executive’s employment with the Company and its affiliates ceased as of March 17, 2020 (the “Termination Date”); and

 

WHEREAS, the Company has agreed to pay the Executive certain amounts and provide certain benefits in connection with the Executive’s termination of his employment, subject to his execution of this Agreement.

 

NOW THEREFORE, in consideration of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the parties agree as follows:

 

1.            Termination of Employment. Executive hereby agrees and recognizes that, as of the Termination Date his employment relationship with the Company has been permanently and irrevocably severed and all officer, director and fiduciary positions with the Company or any of its affiliates, including with respect to any benefit plan sponsored by or contributed to by the Company or any of its affiliates, held by the Executive terminated effective as of the Termination Date. Executive shall execute any document reasonably requested to effect his resignation from the Company’s board of directors and termination of his officer and other positions with the Company. Notwithstanding the foregoing, Executive shall serve the Company in an advisory role pursuant to the Advisor Services Agreement with the Company dated as of March 17, 2020.

 

2.            Consideration; Acknowledgements.

 

a.            In connection with the cessation of the Executive’s employment, and in consideration of the Executive’s execution of this Agreement, and this Agreement becoming irrevocable in accordance with its terms, the Company will (1) continue to pay Executive’s base salary (at the rate of $386,250) for the twelve (12) month period following the Termination Date, (2) in satisfaction of any and all bonus amounts payable to Executive, make a lump sum payment to Executive of $104,287.50 and (3) waive in the entirety the medical insurance premiums under COBRA until the earlier of the first anniversary of the Termination Date and the date Executive becomes eligible for medical benefits through another employer. The payment described in this Section 2 shall commence as soon as administratively feasible following the date that this Agreement becomes irrevocable, provided that the Company will pay Executive in a single lump sum payment the payments that Executive would have received between the Termination Date and the date this Agreement becomes irrevocable, with the balance of the payments to be paid as originally scheduled. The Company shall also pay Executive his accrued but unused vacation time (i.e. ten (10) days) no later than the second payroll date of the Company occurring after the Termination Date.

 

b.            Executive acknowledges that: (1) he has no entitlement or rights under any severance or similar arrangement maintained by the Company or any of its affiliates, and (2) except as otherwise provided specifically in this Section 2 of this Agreement, the Company and its affiliates do

 

 

not and will not have any other liability or obligation to the Executive, including under the Employment Agreement. The Executive further acknowledges that, in the absence of his execution of this Agreement, the payments specified in this Section 2, would not otherwise be payable. Executive further acknowledges and agrees that all incentive equity awards made by the Company to Executive, including without limitation any options to purchase Common Stock of the Company, shall cease to vest as of the Termination Date and no portion of any options that are not exercisable as of the Termination Date shall thereafter become exercisable, regardless of any service or availability of Executive to the Company following the Termination Date.

 

3.            Release of Claims. In consideration of the payments and benefits described in Section 2 hereof, to which Executive agrees Executive is not entitled until and unless Executive executes and does not revoke this Agreement, Executive, for and on behalf of himself and his heirs, executors, administrators and assigns, hereby waives and releases any and all complaints, claims, suits, controversies, and actions, whether known or unknown, suspected or claimed, which Executive, or any of the Executive’s heirs, executors, administrators or assigns ever had, now has or may have against the Company and/or its respective predecessors, successors, past or present parents or subsidiaries, affiliates, investors, branches or related entities (collectively, including the Company, the “Entities”) and/or the Entities’ past or present stockholders, insurers, assigns, trustees, directors, officers, limited and general partners, managers, joint venturers, members, employees or agents in their respective capacities as such (collectively with the Entities, the “Releasees”) by reason of circumstances, acts or omissions which have occurred on or prior to the date that this Agreement becomes effective, including, without limitation, (a) any complaint, charge or cause of action arising under (i) federal, state or local laws pertaining to employment or termination of employment, including the Age Discrimination in Employment Act of 1967 (the “ADEA,” a law which prohibits discrimination on the basis of age), the National Labor Relations Act, as amended, the Civil Rights Act of 1991, as amended, the Americans with Disabilities Act of 1990, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1963, as amended, the Family and Medical Leave Act of 1993, as amended, the Worker Adjustment Retraining and Notification Act, as amended, the Executive Retirement Income Security Act of 1974, as amended, any applicable Executive Order Programs, the Fair Labor Standards Act, or their state or local counterparts (including, but not limited to, the Pennsylvania Human Relations Act); (ii) any other federal, state or local civil or human rights law; (iii) any other local, state, or federal law, regulation or ordinance; (iv) any public policy, contract and/or quasi-contract or tort (including, but not limited to, claims of breach of the Employment Agreement, an expressed or implied contract, tortious interference with contract or prospective business advantage, breach of the covenant of good faith and fair dealing, promissory estoppel, detrimental reliance, invasion of privacy, nonphysical injury, personal injury or sickness or any other harm, wrongful or retaliatory discharge, fraud, defamation, slander, libel, false imprisonment, negligent or intentional infliction of emotional distress); (v) common law; or (vi) any policies, practices or procedures of the Company; or (b) any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters (the “Released Claims”). By signing this Agreement, Executive acknowledges that he intends to waive and release any rights known or unknown that he may have against the Releasees under these and any other laws. Notwithstanding the foregoing, Executive does not release, discharge or waive: any rights to indemnification that he may have under the certificate of incorporation, the by-laws or equivalent governing documents of the Company or its subsidiaries or affiliates, the laws of the State of Delaware or any other state of which any such subsidiary or affiliate is a domiciliary, the Employment Agreement or any indemnification agreement between Executive and the Company; any rights to insurance coverage under any directors’ and officers’ personal liability insurance or fiduciary insurance policy; any rights he may have in his capacity as a stockholder of the Company; any rights he may have to enforce the vested terms of any equity or other incentive agreement previously provided to him; any rights he may have to the Accrued Obligations under the Employment Agreement

 

 

and severance benefits describe in Section 2 hereof. The Executive acknowledges that he has made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by this Section 3.

 

4.            Proceedings. Executive acknowledges that he has not filed any complaint, charge, claim or proceeding, if any, or assigned to any other person the right to bring any such complaint, charge, claim, or proceeding, relating to the Released Claims against any of the Releasees before any local, state or federal agency, court or other body (each individually a “Proceeding”). Executive (i) acknowledges that he will not initiate or cause to be initiated on her behalf any Proceeding and will not participate in any Proceeding, in each case, except as required by law and (ii) waives any right he may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding, including any Proceeding conducted by the Equal Employment Opportunity Commission (the “EEOC”). Further, Executive understands that, by executing this Agreement, he will be limiting the availability of certain remedies that he may have against the Releasees and limiting also his ability to pursue certain claims against the Releasees. Notwithstanding the above, nothing in Section 3 of this Agreement shall prevent Executive from (i) initiating or causing to be initiated on his behalf any complaint, charge, claim or proceeding against any Releasee before any local, state or federal agency, court or other body challenging the validity of the waiver of his claims under the ADEA contained in Section 3 of this Agreement (but no other portion of such waiver), (ii) initiating or participating in an investigation or proceeding conducted by the EEOC or (iii) reporting possible violations of federal, state or local law, ordinance or regulation to any governmental agency or entity, including, but not limited to, the Department of Justice, the U.S. Securities and Exchange Commission (the “SEC”), the Congress and any agency Inspector General, or otherwise taking action or making disclosures that are protected under the whistleblower provisions of any federal, state or local law, ordinance or regulation, including, but not limited to, Rule 21F-17 promulgated under the Securities Exchange Act of 1934, as amended; or (iv) receiving a monetary award for information provided to the SEC pursuant to Rule 21F-17 promulgated under the Securities Exchange Act of 1934, as amended. The Executive acknowledges and agrees that the Executive’s separation from employment with the Company in compliance with the terms of the Employment Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).

 

5.            Time to Consider. Executive acknowledges that he has been advised that he has twenty- one (21) days from the date of receipt of this Agreement to consider all the provisions of this Agreement and, further, that if Executive signs this Agreement prior to the expiration of such twenty-one (21) day period, he does hereby knowingly and voluntarily waive said given twenty-one (21) day period. EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT CAREFULLY, HAS BEEN ADVISED BY THE COMPANY TO, AND HAS IN FACT, CONSULTED AN ATTORNEY, AND FULLY UNDERSTANDS THAT BY SIGNING BELOW HE IS GIVING UP CERTAIN RIGHTS WHICH HE MAY HAVE TO SUE OR ASSERT A CLAIM AGAINST ANY OF THE RELEASEES, AS DESCRIBED IN SECTION 3 OF THIS AGREEMENT AND THE OTHER PROVISIONS HEREOF. EXECUTIVE ACKNOWLEDGES THAT HE HAS NOT BEEN FORCED OR PRESSURED IN ANY MANNER WHATSOEVER TO SIGN THIS AGREEMENT, AND EXECUTIVE AGREES TO ALL OF ITS TERMS VOLUNTARILY.

 

6.            Revocation. Executive hereby acknowledges and understands that Executive shall have seven (7) days from the date of his execution of this Agreement to revoke this Agreement (including, without limitation, any and all claims arising under the ADEA) and that neither the Company nor any other person is obligated to provide any benefits to Executive pursuant to Section 2 of this Agreement until eight (8) days have passed since Executive’s signing of this Agreement without Executive having

 

 

revoked this Agreement. If Executive revokes this Agreement, Executive will be deemed not to have accepted the terms of this Agreement, no action or forbearance of action will be required of the Company under any section of this Agreement, and Executive shall not be entitled to receive any portion of the severance compensation and benefits which are conditioned on the delivery of this Agreement.

 

7.            No Admission. This Agreement does not constitute an admission of liability or wrongdoing of any kind by Executive or the Company.

 

8.            Confidentiality. Executive agrees that Executive will not communicate or disclose the terms of this Agreement to any persons with the exception of members of Executive’s immediate family and Executive’s attorney and financial advisor, or as permitted by Section 4 above.

 

9.            Return of Company Property; Expenses. Executive represents that all equipment and other property of the Company, including any documents and files containing Confidential Information (as such term is defined in the Employee Non-Disclosure and Invention Assignment Agreement by and between the Company and the Executive) whether electronically stored or maintained in hard copy, have been returned or will be promptly returned to the Company. In furtherance thereof, Executive will, no later than May 1, 2020, deliver all Company files held by him to an electronic dropbox, dataroom or other electronic platform established by the Company, or by such other method determined by the Company in its discretion. Notwithstanding the foregoing, the Company agrees that Executive may keep the Company-issued laptop computer currently in his possession, provided that Executive shall deliver any new documents and files electronically stored thereon to the Company, no later than one month after the termination of the Advisory Services Agreement, and that Executive will not retain any copies of the Confidential Information. The Company will reimburse all properly incurred business expenses pursuant to the Company’s expense reimbursement policy, provided, that Executive submits any such business expenses within sixty (60) days following the Termination Date. The Company will reimburse up to $5,000 of the reasonable attorneys’ fees incurred by Executive in connection with entry into this Agreement and the Advisor Services Agreement.

 

10.            Non-Disparagement. Executive will not disparage any Releasee or otherwise take any action which could reasonably be expected to adversely affect the personal or professional reputation of any Releasee. The Company’s directors, officers and senior executives shall not disparage or otherwise take any action which could reasonably be expected to adversely affect the personal or professional reputation of the Executive.

 

11.            Post-Employment Obligations. Executive reaffirms that he will comply with all of his post-employment obligations as set forth in Section 5 of the Employment Agreement.

 

12.            Stock Options. Reference is hereby made to the Incentive Stock Option Agreement between the Executive and the Company dated as of April 28, 2017, as amended, pursuant to which the Executive was awarded 3,834,211 shares of the Company’s Common Stock (the “2017 Option Shares”). As of the Termination Date, 2,339,304 of the 2017 Option Shares are vested and have an exercise price of $0.27 per share. The parties further agree that the remaining 2017 Option Shares (i.e., 1,494,907 shares of Company Common Stock) were automatically forfeited as of the Termination Date. Reference is hereby made to the Incentive Stock Option Agreement between the Executive and the Company dated as of April 24, 2019, pursuant to which the Executive was awarded 100,000 shares of the Company’s Common Stock (the “2019 Option Shares”). As of the Termination Date, none of the 2019 Option Shares are vested and the entirety of the 2019 Option Shares were automatically forfeited as of the Termination Date. The parties acknowledge and agree that 1,282,272 of the vested 2017 Option Shares are eligible to be treated as incentive stock options under Section 422 of the Code if exercised by the deadline prescribed under applicable law. The remainder of the vested 2017 Option Shares, together with any of such 1,282,272 vested 2017 Option Shares

 

 

that are not exercised by the applicable deadline and not eligible for tax treatment under Section 422 of the Code, subject to Section 1(b) of that certain Option Transfer Agreement by and among the Company, the Executive and The 2012 Kenneth Ian Moch Irrevocable GST Trust F/B/O Ellen Gray Stolzman and Descendants dated May 25, 2012 (the “Trust”), have been or shall be deemed transferred to the Trust pursuant to and subject to the terms and conditions of the Option Transfer Agreement dated as of July 20, 2019 by and among the Company, the Executive and the Trust. The 2017 Option Shares shall remain subject to the terms of the Incentive Stock Option Agreement and the Cognition Therapeutics, Inc. Amended and Restated 2007 Equity Incentive Plan, including, without limitation, permitting exercise of the 2017 Option Shares up to the date that is three (3) years plus three (3) months after the Termination Date.

 

13.            Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes any and all prior representations, agreements, written or oral, expressed or implied, except for Section 5 of the Employment Agreement, which survives the termination of Executive’s employment and is incorporated herein by reference, and except for any agreements with respect to Executive’s options to acquire Common Stock of the Company. This Agreement may not be modified or amended other than by an agreement in writing signed by an officer of the Company.

 

14.            Acknowledgement. Executive acknowledges and agrees that, subsequent to the termination of Executive’s employment, Executive shall not be eligible for any payments from the Company or Company-paid benefits, except as expressly set forth in this Agreement. Executive also acknowledges and agrees that Executive has been paid for all time worked and has received all other compensation owed to him.

 

15.            Assignment. This Agreement shall be binding upon and be for the benefit of the parties as well as Executive’s heirs and the Company’s successors and assigns.

 

16.            General Provisions. A failure of any of the Releasees to insist on strict compliance with any provision of this Agreement shall not be deemed a waiver of such provision or any other provision hereof. If any provision of this Agreement is determined to be so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable, and in the event that any provision is determined to be entirely unenforceable, such provision shall be deemed severable, such that all other provisions of this Agreement shall remain valid and binding upon Executive and the Releasees.

 

17.            Governing Law. The validity, interpretations, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania without giving effect to conflict of laws principles.

 

18.            Counterparts and Facsimiles. This Agreement may be executed, including execution by facsimile signature, in multiple counterparts, each of which shall be deemed an original, and all of which together shall be deemed to be one and the same instrument.

 

[space intentionally left blank; signature page follows]

 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its respective duly authorized officer, and the Executive has executed this Agreement, on the date(s) below written.

 

		COGNITION THERAPEUTICS, INC.
		By:	/s/ Robert Gailus
		Name & Title:   Robert Gailus
		Date:   April 21, 2020
		KENNETH I. MOCH
		/s/ Kenneth I. Moch
		Date:   April 21, 2020

 

 

Exhibit 10.16

 

ADVISOR SERVICES AGREEMENT

 

This Advisor Services Agreement (“Agreement”), effective as of March 17, 2020, is made between Cognition Therapeutics, Inc. (the “Company”) and Kenneth I. Moch (“Advisor”).

 

WHEREAS, Advisor’s employment by the Company ceased on March 17, 2020 (the “Termination Date”) and in connection therewith the Company and Advisor entered into a Separation and Release Agreement dated as of April 21, 2020 (the “Separation Agreement”); and

 

WHEREAS, the Company wishes to retain the services of Advisor following the Termination Date to advise and consult the Company in various matters in which Advisor has expertise and that are relative to the Company’s business, and Advisor is willing to provide such services.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

 

1.           For the twelve (12) month period following the Termination Date (the “Initial Term”), subject to earlier termination or extension in accordance with Section 9, Advisor will (i) advise and act on the Company’s behalf to assist the Company in transitioning his duties and responsibilities (related to his prior employment) and (ii) perform such other consulting services, including with respect to the Company’s business strategy, and legal matters and investor relations, as the Company’s Chief Executive Officer (including any interim Chief Executive Officer) may reasonably request and as reasonably agreed to by Advisor. Advisor will perform such services in good faith, to the best of his ability and in compliance with all applicable laws. Advisor will be reasonably available to the Company (and to persons the Company may designate) at reasonable times (on-site, by telephone and/or by email) on an as-needed basis with regard to the performance of the services, and Advisor agrees to commit sufficient time to the performance of the services, which will not exceed 40 hours per month.

 

2.           Company agrees to pay Advisor for his consulting services an aggregate amount of $100,000 for the Initial Term, paid in substantially equal monthly installments in accordance with the Company’s normal practices. The fees payable in any Renewal Term, if applicable, will be determined between the parties.

 

3.           Advisor acknowledges and agrees that all incentive equity awards made by Company to Advisor during or in connection with his employment by Company, including without limitation any options to purchase Common Stock of Company, ceased to vest as of the Termination Date and no portion of any options that are not exercisable as of the Termination Date shall thereafter become exercisable.

 

4.           Company will reimburse Advisor for all reasonable business expenses incurred in connection with the engagement reflected by this Agreement. Any such expenses that are beyond incidental costs (including, without limitation, any travel expenses) incurred in connection with the performance of Advisor’s duties must be approved by Company in advance.

 

5.           Advisor shall act strictly in a professional consulting capacity as an independent contractor for all purposes, including without limitation, federal, state and local withholding, employment and payroll tax purposes, and in all situations and shall not be considered an employee of the Company for any purposes. Advisor acknowledges that during the Term he will not be eligible to participate in any retirement, welfare, or other employee benefit plan or arrangement maintained by the Company or its affiliates (other than in accordance with COBRA and consistent with the Separation Agreement) and agrees that he will

 

 

not claim any such benefits. Advisor shall make no representation to any third party that Advisor is an agent or employee of Company. Advisor shall have no authority to bind Company or to incur other obligations on behalf of Company.

 

6.           Advisor agrees that all the Intellectual Property (as defined below) is considered to be “works made for hire” as that term is defined in Section 101 of the Copyright Act (17 U.S.C. § 101) and that all right, title and interest in such Intellectual Property shall be the sole and exclusive property of Company and its subsidiaries and affiliates (collectively, the “Company Parties” and each a “Company Party”). To the extent that any of the Intellectual Property may not by law be considered a work made for hire, or to the extent that, notwithstanding the foregoing, Advisor retains any interest in the Intellectual Property, Advisor hereby irrevocably assigns and transfers to the Company Parties any and all right, title, or interest that Advisor may now or in the future have in the Intellectual Property under patent, copyright, trade secret, trademark or other law, in perpetuity or for the longest period otherwise permitted by law, without the necessity of further consideration. The Company Parties will be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, trademarks and other similar registrations with respect to such Intellectual Property. Advisor further agrees to execute any and all documents and provide any further cooperation or assistance reasonably required by the Company to perfect, maintain or otherwise protect its rights in the Intellectual Property. If the Company or any other Company Party, as applicable, are unable after reasonable efforts to secure the Advisor’s signature, cooperation or assistance in accordance with the preceding sentence, whether because of the Advisor’s incapacity or any other reason whatsoever, Advisor hereby designates and appoints each Company Party or its designee as the Advisor’s agent and attorney-in-fact, to act on his behalf, to execute and file documents and to do all other lawfully permitted acts necessary or desirable to perfect, maintain or otherwise protect the Company Parties’ rights in the Intellectual Property. Advisor acknowledges and agrees that such appointment is coupled with an interest and is therefore irrevocable. “Intellectual Property” means inventions, original works of authorship, developments, concepts, improvements or any trade secrets which relate in any manner to the Company Parties’ business or proposed business, whether or not patentable or registrable under patent, copyright or similar laws, which Advisor may solely or jointly conceives or develops or reduces to practice or causes to be conceived or developed or reduced to practice, at any time and at any place while Advisor is engaged by Company (collectively referred to as “Inventions”), including any and all intellectual property rights inherent in the Inventions and appurtenant thereto including, without limitation, all patent rights, copyrights, trademark rights and trade secret rights.

 

7.           Advisor recognizes and acknowledges that the Confidential Information (as defined below) is a valuable, special and unique asset of the business of the Company. As a result, both during the term of this Agreement and thereafter, Advisor will not, without the prior written consent of Company, for any reason divulge to any third-party or use for his own benefit, or for any purpose other than the exclusive benefit of Company, any Confidential Information. All right, title and interest in and to Confidential Information shall be and remain the sole and exclusive property of the Company Parties. Advisor shall not remove from the offices or premises of any Company Party any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing Confidential Information, or other materials or property of any kind belonging to any of the Company Parties unless necessary or appropriate in the performance of his duties to the Company Parties. If Advisor removes such materials or property in the performance of his services, he will return such materials or property promptly after the removal has served its purpose. Advisor will not make, retain, remove and/or distribute any copies of any such materials or property, or divulge to any third person the nature of and/or contents of such materials or property, except to the extent necessary to satisfy contractual obligations of any of the Company Parties and to perform his services on behalf of the Company Parties. Upon termination of the Advisor’s engagement by the Company, he shall leave with the Company Parties or promptly return to the Company Parties all originals and copies of such materials or property then in his possession. “Confidential

 

 

Information” means any Company Party’s proprietary or confidential information, technical data, trade secrets or know-how, including, but not limited to, research, product plans and developments, prototypes, products, services, customer lists and customers, prospective customers and contacts, proposals, customer purchasing practices, prices and pricing methodology, cost information, terms and conditions of business relationships with customers, customer research and other needs, markets, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, distribution and sales methods and systems, sales and profit figures, finances, personnel information including, information regarding compensation, skills, training, promotions, and duties, as well as reports and other business information that Advisor learns of, obtains, or that is disclosed to Advisor relating to the Company Parties at any time prior to or during Advisor’s engagement by the Company, either directly or indirectly, in writing, orally or by review or inspection of documents or other tangible property. Failure by any of the Company Parties to mark any of the Confidential Information as confidential or proprietary shall not affect its status as Confidential Information.

 

8.           Advisor acknowledges that any breach by him, willfully or otherwise, of Sections 6 or 7 of this Agreement will cause continuing and irreparable injury to the Company Parties for which monetary damages would not be an adequate remedy. Advisor shall not, in any action or proceeding to enforce any of the provisions of this Agreement, assert the claim or defense that such an adequate remedy at law exists. In the event of any such breach or threatened breach by Advisor of Section 6 or 7, the Company Parties shall be entitled to injunctive or other similar equitable relief in any court, without any requirement that a bond or other security be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company Parties.

 

9.           This Agreement shall automatically terminate upon the one-year anniversary of the Termination Date (the “Initial Term”), provided that Advisor and Company may agree to extend the engagement of Advisor (such extension period a “Renewal Term” and together with the Initial Term, the “Term”). Either party may terminate this Agreement during the Term upon ten (10) days advance written notice to the other party, in which case no further fees shall be payable to Advisor; provided, however, in the event that Company terminates this Agreement and Advisor’s engagement during the Initial Term without “Cause”, Company shall continue to pay Advisor the balance of fees during the remainder of the Initial Term pursuant to Section 2. For purposes of this Agreement, “Cause” means (i) the Advisors’ continued failure to substantially perform his duties and obligations to Company pursuant to this Agreement, including but not limited to any material breach of this Agreement, and failure to cure the same within ten (10) business days after being notified by Company, (ii) Advisor having committed willful fraud or willful misconduct, in any such case which is materially injurious to the Company; (iii) Advisor having been convicted of a felony involving moral turpitude that results in material harm to the standing or reputation of Company; (iv) Advisor’s material breach of the terms of the Separation Agreement or Section 5 of the Employment Agreement effective October 11, 2016 and subsequently amended, by and between Company and Advisor; or (v) Advisor engages in such other behavior detrimental to the interests of the Company during the Term as the Board reasonably determines.

 

10.         Company may assign this Agreement to any parent company or direct or indirect subsidiary of the Company, or any successor to all or substantially all of the assets and business of the Company by means of liquidation, dissolution, merger, consolidation, transfer of assets, sale of stock or otherwise. The duties of Advisor hereunder are personal to Advisor and may not be assigned by him.

 

11.         This Agreement will be governed by the laws of the Commonwealth of Pennsylvania, without regard to conflict of law principles. The Parties (i) agree that any legal proceeding arising out of this Agreement may be brought in the courts of record of the Commonwealth of Pennsylvania or the courts of the United States located in the Commonwealth of Pennsylvania; (ii) consent to the jurisdiction of each

 

 

such court in any such suit, action or proceeding; and (iii) waive any objection which said Parties may have to the laying of venue of any such suit, action or proceeding in any of such courts.

 

[signature page follows]

 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and Advisor has executed this Agreement, in each case on the dates indicated below.

 

ADVISOR			COGNITION THERAPEUTICS, INC.
/s/ Kenneth I. Moch			By:
Kenneth I. Moch			Name:
			Title:
Date: :	April 21, 2020		Date:

 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and Advisor has executed this Agreement, in each case on the dates indicated below.

 

 

ADVISOR			COGNITION THERAPEUTICS, INC.
			By:	/s/ Robert Gailus
Kenneth I. Moch			Name:	Robert Gailus
			Title:	Chairman, Cognition Therapeutics, Inc.
Date:			Date:	April 21, 2020

 

 

Exhibit 10.17

 

 

Cognition Therapeutics Inc.
2403 Sidney Street
Pittsburgh PA 15203
t: 412 481 2210 f: 412 481 2216

 

www.cogrx com

 

October 7, 2019

 

Mr. James O’Brien
20 Hollow Tree Ridge Road
Darien, Connecticut 06820

 

Dear Jim:

 

This letter agreement (the “Agreement”) sets forth the terms and conditions of your employment with Cognition Therapeutics, Inc., a Delaware corporation (the “Company”).

 

1.            Position and Duties.

 

(a)            Position. Effective October 28, 2019 (the “Start Date”), you shall commence your employment with the Company as its Chief Financial Officer. This Agreement will set forth the terms and conditions of your employment in such capacity.

 

(b)            Duties. Your employment by the Company shall be full-time and exclusive of any other employment and you shall devote all of your business time, attention and services to the Company and its Affiliates (as defined below). You will perform such duties as may be customary to, and consistent with, the position of Chief Financial Officer, and such duties that may reasonably be assigned from time to time by the Chief Executive Officer. You will devote your best efforts, business judgment, skill and knowledge to the advancement of the business and interests of the Company and to the discharge of your duties and responsibilities to the Company. Notwithstanding the foregoing, during the term of your employment, you may participate in charitable activities and manage your passive investments, in each case so long as such activities do not interfere with the performance of your duties and responsibilities hereunder or present a conflict of interest with the Company or its Affiliates.

 

(c)            Office Location. You shall perform your services hereunder primarily at the Company’s offices to be established in the Tri-State (New York, New Jersey, Connecticut) area, and in Pittsburgh, PA, subject to reasonable business travel.

 

2.            Compensation and Benefits. During your employment, as compensation for all services performed by you for the Company, the Company will provide you the following pay and benefits:

 

(a)            Base Salary. The Company will pay you a base salary (the “Base Salary”) at the rate of $340,000 per year, payable in accordance with the regular payroll practices of the Company and subject to adjustment from time to time by the Company’s Board of Directors (the “Board”) in its discretion.

 

 

Mr. James OBrien

October 7, 2019

Page Two

 

(b)            Bonus Compensation. During your employment, you will be considered annually for a cash bonus targeted at 30% of your Base Salary. The amount of any bonus awarded to you for any year will be determined by the Board in its discretion, based on your performance and that of the Company against the specific priorities and/or goals established for each such annual period by the Board. Any annual bonus will be paid in the year following the fiscal year with respect to which such annual bonus was earned and attributable, at the same time as other executives receive any applicable bonus compensation and as soon as practicable following the availability of the Company’s results of operations for the applicable fiscal year. Subject to Section 5(a)(i), in order for you to receive payment of any such annual bonus, you must be employed by the Company on the date of payment.

 

(c)            Stock Options. In connection with the commencement of your employment, the Company’s management will recommend that the Board grant you a stock option (the “Option”), under and subject in all respects to the Cognition Therapeutics 2017 Equity Incentive Plan (the “Plan”) and award agreement, to purchase the number of shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) equal to 0.75% of the Company’s outstanding equity on a fully diluted basis. The Option will: (A) have an exercise price per share equal to the fair market value per share of Common Stock on the date of the grant, as determined by the Board; and (B) will be subject to vesting requirements such that (i) 25% of the shares of Common Stock underlying the Option shall vest as of the first anniversary of the Start Date, and (ii) the remaining 75% of the shares of Common Stock underlying the Option shall vest in 36 substantially equal monthly installments as of the last day of each month thereafter, in each case if you remain continuously employed by the Company through the applicable vesting dates; provided, however, that any then-unvested portion of the Option shall vest upon the closing of a Change in Control (as defined in Section 6) if you remain employed through such event.

 

(d)            Participation in Employee Benefit Plans. You shall be eligible to participate in any and all employee benefit plans from time to time in effect for employees of the Company generally. The Company shall not be required to establish or maintain any such program or plan. Such participation shall be subject to (i) the terms of the applicable plan documents, and (ii) generally applicable Company policies. The Company may alter, modify, add to or terminate its employee benefit plans at any time as it, in its sole discretion, determines to be appropriate.

 

(e)            Paid Time Off. You will be entitled to 4 weeks vacation, in addition to holidays observed by the Company, pursuant to the Company’s paid-time-off policies. Vacation may be taken at such times and intervals as you shall determine, subject to the business needs of the Company and prior notice to the Chief Executive Officer.

 

(f)            Business Expenses. The Company will pay or reimburse you for all reasonable business expenses incurred or paid by you in the performance of your duties and responsibilities for the Company, subject to any maximum annual limit and other restrictions on such expenses set forth by the Company and to such reasonable substantiation and documentation as the Company may specify from time to time.

 

3.            Confidential Information; Restricted Activities; Intellectual Property. To induce the Company to enter into this Agreement, as a condition to your employment by the Company, and in recognition of (i) the compensation payable to you pursuant to this Agreement, and (ii) such other consideration payable to you by the Company or any of its Affiliates, you must sign and return to the

 

 

Mr. James OBrien

October 7, 2019

Page Three

 

Company no later than your Start Date the Confidential Disclosure, Invention Assignment, Noncompetition, Non-Solicitation and Non-Interference Agreement attached hereto as Exhibit A (the “Restrictive Covenants Agreement”).

 

4.            Termination of Employment. Your employment under this Agreement shall continue for no definite term until terminated pursuant to this Section 4.

 

(a)            The Company may terminate your employment for Cause upon notice to you setting forth in reasonable detail the nature of the Cause (as defined below). The following, as determined by the Company in its reasonable judgment, shall constitute “Cause” for termination: (i) your persistent and willful refusal to follow reasonable directives of the Chief Executive Officer; (ii) gross negligence or willful misconduct in the performance of your duties and responsibilities to the Company or any of its Affiliates; (iii) your material breach of this Agreement or any other agreement between you and the Company, which breach continues for more than 15 days after the Company gives you written notice that sets forth in reasonable detail the nature of such breach; or (iv) other conduct by you that is or could reasonably anticipated to be materially harmful to the business, interests or reputation of the Company or any of its Affiliates. The Company may terminate your employment as a result of your Disability and at any time other than for Cause upon notice to you. Termination of your employment as a result of your Disability will not be construed as a termination by the Company “other than for Cause.”

 

(b)            You may terminate your employment at any time upon 60 days’ notice to the Company without Good Reason. You may also terminate your employment with Good Reason. “Good Reason” means, without your consent: (i) a material diminution by the Company of your responsibilities with the position you then hold, or (ii) the Company reduces your Base Salary, other than in connection with the same percentage across-the-board decrease in base salaries applicable to other key executives; provided that, in each case, written notice of your resignation for Good Reason must be delivered to the Company within thirty (30) days after the occurrence of the event falling within the definition of Good Reason in order for your resignation for Good Reason to be effective, the Company fails to cure such event within thirty (30) days after delivery of such notice to cure any such event and you resign your employment within thirty (30) days following the expiration of that cure period.

 

(c)            This Agreement shall automatically terminate in the event of your death during employment.

 

5.            Severance Payments and Other Matters Related to Termination.

 

(a)            Involuntary Termination/Good Reason Termination.

 

 (i)            In the event of termination of your employment by the Company other than for Cause, or your resignation of employment for Good Reason, the Company (or its successor, as applicable) will (A) continue to pay you your Base Salary for a period of six (6) months after the date of termination; (B) pay you for any bonus to which you would have otherwise been entitled for the prior fiscal year but for the termination of your employment prior to payment of such bonus; and (C) waive the applicable premium otherwise payable for COBRA continuation coverage for you (and, to the extent covered immediately prior to the date of such cessation, your eligible dependents) for a period equal to six (6) months following termination; provided, however, that if such termination occurs within eighteen (18)

 

 

Mr. James OBrien

October 7, 2019

Page Four

 

months after your Start Date, the Base Salary continuation described in subsection (A), and the subsidized COBRA coverage described in subject (C), shall be provided for nine (9) months in lieu of six (6) months. The Company will also pay you any Base Salary earned but not paid through the date of termination, pay for any vacation time accrued but not used to that date and reimburse any business expenses incurred in accordance with Company policy and subject to the Company’s policies regarding appropriate documentation (the “Accrued Rights”).

 

 (ii)            Notwithstanding the foregoing, in the event your employment is terminated by the Company (or its successor) other than for Cause or by you for Good Reason, in each case during the twelve (12) month period immediately following the occurrence of a Change in Control (as defined below), you will receive the payments and benefits described in Section 5(a)(i) above, subject to the following modifications: (A) references in in Section 5(a)(i) to “six (6) months” or “nine (9) months” (as applicable) will each be replaced with a reference to “twelve (12) months”; and (B) all unvested restricted stock, stock options and other equity incentives awarded to you by the Company will become immediately and automatically fully vested and exercisable (as applicable). The payments described in subsection (A) of this Section 5(a)(ii) shall be paid in a lump sum not later than the forty-fifty (45th) day following your termination of employment.

 

(b)            Limitation of Payments. If any payment or benefit due under this Agreement, together with all other payments and benefits you receive or are entitled to receive from the Company or any of its Affiliates, would (if paid or provided) constitute an excess parachute payment (within the meaning of Section 280G(b)(1) of the Code), the amounts otherwise payable and benefits otherwise due under this Agreement will be limited to the minimum extent necessary to ensure that no portion thereof will fail to be tax-deductible to the Company by reason of Section 280G of the Code or result in an excise tax pursuant to Section 4999 of the Code. The determination of whether any payment or benefit would (if paid or provided) constitute an excess parachute payment will be made by the Board, in its sole discretion. If a reduction to the payments otherwise payable under this Agreement or any other arrangement is required pursuant to this Section 5(b), such reduction shall be made in the following order: (i) first, any future cash payments (if necessary, to zero); (ii) second, any current cash payments (if necessary, to zero); (iii) third, all non-cash payments (other than equity’ or equity derivative related payments) (if necessary, to zero); and (iv) fourth, all equity or equity derivative payments; provided that in all events, such reductions shall be done in a manner consistent with the requirements of Section 409A of the Code, to the extent applicable.

 

(c)            Severance Conditional upon Release. The payments and benefits described in Section 5(a) are in lieu of, and not in addition to, any other severance arrangement maintained by the Company. Notwithstanding any provision of this Agreement, the payments described in Section 5(a) (other than the Accrued Rights) are conditioned on your execution and delivery to the Company of a general release of all claims against the Company and its Affiliates in a manner consistent with the requirements of the Older Workers Benefit Protection Act and any other applicable law, and in a form reasonably prescribed by the Company (the “Release”) and such Release becoming irrevocable within sixty (60) days following the date of termination and (ii) your continued compliance with the Restrictive Covenants Agreement. The severance benefits described in Section 5(a) (other than the Accrued Rights) will be paid or begin to be paid or provided within sixty (60) days following your date of termination; provided that the initial payment of Base Salary continuation shall include a catch-up payment to cover amounts retroactive to the day immediately following the effective date of your termination of employment. If the severance benefits payable pursuant to Section 5(a) are deferred compensation subject to the requirements of Section 409A of

 

 

Mr. James OBrien

October 7, 2019

Page Five

 

the Code, and if the 60-day period described herein begins in one taxable year and ends in a second taxable year, such payments shall not commence until the second taxable year.

 

(d)            Termination for Cause, upon Disability, or by Voluntary Termination. In the event of termination of your employment by the Company for Cause or Disability, or your voluntary termination of employment, the Company will pay you the Accrued Rights. The Company shall have no other obligation to you, including any bonus or severance payments.

 

(e)            Survival of Certain Provisions. Provisions of this Agreement shall survive any termination if so provided in this Agreement or if necessary or desirable to accomplish the purposes of other surviving provisions. The obligation of the Company to make payments to you under this Section 5, and your right to retain such payments, are expressly conditioned upon your continued full performance of your obligations under the Restrictive Covenants Agreement. Upon termination by either you or the Company, all rights, duties and obligations of you and the Company to each other shall cease, except as otherwise expressly provided in this Agreement.

 

6.            Definitions. For purposes of this Agreement, the following definitions apply:

 

“Affiliate” means any Person that controls, is controlled by or under common control of the Person, with “control” meaning the ownership or right to vote at least a majority of the equity interests of such Person.

 

“Change in Control” means (A) the sale, lease, exchange, transfer or other disposition of all or substantially all of the assets of the Company and its Affiliates, or (B) any sale, merger, consolidation or other business combination that results in the holders of the outstanding voting securities of the Company immediately prior to such transaction beneficially owning or controlling less than a majority of the voting securities of the surviving entity immediately thereafter.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Disability” means a condition that, in the judgment of the Board, renders you incapable of performing your duties under this Agreement with or without a reasonable accommodation.

 

“Person” means an individual, a corporation, a limited liability company, an association, a partnership, an estate, a trust or any other entity or organization, other than the Company or any of its Affiliates.

 

7.            Conflicting Agreements. You hereby represent and warrant that your signing of this Agreement and the performance of your obligations under it will not breach or be in conflict with any other agreement to which you are a party or are bound, and that you are not now subject to any covenants against competition or similar covenants or any court orders that could affect the performance of your obligations under this Agreement. You agree that you will not disclose to or use on behalf of the Company any proprietary information of a third party without that party’s consent.

 

8.            Withholding. All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law.

 

 

Mr. James OBrien

October 7, 2019

Page Six

 

9.            Assignment. Neither you nor the Company may make any assignment of this Agreement or any interest in it, by operation of law or otherwise, without the prior written consent of the other; provided, however, that the Company may assign its rights and obligations under this Agreement without your consent to one of its Affiliates or to any Person with whom the Company shall hereafter effect a reorganization, consolidate with, or merge into or to whom it transfers all or substantially all of its properties or assets. This Agreement shall inure to the benefit of and be binding upon you and the Company, and each of our respective successors, executors, administrators, heirs and permitted assigns.

 

10.          Severability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

11.          Miscellaneous. This Agreement sets forth the entire agreement between you and the Company and replaces all prior and contemporaneous communications, agreements and understandings, written or oral, with respect to the terms and conditions of your employment. This Agreement may not be modified or amended, and no breach shall be deemed to be waived, unless agreed to in writing by you and an expressly authorized representative of the Board. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement. This Agreement may be executed in two counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to the conflict of laws principles thereof.

 

12.          Notices. Any notices provided for in this Agreement shall be in writing and shall be effective when delivered in person or deposited in the United States mail, postage prepaid, and addressed to you at your last known address on the books of the Company or, in the case of the Company, to it at its principal place of business, attention of the Chief Executive Officer, or to such other address as either party may specify by notice to the other actually received.

 

13.          Section 409A. It is intended that this Agreement be drafted and administered in compliance with section 409A of the Code, including, but not limited to, ally future amendments to Code section 409A, and any other Internal Revenue Service or other governmental rulings or interpretations (together, “Section 409A”) issued pursuant to Section 409A so as not to subject you to payment of interest or any additional tax under Code section 409A. The parties intend for any payments under this Agreement to either satisfy the requirements of Section 409A or to be exempt from the application of Section 409A, and this Agreement shall be construed and interpreted accordingly. Notwithstanding anything in this Agreement to the contrary, all payments to be made upon a termination of employment under this Agreement will only be made upon a “separation from service” within the meaning of Section 409A. To the maximum extent permitted under Section 409A, the cash severance benefits payable under this Agreement are intended to meet the requirements of the short-term deferral exemption under Section 409A and the “separation pay exception” under Treas. Reg. § 1.409A-1(b)(9)(iii). For purposes of the application of Treas. Reg. § 1.409A-1(b)(4)(or any successor provision), each payment in a series of payments to you will be deemed a separate payment. Notwithstanding anything herein to the contrary, to the extent any expense, reimbursement or in-kind benefit provided to you constitutes a “deferral of compensation” within

 

 

Mr. James OBrien

October 7, 2019

Page Seven

 

the meaning of Section 409A of the Code (i) the amount of expenses eligible for reimbursement or in-kind benefits provided to you during any calendar year will not affect the amount of expenses eligible for reimbursement or in-kind benefits provided to you in any other calendar year, (ii) the reimbursements for expenses for which you are entitled to be reimbursed shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred and (iii) the light to payment or reimbursement or in-kind benefits hereunder may not be liquidated or exchanged for any other benefit.

 

14.          Arbitration. Any dispute or controversy arising under or in connection with this Agreement or your employment with the Company, other than a claim for injunctive relief pursuant to the Restrictive Covenants Agreement, shall be settled exclusively by arbitration, conducted before a single arbitrator in Pittsburgh, Pennsylvania (applying Pennsylvania law) in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect. However, prior to resorting to arbitration, both parties agree to negotiate in good faith to resolve any such dispute or controversy. The arbiter shall be selected in accordance with the rules of the American Arbitration Association. The decision of the arbitrator shall be final and binding upon the parties hereto and judgment may be entered on the arbitrator’s award in any court having jurisdiction. The prevailing party in any such proceeding shall be entitled to receive from the other party all reasonable attorneys’ fees incurred by such prevailing party and all costs incurred in connection therewith if and to the extent so awarded by the arbitrator.

 

[remainder of page intentionally left blank]

 

 

Mr. James OBrien

October 7, 2019

Page Eight

 

Please sign this Agreement in the space provided and return it to me. At the time you sign and return it, and the Company counter-signs it this Agreement will take effect as a binding agreement between you and the Company on the basis set forth above.

 

COGNITION THERAPEUTICS, INC.
By:	/s/ Kenneth I. Moch		By:	/s/ James O’Brien
Name:	Kenneth I. Moch			James O’Brien
Title:	President and Chief Executive Officer
Date signed:          October 7, 2019			Date signed: October 8, 2019

 

 

EXHIBIT A

 

Restrictive Covenants Agreement

 

 

EMPLOYEE NON-DISCLOSURE AND
INVENTION ASSIGNMENT AGREEMENT

 

THIS AGREEMENT between Cognition Therapeutics, Inc. (the “Company”), a Delaware corporation with its principal offices at 2403 Sidney St., Suite 261, Pittsburgh, PA 15203 and James M. O’Brien (the “Employee”), an individual residing at the address set forth on the signature page to this Agreement.

 

Recitals:

 

The parties desire to enter into this Agreement in connection with the Employee’s employment by the Company.

 

NOW, THEREFORE, in consideration of the employment of the Employee by the Company and the payment by the Company of compensation to the Employee for services rendered and to be rendered, and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.            Non-Disclosure of Confidential Information. The Employee acknowledges that in the course of performing services for the Company, the Employee may obtain knowledge of the Company’s business plans, products, processes, software, know-how, trade secrets, formulas, methods, models, prototypes, discoveries, inventions, materials and reagents, improvements, disclosures, customer and supplier lists, names and positions of employees and/or other proprietary and/or confidential information (collectively, the “Confidential Information”). The Employee agrees to keep the Confidential Information secret and confidential and not to publish, disclose or divulge to any other party, or use for the Employee’s own benefit or to the detriment of the Company, any Confidential Information without the prior written consent of the Company, whether or not such Confidential Information was discovered or developed by the Employee. The Employee also agrees not to divulge, publish or use any proprietary and/or confidential information of others that the Company is obligated to maintain in confidence.

 

2.            Inventions and Discoveries.

 

(a)           Disclosure. The Employee shall promptly and fully disclose to the Company, with all necessary detail, all developments, know-how, discoveries, inventions, improvements, concepts, ideas, formulae, processes and methods (whether copyrightable, patentable or otherwise) made, received, conceived, acquired or written by the Employee (whether or not at the request or upon the suggestion of the Company), solely or jointly with others, during the period of the Employee’s engagement by the Company as a consultant hereunder that (i) relate to any line of business, activity or field of interest or investigation with respect to which the Employee renders services to the Company or (ii) are otherwise made through the use of the Company’s time, facilities or materials (all of the foregoing being hereinafter referred to collectively as the “Inventions”).

 

(b)           Assignment and Transfer. The Employee agrees to assign and transfer to the Company all of the Employee’s right, title and interest in and to the Inventions, and the Employee further agrees to deliver to the Company any and all drawings, notes, specifications

 

 

and data relating to the Inventions, and to sign, acknowledge and deliver all such further papers, including applications for and assignments of copyrights and patents, and all renewals thereof, as may be necessary to obtain copyrights and patents for any Inventions in any and all countries and to vest title thereto in the Company and its successors and assigns and to otherwise protect the Company ’s interests therein.

 

(c)           Power of Attorney. If the Company is unable, after reasonable effort, to secure the Consultant’s signature on any application for patent, copyright, trademark or other analogous registration or other documents regarding any legal protection relating to an Invention, whether because of the Employee’s physical or mental incapacity or for any other reason whatsoever, the Employee hereby irrevocably designates and appoints each of the President and each Vice President of the Company as the Employee’s agent and attorney-in-fact, to act for and in the Employee’s behalf and stead to execute and file any such application or applications or other documents and to do all other lawfully permitted acts to further the prosecution and issuance of patent, copyright, trademark or other registrations or any other legal protection thereon with respect to an Invention with the same legal force and effect as if executed by the Employee.

 

(d)           Documentation and Records. The Employee shall hold in a fiduciary capacity for the benefit of the Company all documentation, disks, programs, data, records, drawings, manuals, reports, sketches, blueprints, letters, notes, notebooks and all other writings, electronic data, graphics and tangible information and materials of a secret, confidential or proprietary information nature relating to the Company or the Company’s business that are in the possession or under the control of the Employee. The Employee agrees that in connection with any research, development or other services performed for the Company, the Employee will maintain careful, adequate and contemporaneous written records of all Inventions, which records shall be the property of the Company.

 

3.            Injunctive Relief. The Employee acknowledges that compliance with this Agreement is necessary to protect the goodwill and other proprietary interests of the Company. The Employee acknowledges that a breach of this Agreement will result in irreparable and continuing damage to the Company and its business, for which there will be no adequate remedy at law. The Employee further agrees that in the event of any breach of this Agreement, the Company and its successors and assigns shall be entitled to injunctive relief and to such other and further relief and damages as may be proper.

 

4.            No Right to Employment. It is expressly understood that this Agreement is not intended to define the scope of the Employee’s employment by the Company or the terms of such employment other than as specifically provided herein. Any such other terms may or may not be contained in a written agreement. In any event, nothing contained in this Agreement shall be interpreted to create an employment relationship other than at will.

 

5.            Survival of Agreement; Binding Nature. It is expressly agreed that the provisions of this Agreement shall survive and apply after the termination of the Employee’s employment with the Company. This Agreement shall be binding on and inure to the benefit of the Employee’s executors, administrators or other legal representatives or assigns and on the Company’s successors and assigns. The Company shall have the right to assign this Agreement without the consent of the Employee.

 

 

6.            Enforceability. If any provision of this Agreement shall be invalid or unenforceable, in whole or in part, then such provision shall be deemed to be modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced accordingly to the maximum extent permitted by law.

 

7.            No Waiver. No claim or right arising out of a breach or default under this Agreement shall be discharged in whole or in part by a waiver of that claim or right unless the waiver is in writing and signed by the aggrieved party.

 

8.            Construction. This Agreement shall be construed and interpreted in accordance with the substantive laws of the Commonwealth of Pennsylvania. This Agreement supersedes and replaces any existing agreement between the Employee and the Company relating generally to the same subject matter; and this Agreement may not be modified, in whole or in part, except in writing signed by both of the parties.

 

IN WITNESS WHEREOF, this Agreement has been signed by the parties as of the date set forth below next to the name of the Employee.

 

			COGNITION THERAPEUTICS, INC.
Date:	October 7, 2019		By:	/s/ Kenneth I. Moch
			Name:        Kenneth I. Moch
			Title:          President & CEO
Date:	October 8, 2019		/s/ James M. O’Brien
			Employee’s Signature
			James M. O’Brien
			Name of Employee (please print or type)
			Employee’s Address:
			20 Hollow Tree Ridge Rd
			Darien, CT 06828