Form 8-K Eloxx Pharmaceuticals, For: Apr 01

April 1, 2021 8:11 AM
 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): April 1, 2021

 

 

 

Eloxx Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Delaware   001-31326   84-1368850

(State or other jurisdiction

of incorporation)

 

 

(Commission

File Number)

 

 

(I.R.S. Employer

Identification No.)

 

 

950 Winter Street
Waltham, MA
  02451
(Address of principal executive offices)   (Zip Code)

 

(Registrant’s telephone number, including area code): (781) 577-5300

 

 

(Former name or former address, if changed since last report)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company  ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value per share ELOX The Nasdaq Global Market

 

 

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

Agreement and Plan of Merger

 

On April 1, 2021, Eloxx Pharmaceuticals, Inc., a Delaware corporation (“Eloxx” or the “Company”), acquired Zikani Therapeutics, Inc., a Delaware corporation (“Zikani”), pursuant to that certain Agreement and Plan of Merger, dated April 1, 2021 (the “Merger Agreement”), by and among Eloxx, Delta Merger Sub Acquisition Corporation, a Delaware corporation and direct, wholly owned subsidiary of the Company (“Merger Sub”), and Zikani. Pursuant to the Merger Agreement, Merger Sub was merged with and into Zikani, with Zikani surviving the Merger as a wholly owned subsidiary of the Company (the “Merger”). The Eloxx Board of Directors (the “Eloxx Board”) has approved the Merger Agreement and the related transactions. The consummation of the Merger was not subject to approval of Eloxx’s stockholders.

 

Under the terms of the Merger Agreement, in connection with the closing of the Merger, Eloxx issued 7,596,810 shares of Eloxx common stock, $0.01 par value per share (“Eloxx Common Stock”), in exchange for all of the issued and outstanding equity interests of Zikani (the “Merger Consideration”). In addition to but separate from the Merger Consideration, in connection with the Merger, Eloxx issued restricted stock units under the Eloxx Pharmaceuticals, Inc. 2018 Equity Incentive Plan (the “Equity Plan”) to Sumit Aggarwal, Vijay Modur, Ph.D., Alan Walts and certain other employees of Zakani covering 223,304, 174,643, 37,695 and 6,500 shares of Eloxx Common Stock, respectively, in respect of each applicable individual’s service as an officer or director of Eloxx (as applicable) following the consummation of the Merger (the “Closing RSUs”). As a condition of the grant of Closing RSUs, each of Mr. Aggarwal and Dr. Modur executed a waiver of their rights to certain payments under a previously-approved Zikani Management Carve-Out Plan, which payments would have otherwise been part of the Merger Consideration.

 

The Merger Agreement contains customary representations, warranties and covenants of Eloxx and Zikani. The representations and warranties contained in the Merger Agreement did not survive the closing of the Merger.

 

Pursuant to the terms of the Merger Agreement, (i) Sumit Aggarwal, Zikani’s President and Chief Executive Officer, was appointed as the President and Chief Executive Officer of Eloxx, (ii) Dr. Vijay Modur, Zikani’s Chief Scientific and Medical Officer, was appointed as the Head of Research and Development of Eloxx, and (iii) Sumit Aggarwal, Alan Walts and Rajesh Parekh, each Zikani directors, were appointed to the Eloxx Board.

 

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

The Merger Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about Eloxx or Zikani. The Merger Agreement contains representations, warranties and covenants that Eloxx or Zikani made to each other as of specific dates. The assertions embodied in those representations, warranties and covenants were made solely for purposes of the Merger Agreement between Eloxx and Zikani and may be subject to important qualifications and limitations agreed to by Eloxx and Zikani in connection with negotiating its terms, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Merger Agreement. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to investors or securityholders, or may have been used for the purpose of allocating risk between Eloxx and Zikani rather than establishing matters as facts. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in Eloxx’s public disclosures. Accordingly, investors should read the representations and warranties in the Merger Agreement not in isolation but only in conjunction with the other information about Eloxx and its subsidiaries that Eloxx includes in reports, statements and other filings it makes with the Securities and Exchange Commission.

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Item 2.01 Completion of Acquisition or Disposition of Assets.

 

On April 1, 2021, Eloxx completed its acquisition of Zikani pursuant to the terms of the Merger Agreement. The information contained in Item 1.01 of this Current Report on Form 8-K regarding the acquisition of Zikani is incorporated by reference into this Item 2.01.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The information contained in Item 1.01 of this Current Report on Form 8-K regarding the issuance of the Merger Consideration to former Zikani stockholders is incorporated by reference into this Item 3.02. The Eloxx Common Stock issued in the Merger was offered and sold in transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) thereof and Regulation D thereunder. Each of the former Zikani stockholders that received the Merger Consideration are “accredited investors,” as defined in Regulation D.

The Eloxx Common Stock issued in the Merger has not been registered under the Securities Act and such Eloxx Common Stock may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws. Neither this Current Report on Form 8-K nor any of the exhibits attached hereto is an offer to sell or the solicitation of an offer to buy shares of Eloxx Common Stock or any other securities of Eloxx.

 

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

 

Eloxx Board of Directors

 

Effective as of the effective time of the Merger on April 1, 2021, each of Martijn Kleijwegt, Silvia Noiman and Gregory C. Williams resigned from the Eloxx Board. The resignations were not the result of any disagreements with Eloxx relating to the Eloxx’s operations, policies or practices.

 

Immediately following the effective time of the Merger on April 1, 2021, pursuant to the terms of the Merger Agreement, each of Sumit Aggarwal, Alan Walts and Rajesh Parekh were appointed to the Eloxx Board. Mr. Aggarwal, Dr. Walts and Dr. Parekh will each serve until the Company’s 2021 annual meeting of stockholders, when they are expected to stand for re-election to the Eloxx Board by a vote of the Company’s stockholders. Dr. Walts was also appointed as a member of the Audit Committee of the Eloxx Board.

 

Dr. Parekh and Dr. Walts will each be compensated in accordance with the Company’s standard compensation policies and practices for its non-employee directors.

 

In addition, Dr. Walts was granted Closing RSUs as described above. The Closing RSUs will vest in full on December 1, 2021 (generally subject to Dr. Walts’ continued service through such date). If Dr. Walts is terminated by the Company due to his death or his “Disability” (as defined in the Equity Plan) prior to December 1, 2021, the Closing RSUs will vest as of the date of such termination. The Closing RSUs will also vest in full on the date of a “Corporate Transaction” (as defined in the Equity Plan), subject to Dr. Walts’ continuous service through the date of such Corporate Transaction.

 

Mr. Aggarwal served as President and Chief Executive Officer of Zikani since 2019. Mr. Aggarwal joined Zikani in 2018 as Chief Financial Officer and Chief Business Officer. Prior to joining Zikani, from 2015 to 2018, Mr. Aggarwal served as acting President and Chief Financial Officer of Progenity, Inc., a private genetic services company offering pre-natal genetic testing to OB/GYN. He has also held leadership roles in healthcare and biotechnology at Adage Capital and as an Associate Partner at McKinsey & Company in its healthcare practice.

 

Dr. Parekh is a General Partner at Advent Life Sciences LLP, which he joined in 2006. During an academic career at Oxford University, he co-founded Oxford GlycoSciences PLC, where he served as Chief Scientific Officer and Chief Executive Officer from 1988 until its sale to Celltech Group PLC (now UCB SA) in 2003.

 3 

 

Dr. Walts is a US-based Venture Partner with Advent Life Sciences, a position he has held since January 2014. Dr. Walts serves as Executive Chairman and Director of PIC Therapeutics (since 2016) and Artax Biopharma (since 2017). Dr. Walts is also a founder, Director and Treasurer of The Termeer Foundation, a public 501(c)(3) organization founded in 2019. Dr. Walts has over 25 years of industry experience at Genzyme in business development, business strategy, research and development, general management, and venture capital. Prior to leaving Genzyme in 2013, Dr. Walts most recently managed Genzyme’s corporate venture fund, Genzyme Ventures (now Sanofi Ventures).

 

Appointment of New President and Chief Executive Officer; Appointment of Head of Research and Development

 

Effective as of the effective time of the Merger on April 1, 2021, and pursuant to the Merger Agreement, (i) Sumit Aggarwal was appointed as the President and Chief Executive Officer of the Company, and in connection therewith, the Company and Mr. Aggarwal entered into an Employment Agreement effective as of April 1, 2021 (the “Aggarwal Employment Agreement”); and (ii) Vijay Modur, Ph.D. was appointed the Company’s Head of Research and Development, and in connection therewith, the Company and Dr. Modur entered into an Employment Agreement effective as of April 1, 2021 (the “Modur Employment Agreement” and, together with the Aggarwal Employment Agreement, the “Employment Agreements”).

 

Mr. Aggarwal and Dr. Modur each also executed a Confidentiality and Non-Competition Agreement, the obligations of which will survive the termination of the Employment Agreements.

 

Under the Employment Agreements, (i) Mr. Aggarwal will serve as the President and Chief Executive Officer of the Company and will be appointed as a member of the Eloxx Board and, so long as he continues to serve under the Aggarwal Employment Agreement, will continue to be nominated by the Eloxx Board (or a committee thereof) for re-election as a member of the Board at the expiration of the then-current term; and (ii) Dr. Modur will serve as the Company’s Head of Research and Development.

 

Under the Employment Agreements, Mr. Aggarwal will receive an annual base salary of $530,000 and Dr. Modur will receive an annual base salary of $425,000. Each of Mr. Aggarwal and Dr. Modur will also be eligible for an annual bonus with a target value equal to 50% and 40% of base salary, respectively (as applicable, the “Target Bonus”) and for an annual “stretch” bonus of an additional 50% and 25% of base salary, respectively, with such stretch bonus to be earned, if at all, based upon achievement of performance goals and/or such other factors as determined by the Board (or a committee thereof) in its discretion.

 

In addition, on April 1, 2021, each of Mr. Aggarwal and Dr. Modur was granted the following equity awards under the Equity Plan: (i) an award of stock options to purchase 1,423,238 shares and 711,619 shares of Eloxx Common Stock, respectively, vesting with respect to one-fourth of the shares of Eloxx Common Stock subject to such stock options on April 1, 2022, and vesting with respect to the remaining three-fourths of the shares of Eloxx Common Stock subject to such stock options in equal installments of one-twelfth on each quarterly anniversary of April 1, 2021 thereafter (generally subject to the applicable employee’s continued employment with the Company on each such vesting date) (the “Closing Options”); and (ii) an award of restricted stock units in respect of 55,854 shares and 44,683 shares of Eloxx Common Stock, respectively, vesting in full on December 1, 2021 (generally subject to the applicable employee’s continued employment through such date) (the “Additional RSUs” and, together with the Closing RSUs received by each of Mr. Aggarwal and Dr. Modur as described above, the “RSUs”). If there is an equity financing that results in proceeds for the Company of at least $20,000,000 and that results in dilution to the percentage of Eloxx Common Stock represented by the equity awards granted to Mr. Aggarwal and Dr. Modur, then within five days of such financing, the Company will grant additional stock options to Mr. Aggarwal and Dr. Modur, as applicable (on terms consistent with the Closing Options) such that, when combined with the Closing Options, Mr. Aggarwal’s and Dr. Modur’s stock options will represent the same percentage of the Eloxx Common Stock immediately following such financing as the Closing Options represented immediately prior to such financing (determined on a fully-diluted and as-converted basis).

 

The Employment Agreements can be terminated by the Company without “Cause” (but only following the 18-month anniversary of the effective time of the Merger), due to the applicable employee’s death or “Disability” or by the applicable employee with or without “Good Reason” (in each case, as such terms are defined in the Employment Agreements).

 

 4 

 

If Mr. Aggarwal’s or Dr. Modur’s employment with the Company is terminated due to their death or Disability, the applicable employee will be entitled to the following payments and benefits: (i) the “Accrued Amounts” (as defined in the Employment Agreements), (ii) any earned but unpaid bonus in respect of the most recently completed fiscal year of the Company (the “Prior Year Bonus”), a pro-rata bonus for the year of termination (which will be determined (prior to pro-ration) based on the Target Bonus if performance goals have not yet been established for the year of termination at the time of termination, or based on actual performance if performance goals have been established for the year of termination at the time of termination) (as applicable, the “Pro-Rata Bonus”), and (iii) if such termination occurs prior to December 1, 2021, the RSUs will vest in full as of the date of such termination.

 

If Mr. Aggarwal’s or Dr. Modur’s employment with the Company is terminated by the Company without Cause or by the applicable employee for Good Reason, the applicable employee will be entitled to the following payments and benefits: (i) the Accrued Amounts, (ii) the Prior Year Bonus, (iii) the Pro-Rata Bonus, (iv) 12 months’ base salary, payable in a lump sum (the “Salary Severance”), (v) reimbursement for premiums for continued coverage pursuant to COBRA, or payment in lieu thereof, for a period of 12 months following termination (or until eligible for equivalent health insurance in connection with new employment or self-employment, or until no longer eligible for COBRA continuation coverage) (the “COBRA Benefit”), (vi) if such termination occurs prior to December 1, 2021, the RSUs will vest in full as of the date of such termination, (vii) if such termination occurs (A) prior to April 1, 2023, 50% of all other outstanding equity incentive awards with time-based vesting (including the Closing Options) will vest and an additional 50% of any equity incentive awards with performance-based vesting will vest based on target performance, in each case as of the date of such termination, or (B) on or after April 1, 2023, all other outstanding equity incentive awards with time-based vesting (including the Additional Options) will vest in full and any equity incentive awards with performance-based vesting will vest based on target performance, in each case, as of the date of such termination and (viii) any vested awards of stock options will remain exercisable for a period equal to the shorter of (A) one year following termination and (B) the remaining term of the award (unless the applicable award provides for more favorable treatment on termination).

 

If there is a “Corporate Transaction” (as defined in the Equity Plan) during Mr. Aggarwal’s or Dr. Modur’s employment pursuant to the Employment Agreements, all outstanding and unvested equity incentive awards held by the applicable employee as of such time will accelerate and become fully vested and exercisable or payable immediately prior to the closing of such Corporation Transaction.

 

If Mr. Aggarwal’s or Dr. Modur’s employment with the Company is terminated by the Company without Cause or by the applicable employee for Good Reason, in either case, within the 24-month period immediately following a Corporate Transaction, the applicable employee will be entitled to the same payments and benefits as set forth above in connection with a termination by the Company without Cause or by the applicable employee for Good Reason, except (i) the Salary Severance will be increased to a total of 18 months’ base salary, (ii) in lieu of the Pro-Rata Bonus, the employee will be entitled to receive an amount equal to the Target Bonus and (iii) the COBRA Benefit will cover the 18-month period following termination.

 

Mr. Aggarwal’s and Dr. Modur’s entitlement to the foregoing severance payments and benefits is generally subject to their execution of a release of claims in favor of the Company and its affiliates following termination, and their continuing compliance with all confidentiality obligations and restrictive covenants to which they are subject.

 

The description of these benefits is qualified in its entirety by the Aggarwal Employment Agreement and the Modur Employment Agreement, which are filed as Exhibit 10.1 and Exhibit 10.2 hereto, respectively, and incorporated by reference herein.

 

Appointment of Interim Chief Financial Officer

 

Effective as of the effective time of the Merger on April 1, 2021, the Company appointed Daniel Geffken to serve as the Company’s Interim Chief Financial Officer.

 

Mr. Geffken provides services through Danforth Advisors, LLC (“Danforth Advisors”), a consulting entity. It is contemplated that Danforth Advisors and the Company will enter into a new consulting agreement after the effective time of the Merger (the “Consulting Agreement”) concerning services to be provided by Danforth Advisors for the benefit of the Company, including those services provided by Mr. Geffken. Mr. Geffken previously provided services as the Chief Financial Officer of Zikani through Danforth Advisors.

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Resignation of Chief Executive Officer

 

On April 1, 2021, the Company and Dr. Williams entered into a Separation Agreement and General Release (the “Separation Agreement”) pursuant to which, among other things, the Company and Dr. Williams agreed that Dr. Williams would separate from service with the Company, resigning from his position as the Chief Executive Officer of the Company and all other offices of the Company, effective as of April 1, 2021.

 

Dr. Williams’ separation from service with the Company was not considered a termination for “Cause” as that term is defined in his employment agreement with the Company, which was included as Exhibit 10.42 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on March 6, 2020 (the “Williams Employment Agreement”). Dr. Williams’ separation was not in connection with a disagreement between Dr. Williams and the Company on any matter relating to the Company’s operations, policies or practices.

 

Pursuant to the terms of the Williams Employment Agreement, Dr. Williams is eligible to receive certain severance payments and benefits due to him upon a termination without “Cause” by the Company, as described in the Williams Employment Agreement, contingent upon his release of claims against the Company. In addition, since the Williams Employment Agreement is not terminable without “Cause” by the Company until August 25, 2021, the Separation Agreement provides that, in consideration of, among other things, Dr. Williams’ entry into the Separation Agreement, Dr. Williams will receive certain compensation and continued equity vesting and option exercisability as though Dr. Williams had remained employed through August 25, 2021.

 

The description of these benefits is qualified in its entirety by the Separation Agreement, which is filed as Exhibit 10.3 hereto and incorporated by reference herein.

 

Item 7.01 Regulation FD.

 

Eloxx prepared an investor presentation with respect to the Merger. A copy of the investor presentation is furnished as Exhibit 99.1 to this Current Report on Form 8-K. Such investor presentation shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Item 7.01, including Exhibit 99.1 attached hereto, shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act regardless of any general incorporation language in such filing.

 

Item 8.01 Other Events.

 

In anticipation of the consummation of the Merger, the lenders under the Loan and Security Agreement, dated as of January 30, 2019 (the “Credit Agreement”), by and among Eloxx, Eloxx Pharmaceuticals Ltd. Silicon Valley Bank and SVP Innovation Credit Fund VIII, L.P., consented to the Merger for purposes of the Credit Agreement, and in connection therewith, the Credit Agreement was amended to, among other things, provide that Zikani will be added as a co-borrower thereunder.

 

On April 1, 2021, Eloxx issued a press release announcing the Merger. A copy of the press release is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

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Item 9.01

Financial Statements and Exhibits.

 

(a)Financial Statements of Business Acquired

 

The financial statements required by this Item are not being filed with this Current Report on Form 8-K. Such financial statements will be filed by an amendment to this Current Report on Form 8-K not later than 71 days after the date on which this Current Report on Form 8-K is required to be filed.

 

(b)Pro Forma Financial Information

 

The pro forma financial information required by this Item is not being filed with this Current Report on Form 8-K. Such pro forma financial information will be filed by an amendment to this Current Report on Form 8-K not later than 71 days after the date on which this Current Report on Form 8-K is required to be filed.

 

(d)Exhibits.
       

Exhibit

No.

    Description  
     
2.1   Agreement and Plan of Merger, dated April 1, 2021, by and among Eloxx Pharmaceuticals, Inc., Delta Merger Sub Acquisition Corporation and Zikani Therapeutics, Inc.*
10.1   Employment Agreement, dated as of April 1, 2021, by and between Sumit Aggarwal and Eloxx Pharmaceuticals, Inc.
10.2   Employment Agreement, dated as of April 1, 2021, by and between Vijay Modur and Eloxx Pharmaceuticals, Inc.
10.3   Separation Agreement and General Release, dated as of April 1, 2021, by and between Gregory C. Williams and Eloxx Pharmaceuticals, Inc.
99.1   Investor Presentation
99.2   Press Release issued April 1, 2021
     
   

* Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Eloxx hereby agrees to furnish supplementally a copy of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission.

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  ELOXX PHARMACEUTICALS, INC.
     
  By:   /s/ Neil S. Belloff
  Name:   Neil S. Belloff
  Title:   Chief Operating Officer and General Counsel

 

Date: April 1, 2021

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Exhibit 2.1

 

 

EXECUTION VERSION

 

 

 

 

AGREEMENT AND PLAN OF MERGER

 

BY AND AMONG

 

ELOXX PHARMACEUTICALS, INC.

 

AND

 

Delta Merger Sub Acquisition Corporation

 

AND

 

ZIKANI THERAPEUTICS, INC.

 

DATED AS OF APRIL 1, 2021

 

 

 

 

Table of Contents

Page

 

ARTICLE I DEFINITIONS 2
ARTICLE II THE MERGER 10
Section 2.01   The Merger 10
Section 2.02   Closing 10
Section 2.03   Effective Time 10
Section 2.04   Effects of the Merger 11
Section 2.05   Constituent Documents 11
Section 2.06   Directors and Officers 11
Section 2.07   Effect of the Merger on the Capital Stock of the Company 11
Section 2.08   Surrender and Payment 12
Section 2.09   No Further Ownership Rights in Company Capital Stock 12
Section 2.10   Withholding Rights 13
Section 2.11   Lost Certificates 13
Section 2.12   Consideration Spreadsheet 13
Section 2.13   Tax Consequences 13
Section 2.14   Dissenting Shares 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 14
Section 3.01   Organization and Qualification of the Company 14
Section 3.02   Authority; Board Approval 14
Section 3.03   No Conflicts; Consents 15
Section 3.04   Capitalization 16
Section 3.05   No Subsidiaries 17
Section 3.06   Financial Matters 17
Section 3.07   Absence of Certain Changes, Events and Conditions 18
Section 3.08   Material Contracts 19
Section 3.09   Assets 21
Section 3.10   Real Property 21
Section 3.11   Intellectual Property 22
Section 3.12   Insurance 24
Section 3.13   Legal Proceedings; Governmental Orders 24
Section 3.14   Compliance With Laws; Permits; Regulatory Matters 24
Section 3.15   Environmental Matters 29
Section 3.16   Employee Benefit Matters 30
Section 3.17   Employment Matters 32
Section 3.18   Taxes 33
Section 3.19   Books and Records 35
Section 3.20   Related Party Transactions 35
Section 3.21   Brokers 36
Section 3.22   No Other Representations or Warranties 36
Section 3.23   Full Disclosure 36
i 

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB 36
Section 4.01   Organization and Qualification of Parent and Merger Sub 36
Section 4.02   Authority; Board Approval 37
Section 4.03   No Conflicts; Consents 37
Section 4.04   Capitalization 38
Section 4.05   SEC Filings; Financial Matters 39
Section 4.06   Absence of Certain Changes, Events and Conditions 40
Section 4.07   Compliance With Laws; Permits; Regulatory Matters 40
Section 4.08   Legal Proceedings 42
Section 4.09   Taxes 42
Section 4.10   Brokers 44
Section 4.11   Related Party Transactions 44
Section 4.12   CFIUS 44
Section 4.13   No Other Representations and Warranties 44
Section 4.14   Full Disclosure 44
ARTICLE V COVENANTS 45
Section 5.01   Stockholder Consent 45
Section 5.02   Directors’ and Officers’ Indemnification and Insurance 46
Section 5.03   Restricted Securities; Rule 144 Obligations 46
Section 5.04   Listing Compliance Matters 47
Section 5.05   Employee Matters 47
Section 5.06   Post-Closing Governance Matters 48
Section 5.07   Further Assurances 48
ARTICLE VI TAX MATTERS 48
Section 6.01   Tax Consequences 48
Section 6.02   FIRPTA Statement 48
ARTICLE VII MISCELLANEOUS 49
Section 7.01   Expenses 49
Section 7.02   Notices 49
Section 7.03   Interpretation 49
Section 7.04   Headings 50
Section 7.05   Severability 50
Section 7.06   Entire Agreement 50
Section 7.07   Successors and Assigns 50
Section 7.08   No Third-Party Beneficiaries; No Survival 50
Section 7.09   Amendment and Modification; Waiver 51
Section 7.10   Governing Law; Submission to Jurisdiction; Waiver of Jury Trial 51
Section 7.11   Specific Performance 52
Section 7.12   Counterparts 52
ii 

 

SCHEDULES

 

Schedule A – Company Stockholders Required Signatures

iii 

 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), is made as of April 1, 2021, by and among Eloxx Pharmaceuticals, Inc., a Delaware corporation (“Parent”), Delta Merger Sub Acquisition Corporation, a Delaware corporation and direct, wholly owned subsidiary of Parent (“Merger Sub”), and Zikani Therapeutics, Inc., a Delaware corporation (the “Company”).

 

RECITALS

 

WHEREAS, the parties intend that Merger Sub be merged with and into the Company, with the Company surviving that merger as a direct, wholly owned subsidiary of Parent, on the terms and subject to the conditions set forth herein (the “Merger”);

 

WHEREAS, the parties intend that the Merger qualify as a “reorganization” within the meaning of Section 368(a) of the Code;

 

WHEREAS, the board of directors of the Company (the “Company Board”) has unanimously (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are in the best interests of the Company and its stockholders, (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, and (c) recommended the adoption of this Agreement by the stockholders of the Company in accordance with the General Corporation Law of the State of Delaware (the “DGCL”);

 

WHEREAS, pursuant to Section 228 of the DGCL and the Company Charter Documents, prior to, but with effect immediately after, the execution and delivery of this Agreement, each holder of Company Capital Stock set forth on Schedule A has executed and delivered to the Company, and the Company has delivered to Parent, a true, correct and complete copy of an action by written consent evidencing the approval and adoption of this Agreement and the transactions contemplated hereby, including the Merger (the “Company Stockholder Written Consent”), which constitutes the Requisite Stockholder Approval;

 

WHEREAS, the respective boards of directors of Parent and Merger Sub have (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are in the best interests of Parent, Merger Sub and their respective stockholders, as applicable, and (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger; and

 

WHEREAS, Parent, as the sole stockholder of Merger Sub, has approved and adopted this Agreement and the transactions contemplated hereby, including the Merger, upon the terms and subject to the conditions set forth herein, in accordance with the DGCL.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

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ARTICLE I
DEFINITIONS

 

The following terms have the meanings specified or referred to in this ARTICLE I:

 

Action” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, notice of deficiencies, notice of potential liability, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.

 

Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

Agreement” has the meaning set forth in the Preamble.

 

Ancillary Document(s)” means when used in reference to a particular Person, any agreement, certificate, instrument, or other document executed or contemplated to be executed by such Person in connection with the transactions contemplated hereby.

 

Assets” has the meaning set forth in Section 3.09(a).

 

Audited Financial Statements” has the meaning set forth in Section 3.06(a)(i).

 

Balance Sheet Date” has the meaning set forth in Section 3.06(a)(i).

 

Benefit Plan” has the meaning set forth in Section 3.16(a).

 

Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in New York, New York are authorized or required by Law to be closed for business.

 

Carve-Out Plan” means the Company’s Management Carve-Out Plan.

 

Carve-Out Plan Waivers” means those certain waivers, entered into no fewer than two (2) days prior to the Closing, by the Company and the Participants in the form previously approved by Parent, copies of which have been delivered to Parent.

 

CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended from time to time, including by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.

 

Certificate of Merger” has the meaning set forth in Section 2.03.

 

Closing” has the meaning set forth in Section 2.02.

 2 

 

Closing Date” has the meaning set forth in Section 2.02.

 

Code” means the Internal Revenue Code of 1986, as amended.

 

Company” has the meaning set forth in the Preamble.

 

Company Board” has the meaning set forth in the Recitals.

 

Company Board Recommendation” has the meaning set forth in Section 3.02(b).

 

Company Capital Stock” means the Company Common Stock and Company Preferred Stock, taken together.

 

Company Common Stock” means the common stock, with a par value of $0.001 per share, of the Company.

 

Company Charter Documents” means, collectively, the Company’s certificate of incorporation and bylaws, each as amended through the date hereof and as in full force and effect on the date hereof.

 

Company Disclosure Schedules” means the Disclosure Schedules delivered by the Company concurrently with the execution and delivery of this Agreement.

 

Company Intellectual Property” means all Intellectual Property that is owned by or exclusively licensed to the Company.

 

Company IP Agreements” means all assignments, options, licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants not to sue, permissions and other Contracts (including any right to receive or obligation to pay royalties or any other consideration), whether written or oral, relating to Intellectual Property to which the Company is a party, beneficiary or otherwise bound.

 

Company IP Registrations” means all Company Intellectual Property that is subject to any issuance registration, application or other filing by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including registered trademarks, domain names and copyrights, issued and reissued patents and pending applications for any of the foregoing.

 

Company Material Adverse Effect” means any change, event, effect, fact, condition or circumstance which, individually or in the aggregate has resulted in or would reasonably be expected to (1) prevent, materially impede or materially delay the Company from consummating the Merger or any of the other transactions contemplated by this Agreement or the Company from performing its obligations under this Agreement or (2) result in a material adverse effect on the business, financial condition or results of operations of the Company.

 

Company Options” means all options granted under the Company Plan by the Company prior to the date hereof to purchase or otherwise acquire Company Capital Stock (whether or not vested).

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Company Plan” means the Company’s 2015 Employee, Director and Consultant Equity Incentive Plan.

 

Company Preferred Stock” means, collectively, the Company Series A Preferred Stock and the Company Series A-1 Preferred Stock.

 

Company Permits” has the meaning set forth in Section 3.14(b).

 

Company Series A Preferred Stock” means the Series A Preferred Stock, with a par value of $0.001 per share, of the Company.

 

Company Series A-1 Preferred Stock” means the Series A-1 Preferred Stock, with a par value of $0.001 per share, of the Company.

 

Company Stockholder Written Consent” has the meaning set forth in the Recitals.

 

Consideration Spreadsheet” has the meaning set forth in Section 2.12(a).

 

Continuing Employees” means those employees of the Company who are actively employed immediately prior to the Closing and who remain employees of the Surviving Entity immediately following the Closing.

 

Contract” or “Contracts” means with respect to any Person, any contract, lease, sublease, deed, mortgage, license, sublicense or any other promise, instrument, note, commitment, understanding, arrangement, undertaking, indenture, joint venture, whether written or oral, to which or by which such Person is a party or otherwise subject or bound or to which or by any property, business, operation or right of such Person is subject or bound.

 

Data Room” means Parent’s virtual data room hosted by Donnelley Financial Solutions in the folder “Zikani”.

 

D&O Indemnified Party” has the meaning set forth in Section 5.02(a).

 

D&O Insurance Policies” has the meaning set forth in Section 5.02(b).

 

Data” has the meaning set forth in Section 3.14(e).

 

Debarred” has the meaning set forth in Section 3.14(c).

 

Dissenting Shares” has the meaning set forth in Section 2.14.

 

DGCL” has the meaning set forth in the Recitals.

 

Dollars or $” means the lawful currency of the United States.

 

Effective Time” has the meaning set forth in Section 2.03.

 

Encumbrance” means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

 4 

 

Enforceability Exceptions” has the meaning set forth in Section 3.02(a).

 

Environmental Claim” means any Action, Governmental Order, lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the presence, Release of, or exposure to, any Hazardous Materials; or (b) any actual or alleged non-compliance with any Environmental Law or term or condition of any Environmental Permit.

 

Environmental Law” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes the following (including their implementing regulations and any state analogs): CERCLA; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.

 

Environmental Notice” means any written directive, notice of violation or infraction, or notice respecting any Environmental Claim relating to actual or alleged non-compliance with, or violation of, any Environmental Law, actual or alleged liability arising under any Environmental Law, or any term or condition of any Environmental Permit.

 

Environmental Permit” means any Permit, letter, clearance, consent, waiver, closure, exemption, decision or other action required under or issued, granted, given, authorized by or made pursuant to any Environmental Law.

 

ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

 

ERISA Affiliate” means all employers (whether or not incorporated) that would be treated together with the Company or any of its Affiliates as a “single employer” within the meaning of Section 414 of the Code.

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Exchange” means The Nasdaq Global Market or such other stock exchange on which Parent Common Stock is listed or quoted.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

FDA” means the United States Food and Drug Administration.

 

FDA Act” means the Federal Food, Drug and Cosmetic Act, as amended.

 

FDA Ethics Policy” has the meaning set forth in Section 3.14(j).

 

Financial Statements” has the meaning set forth in Section 3.06(a)(ii).

 

Forum” has the meaning set forth in Section 7.10(b).

 

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

 

Good Laboratory Practices” has the meaning set forth in Section 3.14(h).

 

Government Contracts” has the meaning set forth in Section 3.08(a)(vii).

 

Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

 

Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

Hazardous Materials” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is regulated under any Environmental Law, including any that are hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, mold, and polychlorinated biphenyls.

 

HIPAA” has the meaning set forth in Section 3.14(k).

 

ICH” has the meaning set forth in Section 3.14(h).

 

Indebtedness” means, without duplication and with respect to the Company, all (a) indebtedness for borrowed money; (b) obligations for the deferred purchase price of property or services, (c) long or short-term obligations evidenced by notes, bonds, debentures or other similar instruments; (d) obligations under any interest rate, currency swap or other hedging agreement or arrangement; (e) capital lease obligations; (f) reimbursement obligations under any letter of credit, banker’s acceptance or similar credit transactions; (g) guarantees made by the Company on behalf of any third party in respect of obligations of the kind referred to in the foregoing clauses (a) through (f); and (h) any unpaid interest, prepayment penalties, premiums, costs and fees that would arise or become due as a result of the prepayment of any of the obligations referred to in the foregoing clauses (a) through (g).

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Instructions” has the meaning set forth in Section 2.08(b).

 

Insurance Policies” has the meaning set forth in Section 3.12.

 

Intellectual Property” means all intellectual property and industrial property rights and assets, and all rights, interests and protections that are associated with, similar to, or required for the exercise of, any of the foregoing, however arising, pursuant to the Laws of any jurisdiction throughout the world, whether registered or unregistered, including any and all: (a) trademarks, service marks, trade names, brand names, logos, trade dress, design rights and other similar designations of source, sponsorship, association or origin, together with the goodwill connected with the use of and symbolized by, and all registrations, applications and renewals for, any of the foregoing; (b) internet domain names, whether or not trademarks, registered in any top-level domain by any authorized private registrar or Governmental Authority, web addresses, web pages, websites and related content, accounts with Twitter, Facebook and other social media companies and the content found thereon and related thereto, and URLs; (c) works of authorship, expressions, designs and design registrations, whether or not copyrightable, including copyrights, author, performer, moral and neighboring rights, and all registrations, applications for registration and renewals of such copyrights; (d) inventions, discoveries, trade secrets, business and technical information and know-how, databases, data collections and other confidential and proprietary information and all rights therein; (e) patents (including all reissues, divisionals, provisionals, continuations and continuations-in-part, re-examinations, renewals, substitutions and extensions thereof), patent applications, and other patent rights and any other Governmental Authority-issued indicia of invention ownership (including inventor’s certificates, petty patents and patent utility models); and (f) software and firmware, including data files, source code, object code, application programming interfaces, architecture, files, records, schematics, computerized databases and other related specifications and documentation.

 

Interim Financial Statements” has the meaning set forth in Section 3.06(a)(ii).

 

IRB” has the meaning set forth in Section 3.14(i).

 

Knowledge” with respect to any fact, circumstance, event or other matter in question, means the knowledge of such fact, circumstance, event or other matter after reasonable inquiry of (a) with respect to the Company, Sumit Aggarwal and Daniel Geffken and (b) with respect to Parent and its Subsidiaries, Neil Belloff and Greg Williams.

 

Law” means any statute, law, ordinance, regulation, permit, convention, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.

 

Liabilities” has the meaning set forth in Section 3.06(c).

 7 

 

Material Contracts” has the meaning set forth in Section 3.08(a).

 

Merger” has the meaning set forth in the Recitals.

 

Merger Consideration” means an aggregate number of shares of Parent Common Stock equal to 7,596,810.

 

Merger Sub” has the meaning set forth in the Preamble.

 

NIH” has the meaning set forth in Section 3.08(a)(xi).

 

Parachute Payment Waivers” has the meaning set forth in Section 5.01(c).

 

Parent” has the meaning set forth in the Preamble.

 

Parent Board” means the Board of Directors of Parent.

 

Parent Capital Stock” means the Parent Common Stock and the Parent Preferred Stock.

 

Parent Charter Documents” means, collectively, the Parent’s certificate of incorporation and bylaws, each as amended through the date hereof and as in full force and effect on the date hereof.

 

Parent Common Stock” means the common stock, with a par value $0.01 per share, of Parent.

 

Parent Disclosure Schedules” means the Disclosure Schedules delivered by the Parent concurrently with the execution and delivery of this Agreement.

 

Parent Financial Statements” has the meaning set forth in Section 4.05(b).

 

Parent Material Adverse Effect” means any change, event, effect or circumstance which, individually or in the aggregate, has resulted in or would reasonably be expected to result in a material adverse effect on the business, financial condition or results of operations of the Parent and its Subsidiaries, taken as a whole.

 

Parent Preferred Stock” means the preferred stock, with a par value $0.01 per share, of Parent.

 

Parent RSU” has the meaning set forth in Section 2.07(e).

 

Parent SEC Documents” has the meaning set forth in Section 4.05(a).

 

Participant” has the meaning given to the term in the Carve-Out Plan.

 

Permits” means all permits, licenses, franchises, approvals, consents, waivers, clearances, concessions, authorizations, registrations, certificates, variances and similar rights obtained or filed, or required to be obtained or filed, from or with Governmental Authorities including any authorizations or rights required to conduct pre-clinical studies, animal studies, and clinical trials.

 8 

 

Permitted Encumbrances” has the meaning set forth in Section 3.09(a).

 

Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

 

Privacy Laws” has the meaning set forth in Section 3.14(n).

 

Privacy Policies” has the meaning set forth in Section 3.14(n).

 

Proprietary Information” means at any date, any information of a Person, that is not already generally available to the public (unless such information has entered the public domain and become available to the public through fault on the part of the party to be charged hereunder), which constitute trade secrets, personally identifiable financial information, or personal health information under governing Law.

 

Qualified Benefit Plan” has the meaning set forth in Section 3.16(d).

 

Real Property” has the meaning set forth in Section 3.10(a).

 

Recall” has the meaning set forth in Section 3.14(d).

 

Release” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).

 

Representative” means, with respect to any Person, any and all directors, officers, employees, managers, advisors, consultants, agents, Persons providing services or activities for, with, on behalf of, or in conjunction with such Person, but only to the extent of those services or activities, or other representative of such Person, including legal counsel, accountants, and financial advisors.

 

Requisite Stockholder Approval” has the meaning set forth in Section 3.02(a).

 

Rule 144” has the meaning set forth in Section 5.03.

 

SEC” means the U.S. Securities and Exchange Commission.

 

Section 280G” has the meaning set forth in Section 5.01(c).

 

Section 280G Payments” has the meaning set forth in Section 5.01(c).

 

Securities Act” means the Securities Act of 1933, as amended.

 

Stockholder” means a holder of the Company’s Capital Stock as of the Effective Time.

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Studies” has the meaning set forth in Section 3.14(e).

 

Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association, trust or other entity (i) of which securities or other ownership interests representing more than 50% of the equity and more than 50% of the ordinary voting power (or, in the case of a partnership, more than 50% of the general partnership interests) are, as of the date of determination, owned by such Person or one or more Subsidiaries of such Person, or (ii) that is a variable interest entity in which such Person is the primary beneficiary, as determined in accordance with GAAP.

 

Surviving Entity” has the meaning set forth in Section 2.01.

 

Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real, personal or tangible property), escheat, unclaimed property, real property gains, windfall profits, capital, net worth, customs, duties or other taxes, fees, assessments or charges in the nature of a tax, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

 

Tax Return” means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, filed or required to be filed with a Governmental Authority.

 

Union” has the meaning set forth in Section 3.17(b).

 

ARTICLE II
THE MERGER

 

Section 2.01      The Merger. On the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time, (a) Merger Sub will merge with and into the Company, and (b) the separate corporate existence of Merger Sub will cease and the Company will continue its existence under the DGCL as the surviving entity following the Merger (sometimes referred to herein as the “Surviving Entity”).

 

Section 2.02      Closing. Subject to the terms and conditions of this Agreement, the closing of the Merger (the “Closing”) shall take place immediately following the execution of this Agreement and delivery of the Requisite Stockholder Approval to Parent, virtually through electronic transfer (the day on which the Closing takes place being the “Closing Date”) and shall be effective pursuant to Section 2.03.

 

Section 2.03      Effective Time. Subject to the provisions of this Agreement, at the Closing, the Company, Parent and Merger Sub shall cause a certificate of merger (the “Certificate of Merger”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL. The Merger shall become effective at such time as the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware, or at such later date or time as may be agreed by the Company and Parent in writing and specified in the Certificate of Merger in accordance with the DGCL (the effective time of the Merger being hereinafter referred to as the “Effective Time”).

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Section 2.04      Effects of the Merger. The Merger shall have the effects set forth herein and in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, all property, rights, privileges, immunities, powers, franchises, licenses and authority of the Company and Merger Sub shall vest in the Surviving Entity, and all debts, liabilities, obligations, restrictions and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions and duties of the Surviving Entity.

 

Section 2.05      Constituent Documents. At the Effective Time, (a) the certificate of incorporation of the Surviving Entity shall be amended and restated as of the Effective Time to be identical to the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, until thereafter amended in accordance with the DGCL and as provided in such certificate of incorporation; provided, however, that Section 1 of the certificate of incorporation of the Surviving Entity shall be amended to read: “The name of the corporation is Zikani Therapeutics, Inc.” and (b) the parties shall take all actions necessary so that the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Entity, until thereafter amended in accordance with the DGCL and as provided in the certificate of incorporation of the Surviving Entity and such bylaws; provided, however, that such bylaws shall indicate that the name of the Surviving Entity is “Zikani Therapeutics, Inc.”.

 

Section 2.06      Directors and Officers. Parent shall cause, in connection with the Effective Time, for the directors and officers listed on Schedule 2.06, to be the directors and officers, respectively, of the Surviving Entity until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and by-laws of the Surviving Entity.

 

Section 2.07      Effect of the Merger on the Capital Stock of the Company. At the Effective Time, as a result of the Merger and without any action on the part of Parent, Merger Sub, the Company or any Stockholder:

 

(a)            Cancellation of Certain Company Capital Stock. All shares of the Company Capital Stock that are owned by Parent, Merger Sub or the Company (as treasury stock or otherwise) or any of their respective direct or indirect wholly owned Subsidiaries shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

 

(b)           Conversion of Company Capital Stock. Each share of Company Capital Stock issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares and shares to be cancelled and retired in accordance with Section 2.07(a)), shall be converted into the right to receive a respective amount of shares of Parent Common Stock as reflected in the Consideration Spreadsheet in accordance with Section 2.12.

 

(c)            Conversion of Merger Sub Capital Stock. Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one newly issued, fully paid and non-assessable share of common stock of the Surviving Entity, with the same rights, powers, and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Entity.

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(d)           Company Options. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, the Company or the holders of Company Options, each Company Option that is outstanding immediately prior to the Effective Time shall be cancelled at the Effective Time without the payment of any consideration therefor. Prior to the Closing Date, the Board of Directors of the Company (or any applicable committee thereof) adopted resolutions and took all such other actions as are required to: (i) terminate the Company Plan as of the Closing; and (ii) ensure that, after the Closing, no holder of any award granted under the Company Plan shall have any right thereunder to acquire any equity securities of the Company or to receive any payment or benefit with respect thereto.

 

(e)            Carve-out Plan. The Board of Directors or applicable committee thereof, has adopted resolutions that, subject to the service of the individuals set forth on Schedule 2.07 with Parent or it applicable Subsidiary as of the Closing, provide for the issuance of Restricted Stock Unit Awards (under and within the meaning of the Parent’s 2018 Equity Incentive Plan), effective as of, and subject to the occurrence of, the Closing, to the individuals in the amounts and subject to the terms set forth on Schedule 2.07 (such Restricted Stock Unit Awards, the “Parent RSUs”).

 

Section 2.08      Surrender and Payment.

 

(a)            At the Effective Time, all shares of Company Capital Stock outstanding immediately prior to the Effective Time shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate formerly representing such shares of Company Capital Stock (each, a “Certificate”) shall cease to have any rights as a stockholder of the Company.

 

(b)           Each Stockholder entitled to receive Merger Consideration, has delivered to Parent a duly completed and validly executed letter of transmittal, together with such Stockholder’s Certificate(s) for cancellation (or an affidavit of loss thereto in accordance with Section 2.11) and written instructions regarding (i) the Person in whose name the Merger Consideration issuable to such holder in respect of such Certificate shall be registered, and (ii) the Person to whom book- entry shares representing such Parent Common Stock shall be delivered (collectively, subclauses (i) and (ii), the “Instructions”). If after the Effective Time, any Certificate is presented to Parent, it shall be cancelled and exchanged as provided in this Section 2.08. No interest shall be paid or accrued upon the surrender or transfer of any Certificate. In connection with the Effective Time, Parent shall instruct its transfer agent to issue and deliver to such Stockholder book-entry shares representing such Stockholder’s Merger Consideration issuable to such holder in respect of such Certificate in accordance with such Instructions.

 

Section 2.09      No Further Ownership Rights in Company Capital Stock. All Merger Consideration paid or payable upon the surrender of Certificates in accordance with the terms hereof shall be deemed to have been paid or payable in full satisfaction of all rights pertaining to the shares of Company Capital Stock formerly represented by such Certificate, and from and after the Effective Time, there shall be no further registration of transfers of any shares of the Company Capital Stock on the stock transfer books of the Surviving Entity. If, after the Effective Time, Certificates are presented to the Surviving Entity, such Certificates shall be cancelled and exchanged for the Merger Consideration provided for, and in accordance with the procedures set forth, in this ARTICLE II and elsewhere in this Agreement.

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Section 2.10      Withholding Rights. Each of Parent, Merger Sub and the Surviving Entity shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this ARTICLE II such amounts as are required to be deducted and withheld with respect to the making of such payment under any provision of Tax Law. To the extent that amounts are so deducted and withheld by Parent, Merger Sub or the Surviving Entity, as the case may be, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which the Parent, Merger Sub or the Surviving Entity, as the case may be, made such deduction and withholding.

 

Section 2.11      Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, without the requirement of such Person of a bond, Parent shall issue (or cause of be issued), in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration to be paid in respect of the shares of Company Capital Stock formerly represented by such Certificate as contemplated under this ARTICLE II.

 

Section 2.12      Consideration Spreadsheet.

 

(a)            Attached hereto is Schedule 2.12 (the “Consideration Spreadsheet”), certified by the Chief Executive Officer of the Company, which sets forth, as of the immediately prior to the Effective Time (except as set forth below) the following:

 

(i)             with respect to each Stockholder, on a certificate by certificate basis:

 

(A)          the names and addresses of all Stockholders;

 

(B)          the number and type of shares of Company Capital Stock held by each such Stockholder;

 

(C)          the respective certificate number(s) representing such shares of Company Capital Stock; and

 

(D)          the Merger Consideration payable to each Stockholder with respect to each share of Company Capital Stock.

 

(b)           The parties agree that Parent and Merger Sub shall be entitled to rely on the Consideration Spreadsheet in making payments under this ARTICLE II and Parent and Merger Sub shall not be responsible for the calculations or the determinations regarding such calculations in such Consideration Spreadsheet.

 

Section 2.13      Tax Consequences. For U.S. federal income tax purposes, the Merger is intended to constitute a “reorganization” within the meaning of Section 368(a) of the Code to which each of Parent, Merger Sub and the Company are to be parties under Section 368(b) of the Code. The parties adopt this Agreement as a “plan of reorganization” within the meaning of Section 1.368-2(g) of the Treasury Regulations.

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Section 2.14      Dissenting Shares. Notwithstanding any provision of this Agreement to the contrary, shares of Company Capital Stock issued and outstanding immediately prior to the Effective Time (other than shares to be cancelled and retired in accordance with Section 2.07(a)) and held by a holder who has not voted in favor of adoption of this Agreement or consented thereto in writing and who is entitled to demand and has properly exercised appraisal rights of such shares in accordance with Section 262 of the DGCL (such shares of Company Capital Stock being referred to collectively as the “Dissenting Shares” until such time as such holder fails to perfect or otherwise waives, withdraws, or loses such holder’s appraisal rights under the DGCL with respect to such shares) shall not be converted into a right to receive the Merger Consideration, but instead shall be entitled to only such rights as are granted by Section 262 of the DGCL; provided, however, that if, after the Effective Time, such holder fails to perfect, waives, withdraws, or loses such holder’s right to appraisal pursuant to Section 262 of the DGCL or if a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262 of the DGCL, such shares of Company Capital Stock shall be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration in accordance with Section 2.07(b) and subject to Section 2.08. Parent shall direct and control the negotiations and proceedings with respect to demands for appraisal in respect of any Dissenting Shares.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the correspondingly numbered Section of the Company Disclosure Schedules, the Company represents and warrants to Parent and Merger Sub that the statements contained in this ARTICLE III are true and correct as of the date hereof.

 

Section 3.01      Organization and Qualification of the Company. The Company is a corporation duly organized, validly existing and in good standing under the Laws of the state of Delaware and has full corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it has been and is currently conducted. Section 3.01 of the Company Disclosure Schedules sets forth each jurisdiction in which the Company is licensed or qualified to do business, and the Company is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing or qualification necessary other than in jurisdictions where the failure to be so qualified individually or in the aggregate would not have a Company Material Adverse Effect.

 

Section 3.02      Authority; Board Approval.

 

(a)            The Company has full corporate power and authority to enter into and perform its obligations under this Agreement and the Ancillary Documents to which it is a party and, subject to, in the case of the consummation of the Merger, adoption of this Agreement by the affirmative vote or consent of the Stockholders representing (i) a majority of the issued and outstanding Company Preferred Stock voting together as a single class and (ii) a majority of the issued and outstanding Company Capital Stock voting together as a single class (the “Requisite Stockholder Approval”), to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Company of this Agreement and any Ancillary Document to which it is a party and the consummation by the Company of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize the execution, delivery and performance of this Agreement or to consummate the Merger and the other transactions contemplated hereby and thereby, subject only, in the case of consummation of the Merger, to the receipt of the Requisite Stockholder Approval. The Requisite Stockholder Approval is the only vote or consent of the holders of any class or series of the Company’s capital stock required to approve and adopt this Agreement and the Ancillary Documents, approve the Merger and consummate the Merger and the other transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Company, and (assuming due authorization, execution and delivery by each other party hereto) this Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or similar laws relating to or affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) (the “Enforceability Exceptions”). When each Ancillary Document to which the Company is or will be a party has been duly executed and delivered by the Company (assuming due authorization, execution and delivery by each other party thereto), such Ancillary Document will constitute a legal and binding obligation of the Company enforceable against it in accordance with its terms, subject to the Enforceability Exceptions.

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(b)           The Company Board, by resolutions duly adopted by unanimous vote at a meeting of all members of the Company Board duly called and held or pursuant to a written consent and, as of the date hereof, not subsequently rescinded or modified in any way, has, as of the date hereof (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to, and in the best interests of, the Company and its Stockholders, (ii) approved and declared advisable the “agreement of merger” (as such term is used in Section 251 of the DGCL) contained in this Agreement and the transactions contemplated by this Agreement, including the Merger, in accordance with the DGCL, (iii) directed that the “agreement of merger” contained in this Agreement be submitted to the Stockholders for adoption, and (iv) resolved to recommend that the Stockholders adopt the “agreement of merger” set forth in this Agreement (collectively, the “Company Board Recommendation”) and directed that such matter be submitted for consideration by the Stockholders.

 

Section 3.03      No Conflicts; Consents. The execution, delivery and performance by the Company of this Agreement and the Ancillary Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, including the Merger, do not and will not: (i) conflict with or result in a violation or breach of, or default under, any provision of the Company Charter Documents; (ii) subject to, in the case of the Merger, obtaining the Requisite Stockholder Approval, conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to the Company; (iii) except as set forth in Section 3.03 of the Company Disclosure Schedules, require any consent under, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, or cancel any Material Contract, or (iv) result in the creation or imposition of any Encumbrance other than Permitted Encumbrances on any properties or assets of the Company, other than, in the case of clauses (ii) and (iii), any such conflict, violation, breach, default, acceleration, termination, modification or cancellation that, would not, individually or in the aggregate, reasonably be expected to be material to the Company. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to the Company in connection with the execution, delivery and performance of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby, except for the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and such other consents, approvals, Permits, Governmental Orders, declaration, filings or notices, the failure of which to be obtained or made would not, individually or in the aggregate, reasonably be expected to be material to the Company.

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Section 3.04      Capitalization.

 

(a)            The authorized capital stock of the Company consists of (i) 200,000,000 shares of Company Common Stock, of which 9,992,731 shares are issued and outstanding; (ii) 165,989,214 shares of Company Preferred Stock, consisting of (x) 50,604,600 shares of Company Series A Preferred Stock, of which 8,160,000 shares are issued and outstanding and (y) 115,384,614 shares of Company Series A-1 Preferred Stock, of which 4,016,000 shares are issued and outstanding; (iii) 23,790,446 shares of Company Common Stock issuable pursuant to outstanding Company Options granted pursuant to the Company Plan and (iv) 1,260,812 shares of Company Common Stock available for future issuance pursuant to the Company Plan.

 

(b)         Except as set forth on Section 3.04(b) of the Company Disclosure Schedules, (i) no subscription, warrant, option, convertible or exchangeable security, or other right (contingent or otherwise) to purchase or otherwise acquire equity securities of the Company is authorized or outstanding, and (ii) the Company has no commitment to issue shares, subscriptions, warrants, options, convertible or exchangeable securities, or other such rights or to distribute to holders of any of its equity securities any evidence of indebtedness or asset, to repurchase or redeem any securities of the Company or to grant, extend, accelerate the vesting of, change the price of, or otherwise amend any warrant, option, convertible or exchangeable security or other such right. There are no undeclared or accrued and unpaid dividends with respect to any of any shares of Company Capital Stock.

 

(c)            Except as set forth on Section 3.04(c) of the Company Disclosure Schedules, all issued and outstanding shares of Company Capital Stock are (i) duly authorized, validly issued, fully paid and non-assessable; (ii) not subject to any preemptive rights created by statute, the Company Charter Documents or any agreement to which the Company is a party; and (iii) free of any Encumbrances except for restrictions imposed by applicable securities Laws. All issued and outstanding shares of Company Capital Stock were issued in compliance with applicable Law.

 

(d)            No outstanding Company Capital Stock is subject to vesting or forfeiture rights or repurchase by the Company. There are no outstanding or authorized stock appreciation, dividend equivalent, phantom stock, profit participation or other similar rights with respect to the Company or any of its securities.

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(e)            All distributions, dividends, repurchases and redemptions of the capital stock (or other equity interests) of the Company were undertaken in compliance with the Company Charter Documents then in effect, any agreement to which the Company then was a party and in compliance with applicable Law.

 

(f)            All Company Options have been granted in all material respects in accordance with the terms of the plan or program pursuant to which such Company Options were issued, and in compliance in all material respects with applicable Laws, and each Company Option has an exercise price per share of Company Common Stock that has been determined to be equal to or greater than the fair market value of a share of Company Common Stock on the date of grant, in accordance with any applicable requirements of Section 409A of the Code.

 

Section 3.05      No Subsidiaries. The Company has no Subsidiaries, and does not own, or have any interest in any shares or have an ownership interest in, any other Person.

 

Section 3.06      Financial Matters.

 

(a)            Financial Statements. Section 3.06(a) of the Company Disclosure Schedules contains complete copies of each of the following:

 

(i)             the Company’s audited financial statements consisting of the audited balance sheets of the Company as of December 31, 2019 (the “Balance Sheet Date”) and December 31, 2018, and the related audited statements of operations, statements of stockholders’ deficit/equity and statements of cash flows for the years then ended (collectively, the “Audited Financial Statements”); and

 

(ii)           the Company’s unaudited financial statements consisting of the balance sheet of the Company as of December 31, 2020, and the related statements of operations, changes in stockholders’ deficit/equity and statement of cash flows for the year then ended (the “Interim Financial Statements” and together with the Audited Financial Statements, the “Financial Statements”).

 

(b)           Compliance with GAAP, etc. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments (the effect of which will not be materially adverse to the Company) and the absence of notes (that if presented would not differ materially from those presented in the Audited Financial Statements). The Financial Statements are based on the books and records of the Company, which are complete and correct in all material respects, and fairly present in all material respects the financial condition of the Company as of the respective dates they were prepared and the results of the operations of the Company for the periods indicated. The Company has maintained a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as reasonably necessary to permit preparation of financial statements in conformity with the historical accounting policies and procedures of the Company, consistently applied, and to maintain asset accountability; and (iii) access to assets is permitted only in accordance with management’s general or specific authorization. There are no significant deficiencies or material weaknesses in the design or operation of the Company’s internal control over financial reporting that would reasonably be expected to adversely affect the Company’s ability to record, process, summarize, or report financial information to the Company’s management, except as may be expressly indicated in the notes to the Financial Statements. To the Company’s Knowledge, there is not, and there has not been, any fraud, whether or not material, that involves or involved any member of management or any other employee who has or had a significant role in the Company’s internal control over financial reporting.

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(c)            Undisclosed Liabilities. The Company has no liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise (“Liabilities”), except (a) those which are adequately reflected, disclosed or reserved against in the Financial Statements, (b) those which have been incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date (in each case, none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of Contract, breach of warranty, tort, infringement, or violation of Law), (c) those that are not, individually or in the aggregate, material to the Company, and (c) those that are set forth in Section 3.06(c) of the Company Disclosure Schedules.

 

Section 3.07      Absence of Certain Changes, Events and Conditions. Since the Balance Sheet Date, there has not occurred any event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Except for the transactions contemplated by this Agreement or the Ancillary Documents or as set forth in Section 3.07 of the Company Disclosure Schedules, since the Balance Sheet Date, there has not been, with respect to the Company, any:

 

(a)       amendment of the Company Charter Documents;

 

(b)       split, combination or reclassification of any shares of its capital stock;

 

(c)       issuance, sale or other disposition of any of its capital stock, or grant of any options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its capital stock;

 

(d)       declaration or payment of any dividends or distributions on or in respect of any of its capital stock or redemption, purchase or acquisition of its capital stock;

 

(e)       material change in any method of accounting or accounting practice of the Company, except as required by GAAP or as disclosed in the notes to the Audited Financial Statements;

 

(f)       incurrence, assumption or guarantee of any indebtedness for borrowed money;

 

(g)       transfer, assignment, sale or other disposition of any of the assets shown or reflected in the balance sheets of the Audited Financial Statements or cancellation of any indebtedness;

 

(h)       transfer or assignment of or grant of any license or sublicense under or with respect to any material Company Intellectual Property or Company IP Agreements (except for non-exclusive licenses or sublicenses granted in the ordinary course of business consistent with past practice) or abandonment or lapse of or failure to maintain in full force and effect any material Company IP Registration;

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(i)             material damage, destruction or loss (whether or not covered by insurance) to its property or imposition of any Encumbrance upon any of the Company properties, capital stock or assets, tangible or intangible;

 

(j)             any capital investment in, or any loan to, any other Person;

 

(k)           any loan to (or forgiveness of any loan to), or entry into any other transaction with, any of its stockholders or current or former directors, officers and employees (other than participant loans under a Qualified Plan);

 

(l)             action by the Company to make, change or rescind any Tax election, amend any Tax Return, change any method of Tax accounting, settle any claim or assessment with respect to any income Tax or other material Tax, or take any position on any Tax Return, take any action, omit to take any action or enter into any other transaction that would have the effect of increasing the Tax Liability or reducing any Tax asset of Parent in respect of any post-Closing Tax period;

 

(m)          purchase, lease or other acquisition of the right to own, use or lease any material or substantial portion of the property or assets of any Person or the stock of any Person, including by merger or otherwise;

 

(n)           except as required pursuant to any Benefit Plan or applicable Laws, (i) materially increased the compensation or other benefits payable or that may become payable to, or granted or entered into any arrangement for severance, termination, retention, change in control or similar pay to, directors, officers or employees of the Company; (ii) accelerated the vesting, payment or funding of, or caused the funding of, any material compensation or benefits to directors, officers or employees of the Company; (iii) terminated, other than for “cause”, the employment of any employee at or above the level of vice president or (iv) hired or promoted any employee other than hires or promotions in the ordinary course of business consistent with past practice of the business below the level of vice president;

 

(o)           except for the Merger, adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law; or

 

(p)           any Contract to do any of the foregoing, or any action or omission that would result in any of the foregoing.

 

Section 3.08      Material Contracts.

 

(a)            Section 3.08(a) of the Company Disclosure Schedules lists each of the following Contracts of the Company (such Contracts, together with all Contracts concerning the occupancy, management or operation of any Real Property (including brokerage contracts) listed or otherwise disclosed in Section 3.10(b) of the Company Disclosure Schedules and all Company IP Agreements set forth in Section 3.11(c) of the Company Disclosure Schedules, being “Material Contracts”):

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(i)             all Contracts that require the Company to purchase its total requirements of any product or service from a third party or that contain “take or pay” provisions;

 

(ii)           all Contracts that provide for the indemnification by the Company of any Person or the assumption of any Tax, environmental or other Liability of any Person;

 

(iii)         all Contracts that relate to the acquisition or disposition of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise);

 

(iv)          all broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing consulting and advertising Contracts to which the Company is a party;

 

(v)           all employment agreements and Contracts with independent contractors or consultants (or similar arrangements) to which the Company is a party and which are not cancellable without material penalty or without more than 90 days’ notice;

 

(vi)          except for Contracts relating to trade receivables, all Contracts relating to Indebtedness of the Company;

 

(vii)        all Contracts with any Governmental Authority to which the Company is a party (“Government Contracts”);

 

(viii)      all Contracts that limit or purport to limit the ability of the Company to compete in any line of business or with any Person or in any geographic area or during any period of time;

 

(ix)          any Contracts to which the Company is a party that provide for any joint venture, partnership, strategic alliance or similar arrangement by the Company;

 

(x)           all collective bargaining agreements or Contracts with any Union to which the Company is a party;

 

(xi)          any grants or research funding agreements, including agreements with the National Institutes of Health (“NIH”), as well as any collaboration agreements;

 

(xii)        all Contracts involving (A) “milestone” or other similar contingent payments to be made to or by the Company upon the achievement of certain milestones, or (B) payment of royalties or other amounts calculated based upon any revenues or income of the Company; and

 

(xiii)      all Contracts pursuant to which (A) the Company has an obligation to make any capital commitment, loan or expenditure in an amount in excess of $100,000 in any 12-month period or $250,000 over the term of such Contract, or (B) pursuant to which the Company received aggregate consideration in excess of $100,000 during the fiscal year ended December 31, 2020 or is reasonably expected to receive aggregate consideration in excess of $100,000 during the current fiscal year.

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(b)           Each Material Contract is valid and binding on the Company in accordance with its terms and is in full force and effect, subject to the Enforceability Exceptions. None of the Company or, to the Company’s Knowledge, any other party thereto is in breach of or default under (or is alleged to be in breach of or default under) in any material respect, or has provided or received any notice of any intention to terminate, any Material Contract. Complete and correct copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have been delivered to Parent.

 

Section 3.09      Assets.

 

(a)            Ownership of Assets. The Company has good and valid title to, or, in the case of leased properties and assets, valid leasehold interest in all tangible properties or tangible assets and equipment used or held for use in its business or operations or purported to be owned by it that are material to the Company or its business, including all assets reflected in the Audited Financial Statements or acquired after the Balance Sheet Date, except for such properties and assets that have been sold or otherwise disposed of since the Balance Sheet Date in the ordinary course of business (collectively, the “Assets”). The Assets are owned or leased by the Company free and clear of Encumbrances except for the following (collectively referred to as “Permitted Encumbrances”):

 

(i)             statutory liens for current Taxes not yet due and payable;

 

(ii)           mechanics’, carriers’, workmen’s, repairmen’s or similar statutory liens arising or incurred in the ordinary course of business consistent with past practice or amounts that are not delinquent and which are not, individually or in the aggregate, material to the business of the Company; or

 

(iii)         liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business consistent with past practice which are not, individually or in the aggregate, material to the business of the Company.

 

(b)           Sufficiency of Assets. The Assets comprise all of the assets, properties and rights of every type and description, whether real or personal, tangible or intangible, that are used in or necessary to the operations of the business of the Company and are adequate to conduct the business of the Company as currently being conducted by the Company.

 

(c)            Condition of Tangible Assets. The buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property of the Company included in the Assets, are in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost.

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Section 3.10      Real Property.

 

(a)            The Company does not own, nor has it ever owned, real property. Section 3.10(a) of the Company Disclosure Schedules set forth a list of the addresses of all real property leased, subleased or licensed by, or for which a right to use or occupy has been granted to, the Company (the “Real Property”).

 

(b)           Section 3.10(b) of the Company Disclosure Schedules lists (i) the street address of each parcel of Real Property; (ii) if such property is leased or subleased by the Company, the landlord under the lease, the rental amount currently being paid, and the expiration of the term of such lease or sublease for each leased or subleased property; and (iii) the current use of such property.

 

(c)            The Company has delivered or made available to Parent true, complete and correct copies of any leases of the Company for the Real Property. The Company is not a sublessor or grantor under any sublease or other instrument granting to any other Person any right to the possession, lease, occupancy or enjoyment of any leased Real Property. (i) The use and operation of the Real Property in the conduct of the Company’s business do not violate in any material respect any Law, Permit, covenant, condition, restriction, easement, license, or agreement, (ii) to the Company’s Knowledge, no material improvements constituting a part of the Real Property encroach on real property owned or leased by a Person other than the Company and (iii) there are no Actions pending nor, to the Company’s Knowledge, threatened against or affecting the Real Property or any portion thereof or interest therein in the nature or in lieu of condemnation or eminent domain proceedings.

 

Section 3.11      Intellectual Property.

 

(a)            Section 3.11(a) of the Company Disclosure Schedules lists all Company IP Registrations. All required filings and fees related to the Company IP Registrations have been timely filed with and paid to the relevant Governmental Authorities and authorized registrars, and all Company IP Registrations are otherwise in good standing. The Company has provided Parent with or made available to Parent true and complete copies of file histories, documents, certificates, office actions, correspondence and other materials related to all Company IP Registrations that are not publicly available.

 

(b)           No Governmental Authority grants were used in the conception or reduction to practice of any material Company IP Registrations owned by the Company, except for any such grants that do not result in such Governmental Authority or institution obtaining ownership rights in or licenses to use or otherwise exploit such Company IP Registrations or the right to receive royalties.

 

(c)            Section 3.11(c) of the Company Disclosure Schedules lists all material Company IP Agreements, excluding (i) licenses for commercially available computer components, (ii) software that are generally available on nondiscriminatory pricing terms or non-exclusive licenses relating to the products, processes and services of the Company, and (iii) agreements between the Company and its employees or independent contractors on such Company’s standard form thereof. The Company has provided Parent with true and complete copies of all such Company IP Agreements, including all modifications, amendments and supplements thereto and waivers thereunder. Each such Company IP Agreement is valid and binding on the Company in accordance with its terms and is in full force and effect, subject to the Enforceability Exceptions. Neither the Company nor any other party thereto is in material breach of or default under (or is alleged to be in breach of or default under), or has provided or received any notice of breach or default of or any intention to terminate, any such Company IP Agreement.

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(d)           Except as set forth in Section 3.11(d) of the Company Disclosure Schedules, the Company is the sole and exclusive legal and beneficial, and with respect to the Company IP Registrations, record, owner of all right, title and interest in and to the Company Intellectual Property that is owned or purported to be owned by the Company, and has the valid right to use all other material Intellectual Property used in or necessary for the conduct of the Company’s current business or operations, in each case, free and clear of Encumbrances other than Permitted Encumbrances or non-exclusive licenses of Intellectual Property granted in the ordinary course of business. Without limiting the generality of the foregoing, except as set forth in Section 3.11(d) of the Company Disclosure Schedules, to the Knowledge of the Company, the Company has entered into binding, written agreements with every current and former employee, and with every current and former independent contractor, whereby such employees and independent contractors (i) assign to the Company any ownership interest and right they may have in the Company Intellectual Property (that is owned or purported to be owned by the Company); and (ii) acknowledge the Company’s exclusive ownership of all such Company Intellectual Property. The Company has provided Parent with true and complete copies of standard form of such agreements.

 

(e)            The consummation of the transactions contemplated hereunder will not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, the Company’s right to own, use or hold for use any material Intellectual Property as owned, used or held for use in the conduct of the Company’s business or operations as currently conducted.

 

(f)            To the Knowledge of the Company, the Company’s rights in the Company IP Registrations that have been issued or that have completed registration are valid, subsisting and enforceable. Except as set forth on Section 3.11(f) of the Company Disclosure Schedules, the Company has taken reasonable steps to maintain the Company Intellectual Property and to protect and preserve the confidentiality of all trade secrets included in the Company Intellectual Property, including requiring all Persons having access thereto to execute written non-disclosure agreements. Except as set forth on Section 3.11(f) of the Company Disclosure Schedules, all current and former employees, consultants and contractors of the Company who contributed to the creation or development of the Company Intellectual Property that is owned by the Company have executed Contracts that assign to the Company all of such Person’s rights to Intellectual Property in such contribution.

 

(g)           To the Knowledge of the Company, the conduct of the Company’s business as currently and formerly conducted, and the products, processes and services of the Company, have not infringed, misappropriated, diluted or otherwise violated, and do not infringe, dilute, misappropriate or otherwise violate the valid and enforceable Intellectual Property or other rights of any Person. To the Knowledge of the Company, no Person has infringed, misappropriated, diluted or otherwise violated, or is currently infringing, misappropriating, diluting or otherwise violating, any Company Intellectual Property.

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(h)           There are no Actions (including any oppositions, interferences or re-examinations) settled, pending or, to the Company’s Knowledge, threatened (including in the form of offers to obtain a license): (i) alleging any infringement, misappropriation, dilution or violation of the valid and enforceable Intellectual Property of any Person by the Company; (ii) challenging the validity, enforceability, registrability or ownership of any Company Intellectual Property or the Company’s rights with respect to any material Company Intellectual Property (except for office actions and other ex parte proceedings in the ordinary course of prosecuting or maintaining the Company IP Registrations); or (iii) by the Company or any other Person alleging any infringement, misappropriation, dilution or violation by any Person of any material Company Intellectual Property. The Company is not subject to any outstanding or prospective Governmental Order (including any motion or petition therefor) that does or would restrict or impair the use of any Company Intellectual Property.

 

Section 3.12      Insurance. Section 3.12 of the Company Disclosure Schedules sets forth a true and complete list of each insurance policy of the Company (collectively, the “Insurance Policies”), including type, coverage, underwriter, and true and complete copies of such Insurance Policies have been made available to Parent. (a) Such Insurance Policies are in full force and effect and shall remain in full force and effect following the consummation of the transactions contemplated by this Agreement and have not been subject to any lapse in coverage, (b) the Company has not received any written notice of cancellation of, premium increase with respect to, or alteration of coverage under, any of such Insurance Policies, (c) all premiums due on such Insurance Policies have either been paid or, if due and payable prior to Closing, have been prior to Closing in accordance with the payment terms of each Insurance Policy, (d) to the Company’s Knowledge, no insurer of any such Insurance Policy has been declared insolvent, and (e) the Company is not in default under, and has not otherwise failed to comply in any material respect with any provision contained in any such Insurance Policy. There are no claims related to the business of the Company pending under any such Insurance Policies as to which coverage has been questioned, denied or disputed or in respect of which there is an outstanding reservation of rights. The Insurance Policies are sufficient for compliance with all applicable Laws and Material Contracts.

 

Section 3.13      Legal Proceedings; Governmental Orders.

 

(a)            There are no Actions pending or, to the Company’s Knowledge, threatened (a) against or by the Company affecting any of its properties or assets; or (b) against or by the Company that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. To the Company’s Knowledge, no event has occurred or circumstances exist that would reasonably be expected to give rise to, or serve as a basis for, any such Action.

 

(b)           There are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against or affecting the Company or any of the Assets.

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Section 3.14      Compliance With Laws; Permits; Regulatory Matters.

 

(a)            The Company and, to the Company’s Knowledge, its Representatives have, since January 1, 2018, complied, and are now complying, in all material respects with all Laws applicable to it or its business, properties or assets, including (i) the FDA Act (21 U.S.C. §§301 et seq.) and its implementing regulations, and (ii) Laws pertaining to the research (including preclinical, nonclinical, and clinical research or studies), development, testing, production, preparation, assembly, propagation, packaging, processing, manufacture, transfer, transporting, storing, distribution, approval, labeling, marketing, pricing, third party reimbursement or sale of drugs, biological products and medical devices, or components thereof, in each case except for any noncompliance, either individually or in the aggregate, which would not reasonably be expected to be material to the Company.

 

(b)           The Company and, to the Company’s Knowledge, its Representatives, have all Permits required to conduct their business in all material respects, as it relates to the Company’s operations, and all such Permits are valid and in full force and effect (including all material Permits that may be required by the FDA, NIH or any other Governmental Authority engaged in the regulation of the operations of the Company’s business). All fees and charges with respect to such Permits as of the date hereof have been paid in full and all filing, reporting, and maintenance obligations have been completely and timely satisfied in all material respects. Section 3.14(b) of the Company Disclosure Schedules lists all current Permits issued to the Company which are material for the conduct of activities related to the Company’s business, including those Permits issued and held by the Company’s Representatives for the Company’s business (the “Company Permits”), including the names of the Permits, the holder of the Permit, and their respective dates of issuance and expiration. All Company Permits are valid and in full force and effect and will continue to be so upon consummation of the transactions contemplated by this Agreement, except for such invalidity or failure to be in full force and effect that, individually or in the aggregate, would not reasonably be expected to be material to the Company. No event has occurred that, with or without notice lapse or limitation of time or both, would reasonably be expected to result in the revocation, suspension, or lapse of any Company Permit. The Company, and to the Company’s Knowledge, its Representatives, are in compliance with the terms of the Company Permits, except for such failures to comply that, individually or in the aggregate, would not reasonably be expected to be material to the Company. The Company, and to the Company’s Knowledge, its Representatives, have not received any notice or other communication from any Governmental Authority regarding (i) any material adverse change in any Company Permit, or any failure to comply with any applicable Laws of any Governmental Authority or any term or requirement of any Company Permit or (ii) any lapse, revocation, withdrawal, suspension, cancellation, limitation, subjection to an integrity review, termination, material modification of, or any other action against any Company Permit.

 

(c)            (i) None of the Company and, to the Company’s Knowledge, any of its Representatives, have been convicted of any crime, engaged in any conduct, or have been the subject of any proceeding that has previously caused or would reasonably be expected to result in (A) debarment or suspension from participation in any activities or programs related to pharmaceutical product candidates or pharmaceutical products pursuant to 21 U.S.C. Section 335a; (B) exclusion under 42 U.S.C. Section 1320a-7 or any similar law, rule or regulation of any Governmental Authority, (C) exclusion, debarment, suspension or ineligibility to participate in federal procurement and non-procurement programs, including those produced by the U.S. General Services Administration; (D) charging or conviction of a criminal or civil offense or otherwise named in an action that falls within the ambit of 21 U.S.C. § 331, 21 U.S.C. § 333, 21 U.S.C. § 334, 21 U.S.C. § 335a, 21 U.S.C. § 335b, 42 U.S.C. § 1320a - 7, 31 U.S.C. §§ 3729 – 3733, 42 U.S.C. § 1320a-7a, or any other statute pertaining to the development, testing, manufacturing, labeling, packaging, distribution, sale, marketing, promotion, or advertising of drugs, biologics, devices, or health related products; or (E) disqualified or deemed ineligible pursuant to 21 C.F.R. Parts 312, 511, or 812 (collectively (A)-(E), “Debarred”); (ii) the Company, and to the Company’s Knowledge, the Company’s Representatives, do not employ or use the services of, and are not a party to a Contract with any person who is Debarred; (iii) neither the Company nor, to the Knowledge of the Company, a Company Representative, has employed, used the services of, or been a party to a Contract with any Person who, during the time when such Person was employed by, under contract with, or provided services to the Company or Representative, was Debarred; and (iv) neither the Company nor, to the Knowledge of the Company, its Representatives, have received any notice or other communication from any Governmental Authority or any Person threatening, investigating, or pursuing Debarment or any acts that could reasonably be expected to result in Debarment.

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(d)           Each of the product candidates of the Company is and, since January 1, 2018, has, among other things, been and is being developed, tested, manufactured and held, shipped, and labeled, as applicable, by the Company, and, to the Knowledge of the Company, by its Representatives, in material compliance with the FDA Act and/or all applicable Laws, regulations and guidance issued by the FDA, NIH, and/or other Governmental Authority, except for any noncompliance, either individually or in the aggregate, which would not reasonably be expected to be material to the Company. No product candidate developed, manufactured, tested, held, shipped, or labeled by the Company or, to the Knowledge of the Company, a Company Representative, has been or has been requested by a Governmental Authority or Person to be recalled, withdrawn, removed, suspended or discontinued or otherwise corrected (whether voluntarily or otherwise) (collectively “Recall”). Neither the Company, a Representative, nor any Governmental Authority has sought, is seeking, or has or is currently threatening or contemplating any Recall or seizure of the product candidates of the Company. There are no proceedings (whether completed or pending) seeking the recall, withdrawal, removal, discontinuation, suspension or seizure of any such product candidate, pre-market approvals or other study authorizations, or marketing authorizations, or to the Knowledge of the Company threatened, against the Company or, to the Company’s Knowledge, any Representative, nor have any such proceedings been pending at any time.

 

(e)            All reports, documents, claims, notices and other submissions required to be filed, maintained, or furnished to the FDA, NIH, or any other Governmental Authority by the Company or, to the Company’s Knowledge, a Company Representative, have been so filed, maintained or furnished and were complete and correct in all respects on the date filed (or were corrected in or supplemented by a subsequent filing), except for any such reports, documents, claims or notices the failure of which to so file, maintain or furnish would not, individually or in the aggregate, reasonably be expected to be material to the Company. For all pre-clinical studies, animal studies, and clinical trials conducted or being conducted by, in conjunction with, or on behalf of the Company or a Representative or otherwise contemplated by the Company or a Representative (collectively “Studies”), the Company has made available to Parent true, complete and correct copies of all material study reports, protocols, and statistical analysis plans (collectively, the “Data”). All Data accurately, completely, and fairly reflects the results from and plans for the Studies in all material respects. The Company has no Knowledge of any other studies, the results of which are inconsistent with, or otherwise call into question, the Data. Except as reflected in the Data, the Company is not aware of any facts or circumstances related to the safety or efficacy of any of the product candidates of the Company that was the subject of a Study that would materially impact the ability of the Company to receive, or otherwise delay the receipt of, regulatory approval for the marketing and commercialization of any of the product candidates of the Company.

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(f)            The Company has delivered to Parent each annual report filed by the Company or its Representatives with the FDA, NIH, and any similar Governmental Authority with respect to any product candidates, if any. The Company has delivered to Parent all material information in its possession about adverse drug experiences obtained or otherwise received by the Company or, to the Company’s Knowledge, a Representative from any source, including information derived from clinical investigations, animal or pre-clinical investigations, and reports in the scientific literature, and unpublished scientific papers relating to any product candidate.

 

(g)           The Company has delivered to Parent as of the date hereof (i) complete and correct copies of each investigational new drug application filed with the FDA and each similar regulatory filing made by or on behalf of the Company with any other Governmental Authority, including the NIH, and including all supplements and amendments thereto with respect to each product candidate and Study, in each case, if any, (ii) all material correspondence or submissions including summaries of oral interactions sent to and received from the FDA, NIH, and similar Governmental Authority by the Company or, to the Company’s Knowledge, a Representative that concerns or would reasonably be expected to impact a product candidate of the Company or Study, if any and (iii) all existing written records relating to all material discussions and all meetings between the Company and the FDA, NIH, or similar Governmental Authority with respect to each product candidate or Study, if any.

 

(h)           The Studies have, since January 1, 2018, been and are being conducted in all material respects in accordance with all applicable Law and requirements of the FDA, NIH, and similar Governmental Authorities, including, as applicable, the requirements of “Good Laboratory Practice” as promulgated by the FDA under and in accordance with Title 21, Part 58 of the U.S. Code of Federal Regulations, and the applicable guidelines and standards published by the FDA that relate thereto, and the applicable principles of Good Laboratory Practice as promulgated by the European Commission under European Directives 2004/9/EC and 2004/10/EC, and the requirements of “Good Clinical Practice,” informed consent, and all other applicable requirements relating to protection of human subjects and the conduct of clinical trials contained in Title 21, Parts 50, 56, and 312, and in Title 45, Part 46 of the U.S. Code of Federal Regulations, and the applicable guidelines and standards published by the FDA and United States Department of Health and Human Services that relate to the conduct of clinical studies in humans, the applicable practices and standards described in the Guidelines on Principles of Good Clinical Practice in Conduct of EU Clinical Trials as promulgated by the European Commission under European Directive 2001/20/EC, and similar applicable standards, guidelines and regulations promulgated or otherwise required by the International Conference on Harmonisation (“ICH”) Harmonised Tripartite Guideline for Good Clinical Practice (ICH E6), except for any noncompliance, either individually or in the aggregate, which would not reasonably be expected to be material to the Company.

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(i)             Neither the Company nor, to the Company’s Knowledge, any Representative, has received any written or other notice or communication from the FDA, NIH, any other Governmental Authority, any Institutional Review Board (“IRB”), or other Person or board responsible for the oversight or conduct of any Study, requiring or threatening the termination, suspension, material modification or restriction, delay, or clinical hold of, or otherwise rejecting any Study that was, is planned to be, or is being conducted, nor has any such action commenced. All Studies were and, if still pending, are being conducted in all respects in accordance with the protocols, procedures and controls designed and approved for such Studies, with standard medical and scientific research procedures, and in accordance with any requirement of an IRB or other Person or board responsible for review of such Studies. All Studies have obtained all applicable approvals from an IRB or other Person or board responsible for review of such Studies. In the case of any Studies involving human subjects, all subjects, or their legal representatives, have provided their informed consent for participation.

 

(j)             The Company has not, and to the Company’s Knowledge, none of its Representatives, has made an untrue statement of a material fact or fraudulent or misleading statement to the FDA, NIH, or a Governmental Authority, failed to disclose a material fact required to be disclosed to the FDA, NIH or a Governmental Authority, or otherwise committed an act, made a statement, or failed to make a statement that, would reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” Final Policy set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto (the “FDA Ethics Policy”). Neither the Company nor, to the Company’s Knowledge, any Representatives is the subject of any pending or, to the Knowledge of the Company, threatened investigation pursuant to the FDA Ethics Policy, or resulting from any other untrue or false statement or omission.

 

(k)           The Company and, to the Company’s Knowledge, its Representatives, are in compliance with, and since the Company’s incorporation, have complied with, all applicable security and privacy standards regarding protected health information, including the standards under (i) the Health Insurance Portability and Accountability Act of 1996, (42 U.S.C. § 1320d et seq.), as amended, and its implementing Administrative Simplification regulations related to the privacy of Protected Health Information and the Security Standards, as defined by law (45 C.F.R. parts 160, 162 and 164), also known as the HIPAA Privacy Rule (“HIPAA”), and the Standards for Electronic Transactions, the Security Standards and the Health Information Technology for Economic and Clinical Health Act as incorporated in the American Recovery and Reinvestment Act of 2009 and (ii) any applicable state privacy Laws, including the California Consumer Privacy Act, Cal. Civ. Code §1798.100 et seq., and its implementing regulations, except for any noncompliance, either individually or in the aggregate, which would not reasonably be expected to be material to the Company. No claims have been asserted or, to the Company’s Knowledge, are threatened against the Company by any Person or Governmental Authority alleging a material violation of any privacy, personal or confidentiality rights under any applicable Laws. To the Company’s Knowledge, there has been no unauthorized access to, theft, breach or disclosure of or other misuse of that information. There has been no unauthorized disclosure by the Company, of electronic communications, patient data, clinical data or protected health information to any third party.

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(l)             No Actions, investigations, lawsuits, or regulatory proceedings, are or have ever been pending, brought, or to the Company’s Knowledge, threatened by or before the FDA, NIH, the Centers for Medicare and Medicaid Services, the U.S. Office of Inspector General of the U.S. Health and Human Services, the U.S. Department of Justice, or other Person in which the Company or, to the Company’s Knowledge, a Representative was, is or will be made the defendant or respondent, nor are there any adverse judgments, decrees, or orders, currently in effect that have been issued by such Governmental Authority against the Company or to the Company’s Knowledge, a Representative.

 

(m)          The Company does not participate in (i) Medicare (42 U.S.C. §1395 et seq.), (ii) Medicaid (42 U.S.C. § 1396 et seq.), or other governmental payment program; and no income or revenue of the Company is derived from any of the foregoing.

 

(n)           The Company and, to the Company’s Knowledge, its Representatives, are in compliance with, and since January 1, 2018, have complied with, all applicable Laws of all Governmental Authority, or any self-regulating organization, regarding privacy, security and/or data protection (collectively, “Privacy Laws”), except for any noncompliance, either individually or in the aggregate, which would not reasonably be expected to be material to the Company. The Company and, to the Company’s Knowledge, its Representatives, have maintained, enforced and complied with all written privacy, security and data protection policies (the “Privacy Policies”) with respect to any Proprietary Information providing for, without limitation: (i) clear and conspicuous disclosure of the Company’s privacy, security and data protection practices, including collection, storage, use and disclosure of, and provision of access and corrections to any Proprietary Information, and (ii) protection from loss, misappropriation, disclosure or corruption of, and unauthorized access to any Proprietary Information, except for any noncompliance, either individually or in the aggregate, which would not reasonably be expected to be material to the Company. Neither this Agreement nor the transactions contemplated by this Agreement violate or will violate the terms and conditions of any Privacy Policies. To the Company’s Knowledge, no Proprietary Information has been subject to any breach, misappropriation, unauthorized disclosure, or unauthorized access or use by any Person.

 

(o)           Neither the Company nor, to the Knowledge of the Company, its Representatives, including sites engaging in the manufacture and/or testing of the product candidates, and conduct of Studies, have received any notice or other communication from any Governmental Authority or other Person and is not aware that any Governmental Authority or other Person has or is alleging any violation of any Laws applicable to a Study, the product candidates of the Company or the Company’s operations. Without limiting the foregoing, neither the Company, nor to the Company’s Knowledge, its Representatives, have received, had threatened, had asserted, or have pending any Warning Letters, Untitled Letters, Cyber Letters, notices of violation, adverse inspectional findings, or FDA Form 483s, or other notice of enforcement action, including any suspension, consent decree, corporate integrity agreement, monitoring agreement, settlement order, notice of criminal investigation, indictment, sentencing memorandum, plea agreement, court order, target or no-target letter, or other similar agreement or action relating to the conduct of the Company’s business, the Studies, or the product candidates of the Company.

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Section 3.15      Environmental Matters.

 

(a)            The operations of the Company and the business of the Company are and, have been in material compliance with all applicable Environmental Laws and the Company has not received from any Person any: (i) Environmental Notice or Environmental Claim; or (ii) written request for information pursuant to any Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date, or is reasonably likely to result in an obligation by the Company to undertake or fund any investigation or remediation of any environmental conditions.

 

(b)           The Company has obtained and is in material compliance with all Environmental Permits necessary for the ownership, lease, operation or use of the business or assets of the Company; and all such Environmental Permits are in full force and effect and no reason exists why they cannot be maintained in full force and effect by the Company through the Closing Date in accordance with Environmental Law. The Company is not aware of any condition, event or circumstance that might prevent or impede, after the Closing Date, the ownership, lease, operation or use of the business or assets of the Company as currently carried out.

 

(c)            No real property currently or formerly owned, operated, used or leased by the Company is listed on, or has been proposed for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar state list.

 

(d)           To the Knowledge of the Company, with respect to the Real Property, there have been no Releases on or underneath any of such real properties that has caused environmental contamination at such real properties that is reasonably likely to result in an obligation to remediate such environmental contamination pursuant to applicable Environmental Law. The Company has not received any Environmental Notice that any of the Real Property is or has been contaminated with any Hazardous Materials which could reasonably be expected to result in an Environmental Claim against, or a violation of any Environmental Law or term of any Environmental Permit by the Company, or any obligation by the Company to investigate or remediate the Real Property or any other real property at which the Company may have disposed of waste or Hazardous Materials.

 

Section 3.16      Employee Benefit Matters.

 

(a)            Section 3.16(a) of the Company Disclosure Schedules contains a true and complete list of each material Benefit Plan. “Benefit Plan” means any pension, benefit, retirement, savings, compensation, employment, consulting, profit sharing, deferred compensation, incentive, bonus, performance award, phantom equity, stock option, stock or stock-based, change in control, retention, severance, vacation, paid time off, medical, dental, vision, life insurance, cafeteria (Section 125 of the Code), adoption assistance, dependent care assistance, health savings, health reimbursement, flexible spending, accident, disability, long-term care, employee assistance, scholarship, welfare, expense reimbursement, fringe-benefit and other benefit or similar agreement, plan, policy, program or arrangement (and any amendments thereto), in each case whether or not reduced to writing and whether funded or unfunded, including each “employee benefit plan” within the meaning of Section 3(3) of ERISA, whether or not tax-qualified and whether or not subject to ERISA, which is maintained, sponsored, contributed to, or required to be contributed to by the Company for the benefit of any current or former employee, officer, director, retiree, independent contractor or consultant of the Company or any spouse or dependent of such individual, or under which the Company or any of its ERISA Affiliates has or may have any Liability.

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(b)           With respect to each material Benefit Plan, to the extent applicable, the Company has made available to Parent accurate, current and complete copies of each of the following: (i) where the Benefit Plan has been reduced to writing, the plan document together with all amendments; (ii) where the Benefit Plan has not been reduced to writing, a written summary of all material plan terms; (iii) copies of any trust agreements or other funding arrangements, custodial agreements, insurance policies and contracts, administration agreements and similar agreements, and investment management or investment advisory agreements, now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise; (iv) copies of any current summary plan descriptions, summaries of material modifications and employee handbooks relating to any Benefit Plan; (v) in the case of any Benefit Plan that is intended to be qualified under Section 401(a) of the Code, a copy of the most recent determination, opinion or advisory letter from the Internal Revenue Service; (vi) in the case of any Benefit Plan for which a Form 5500 is required to be filed, copies of the three (3) most recently filed Forms 5500, with schedules and financial statements attached; (vii) actuarial valuations and reports related to any Benefit Plans with respect to the most recently completed plan year; (viii) in the case of any Benefit Plan that is intended to be qualified under Section 401(a) of the Code, the nondiscrimination testing results for the three (3) most recently completed years; and (ix) copies of material, non-routine notices, letters or other correspondence during the past three years from the Internal Revenue Service, Department of Labor, Pension Benefit Guaranty Corporation or other Governmental Authority relating to the Benefit Plan.

 

(c)            Each Benefit Plan (and any related trust or other funding vehicle) has been established, administered and maintained in all material respects in accordance with its terms and in compliance with all applicable Laws (including ERISA and the Code).

 

(d)           Each Benefit Plan that is intended to be qualified within the meaning of Section 401(a) of the Code (a “Qualified Benefit Plan”) is so qualified and has received a favorable and current determination letter from the Internal Revenue Service, or has been established under a prototype plan for which a favorable and current opinion letter from the Internal Revenue Service has been obtained by the prototype plan sponsor, in each case, to the effect that such Qualified Benefit Plan is so qualified and that the plan and the trust related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and, to the Knowledge of the Company, nothing has occurred that could reasonably be expected to cause a loss of a qualified status of any Qualified Benefit Plan.

 

(e)            Nothing has occurred with respect to any Benefit Plan that has subjected or could reasonably be expected to subject the Company or any of its ERISA Affiliates or, with respect to any period on or after the Closing Date, Parent or any of its Affiliates, to a penalty under Section 502 of ERISA or to tax or material penalty under Section 4975 of the Code.

 

(f)            All material benefits, contributions and premiums relating to each Benefit Plan have been timely paid in accordance with the terms of such Benefit Plan and all applicable Laws or if not due have been accrued or otherwise adequately reserved to the extent required by, and in accordance with, GAAP.

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(g)           There are no pending or threatened Actions relating to any Benefit Plan (other than routine claims for benefits in the ordinary course), and no Benefit Plan has been or, to the Knowledge of the Company is reasonably expected to be, the subject of an examination, investigation or audit by a Governmental Authority or the subject of an application or filing under or is a participant in, an amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Authority.

 

(h)           Neither the Company nor any of its ERISA Affiliates has or reasonably expects to incur, either directly or indirectly, any Liability under Title IV of ERISA or related provisions of the Code, including with respect to any multiemployer plan within the meaning of Section 3(37) of ERISA.

 

(i)             No Benefit Plan provides or represents an obligation to provide post-termination or retiree medical, dental, vision, life or other welfare benefits to any individual, other than (i) non-subsidized coverage as required under Section 601 et. seq. of ERISA or other applicable Law, (ii) for coverage through the end of the month in which such termination occurs or (iii) under an employment agreement included on Section 3.16(a) of the Company Disclosure Schedules.

 

(j)             Neither the execution of this Agreement nor any of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional or subsequent events that would not by itself): (i) entitle any current or former director, officer, employee, independent contractor or consultant of the Company to compensation, severance pay or any other payment or benefit; (ii) accelerate the time of payment, funding or vesting of any compensation or benefits, or increase the amount of compensation due to

 

(k)           any such individual; (iii) limit or restrict the right of the Company to merge, amend or terminate any Benefit Plan; or (iv) increase the amount payable under or result in any other material obligation pursuant to any Benefit Plan.

 

Section 3.17      Employment Matters.

 

(a)            The Company has provided to Parent a complete and correct list of (i) all Company employees by (A) name, (B) title or position, (C) full-time or part-time status, (D) current base salary or wage rate, (E) current target bonus, (F) start date, (G) service reference date (if different from the start date), (H) work location (city and state), (I) vacation entitlement formula, (J) amount of accrued but unused vacation and (K) an indication of whether or not such employee is on a leave of absence, and (ii) all independent contractors engaged by the Company and all “leased employees” (as such term is defined in Section 414(n) of the Code) of the Company by (A) job position or function, (B) hourly pay rate or other compensatory arrangement, and (C) the total amount paid by the Company to such Person in 2020.

 

(b)           The Company is not, and has never been, a party to or bound by, and is not negotiating and has not agreed to negotiate, any collective bargaining agreement or other Contract with a union, works council or labor organization (collectively, “Union”), and there is not, and has never been, any Union representing or purporting to represent any employee of the Company in his or her capacity as such, and, no Union or group of employees is seeking or has sought, and to the Knowledge of the Company is not expected to seek, to organize employees for the purpose of collective bargaining. There has never been, nor to the Knowledge of the Company is there or has there been any threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to work overtime or other similar material labor disruption or dispute affecting the Company or any of its employees.

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(c)            The Company is in compliance in all material respects with all applicable Laws pertaining to employment and employment practices, labor relations, occupational safety and health standards, terms and conditions of employment, payment of wages, classification of employees, immigration, visa, work status, human rights, pay equity and workers’ compensation, and is not engaged in any unfair labor practices.

 

(d)           There are no Actions against the Company pending, or to the Company’s Knowledge, threatened to be brought or filed, by or with any current or former employee of the Company or any Governmental Authority or arbitrator in connection with the employment of any current or former applicant, employee, consultant, volunteer, intern or independent contractor of the Company.

 

(e)            No allegation of sexual or other unlawful harassment or discrimination has been made to Company management or human resources in the past three years against any officer, employee or independent contractor of the Company and, to the Knowledge of the Company, there exists no basis for such allegations. The Company has not entered into any settlement, consent decree or other agreement resolving any such allegations.

 

(f)            To the Knowledge of the Company, as of the date of this Agreement, no officer or key employee has communicated any plans to terminate his, her or their employment with the Company, and no employee of the Company is in violation of any material term of any employment agreement, nondisclosure agreement, common law obligation, fiduciary duty, noncompetition agreement, restrictive covenant or other obligation relating to (i) the right of any such employee to be employed by the Company or (ii) the knowledge or use of trade secrets or proprietary information.

 

(g)           The Company has in all material respects properly verified the employment eligibility of all Company employees in compliance with the Immigration Reform and Control Act and the Illegal Immigration Reform and Immigrant Responsibility Act and has retained a fully completed and executed Form I-9 for each of its employees. To the Knowledge of the Company, each employee is legally entitled to work in the jurisdiction in which he or she is employed and in the position in which he or she is employed.

 

(h)           The Company in all material respects (i) has properly classified and treated all of its non-leased or borrowed workers as independent contractors or employees, (ii) has properly classified and treated all of its employees as “exempt” or “non-exempt” from overtime requirements under all Laws (including the Fair Labor Standards Act) or other requirements of any Governmental Authority, and (iii) is not delinquent in any payments to, or on behalf of, any current or former independent contractors or employees for any services or amounts required to be reimbursed or otherwise paid as of the Closing Date.

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Section 3.18      Taxes.

 

(a)            All federal income Tax Returns and other material Tax Returns that are required to be filed by the Company have been timely filed. Such Tax Returns are complete and correct in all material respects. All material Taxes that have become due and payable by the Company (whether or not shown on any Tax Return) have been timely paid.

 

(b)           The Company has withheld and timely paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, shareholder or other third party.

 

(c)            Subject to exceptions as would not be material, no written claim has been made by any Governmental Authority in any jurisdiction where the Company does not file Tax Returns that it is subject to taxation by that jurisdiction.

 

(d)           No extensions or waivers of statutes of limitations have been given or requested with respect to any material Taxes of the Company.

 

(e)            The amount of the Company’s Liability for unpaid Taxes for all periods ending on or before the Balance Sheet Date does not, in the aggregate, exceed the amount of accruals for Taxes (excluding reserves for deferred Taxes) reflected on the Financial Statements.

 

(f)            No deficiencies for material Taxes have been claimed, proposed or assessed against the Company by any Governmental Authority in writing. There are no pending (or, based on written notice, threatened) material audits, assessments or other actions for or relating to any Liability in respect of Taxes of the Company.

 

(g)           The Company is not a party to any Tax indemnity, Tax sharing or Tax allocation agreement, other than customary indemnification provisions in commercial contracts entered into in the ordinary course of business with vendors, customers and landlords.

 

(h)           The Company is not and has never been a member of an affiliated, combined, consolidated or unitary Tax group for Tax purposes. The Company has no Liability for Taxes of any Person (other than the Company) under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign Law), or as a transferee or successor, pursuant to a Contract, other than customary indemnification provisions in commercial contracts entered into in the ordinary course of business with vendors, customers and landlords.

 

(i)             The Company has never been a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

 

(j)             The Company has not engaged in any transaction identified as a “reportable transaction” under Section 6011 of the Code and the regulations promulgated thereunder.

 

(k)           The Company has not been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code.

 

(l)             There are no Encumbrances for Taxes upon any assets of the Company, other than Permitted Encumbrances.

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(m)          The Company has not entered into or otherwise is a party to a “closing agreement” as described in Section 7121 of the Code (or any similar provision of applicable Law), or any other similar agreement with any Governmental Authority with respect to Taxes, that is currently in effect.

 

(n)           The Company will not be required to include in taxable income for a taxable period ending after the Closing Date any material amount of taxable income attributable to income that arose in a prior taxable period but was not recognized in any prior taxable period as a result of (A) an installment sale or an open transaction made on or prior to the Closing Date, (ii) change in method of accounting for Tax purposes for a taxable period ending on or prior to the Closing Date, or (iii) prepaid amount received on or prior to the Closing Date.

 

(o)           The Company will not be required to pay Taxes after the Closing Date as a result of an election under Section 965(h) of the Code.

 

(p)           The Company does not have a permanent establishment (within the meaning of an applicable Tax treaty) or otherwise have an office or fixed place of business in any country other than the United States.

 

(q)           The Company does not have any obligation to gross up, indemnify or otherwise reimburse any individual for any excise taxes, interest or penalties incurred pursuant to Sections 409A or 4999 of the Code, or otherwise in respect of Taxes.

 

(r)            Neither the execution of this Agreement nor any of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional or subsequent events that would not by itself) result in “excess parachute payments” within the meaning of Section 280G(b) of the Code.

 

Section 3.19      Books and Records. The minute books and stock record books of the Company, all of which have been delivered to Parent, are complete and correct in all material respects. The minute books of the Company contain accurate and complete records in all material respects of all meetings, and actions taken by written consent of, the Stockholders, the Company Board and any committees of the Company Board, and no meeting, or action taken by written consent, of any such Stockholders, Company Board or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Company.

 

Section 3.20      Related Party Transactions. No executive officer or director of the Company or any person owning 1% or more of the shares of Company Capital Stock, on a fully-diluted basis (or any of such person’s immediate family members or Affiliates or associates) is a party to any Contract with or binding upon the Company or any of its assets, rights or properties or has any interest in any property owned by the Company or has engaged in any transaction with any of the foregoing within the last twelve (12) months.

 

Section 3.21      Brokers. Except as set forth on Section 3.21 of the Company Disclosure Schedules, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any Ancillary Document based upon arrangements made by or on behalf of the Company. Section 3.21 of the Company Disclosure Schedules sets forth each Person that is or may become entitled to receive any fee or other amount from the Company for professional or other services performed or to be performed in connection with this Agreement or the transactions contemplated hereby and the amount thereof.

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Section 3.22      No Other Representations or Warranties. In connection with the due diligence investigation of Parent and its Subsidiaries and Merger Sub by the Company and its Representatives, the Company and its Representatives have received and may continue to receive after the date hereof from Parent, Merger Sub and their respective Representatives certain estimates, projections, forecasts and other forward-looking information, as well as certain business plan information, regarding Parent and its Subsidiaries and its business and operations. The Company hereby acknowledges and agrees that, except for the express representations and warranties of Parent and Merger Sub contained in ARTICLE IV of this Agreement, neither Parent nor any other Person on behalf of Parent makes any express or implied representation or warranty with respect to Parent or its Subsidiaries or with respect to any other information provided to the Company in connection with the transactions contemplated thereby, and (subject to the express representations or warranties of Parent and Merger Sub contained in ARTICLE IV of this Agreement and in any certificates delivered by Parent and Merger Sub in connection with the transactions contemplated by this Agreement) none of the Company nor its Representatives has relied on any such information (including the accuracy or completeness thereof). Nothing in this Section 3.22 shall impact any rights of any party to this Agreement in respect of fraud.

 

Section 3.23      Full Disclosure. No representation or warranty by the Company in this Agreement and no statement contained in the Company Disclosure Schedules or any certificate or other document furnished or to be furnished to Parent or any of its Representatives pursuant to this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading. There is no event or circumstance which the Company has not disclosed to Parent which could reasonably be expected to have a Company Material Adverse Effect.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

 

Except as set forth in the correspondingly numbered Section of the Parent Disclosure Schedules or the Parent SEC Documents filed on or after January 1, 2020, and publicly available prior to the date hereof (other than any disclosures contained under the captions “Risk Factors” or “Forward-Looking Statements” and any other disclosures that are predictive, cautionary or forward-looking in nature), Parent and Merger Sub represent and warrant to the Company that the statements contained in this ARTICLE IV are true and correct as of the date hereof.

 

Section 4.01      Organization and Qualification of Parent and Merger Sub. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation and has full corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it has been and is currently conducted. Each of Parent and Merger Sub is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing or qualification necessary other than in jurisdictions where the failure to be so qualified, individually or in the aggregate, would not have a Parent Material Adverse Effect.

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Section 4.02      Authority; Board Approval.

 

(a)            Each of Parent and Merger Sub has full corporate power and authority to enter into and perform its obligations under this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Parent and Merger Sub of this Agreement and any Ancillary Document to which they are a party and the consummation by Parent and Merger Sub of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Parent and Merger Sub and no other corporate proceedings on the part of Parent and Merger Sub are necessary to authorize the execution, delivery and performance of this Agreement or to consummate the Merger and the other transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by Parent and Merger Sub, and (assuming due authorization, execution and delivery by each other party hereto) this Agreement constitutes a legal, valid and binding obligation of Parent and Merger Sub enforceable against Parent and Merger Sub in accordance with its terms, subject to the Enforceability Exceptions. When each Ancillary Document to which Parent or Merger Sub is or will be a party has been duly executed and delivered by Parent or Merger Sub (assuming due authorization, execution and delivery by each other party thereto), such Ancillary Document will constitute a legal and binding obligation of Parent or Merger Sub enforceable against it in accordance with its terms, subject to the Enforceability Exceptions.

 

(b)           The Parent Board, by resolutions duly adopted by a vote at a meeting of all members of the Parent Board duly called and held and, as of the date hereof, not subsequently rescinded or modified in any way, has, as of the date hereof (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to, and in the best interests of, Parent and its stockholders, (ii) approved and declared advisable the “agreement of merger” (as such term is used in Section 251 of the DGCL) contained in this Agreement and the transactions contemplated by this Agreement, including the Merger, in accordance with the DGCL and (iii) recommended the approval of this Agreement by Parent, as Merger Sub’s sole stockholder. Parent, acting in its capacity as the sole stockholder of Merger Sub, has adopted this Agreement and the consummation of the transactions contemplated hereby, including the Merger, and no further vote of, or consent by, Parent or Merger Sub is required.

 

Section 4.03      No Conflicts; Consents. Except as set forth on Section 4.03 of the Parent Disclosure Schedules, the execution, delivery and performance by Parent and Merger Sub of this Agreement and the Ancillary Documents to which they are a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (i) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation, by-laws or other organizational documents of Parent or Merger Sub; (ii) conflict with or result in a material violation or breach of any provision of any Law or Governmental Order applicable to Parent or Merger Sub; (iii) require any consent under, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, or cancel any material Contract of Parent; or (iv) result in the creation or imposition of any Encumbrance other than Permitted Encumbrances on any properties or assets of Parent, other than, in the cause of clauses (ii) and (iii), any such conflict, violation, breach, default, acceleration, termination, modification or cancellation that would not have, individually or in the aggregate, a Parent Material Adverse Effect. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Parent or Merger Sub in connection with the execution, delivery and performance of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby, except for the filing of the Certificate of Merger with the Secretary of State of Delaware and such other consents, approvals, Permits, Governmental Orders, declaration, filings or notices the failure of which to be obtained or made would not have a Parent Material Adverse Effect. The issuance of the Merger Consideration does not require a vote by the Parent’s stockholders under applicable Law.

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Section 4.04      Capitalization.

 

(a)            As of March 30, 2021, the authorized capital stock of Parent consists of (i) 500,000,000 shares of Parent Common Stock, of which 40,214,873 shares are outstanding; and (ii) 5,000,000 shares of Parent Preferred Stock, of which no shares are outstanding.

 

(b)           Except as set forth on Section 4.04(b) of the Parent Disclosure Schedules, (i) no subscription, warrant, option, convertible or exchangeable security, or other right (contingent or otherwise) to purchase or otherwise acquire equity securities of Parent is authorized or outstanding, and (ii) Parent has no commitment to issue shares, subscriptions, warrants, options, convertible or exchangeable securities, or other such rights or to distribute to holders of any of its equity securities any evidence of indebtedness or asset, to repurchase or redeem any securities of Parent or to grant, extend, accelerate the vesting of, change the price of, or otherwise amend any warrant, option, convertible or exchangeable security or other such right. There are no undeclared or accrued and unpaid dividends with respect to any of any shares of Parent Capital Stock.

 

(c)            Except as set forth on Section 4.04(c) of the Parent Disclosure Schedules, all issued and outstanding shares of Parent Capital Stock are (i) duly authorized, validly issued, fully paid and non-assessable; (ii) not subject to any preemptive rights created by statute, the Parent Charter Documents or any agreement to which the Parent is a party; and (iii) free of any Encumbrances created by the Parent in respect thereof except for restrictions imposed by applicable securities Laws and Permitted Encumbrances. All issued and outstanding shares of Parent Capital Stock were issued in compliance with applicable Law.

 

(d)           Except as set forth on Section 4.04(d) of the Parent Disclosure Schedules, no outstanding Parent Capital Stock is subject to vesting or forfeiture rights or repurchase by Parent. There are no outstanding or authorized stock appreciation, dividend equivalent, phantom stock, profit participation or other similar rights with respect to Parent or any of its securities.

 

(e)            All distributions, dividends, repurchases and redemptions of the capital stock (or other equity interests) of Parent were undertaken in compliance with the Parent Charter Documents then in effect, any agreement to which Parent then was a party and in compliance with applicable Law.

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(f)            Upon issuance, the shares of Parent Common Stock that are issued as Merger Consideration will be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens (other than restrictions imposed by applicable securities Laws and Permitted Encumbrances).

 

(g)           All of the issued and outstanding share capital of Merger Sub is, and at the Effective Time will be, owned by Parent or a direct or indirect wholly owned subsidiary of Parent. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated hereby, and it has not conducted any business prior to the date hereof and has no, and prior to the Effective Time will have no, assets, liabilities or obligations of any nature other than those incident to its formation and pursuant to this Agreement and the Merger and other transactions contemplated by this Agreement.

 

Section 4.05      SEC Filings; Financial Matters.

 

(a)            SEC Filings. Parent has filed or furnished (as applicable) with the SEC all forms, reports, schedules, statements and other documents and statements required by it to be filed or furnished as applicable since and including January 1, 2020 under the Exchange Act (all such forms, reports, schedules, statements and other documents and statements filed by Parent with the SEC under the Exchange Act since January 1, 2019, together with all amendments thereto and including all exhibits and schedules thereto and documents incorporated by reference therein, collectively, the “Parent SEC Documents”).

 

(b)           Compliance with GAAP, etc. The consolidated financial statements (including all related notes and schedules) of Parent and its Subsidiaries included in the Parent SEC Documents (the “Parent Financial Statements”) present fairly in all material respects the consolidated financial position of Parent and its Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end or period-end adjustments and to any other adjustments described therein, including the notes thereto) and were prepared in conformity with GAAP (except in the case of the unaudited statements, as permitted by the SEC) applied on a consistent basis during the periods involved (except as may be expressly indicated therein or in the notes thereto). No Subsidiary of Parent is subject to periodic reporting requirements of the Exchange Act.

 

(c)            Disclosure Controls and Procedures. The records, systems, controls, data and information of Parent are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Parent or their accountants (including all means of access thereto and therefrom). Parent has established and maintains “disclosure controls and procedures” and “internal control over financial reporting” (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 promulgated under the Exchange Act) as required by Rule 13a-15 promulgated under the Exchange Act intended to (i) provide reasonable assurances regarding the reliability of financial reporting for Parent and its Subsidiaries and the preparation of financial statements for external purposes in accordance with GAAP and (ii) ensure that material information required to be disclosed by Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to Parent’s management as appropriate to allow timely decisions regarding required disclosure. Parent has disclosed, based on its most recent evaluation of Parent’s internal control over financial reporting prior to the date hereof, to Parent’s auditors and the audit committee of the Parent Board (a) any significant deficiencies and material weaknesses in the design or operation of its internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that are reasonably likely to adversely affect in any material respect Parent’s ability to record, process, summarize and report financial information and (b) to the Knowledge of the Parent, any fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal control over financial reporting, and each such deficiency, weakness and fraud so disclosed to auditors, since January 1, 2020, if any, has been disclosed or made available to the Company prior to the date hereof. Neither Parent nor any of its Subsidiaries has made any prohibited loans to any executive officer of Parent (as defined in Rule 3b-7 under the Exchange Act) or director of Parent. There are no outstanding loans or other extensions of credit made by Parent or any of its Subsidiaries to any executive officer of Parent (as defined in Rule 3b-7 under the Exchange Act) or director of Parent.

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(d)           Undisclosed Liabilities. Parent has no Liabilities, except (a) those which are adequately reflected, disclosed or reserved against in the Parent Financial Statements, (b) those which have been incurred in the ordinary course of business consistent with past practice since December 31, 2020 (in each case, none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of Contract, breach of warranty, tort, infringement, or violation of Law), (c) those that are not, individually or in the aggregate, material to Parent and its Subsidiaries, taken as a whole, and (d) those that are set forth in Section 4.06(d) of the Parent Disclosure Schedules.

 

Section 4.06      Absence of Certain Changes, Events and Conditions. Since December 31, 2020, there has not occurred any event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

 

Section 4.07      Compliance With Laws; Permits; Regulatory Matters.

 

(a)            The Parent and, to the Parent’s Knowledge, its Representatives have, since July 1, 2018, complied, and are now complying, in all material respects with all Laws applicable to it or its business, properties or assets, including, (i) the FDA Act (21 U.S.C. §§301 et seq.) and its implementing regulations, and (ii) Laws pertaining to the research (including preclinical, nonclinical, and clinical research or studies), development, testing, production, preparation, assembly, propagation, packaging, processing, manufacture, transfer, transporting, storing, distribution, approval, labeling, marketing, pricing, third party reimbursement or sale of drugs, biological products and medical devices, or components thereof, in each case, except for any noncompliance, either individually or in the aggregate, which would not reasonably be expected to be, individually or in the aggregate, material to the Parent and its Subsidiaries, taken as a whole.

 

(b)           The Parent and, to the Parent’s Knowledge, its Representatives, have all Permits required to conduct their business in all material respects, as it relates to the Parent’s operations, and all such Permits are valid and in full force and effect (including all material Permits that may be required by the FDA, NIH or any other Governmental Authority engaged in the regulation of the operations of the Parent’s business), except where such invalidity or failure to be in full force and effect that, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect.

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(c)            Each of the product candidates of the Parent is and, since July 1, 2018, has, among other things, been and is being developed, tested, manufactured and held, shipped, and labeled, as applicable, by the Parent, and, to the Knowledge of the Parent, by its Representatives, in material compliance with the FDA Act and/or all applicable Laws, regulations and guidance issued by the FDA, NIH, and/or other Governmental Authority, except for any noncompliance, either individually or in the aggregate, which would not reasonably be expected to be material to the Parent and its Subsidiaries, taken as a whole. No product candidate developed, manufactured, tested, held, shipped, or labeled by the Parent or, to the Knowledge of the Parent, a Parent Representative, has been or has been requested by a Governmental Authority or Person to be recalled, withdrawn, removed, suspended or discontinued or otherwise corrected (whether voluntarily or otherwise) (collectively “Parent Recall”). Neither Parent, nor, to the Parent’s Knowledge, a Representative of Parent or any Governmental Authority, has sought, is seeking, or has or is currently threatening or contemplating any Parent Recall or seizure of the product candidates of the Parent. There are no proceedings (whether completed or pending) seeking the recall, withdrawal, removal, discontinuation, suspension or seizure of any such product candidate, pre-market approvals or other study authorizations, or marketing authorizations, or to the Knowledge of the Parent threatened, against the Parent or, to the Parent’s Knowledge, any Representative, nor have any such proceedings been pending at any time.

 

(d)           All reports, documents, claims, notices and other submissions required to be filed, maintained, or furnished to the FDA, NIH, or any other Governmental Authority by the Parent or, to the Parent’s Knowledge, a Parent Representative, have been so filed, maintained or furnished and were complete and correct in all material respects on the date filed (or were corrected in or supplemented by a subsequent filing), except for any such reports, documents, claims or notices the failure of which to so file, maintain or furnish would not have a Parent Material Adverse Effect. Material study reports and protocols for certain pre-clinical studies, animal studies, and clinical trials conducted or being conducted by, in conjunction with, or on behalf of the Parent or a Representative of Parent (have been made available to the Company in the Data Room (such studies, collectively, the “Parent Studies” and such material study reports and protocols, collectively, the “Parent Data”). All Parent Data accurately, completely, and fairly reflects the results from and plans for the Parent Studies in all material respects. The Parent has no Knowledge of any other studies, the results of which are inconsistent with, or otherwise call into question, the Parent Data. Except as reflected in the Parent Data, the Parent is not aware of any material facts or circumstances related to the safety or efficacy of any of the product candidates of the Parent that was the subject of a Parent Study that would have a Parent Material Adverse Effect on the ability of the Parent to receive regulatory approval for the marketing and commercialization of any of the product candidates of the Parent that are the subject of the Parent Studies.

 

(e)            The Parent has not, and to the Parent’s Knowledge, none of its Representatives, has made an untrue statement of a material fact or fraudulent or misleading statement to the FDA, NIH, or a Governmental Authority, failed to disclose a material fact required to be disclosed to the FDA, NIH or a Governmental Authority, or otherwise committed an act, made a statement, or failed to make a statement that, would reasonably be expected to provide a basis for the FDA to invoke the FDA Ethics Policy. Neither the Parent nor, to the Parent’s Knowledge, any of its Representatives, are the subject of any pending or, to the Knowledge of the Parent, threatened investigation pursuant to the FDA Ethics Policy, or resulting from any other untrue or false statement or omission.

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(f)            The Parent and, to the Parent’s Knowledge, its Representatives, are in compliance in all material respects with, and since the Parent’s incorporation, has complied with, in all material respects, all applicable security and privacy standards regarding protected health information, including, but not limited to, the standards under (i) HIPAA, and the Standards for Electronic Transactions, the Security Standards and the Health Information Technology for Economic and Clinical Health Act as incorporated in the American Recovery and Reinvestment Act of 2009 and (ii) any applicable state privacy Laws, in each case, except for any noncompliance, either individually or in the aggregate, which would not reasonably be expected to be, individually or in the aggregate, material to the Parent and its Subsidiaries, taken as a whole. No claims have been asserted or, to the Parent’s Knowledge, are threatened against the Parent by any Person or Governmental Authority alleging a material violation of any privacy, personal or confidentiality rights under any applicable Laws. To the Parent’s Knowledge, there has been no unauthorized access to, theft, breach or disclosure of or other misuse of that information. Except as would not reasonably be expected to be, individually or in the aggregate, material to the Parent and its Subsidiaries, taken as a whole, there has been no unauthorized disclosure by the Parent, of electronic communications, patient data, clinical data or protected health information to any third party.

 

(g)           No Actions, investigations, lawsuits, or regulatory proceedings, are or have ever been pending, brought, or to the Parent’s Knowledge, threatened by or before the FDA, NIH, the Centers for Medicare and Medicaid Services, the U.S. Office of Inspector General of the U.S. Health and Human Services, the U.S. Department of Justice, or other Person in which the Parent or, to the Parent’s Knowledge, a Parent Representative was, is or will be made the defendant or respondent, nor are there any adverse judgments, decrees, or orders, currently in effect that have been issued by such Governmental Authority against the Parent or to the Parent’s Knowledge, a Representative.

 

Section 4.08      Legal Proceedings. There are no Actions pending or, to the Parent’s Knowledge, threatened (i) against Parent affecting any of its properties or assets; or (ii) against Parent that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement, in either case, that individually or in the aggregate, would have a Parent Material Adverse Effect.

 

Section 4.09      Taxes. Except as would not reasonably be expected to be, individually or in the aggregate, material to Parent and its Subsidiaries, taken as a whole:

 

(a)            Parent and each of its Subsidiaries have timely filed all federal income Tax Returns and other Tax Returns they were required to file. Such Tax Returns were complete and correct in all respects. All Taxes that have become due and payable by Parent and its Subsidiaries (whether or not shown on any Tax Return) have been timely paid;

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(b)           Parent and each of its Subsidiaries has withheld and timely paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, shareholder or other third party;

 

(c)            no written claim has been made by any Governmental Authority in any jurisdiction where Parent or any of its Subsidiaries does not file Tax Returns that Parent or any of its Subsidiaries is subject to taxation by that jurisdiction;

 

(d)           no extensions or waivers of statutes of limitations have been given or requested with respect to any Taxes of Parent or its Subsidiaries;

 

(e)            the amount of the Liability for unpaid Taxes of Parent and any of its Subsidiaries for all periods ending on or before December 31, 2020 does not, in the aggregate, exceed the amount of accruals for Taxes (excluding reserves for deferred Taxes) reflected on the Parent Financial Statements;

 

(f)            no deficiencies for Taxes have been claimed, proposed or assessed against Parent or its Subsidiaries by any Governmental Authority in writing. There are no pending (or, based on written notice, threatened) audits, assessments or other actions for or relating to any Liability in respect of Taxes of Parent or its Subsidiaries;

 

(g)           neither Parent nor any of its Subsidiaries is party to any Tax indemnity, Tax sharing or Tax allocation agreement, other than customary indemnification provisions in commercial contracts entered into in the ordinary course of business with vendors, customers and landlords;

 

(h)           neither Parent nor any of its Subsidiaries has ever been a member of an affiliated, combined, consolidated or unitary Tax group for Tax purposes (other than a group the common parent of which is Parent). Neither Parent nor any of its Subsidiaries has any Liability for Taxes of any Person (other than Parent or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign Law) or as transferee or successor;

 

(i)             neither Parent nor any of its Subsidiaries have been a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;

 

(j)             neither Parent nor any of its Subsidiaries has been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code;

 

(k)           neither Parent nor any of its Subsidiaries has engaged in any transaction identified as a “reportable transaction” under Section 6011 of the Code and the regulations promulgated thereunder; and

 

(l)             Parent and its Subsidiaries have not taken any action, nor to the Knowledge of Parent, are there any facts or circumstances that could reasonably be expected to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

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Section 4.10      Brokers. Except as set forth on Section 4.10 of the Parent Disclosure Schedules, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any Ancillary Document based upon arrangements made by or on behalf of Parent or Merger Sub.

 

Section 4.11      Related Party Transactions. No executive officer or director of the Parent or any person owning 1% or more of the shares of Parent Capital Stock, on a fully diluted basis (or, to the Parent’s Knowledge, any of such person’s immediate family members or Affiliates or associates) is a party to any Contract with or binding upon the Parent or any of its assets, rights or properties or has any interest in any property owned by the Parent or has engaged in any transaction with any of the foregoing within the last twelve (12) months, in any such case, of a type that would be required to be disclosed under Item 404 of Regulation S-K promulgated under the Securities Act.

 

Section 4.12      CFIUS. Parent does not produce, design, test, manufacture, fabricate, or develop any “critical technologies” as defined at 31 C.F.R. § 800.215.

 

Section 4.13      No Other Representations and Warranties. In connection with the due diligence investigation of the Company by Merger Sub and Parent and their respective Representatives, Parent, Merger Sub and their Representatives have received and may continue to receive after the date hereof from the Company and its Representatives certain estimates, projections, forecasts and other forward-looking information, as well as certain business plan information, regarding the Company and its business and operations. Merger Sub and Parent hereby acknowledge and agree that, except for the express representations and warranties of the Company contained in this Agreement, neither the Company nor any other Person on behalf of the Company makes any express or implied representation or warranty with respect to the Company or with respect to any other information provided to the Company in connection with the transactions contemplated thereby, and (subject to the express representations or warranties of the Company contained in ARTICLE III of this Agreement and in any certificates delivered by the Company in connection with the transactions contemplated by this Agreement), none of the Parent, Merger Sub nor any of their respective Representatives has relied on any such information (including the accuracy or completeness thereof). Nothing in this Section 4.13 shall impact any rights of any party to this Agreement in respect of fraud.

 

Section 4.14      Full Disclosure. No representation or warranty by Parent in this Agreement and no statement contained in the Parent Disclosure Schedules or any certificate or other document furnished or to be furnished to the Company or any of its Representatives pursuant to this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading. There is no event or circumstance which the Parent has not disclosed to the Company which could reasonably be expected to have a Parent Material Adverse Effect.

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ARTICLE V
COVENANTS

 

Section 5.01      Stockholder Consent.

 

(a)            Concurrently with the execution of this Agreement, the Company is delivering to Parent the Company Stockholder Written Consent. The materials submitted to the Stockholders in connection with such consent have been reviewed and approved by Parent and the Company Board and include information regarding the Company, the terms of the Merger, this Agreement and the Ancillary Documents, and the Company Board Recommendation.

 

(b)           Promptly following, but in no event more than two (2) Business Days after the execution of this Agreement, the Surviving Entity or Parent shall mail a notice jointly prepared by the Company and Parent prior to the Closing (the “Stockholder Notice”) to every Stockholder that did not execute the Company Stockholder Written Consent. The Stockholder Notice shall (i) be a statement to the effect that the Company Board unanimously determined that the Merger is advisable in accordance with Section 251(b) of the DGCL and in the best interests of the Company and its Stockholders and unanimously approved and adopted this Agreement, the Merger and the other transactions contemplated hereby and (ii) provide the Stockholders to whom it is sent with notice of the actions taken in the Company Stockholder Written Consent, including the approval and adoption of this Agreement, the Merger and the other transactions contemplated hereby in accordance with Section 228(e) of the DGCL and the bylaws of the Company. The Stockholder Notice shall include therewith a copy of Section 262 of the DGCL and all such other information as Parent shall reasonably request, and shall be sufficient in form and substance to start the twenty (20) day period during which a Stockholder must demand appraisal of such Stockholder’s Company Capital Stock as contemplated by Section 262(d)(2) of the DGCL.

 

(c)            Prior to the Closing Date, the Company shall have obtained from each “disqualified individual” (within the meaning of Section 280G of the Code) of the Company who has a right to Section 280G Payments (as defined below) a written waiver of such person’s rights to the portion of such Section 280G Payments that exceed $1.00 less than 3.0 times such person’s “base amount” (within the meaning of Section 280G of the Code) (the “Parachute Payment Waivers”) and (ii) approval by the Stockholders holding the number of shares of stock required by the terms of Section 280G(b)(5)(B) of the Code or any successor provisions, a written consent in favor of a single proposal to render the parachute payment provisions of Section 280G of the Code, or any successor provisions, and the Treasury Regulations thereunder (collectively, “Section 280G”) inapplicable to any and all payments and/or benefits provided pursuant to the Company’s Benefit Plans or other plans, programs, arrangements or Contracts that would reasonably be expected to result, separately or in the aggregate, in the payment of any amount and/or the provision of any benefit that causes the payments and/or benefits to not be deductible by reason of Section 280G or that would be subject to an excise tax under Section 4999 of the Code (together, the “Section 280G Payments”). The Company has provided Parent with a copy of the executed Parachute Payment Waivers and the disclosure statement and related calculations prepared in connection with this Section 5.01(c) prior to delivery of such materials to the Stockholders and considered in good faith any comments made by Parent regarding the content of such Parachute Payment Waivers and disclosure statement.

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Section 5.02      Directors’ and Officers’ Indemnification and Insurance.

 

(a)            Parent and Merger Sub agree that all rights to indemnification, advancement of expenses and exculpation by the Company now existing in favor of each Person who is now, or has been at any time prior to the date hereof or who becomes prior to the Effective Time an officer or director of the Company (each an “D&O Indemnified Party”) as provided in the Company Charter Documents, in each case as in effect on the date of this Agreement, or pursuant to any other Contracts in effect on the date hereof and disclosed in Section 5.02 of the Company Disclosure Schedules, shall be assumed by the Surviving Entity in the Merger, without further action, at the Effective Time and shall survive the Merger and shall remain in full force and effect in accordance with their terms, and, in the event that any proceeding is pending or asserted or any claim made during such period, until the final disposition of such proceeding or claim.

 

(b)           In connection herewith, the parties have obtained appropriate insurance policies for the Company and its directors, officers and managers for claims arising out of or relating to events which occurred before or at the Effective Time (including in connection with the transactions contemplated by this Agreement) (the “D&O Insurance Policies”) and “tail” coverage for such D&O Insurance Policies with a claims period of at least six (6) years from the Effective Time with at least the same coverage and amount and containing terms and conditions that are not less advantageous to the directors, officers, and managers of the Company as the D&O Insurance Policies with respect to claims arising out of or relating to events which occurred before or at the Effective Time (including in connection with the transactions contemplated by this Agreement).

 

(c)            The obligations of Parent and the Surviving Entity under this Section 5.02 shall survive the consummation of the Merger and shall not be terminated or modified in such a manner as to adversely affect any D&O Indemnified Party to whom this Section 5.02 applies without the consent of such affected D&O Indemnified Party (it being expressly agreed that the D&O Indemnified Parties to whom this Section 5.02 applies shall be third-party beneficiaries of this Section 5.02, each of whom may enforce the provisions of this Section 5.02).

 

Section 5.03      Restricted Securities; Rule 144 Obligations. The Parent Common Stock issued pursuant to the terms of this Agreement will be issued in a transaction exempt from registration under the Securities Act by reason of Section 4(a)(2) thereof and/or Regulation D promulgated under the Securities Act and may not be re-offered or resold other than in conformity with the registration requirements of the Securities Act and such other applicable rules and regulations or pursuant to an exemption therefrom. Parent has received from the Stockholders evidence reasonably satisfactory to Parent that the Stockholders receiving shares of Parent Common Stock are each an “accredited investor,” as such term is defined in Rule 501(a) of the Securities Act, and that each Stockholder is acquiring the Parent Common Stock for its own account, for investment purposes only and not with a view to (or for) the distribution (as such term is used in Section 2(11) of the Securities Act) or resale thereof. Until the resale by the Stockholders of their Parent Common Stock has become registered under the Securities Act, or otherwise transferable pursuant to an exemption from such registration otherwise required thereunder, the Parent Common Stock issued to the Stockholders shall be characterized as “restricted securities” under the Securities Act and shall bear a customary restrictive legend. Parent agrees to cooperate in a timely manner with the Stockholders holding such shares of Parent Common Stock to remove any restrictive legends or similar transfer instructions from the such shares upon the registration of such shares or in the event that the shares are otherwise transferable pursuant to an exemption from registration otherwise required thereunder, as accompanied by an opinion of counsel if required by Parent. With a view to making available to the Stockholders the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the Stockholders to sell shares of Parent Common Stock issued pursuant to this Agreement to the public without registration (“Rule 144”), for a period of one year after the Closing, at all times during which there are shares of Parent Common Stock issued pursuant to this Agreement outstanding that have not been previously (i) sold to or through a broker or dealer or underwriter in a public distribution or (ii) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(a)(1) thereof, in the case of either clause (i) or clause (ii) in such a manner that, upon the consummation of such sale, all transfer restrictions and restrictive legends with respect to such shares are removed upon the consummation of such sale, Parent agrees to use commercially reasonable efforts to:

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(a)            make and keep public information available, as those terms are understood and defined in Rule 144;

 

(b)           file with the SEC in a timely manner (including following any extensions of time for filing provided by Rule 12b-25 promulgated under the Exchange Act) all reports and other documents required of Parent under the Exchange Act, so long as Parent remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

 

(c)            furnish to each Stockholder so long as such Stockholder continues to own Parent Common Stock issued pursuant to this Agreement, promptly upon request, (i) a written statement by Parent, if true, that it has complied with the reporting requirements of Rule 144 and the Exchange Act, and (ii) such other information as may be reasonably requested to permit the Stockholders to sell such securities pursuant to Rule 144 without registration.

 

Section 5.04      Listing Compliance Matters. As of the date hereof, Parent has (a) to the extent required by the rules and regulations of the Exchange, prepared and submitted to the Exchange a notification form for the listing of the shares of Parent Common Stock to be issued in connection with transactions contemplated hereby and caused such shares to be approved for listing (subject to official notice of issuance); and (b) to the extent required by Nasdaq Marketplace Rule 5110, filed an initial listing application for the Parent Common Stock on Nasdaq (the “Nasdaq Listing Application”) and caused such Nasdaq Listing Application to be conditionally approved prior to the Effective Time.

 

Section 5.05      Employee Matters.

 

(a)            401(k) Termination and Participation. The Company has adopted a resolution effective no later than the day immediately preceding the date hereof terminating any and all Benefit Plans intended to include a Code Section 401(k) arrangement (a “Company 401(k) Plan”). Effective not later than the Closing Date, Parent shall have in effect one or more defined contribution plans that include a Code Section 401(k) arrangement and a related trust exempt from tax under Section 501(a) of the Code in which each Continuing Employee participating in a Company 401(k) Plan immediately prior to the Closing Date shall be eligible to participate as of the Closing Date and in which each Continuing Employee who would have become eligible to participate in the Company 401(k) Plan on or after the Closing Date shall become eligible to participate no later than such time as he or she would have become eligible to participate in the Company 401(k) Plan, subject, in each case, to the terms and conditions of any such plan(s).

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(b)           Notwithstanding anything in this Section 5.05 to the contrary, nothing contained herein shall be treated as an establishment, amendment or other modification of any Benefit Plan or any employee benefit plan of Parent or any of its affiliates, or shall limit the right of the Company, Parent or any of its affiliates to amend, terminate or otherwise modify any Benefit Plan or other employee benefit plan.  This Section 5.05(b) is not meant to, and does not, create any third party beneficiaries to the Agreement or any right to continued employment with the Company.

 

Section 5.06      Post-Closing Governance Matters. Promptly following the Closing, Parent shall cause Sumit Aggarwal to be appointed as Chief Executive Officer of the Company and for Vijay Modur to be named Head of Research & Development. Promptly following the Closing, the Parent Board to add to the following individuals to the Parent Board: Sumit Aggarwal, Alan Walts and Raj Parekh.

 

Section 5.07      Further Assurances. At and after the Effective Time, the officers and directors of the Surviving Entity shall be authorized to execute and deliver, in the name and behalf of the Company or Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Entity any and all right, title and interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Entity as a result of, or in connection with, the Merger.

 

ARTICLE VI
TAX MATTERS

 

Section 6.01      Tax Consequences. The parties shall not file any U.S. federal, state or local Tax Return nor take any position (whether in audits, Tax Returns or otherwise) in a manner that is inconsistent with the treatment of the Merger as a “reorganization” within the meaning of Section 368(a) of the Code for U.S. federal, state and other relevant Tax purposes, unless otherwise required by a final “determination” within the meaning of Section 1313(a) of the Code. The parties shall use their respective commercially reasonable efforts to cause the Merger to qualify, and will not take any action or cause any action to be taken which action would reasonably be expected to prevent the Merger, from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

 

Section 6.02      FIRPTA Statement. The Company shall have delivered to Parent a properly executed statement and accompanying IRS notice from the Company that meets the requirements of Treasury Regulation Sections 1.1445-2(c)(3) and 1.897-2(h)(1), dated as of the Closing Date and in the form and substance reasonably satisfactory to Parent.

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ARTICLE VII
MISCELLANEOUS

 

Section 7.01      Expenses. Except as otherwise expressly provided herein, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses in connection with the Closing.

 

Section 7.02      Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 7.02):

 

  If to the Company:   Zikani Therapeutics, Inc.
      480 Arsenal Way
      Watertown, MA 02472
      E-mail: saggarwal@zikani.com
      Attention: Sumit Aggarwal
       
  with a copy to:   Latham & Watkins LLP
      200 Clarendon Street
      Boston, MA 02116
      Attention: Peter Handrinos, Scott Shean
      and Brett Urig
      Email: peter.handrinos@lw.com;
      scott.shean@lw.com; brett.urig@lw.com
       
  If to Parent or Merger Sub:   Eloxx Pharmaceuticals, Inc.
      950 Winter Street
      Waltham, MA 02451
      E-mail: neil.belloff@eloxxpharma.com
      Attention: Neil Belloff
       
  with a copy to:   Proskauer Rose LLP
      Eleven Times Square
      New York, NY 10036
      Attention: Robert A. Cantone and Michael E. Ellis
      Email: RCantone@proskauer.com;
      mellis@proskauer.com

 

Section 7.03      Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

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Section 7.04      Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

 

Section 7.05      Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

Section 7.06      Entire Agreement. This Agreement and the Ancillary Documents constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the Ancillary Documents, the Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.

 

Section 7.07      Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.

 

Section 7.08      No Third-Party Beneficiaries; No Survival. Except as provided in Section 2.07(e) and Section 5.02, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. The parties agree that the representations and warranties contained in this Agreement shall not survive the Closing and there shall be no recourse for the parties for any inaccuracies or breaches of such representations and warranties.

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Section 7.09      Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by Parent, Merger Sub and the Company at any time prior to the Effective Time. Any failure of Parent or Merger Sub, on the one hand, or the Company, on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived by the Company (with respect to any failure by Parent or Merger Sub) or by Parent or Merger Sub (with respect to any failure by the Company), respectively, only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

 

Section 7.10      Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

 

(a)            This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction).

 

(b)           The parties agree that the appropriate, exclusive and convenient forum (the “Forum”) for any disputes among any of the parties arising out of or related to this Agreement or the transactions contemplated by this Agreement shall be in the Court of Chancery in the City of Wilmington, New Castle County, Delaware, except where such court lacks subject matter jurisdiction. In such event, the Forum shall be in the federal district court sitting in Wilmington, Delaware, or, in the event such federal district court lacks subject matter jurisdiction, then in the superior court in the City of Wilmington, New Castle County, Delaware. The parties irrevocably submit to the jurisdiction of such courts solely in respect of any disputes between them arising out of or related to this Agreement or the transactions contemplated by this Agreement. The parties further agree that no party shall bring suit with respect to any disputes arising out of or related to this Agreement or the transactions contemplated by this Agreement in any court or jurisdiction other than the above specified courts; provided, however, that the foregoing shall not limit the rights of any party to obtain execution of a judgment in any other jurisdiction. The parties further agree, to the extent permitted by Law, that a final and non-appealable judgment against any party in any action, suit or proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the U.S. by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and amount of such judgment.

 

(c)            EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE ANCILLARY DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 7.10(c).

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Section 7.11      Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

 

Section 7.12      Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission (including DocuSign) shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

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

 

  ELOXX PHARMACEUTICALS, INC.
     
     
  By /s/ Neil Belloff
  Name: Neil Belloff
  Title: Operating Officer, General Counsel and Corporate Secretary
     
     
     
  DELTA MERGER SUB ACQUISITION CORPORATION
   
   
  By /s/ Neil Belloff
  Name: Neil Belloff
  Title: Vice President, Secretary and Treasurer
     
     
     
  ZIKANI THERAPEUTICS, INC.
   
   
  By /s/ Sumit Aggarwal
  Name: Sumit Aggarwal
  Title: President and Chief Executive Officer
     
     

 

 

[Signature Page to Merger Agreement]

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Exhibit 10.1

 

 

EXECUTION COPY

 

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) between Eloxx Pharmaceuticals, Inc. (the “Company”), and Sumit Aggarwal (the “Executive”) is dated as of April 1, 2021 and shall become effective on the date hereof (the “Effective Date”).

 

W I T N E S S E T H:

 

WHEREAS, the Executive wishes to be employed by the Company and to provide employment services to the Company in return for certain compensation and benefits and subject to the terms and conditions as hereinafter set forth;

 

NOW THEREFORE, in consideration of the foregoing, of the mutual promises contained herein and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.              EMPLOYMENT TERM. The Company hereby offers to employ the Executive, and the Executive hereby accepts employment by the Company, upon the terms and conditions set forth in this Agreement, during the period commencing on the Effective Date and ending on the date of the termination of the Executive’s employment in accordance with Section 7 below (the “Employment Term”). The Executive shall be employed at will, meaning that either the Company or the Executive may terminate this Agreement and the Executive’s employment at any time, for any reason or no reason, with or without cause, subject to the terms of this Agreement.

 

2.              POSITION & DUTIES.

 

(a)            Except as provided in Section 2(b) below, the Executive shall serve as the President and Chief Executive Officer (CEO) and, upon the Effective Date, shall be appointed as a member of the Board of Directors (the “Board”) of the Company and its subsidiary, Eloxx Pharmaceuticals, Ltd. during the Employment Term. During the Employment Term, the Executive shall continue to be nominated by the Board (or a Committee thereof) for re-election as a member of the Board at the expiration of the then-current term, and shall serve as a member of the Board without additional compensation. As CEO, the Executive shall have such duties, authorities and responsibilities as are commensurate with the position of CEO and such other duties and responsibilities as the Board shall designate that are consistent with the Executive’s position as Chief Executive Officer. The Executive agrees to serve, if requested, without additional compensation, as an officer or director of any of the Company’s subsidiaries.

 

(b)           During the Employment Term, the Executive agrees to devote his full business time, attention and energies to the performance of all of the lawful duties, responsibilities and authority that may be assigned to him hereunder. Nothing contained in this Agreement will preclude the Executive from (i) devoting time to personal and family investments, (ii) serving as a director of any not-for-profit company, (iii) serving as a director for any for-profit company that is approved by the Board (such approval not to be unreasonably withheld) or (iv) from participating in charitable or industry associations, in each case, provided that such activities or services do not (x) materially interfere with the Executive’s performance of duties hereunder or (y) violate the terms of the Confidentiality Agreement (as defined below).

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(c)            During the Employment Term, the Executive’s principal place of employment shall be the Company’s offices in Watertown, Massachusetts, subject to customary business travel consistent with the Executive’s duties and responsibilities.

 

3.              BASE SALARY. The Company agrees to pay the Executive a base salary (the “Base Salary”) at an annual rate of US$ 530,000. The Base Salary will be payable bimonthly in accordance with the regular payroll practices of the Company. The Executive’s Base Salary shall be subject to review by the Board (or a Committee thereof) at least annually and may be increased, but not decreased, from time to time by the Board. The base salary as determined herein from time to time shall constitute “Base Salary” for purposes of this Agreement.

 

4.              ANNUAL BONUS; STRETCH BONUS. With respect to each full calendar year during the Employment Term, the Executive shall be eligible to earn (a) an annual, performance-based bonus (an “Annual Bonus”) with a target bonus value equal to fifty percent (50%) of the Executive’s Base Salary (the “Target Bonus”) which shall be earned if at all based upon the achievement of performance targets established by the Board (or a committee thereof), in consultation with the Executive, within the first 90 days of each calendar year during the Employment Term (provided that, notwithstanding the foregoing, Executive acknowledges and agrees that the performance targets applicable to the Annual Bonus for the 2021 calendar year were established prior to the Effective Date), and (b) an annual stretch bonus, with a stretch bonus opportunity of fifty percent (50%) of the Executive’s Base Salary, which shall be earned if at all based upon the determination by the Board (or a committee thereof) of performance by the Executive and/or the Company for such calendar year, and/or such other factors as determined by the Board (or a committee thereof) in its sole discretion (the “Stretch Bonus”), with the actual amount of the Annual Bonus or Stretch Bonus for a particular year determined by the Board (or a committee thereof) in its sole discretion. The Board (or a committee thereof) shall consider the Executive’s and the Company’s performance in the entire 2021 calendar year without regard to the Effective Date when determining the Executive’s Annual Bonus and Stretch Bonus for the 2021 calendar year and neither such bonus shall be subject to pro-ration in the 2021 calendar year. Subject to Section 8 below, and except for the 2021 calendar year, in order to be eligible for an Annual Bonus or Stretch Bonus, the Executive must remain employed for the entire calendar year to which the Annual Bonus or Stretch Bonus relates (for the avoidance of doubt, for the 2021 calendar year, the Executive must remain employed from the Effective Date through December 31, 2021 in order to be eligible for an Annual Bonus or Stretch Bonus). Any Annual Bonus or Stretch Bonus earned by the Executive will be paid no later than March 15 of the calendar year immediately following the calendar year in which the Annual Bonus or Stretch Bonus is being measured. The Executive’s Target Bonus shall be subject to review by the Board (or a committee thereof) at least annually and may be increased, but not decreased, from time to time by the Board.

 

5.              EQUITY COMPENSATION. The Company will grant to the Executive on the date hereof (the “Grant Date”) equity compensation awards under the 2018 Equity Incentive Plan (as amended, the “Plan”) for shares of the Company’s common stock (“Common Stock”) as follows:

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(a)            TIME-VESTING AWARDS. (i) A stock option to purchase 1,423,238 shares of Common Stock (the “Option Award”) on the Grant Date will vest and become exercisable or payable, respectively, with respect to 1/4 of the shares on the first anniversary of the Grant Date and with respect to an additional 1/12 of the shares on each quarterly anniversary of the Grant Date thereafter, subject to the Executive’s continued employment with the Company through each such date and with the other terms contained in the form of award attached hereto as Appendix B and (ii) restricted stock units representing 55,854 Common Stock (A) to vest in a single installment on December 1, 2021, subject to the Executive’s continued service through such date and full accelerated vesting upon an earlier termination of Executive’s employment without Cause, by the Executive for Good Reason or as a result of the Executive’s death or Disability, (B) providing that the Executive shall establish a Rule 10b5-1 Plan as soon as practicable following the Effective Date in order to satisfy the federal, state, or local tax withholding obligations upon settlement of the restricted stock units by directing a broker to sell shares of Common Stock issuable upon settlement of the restricted stock units; provided that if the Executive is not permitted to establish a Rule 10b5-1 Plan prior to November 15, 2021 and is prohibited from trading in the Company’s securities under a Company policy or applicable law on the settlement date of the restricted stock units, then the Executive shall have the right to elect to have the Company withhold shares otherwise issuable upon settlement of the restricted stock units in satisfaction of the applicable tax withholdings in accordance with Section 8(h)(ii) of the Plan and (C) with the other terms and conditions contained in the form of award attached hereto as Appendix C. The vesting of any such awards, shall accelerate and such awards shall become fully vested and exercisable or payable, respectively, immediately prior to a Corporate Transaction (as defined in the 2018 Equity Incentive Plan). In the event of the first equity financing that (I) results in proceeds for the Company of at least $20,000,000, and (II) results in dilution to the percentage of the Common Stock represented by the Option Award, determined on a fully diluted and, as applicable, a fully converted basis (a “Qualifying Financing”), the Company will, within five days following the consummation of such Qualifying Financing, grant to Executive additional options to purchase Common Stock under the Plan (the “Additional Options”) such that the percentage of shares of Common Stock covered by the Option Award and the Additional Options, taken together, immediately following the consummation of the Qualifying Financing, determined on a fully diluted and, as applicable, a fully converted basis, equals the percentage of shares of Common Stock covered by the Option Award immediately prior to the consummation of the Qualifying Financing, in each case determined on a fully-diluted basis. The Additional Options shall have terms consistent with the Option Award (except for the exercise price, which will be the fair market value on the date of grant).

 

(b)       ANNUAL AWARDS. Each year, the Executive will be eligible for annual awards of stock options and or restricted stock units as determined by the Board. Nothing herein shall be construed as an obligation to grant such awards, which shall be subject to the sole discretion of the Board. The vesting of any such awards, shall accelerate and such awards shall become fully vested and exercisable or payable, respectively, immediately prior to a Corporate Transaction (as defined in the 2018 Equity Incentive Plan).

 

(c)       TAX WITHHOLDING. At Executive’s request, the Company will withhold from the shares of Common Stock otherwise payable to Executive with respect to vested portions of the equity awards the number of whole shares of Common Stock required to satisfy the applicable tax withholding obligation, the number of shares so withheld to be determined by the Company based on the fair market value of the Common Stock on the date the Company is required to withhold.

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6.              EMPLOYEE BENEFITS.

 

(a)            BENEFIT PLANS. The Executive shall be entitled to participate in all employee benefit plans that the Company generally makes available to its senior executives (other than severance plans) from time to time, including any group health plans, dental plans, life, disability and AD&D insurances, a 401(k) plan, tuition reimbursement, recreation allowance, parking or public transportation and various types of paid time off, subject to the terms and conditions of such benefit plans.

 

(b)           VACATION. The Executive shall be entitled to twenty-five (25) days of paid vacation per year, in accordance with the Company’s vacation policy. Vacation may be taken at such times as the Executive elects with due regard to the needs of the Company.

 

(c)            BUSINESS EXPENSES. The Company will reimburse the Executive for all reasonable business expenses incurred by the Executive in connection with the discharge of his duties for the Company, subject to the Company’s expense reimbursement policy in effect from time to time.

 

(d)           INDEMNIFICATION. The Company shall indemnify the Executive to the maximum extent that its officers, directors and employees are entitled to indemnification pursuant to the Company’s Certificate of Incorporation and Bylaws for any acts or omissions by reason of being a director, officer or employee of the Company as of the Effective Date. The Company shall also execute in favor of Executive the Company’s standard Form of Indemnification Agreement (as of the Effective Date, the Company’s standard Form of Indemnification Agreement is files as Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on December 22, 2017, SEC File No. 001-31326). At all times during the Employment Term, the Company shall maintain in effect a comprehensive director and officers liability insurance policy with the Executive as a covered officer and director, as applicable.

 

7.              TERMINATION. The Executive’s employment and the Employment Term shall terminate on the first of the following to occur:

 

(a)            DISABILITY. Upon the 30th day following the Executive’s receipt of notice of the Company’s intention to terminate the Executive’s employment due to Disability (as defined in this Section 7(a)); provided that, the Executive has not returned to full-time performance of his duties within 30 days after receipt of such notice. If the Company determines in good faith that the Executive’s Disability has occurred during the term of this Agreement, it will give the Executive written notice of its intention to terminate his employment.  For purposes of this Agreement, “Disability” shall mean the Executive’s inability to substantially perform the essential duties of his job with or without reasonable accommodation on a full-time basis for 180 calendar days during any consecutive twelve-month period or for 90 consecutive days as a result of incapacity due to mental or physical illness.

 

(b)           DEATH. Automatically on the date of death of the Executive.

 

(c)            CAUSE. Immediately upon written notice by the Company to the Executive of a termination for Cause. “Cause” shall mean (i) the Executive’s commission of an act of fraud, embezzlement or theft against the Company or its subsidiaries; (ii) the Executive’s conviction of, or a plea of no contest to, a felony; (iii) willful nonperformance by the Executive (other than by reason of disability or illness) of his material duties as an employee of the Company, which, to the extent it is curable by the Executive, is not cured within thirty (30) days after written notice thereof is given to the Executive by the Company; (iv) the Executive’s material breach of this Agreement or any other material agreement between the Executive and the Company or any of its subsidiaries, including the Confidentiality Agreement, which, to the extent it is curable by the Executive, is not cured within thirty (30) days after written notice thereof is given to the Executive by the Company; or (v) the Executive’s gross negligence, willful misconduct or any other act of willful disregard for the Company’s or any of its subsidiaries’ best interests, which, to the extent it is curable by the Executive, is not cured within thirty (30) days after written notice thereof is given to the Executive by the Company.

 4 

 

(d)           WITHOUT CAUSE. Upon written notice by the Company to the Executive no earlier than eighteen (18) months after the Effective Date of an involuntary termination without Cause and other than due to death or Disability.

 

(e)            GOOD REASON. “Good Reason” for the Executive to terminate the Executive’s employment hereunder shall mean the occurrence of any of the following conditions during the Employment Term without the Executive’s express written consent; provided that any resignation by the Executive due to any of the following conditions shall only be deemed for Good Reason if: (i) the Executive gives the Company written notice of the intent to terminate for Good Reason within sixty (60) days following the first occurrence of the condition(s) that the Executive believes constitutes Good Reason, which notice shall describe such condition(s); (ii) the Company fails to remedy, if remediable, such condition(s) within thirty (30) days following receipt of the written notice (the “Cure Period”) of such condition(s) from the Executive; and (iii) the Executive actually resigns his employment within the first thirty (30) days after expiration of the Cure Period:

 

(1)           any material reduction by the Company of the Executive’s Base Salary or Target Bonus as initially set forth herein or as the same may be increased from time to time;

 

(2)           any material diminution in the Executive’s duties, title, responsibilities or authority;

 

(3)           a requirement that the Executive report to a corporate officer or employee other than the Board;

 

(4)           any material breach of this Agreement, including a breach of the Company’s obligations under Section 4, 5 or 11(b); or

 

(5)           a requirement that the Executive relocate to a principal place of employment more than twenty-five (25) miles from Watertown, Massachusetts.

 

(f)            WITHOUT GOOD REASON. The Executive shall provide two (2) weeks’ prior written notice (the “Transition Period”) to the Company of the Executive’s intended termination of employment without Good Reason (“Voluntary Termination”). During the Transition Period, the Executive shall assist and advise the Company in any transition of business, customers, prospects, projects and strategic planning, and the Company shall pay the pro rata portion of the Executive’s Base Salary and benefits through the end of the Transition Period. The Company may, in its sole discretion, upon written notice to the Executive, make such termination of employment effective earlier than the expiration of the Transition Period (“Early Termination Right”), but it shall pay the pro rata portion of the Executive’s Base Salary and benefits through the earlier of: the end of the Transition Period, or the date that the Executive accepts employment or a consulting engagement from a third party.

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8.              CONSEQUENCES OF TERMINATION. Any termination payments made and benefits provided under this Agreement to the Executive shall be in lieu of any termination or severance payments or benefits for which the Executive may be eligible under any of the severance plans, policies or programs of the Company or its affiliates as may be in effect from time to time, but shall be in addition to any termination benefits available under any equity award or other vested benefits retained under any benefit plans of the Company or its affiliates. Subject to satisfaction of each of the conditions set forth in Section 9, the following amounts and benefits shall be due to the Executive:

 

(a)            DISABILITY. Upon employment termination due to Disability, the Company shall pay or provide the Executive: (i) any unpaid Base Salary through the date of termination and any accrued vacation; (ii) reimbursement for any unreimbursed expenses owed to Executive; and (iii) all other payments and benefits to which the Executive is entitled under the terms of any applicable compensation arrangement or benefit, equity or other plan or program, including but not limited to any applicable insurance benefits, payable on the next regularly scheduled Company payroll date following the date of termination or earlier if required by applicable law (collectively, “Accrued Amounts”). In addition, upon the Executive’s termination due to Disability, the Company shall pay the amounts described in Sections 8(d)(3) and 8(d)(4) to the Executive.

 

(b)           DEATH. In the event the Employment Term ends on account of the Executive’s death, the Executive’s estate (or to the extent a beneficiary has been designated in accordance with a program, the beneficiary under such program) shall be entitled to any Accrued Amounts, including but not limited to proceeds from any Company sponsored life insurance programs. In addition, upon the Executive’s death, the Company shall pay the amounts described in Sections 8(d)(3) and 8(d)(4) to the Executive’s estate.

 

(c)            TERMINATION FOR CAUSE OR WITHOUT GOOD REASON. If the Executive’s employment should be terminated (i) by the Company for Cause, or (ii) by the Executive without Good Reason, the Company shall pay to the Executive any Accrued Amounts only, and shall not be obligated to make any additional payments to the Executive.

 

(d)           TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If the Executive’s employment by the Company is terminated by the Company other than for Cause (and not due to Disability or death) or by the Executive for Good Reason, other than in circumstances described in Section 8(e), then the Company shall pay or provide the Executive with the Accrued Amounts and subject to compliance with Section 9:

 6 

 

(1)           the Executive’s Base Salary as in effect immediately preceding the last day of the Employment Term for a period of twelve (12) months following the termination date (the “Salary Severance Period”) payable in a lump sum in cash promptly following the termination date (for purposes of calculating the Executive’s severance benefits, the Executive’s Base Salary shall be calculated based on the rate in effect prior to any material reduction in Base Salary that would give the Executive the right to resign for Good Reason (as provided in Section 7(e)(1)));

 

(2)           if the Executive timely elects continued coverage under COBRA for himself and his covered dependents under the Company’s group health plans following such termination, then the Company shall pay the COBRA premiums necessary to continue the Executive’s and his covered dependents’ health insurance coverage in effect on the termination date until the earliest of (i) twelve (12) months following the termination date (the “COBRA Severance Period”); (ii) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment; or (iii) the date the Executive ceases to be eligible for COBRA continuation coverage for any reason, including plan termination (such period from the termination date through the earlier of (i)-(iii), the “COBRA Payment Period”). Notwithstanding the foregoing, if at any time the Company determines that its payment of COBRA premiums on the Executive’s behalf would result in a violation of applicable law (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of paying COBRA premiums pursuant to this Section 8(d)(2), the Company shall pay the Executive on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to applicable tax withholding (such amount, the “Special Severance Payment”), such Special Severance Payment to be made without regard to the Executive’s payment of COBRA premiums. Nothing in this Agreement shall deprive the Executive of his rights under COBRA or ERISA for benefits under plans and policies arising under his employment by the Company.

 

(3)           in the event that the Executive’s employment is terminated after December 31 of any performance year, but prior to the Annual Bonus payment date for such performance year, the Executive shall receive: (i) the amount of the Annual Bonus as determined by the Board in good faith for the performance year immediately prior to the year in which the Executive’s termination occurs if the Company has not determined the amount of the Executive’s Annual Bonus as of the date of the Executive’s termination; or (ii) the amount of the Annual Bonus as already determined by the Board in good faith for the performance year immediately prior to the year in which the Executive’s termination occurs if the Company has already determined the amount of the Executive’s Annual Bonus as of the date of the Executive’s termination, payable in either case as a lump sum at the same time annual bonuses are paid to the Company’s executives generally, but no later than March 15 of the calendar year immediately following the calendar year in which the Annual Bonus is being measured;

 

(4)           in the event that the Executive’s employment is terminated: (i) on or before the date Annual Bonus performance goals are established for the performance year in which the Executive’s termination occurs, the Executive shall receive a pro-rata portion of the Executive’s Target Bonus for the performance year in which the Executive’s termination occurs, with such pro-rata portion calculated based upon the number of days that the Executive was employed during such performance year divided by the total number of days in such performance year; or (ii) after the date Annual Bonus performance goals are established for the performance year in which the Executive’s termination occurs (but on or before December 31 of such performance year), the Executive shall receive a pro-rata portion of the Executive’s Target Bonus for the performance year in which the Executive’s termination occurs, with such pro-rata portion calculated based upon the Executive’s achievement of performance goals as determined by the Board in good faith, payable in either case as a lump sum payment on the Company’s first ordinary payroll date occurring on or after the General Release effective date (namely, the date it can no longer be revoked) or as soon thereafter as is reasonable practicable thereafter; and

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(5)           if such termination occurs prior to the second anniversary of the Effective Date, an additional fifty percent (50%) of the shares subject to all stock options, restricted stock units and other equity awards which are time-based and are then held by the Executive shall vest and become exercisable or payable, as applicable, and an additional fifty percent (50%) of the performance-based awards shall vest based on target performance and (z) if such termination occurs on or after the second anniversary of the Effective Date, all of the shares subject to all stock options, restricted stock units and other equity awards which are time-based and are then held by the Executive shall vest and become exercisable or payable, as applicable, and all performance-based awards shall vest based on target performance. In addition, the time period that the Executive may have to exercise any stock options shall be extended for a period equal to the shorter of (i) one (1) year or (ii) the remaining term of the award; provided, however, that if any particular equity or equity-based award provides for more favorable termination treatment, then the more favorable treatment provided therein will apply.

 

(e)            TERMINATION WITHOUT CAUSE OR FOR GOOD REASON FOLLOWING A CORPORATE TRANSACTION. If the Executive’s employment by the Company is terminated by the Company other than for Cause (and not due to Disability or death), or by the Executive for Good Reason, in either case on or within twenty-four (24) months immediately following a Corporate Transaction, then the Company shall pay or provide the Executive with the Accrued Amounts and all of the benefits described in Section 8(d) above, subject to compliance with Section 9; provided that: (i) the Salary Severance Period defined in Section 8(d)(1) shall be increased to a total of eighteen (18) months following the termination date; (ii) the COBRA Severance Period defined in Section 8(d)(2) shall be increased to a total of eighteen (18) months following the termination date; and (iii) in lieu of the pro-rata bonus described in Section 8(d)(4), the Company shall pay the Executive the full Target Bonus for the performance year in which the Executive’s termination occurs, payable as a lump sum payment on the Company’s first ordinary payroll date occurring on or after the General Release effective date (namely, the date it can no longer be revoked).

 

9.              CONDITIONS. Any payments or benefits made or provided pursuant to Section 8 (other than Accrued Amounts) are subject to the Executive’s (or, in the event of the Executive’s death, the beneficiary’s or estate’s, or in the event of the Executive’s Disability, the guardian’s):

 

(a)            compliance with the provisions of Section 10 hereof;

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(b)           delivery to the Company of the executed Agreement and General Release (the “General Release”), which shall be in the form attached hereto as Appendix A (with such changes therein or additions thereto as needed under then applicable law to give effect to its intent and purpose) within 21 days following the date of termination of employment, and permitting the General Release to become effective in accordance with its terms; and

 

(c)            delivery to the Company of a resignation from all offices, directorships and fiduciary positions with the Company, its affiliates and employee benefit plans, by no later than 90 days following termination of employment.

 

Notwithstanding the due date of any post-employment payments, any amounts due following a termination under this Agreement (other than Accrued Amounts) shall not be due until after the expiration of any revocation period applicable to the General Release without the Executive having revoked such General Release, and any such amounts shall be paid or commence being paid to the Executive on the Company’s first ordinary payroll date occurring on or after the expiration of such revocation period without the occurrence of a revocation by the Executive (or such later date as may be required under Section 17 or the final sentence of this Section 9). Nevertheless (and regardless of whether the General Release has been executed by the Executive), upon any termination of Executive’s employment, Executive shall be entitled to receive any Accrued Amounts, payable after the date of termination in accordance with the Company’s applicable plan, program, policy or payroll procedures. Notwithstanding anything to the contrary in this Agreement, if any severance pay or benefits are deferred compensation under Section 409A (as defined below), and the period during which the Executive may sign the General Release begins in one calendar year and ends in another, then the severance pay or benefit shall not be paid or the first payment shall not occur until the later calendar year.

 

10.           CONFIDENTIALITY AND POST-EMPLOYMENT OBLIGATIONS. As a condition of employment, the Executive agrees to execute and abide by the Company’s current form of Confidentiality and Non-Competition Agreement (“Confidentiality Agreement”), which may be amended by the parties from time to time without regard to this Agreement. The Confidentiality Agreement contains provisions that are intended by the parties to survive and do survive termination of this Agreement.

 

11.           ASSIGNMENT.

 

(a)            The Executive may not assign or delegate any rights or obligations hereunder without first obtaining the written consent of the Company.

 

(b)           This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns and legal representatives. The Company will require any acquirer or successor of the Company in any merger, consolidation, sale, or acquisition of the Company, or a similar transaction to assume the Company’s obligations under this Agreement, and any failure to do so shall constitute a material breach of this Agreement.

 

12.           NOTICE. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of delivery if delivered by hand, (b) on the date of transmission, if delivered by confirmed facsimile, (c) on the first business day following the date of deposit if delivered by guaranteed overnight delivery service, or (d) on the fourth business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: at the address (or to the facsimile number) shown on the records of the Company.

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If to the Company:

 

Eloxx Pharmaceuticals, Inc.

950 Winter Street

Waltham, MA 02451

 

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

13.           SECTION HEADINGS; INCONSISTENCY. The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. If there is any inconsistency between this Agreement and any other agreement plan, program, policy or practice (collectively, “Other Provision”) of the Company the terms of this Agreement shall control over such Other Provision.

 

14.           SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity of unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, that provision shall be enforced to the maximum extent permitted by law and shall be deemed revised as near as possible to attain the intent of the parties, and all other provisions of this Agreement shall remain in full force and effect.

 

15.           COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instruments. One or more counterparts of this Agreement may be delivered by facsimile, with the intention that delivery by such means shall have the same effect as delivery of an original counterpart thereof.

 

16.           MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or director of the Company as may be designated or authorized by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement together with all exhibits hereto and the Confidentiality Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Massachusetts without regard to its conflicts of law principles.

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17.           SECTION 409A.

 

(a)            Notwithstanding anything to the contrary herein, the following provisions apply to the extent severance benefits provided herein are subject to Section 409A of Code and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”). Severance benefits payable upon a termination of employment shall not commence until Executive has a “separation from service” for purposes of Section 409A. Each installment of severance benefits is a separate “payment” for purposes of Treas. Reg. Section 1.409A-2(b)(2)(i), and the severance benefits are intended to satisfy the exemptions from application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if such exemptions are not available and Executive is, upon separation from service, a “specified employee” for purposes of Section 409A, then, solely to the extent necessary to avoid adverse personal tax consequences under Section 409A, the timing of the severance benefits shall be delayed until the earlier of (i) six (6) months and one day after Executive’s separation from service, or (ii) Executive’s death. Any payment or benefit otherwise payable or to be provided in the six (6) month period following separation from service that is not so paid or provided by reason of this Section 17 shall be accumulated and paid or provided in a single lump sum, as soon as practicable (and in all events within 15 days) after the date that is six (6) months after Executive’s separation from service (or, if earlier, as soon as practicable, and in all events within 15 days, after the date of Executive’s death)

 

(b)           It is intended that this Agreement shall comply with the requirements of Section 409A, and any ambiguity contained herein shall be interpreted in such manner so as to avoid adverse personal tax consequences under Section 409A. Notwithstanding the foregoing, the Company shall in no event be obligated to indemnify the Executive for any taxes or interest that may be assessed by the IRS pursuant to Section 409A of the Code on payments made pursuant to this Agreement.

 

18.           MITIGATION OF DAMAGES. In no event shall the Executive be obliged to seek other employment or take any other action by way of mitigation of the severance benefits payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any severance benefit hereunder be reduced by any compensation earned by the Executive as a result of employment by another employer, except as set forth in this Agreement.

 

19.           REPRESENTATIONS. The Executive represents and warrants to the Company that the Executive has the legal right to enter into this Agreement and to perform all of the obligations on the Executive’s part to be performed hereunder in accordance with its terms and that the Executive is not a party to any agreement or understanding, written or oral, which could prevent the Executive from entering into this Agreement or performing all of the Executive’s obligations hereunder. The Executive further represents and warrants that he has been advised to consult with an attorney and that he has been represented by the attorney of his choosing during the negotiation of this Agreement (or chosen not to be so represented), that he has consulted with his attorney before executing this Agreement (or chosen not to consult an attorney), that he has carefully read and fully understand all of the provisions of this Agreement and that he is voluntarily entering into this Agreement.

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20.           NON-DISPARAGEMENT. Both during and after the Employment Term, the Executive and the Company (through its officers and directors) agree not to disparage the other party, and the other party’s officers, directors, employees, shareholders, affiliates and agents, in any manner likely to be harmful to them or their business, business reputation or personal reputation; provided that both the Executive and the Company may respond accurately and fully to any question, inquiry or request for information when required by legal process and provided further that nothing in this Section 20 shall preclude any party from making truthful statements that are reasonably necessary or to enforce or defend the party’s rights under this Agreement.

 

21.           WITHHOLDING. The Company may withhold from any and all amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

 

22.           SURVIVAL. The respective obligations of, and benefits afforded to, the Company and the Executive which by their express terms or clear intent survive termination of the Executive’s employment with the Company, including, without limitation, the provisions of Sections 8 through 24, inclusive, of this Agreement, will survive termination of the Executive’s employment with the Company, and will remain in full force and effect according to their terms.

 

23.           AGREEMENT OF THE PARTIES. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent. Neither the Executive nor the Company shall be entitled to any presumption in connection with any determination made hereunder in connection with any arbitration, judicial or administrative proceeding relating to or arising under this Agreement.

 

24.           DISPUTE RESOLUTION. In the event of any controversy, dispute or claim between the parties under, arising out of or related to this Agreement (including but not limited to, claims relating to breach, termination of this Agreement, or the performance of a party under this Agreement) whether based on contract, tort, statute or other legal theory (collectively referred to hereinafter as “Disputes”), the parties shall follow the dispute resolution procedures set forth below. Any Dispute shall be finally settled by arbitration in accordance with the Employment Arbitration Rules & Procedures of JAMS (“JAMS”) then in force, and that the arbitration hearings shall be held in Boston, Massachusetts. The parties agree to (i) appoint an arbitrator who is knowledgeable in employment and human resource matters and, to the extent possible, the industry in which the Company operates, and instruct the arbitrator to follow substantive rules of law; (ii) require the testimony to be transcribed; and (iii) require the award to be accompanied by findings of fact and a statement of reasons for the decision. The arbitrator shall have the authority to permit discovery, to the extent deemed appropriate by the arbitrator, upon request of a party, but such discovery process shall continue for no more than thirty (30) days. The arbitrator shall have no power or authority to add to or detract from the written agreement of the parties. If the parties cannot agree upon an arbitrator within ten (10) days after demand by either of them, either or both parties may request JAMS name a panel of five (5) arbitrators. The Company shall strike the names of two (2) off this list; then, the Executive shall strike two (2) of the remaining names; and the remaining name shall be the arbitrator. The Company shall pay for both parties’ reasonable attorneys’ fees and expenses and all JAMS fees and expenses. Any award shall be final, binding and conclusive upon the parties and a judgment rendered thereon may be entered in any court having jurisdiction thereof. This Section shall not limit the right of any party to sue for injunctive relief for a breach of the obligations of this Agreement.

 

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, effective as of the date first written above.

 

 

  ELOXX PHARMACEUTICALS, INC.
     
     
  By: /s/ Tomer Kariv
    Tomer Kariv
    Its: Chairman of the Board of Directors
     
     
     
  EXECUTIVE
     
     
  /s/ Sumit Aggarwal
  Sumit Aggarwal

 

 

[Signature Page to Employment Agreement]

 

 

APPENDIX A

 

FORM OF RELEASE

 

AGREEMENT AND GENERAL RELEASE

 

Eloxx Pharmaceuticals, Inc. (the “Company”) and Sumit Aggarwal (“Executive”) agree:

 

1.              Last Day of Employment. Executive’s last day of employment with Employer was [INSERT DATE] (the “Termination Date”). In addition, effective as of the Termination Date, Executive ceased to serve as the General Counsel of the Company and its affiliates and ceased to be eligible for any benefits or compensation from the Company and its affiliates other than as specifically provided in Section 8 of the Executive Employment Agreement between the Company and Executive dated as of April 1, 2021 (the “Employment Agreement”). Executive further acknowledges and agrees that from and after the date Executive executes this Agreement and General Release, Executive will not represent (and since the Termination Date the Executive has not represented) the Executive as being a director, employee, officer, trustee, agent or representative of the Company or its affiliates for any purpose. In addition, effective as of Termination Date, Executive resigns from all offices, directorships, trusteeships, committee memberships and fiduciary capacities held with, or on behalf of, the Company and its affiliates or any benefit plans of the Company and its affiliates. These resignations will become irrevocable as set forth in Section 3 below.

 

2.              Consideration. The parties acknowledge that this Agreement and General Release is being executed in accordance with Section 9 of the Employment Agreement.

 

3.              Revocation. Executive may revoke this Agreement and General Release for a period of seven (7) calendar days following the day Executive executes this Agreement and General Release. Any revocation within this period must be submitted in writing to the Company and state, “I hereby revoke my acceptance of our Agreement and General Release.” The revocation must be delivered to the Company, Eloxx Pharmaceuticals, Inc., 950 Winter Street, Waltham, MA 02451, or any executive officer of the Company. This Agreement and General Release shall become effective and irrevocable on the eighth (8th) day after Executive executes it, unless earlier revoked by Executive in accordance with this Section 3 (the “Effective Date”).

 

4.              General Release of Claims. (A) Executive and the Executive’s heirs, executors, administrators, successors and assigns (collectively referred to throughout this Agreement as “Employee”) knowingly and voluntarily release and forever discharge the Company and its affiliates, subsidiaries, divisions, benefit plans, successors and assigns in such capacity, and the current, future and former employees, officers, directors, trustees and agents thereof (collectively referred to as “Employer”) from any and all actions, causes of action, contributions, indemnities, duties, debts, sums of money, suits, controversies, restitutions, understandings, agreements, promises, claims regarding stock, stock options or other forms of equity compensation, commitments, damages, fees and liabilities, responsibilities and any and all claims, demands, executions and liabilities of whatsoever kind, nature or description, oral or written, known or unknown, matured or unmatured, suspected or unsuspected at the present time, in law or in equity, whether known and unknown, against Employer, which the Employee has, has ever had or may have as of the date of Executive’s execution of this Agreement and General Release, including, but not limited to, any alleged violation of:

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-Title VII of the Civil Rights Act of 1964, as amended;

 

-The Civil Rights Act of 1991;

 

-Sections 1981 through 1988 of Title 42 of the United States Code, as amended;

 

-The Employee Retirement Income Security Act of 1974, as amended;

 

-The Immigration Reform and Control Act, as amended;

 

-The Americans with Disabilities Act of 1990, as amended;

 

-The Age Discrimination in Employment Act of 1967, as amended;

 

-The Older Workers Benefit Protection Act of 1990;

 

-The Worker Adjustment and Retraining Notification Act, as amended;

 

-The Occupational Safety and Health Act, as amended;

 

-The Family and Medical Leave Act of 1993;

 

-The Massachusetts Wage Act;

 

-Massachusetts anti-discrimination laws, M.G.L Chapter 151B- Any wage payment and collection, equal pay and other similar laws, acts and statutes of the Commonwealth of Massachusetts or the United States;

 

-Any other federal, state or local civil or human rights law or any other local, state or federal law, regulation or ordinance;

 

-Any public policy, contract, tort, or common law; or

 

-Any allegation for costs, fees, or other expenses including attorneys’ fees incurred in these matters.

 

Notwithstanding anything herein to the contrary, the sole matters to which the Agreement and General Release do not apply are: (i) Employee’s express rights or claims for accrued vested benefits under any employee benefit plan, policy or arrangement maintained by Employer or under COBRA; (ii) Employee’s rights under the provisions of the Employment Agreement which are intended to survive termination of employment; ; or (iii) any rights of the Executive to indemnification as a Director or Officer of the Company.

 

5.              No Claims Permitted. Employee waives Executive’s right to file any charge or complaint against Employer arising out of Executive’s employment with or separation from Employer before any federal, state or local court or any state or local administrative agency, except where such waivers are prohibited by law (with the understanding that that this Agreement and General Release bars the Executive from recovering monetary relief from Employer in connection with any charges or complaints which are not waived hereunder).

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Furthermore, nothing in this Agreement or General Release and Waiver of Claims prohibits Executive from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. Executive does not need the prior authorization of the Company to make any such reports or disclosures and Executive is not required to notify the Company that Executive has made such reports or disclosures.

 

6.              Affirmations. Employee affirms Executive has not filed, has not caused to be filed, and is not presently a party to, any claim, complaint, or action against Employer in any forum. Employee further affirms that the Executive has been paid and/or has received all compensation, wages, bonuses, commissions, and/or benefits to which Executive may be entitled and no other compensation, wages, bonuses, commissions and/or benefits are due to Executive, except as provided in Section 8 of the Employment Agreement. Employee also affirms Executive has no known workplace injuries.

 

7.              Cooperation; Return of Property. Employee agrees to reasonably cooperate with Employer and its counsel in connection with any investigation, administrative proceeding or litigation relating to any matter that occurred during Executive’s employment in which Executive was involved or of which Executive has knowledge. Employer will reimburse the Employee for any reasonable out-of-pocket travel, delivery or similar expenses incurred in providing such service to Employer. Employee represents that Employee has returned to Employer all property belonging to Employer, including but not limited to any leased vehicle, laptop, cell phone, keys, access cards, phone cards and credit cards, provided that Executive may retain, and Employer shall cooperate in transferring, Executive’s cell phone number and Executive’s personal rolodex and other address books.

 

8.              Governing Law and Interpretation. This Agreement and General Release shall be governed and conformed in accordance with the laws of the Commonwealth of Massachusetts without regard to its conflict of laws provisions. In the event Employee or Employer breaches any provision of this Agreement and General Release, Employee and Employer affirm either may institute an action to specifically enforce any term or terms of this Agreement and General Release. Should any provision of this Agreement and General Release be declared illegal or unenforceable by any court of competent jurisdiction and should the provision be incapable of being modified to be enforceable, such provision shall immediately become null and void, leaving the remainder of this Agreement and General Release in full force and effect. Nothing herein, however, shall operate to void or nullify any general release language contained in the Agreement and General Release.

 

9.              No Admission of Wrongdoing. Employee agrees neither this Agreement and General Release nor the furnishing of the consideration for this Agreement and General Release shall be deemed or construed at any time for any purpose as an admission by Employer of any liability or unlawful conduct of any kind.

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10.           Non-Disparagement. Employee and Employer (through its officers and directors) agree not to disparage the other party, and the other party’s officers, directors, employees, shareholders and agents, in any manner likely to be harmful to them or their business, business reputation or personal reputation; provided that both Employee and Employer may respond accurately and fully to any question, inquiry or request for information when required by legal process and provided further that nothing in this Section 10 shall preclude Employer or Employee from making truthful statements that are reasonably necessary or to enforce or defend the party’s rights under this Agreement and General Release.

 

11.           Amendment. This Agreement and General Release may not be modified, altered or changed except upon express written consent of both parties wherein specific reference is made to this Agreement and General Release.

 

12.           Entire Agreement. This Agreement and General Release and the Confidentiality Agreement (as defined in the Employment Agreement) sets forth the entire agreement between the parties hereto and fully supersedes any prior agreements or understandings between the parties; provided, however, that notwithstanding anything in this Agreement and General Release, the provisions in the Employment Agreement which are intended to survive termination of the Employment Agreement, including but not limited to those contained in Section 10 thereof, shall survive and continue in full force and effect. Employee acknowledges Executive has not relied on any representations, promises, or agreements of any kind made to Executive in connection with Executive’s decision to accept this Agreement and General Release.

 

13.           ADEA. Employee understands and acknowledges that Employee is waiving and releasing any rights Executive may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary. Employee understands and agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the date Executive signs this Agreement and General Release. Employee understands and acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Employee was already entitled. Employee further understands and acknowledges that Employee has been advised by this writing that nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law.

 

[signature page follows]

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EMPLOYEE HAS BEEN ADVISED THAT EXECUTIVE HAS UP TO TWENTY-ONE (21) CALENDAR DAYS TO REVIEW THIS AGREEMENT AND GENERAL RELEASE AND HAS BEEN ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTION OF THIS AGREEMENT AND GENERAL RELEASE.

 

EMPLOYEE AGREES ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT AND GENERAL RELEASE DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE (21) CALENDAR DAY CONSIDERATION PERIOD. IN THE EVENT EMPLOYEE SIGNS THIS AGREEMENT AND GENERAL RELEASE AND RETURNS IT TO THE COMPANY IN LESS THAN THE TWENTY-ONE (21) DAY PERIOD IDENTIFIED ABOVE, EMPLOYEE HEREBY ACKNOWLEDGES THAT EMPLOYEE HAS FREELY AND VOLUNTARILY CHOSEN TO WAIVE THE TIME PERIOD ALLOTTED FOR CONSIDERING THIS AGREEMENT AND GENERAL RELEASE.

 

HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THE SUMS AND BENEFITS SET FORTH IN THE EMPLOYMENT AGREEMENT, EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS EXECUTIVE HAS OR MIGHT HAVE AGAINST EMPLOYER.

 

IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Agreement and General Release as of the date set forth below:

 

  ELOXX PHARMACEUTICALS, INC.
   
  By:  
    Name:
    Its:
       
    Date:
       
       
       
  EXECUTIVE
   
   
  Sumit Aggarwal
       
       
  Date:  
     

 

Exhibit 10.2

 

 

EXECUTION COPY

 

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) between Eloxx Pharmaceuticals, Inc. (the “Company”), and Vijay Modur (the “Executive”) is dated as of April 1, 2021 and shall become effective on the date hereof (the “Effective Date”).

 

W I T N E S S E T H:

 

WHEREAS, the Executive wishes to be employed by the Company and to provide employment services to the Company in return for certain compensation and benefits and subject to the terms and conditions as hereinafter set forth;

 

NOW THEREFORE, in consideration of the foregoing, of the mutual promises contained herein and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.              EMPLOYMENT TERM. The Company hereby offers to employ the Executive, and the Executive hereby accepts employment by the Company, upon the terms and conditions set forth in this Agreement, during the period commencing on the Effective Date and ending on the date of the termination of the Executive’s employment in accordance with Section 7 below (the “Employment Term”). The Executive shall be employed at will, meaning that either the Company or the Executive may terminate this Agreement and the Executive’s employment at any time, for any reason or no reason, with or without cause, subject to the terms of this Agreement.

 

2.              POSITION & DUTIES.

 

(a)            Except as provided in Section 2(b) below, the Executive shall serve as the Head of Research and Development of the Company and its subsidiary, Eloxx Pharmaceuticals, Ltd. during the Employment Term. The Executive shall have such duties, authorities and responsibilities as are commensurate with the Executive’s position and such other duties and responsibilities as the Company’s Chief Executive Officer shall designate that are consistent with the Executive’s position. The Executive agrees to serve, if requested, without additional compensation, as an officer or director of any of the Company’s subsidiaries.

 

(b)           During the Employment Term, the Executive agrees to devote his full business time, attention and energies to the performance of all of the lawful duties, responsibilities and authority that may be assigned to him hereunder. Nothing contained in this Agreement will preclude the Executive from (i) devoting time to personal and family investments, (ii) serving as a director of any not-for-profit company, (iii) serving as a director for any for-profit company that is approved by the Chief Executive Officer (such approval not to be unreasonably withheld) or (iv) from participating in charitable or industry associations, in each case, provided that such activities or services do not (x) materially interfere with the Executive’s performance of duties hereunder or (y) violate the terms of the Confidentiality Agreement (as defined below).

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(c)            During the Employment Term, the Executive’s principal place of employment shall be the Company’s offices in Watertown, Massachusetts, subject to customary business travel consistent with the Executive’s duties and responsibilities.

 

3.              BASE SALARY. The Company agrees to pay the Executive a base salary (the “Base Salary”) at an annual rate of US $425,000. The Base Salary will be payable bimonthly in accordance with the regular payroll practices of the Company. The Executive’s Base Salary shall be subject to review by the Board of Directors of the Company (the “Board”) (or a Committee thereof) at least annually and may be increased, but not decreased, from time to time by the Board. The base salary as determined herein from time to time shall constitute “Base Salary” for purposes of this Agreement.

 

4.              ANNUAL BONUS; STRETCH BONUS. With respect to each full calendar year during the Employment Term, the Executive shall be eligible to earn (a) an annual, performance-based bonus (an “Annual Bonus”) with a target bonus value equal to forty percent (40%) of the Executive’s Base Salary (the “Target Bonus”) which shall be earned if at all based upon the achievement of performance targets established by the Board (or a committee thereof), in consultation with the Executive, within the first 90 days of each calendar year during the Employment Term (provided that, notwithstanding the foregoing, Executive acknowledges and agrees that the performance targets applicable to the Annual Bonus for the 2021 calendar year were established prior to the Effective Date), and (b) an annual stretch bonus, with a stretch bonus opportunity of twenty five percent (25%) of the Executive’s Base Salary, which shall be earned if at all based upon the determination by the Board (or a committee thereof) of performance by the Executive and/or the Company for such calendar year, and/or such other factors as determined by the Board (or a committee thereof) in its sole discretion (the “Stretch Bonus”), with the actual amount of the Annual Bonus or Stretch Bonus for a particular year determined by the Board (or a committee thereof) in its sole discretion. The Board (or a committee thereof) shall consider the Executive’s and the Company’s performance in the entire 2021 calendar year without regard to the Effective Date when determining the Executive’s Annual Bonus and Stretch Bonus for the 2021 calendar year and neither such bonus shall be subject to pro-ration in the 2021 calendar year. Subject to Section 8 below, and except for the 2021 calendar year, in order to be eligible for an Annual Bonus or Stretch Bonus, the Executive must remain employed for the entire calendar year to which the Annual Bonus or Stretch Bonus relates (for the avoidance of doubt, for the 2021 calendar year, the Executive must remain employed from the Effective Date through December 31, 2021 in order to be eligible for an Annual Bonus or Stretch Bonus). Any Annual Bonus or Stretch Bonus earned by the Executive will be paid no later than March 15 of the calendar year immediately following the calendar year in which the Annual Bonus or Stretch Bonus is being measured. The Executive’s Target Bonus shall be subject to review by the Board (or a committee thereof) at least annually and may be increased, but not decreased, from time to time by the Board.

 

5.              EQUITY COMPENSATION. The Company will grant to the Executive on the date hereof (the “Grant Date”) equity compensation awards under the 2018 Equity Incentive Plan (as amended, the “Plan”) for shares of the Company’s common stock (“Common Stock”) as follows:

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(a)            TIME-VESTING AWARDS. (i) A stock option to purchase 711,619 shares of Common Stock (the “Option Award”) on the Grant Date will vest and become exercisable or payable, respectively, with respect to 1/4 of the shares on the first anniversary of the Grant Date and with respect to an additional 1/12 of the shares on each quarterly anniversary of the Grant Date thereafter, subject to the Executive’s continued employment with the Company through each such date and with the other terms contained in the form of award attached hereto as Appendix B and (ii) restricted stock units representing 44,683 Common Stock (A) to vest in a single installment on December 1, 2021, subject to the Executive’s continued service through such date and full accelerated vesting upon an earlier termination of Executive’s employment without Cause, by the Executive for Good Reason or as a result of the Executive’s death or Disability, (B) providing that the Executive shall establish a Rule 10b5-1 Plan as soon as practicable following the Effective Date in order to satisfy the federal, state, or local tax withholding obligations upon settlement of the restricted stock units by directing a broker to sell shares of Common Stock issuable upon settlement of the restricted stock units; provided that if the Executive is not permitted to establish a Rule 10b5-1 Plan prior to November 15, 2021 and is prohibited from trading in the Company’s securities under a Company policy or applicable law on the settlement date of the restricted stock units, then the Executive shall have the right to elect to have the Company withhold shares otherwise issuable upon settlement of the restricted stock units in satisfaction of the applicable tax withholdings in accordance with Section 8(h)(ii) of the Plan and (C) with the other terms and conditions contained in the form of award attached hereto as Appendix C. The vesting of any such awards, shall accelerate and such awards shall become fully vested and exercisable or payable, respectively, immediately prior to a Corporate Transaction (as defined in the 2018 Equity Incentive Plan). In the event of the first equity financing that (I) results in proceeds for the Company of at least $20,000,000, and (II) results in dilution to the percentage of the Common Stock represented by the Option Award, determined on a fully diluted and, as applicable, a fully converted basis (a “Qualifying Financing”), the Company will, within five days following the consummation of such Qualifying Financing, grant to Executive additional options to purchase Common Stock under the Plan (the “Additional Options”) such that the percentage of shares of Common Stock covered by the Option Award and the Additional Options, taken together, immediately following the consummation of the Qualifying Financing, determined on a fully diluted and, as applicable, a fully converted basis, equals the percentage of shares of Common Stock covered by the Option Award immediately prior to the consummation of the Qualifying Financing, in each case determined on a fully-diluted basis. The Additional Options shall have terms consistent with the Option Award (except for the exercise price, which will be the fair market value on the date of grant).

 

(b)       ANNUAL AWARDS. Each year, the Executive will be eligible for annual awards of stock options and or restricted stock units as determined by the Board. Nothing herein shall be construed as an obligation to grant such awards, which shall be subject to the sole discretion of the Board. The vesting of any such awards, shall accelerate and such awards shall become fully vested and exercisable or payable, respectively, immediately prior to a Corporate Transaction (as defined in the 2018 Equity Incentive Plan).

 

(c)       TAX WITHHOLDING. At Executive’s request, the Company will withhold from the shares of Common Stock otherwise payable to Executive with respect to vested portions of the equity awards the number of whole shares of Common Stock required to satisfy the applicable tax withholding obligation, the number of shares so withheld to be determined by the Company based on the fair market value of the Common Stock on the date the Company is required to withhold.

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6.              EMPLOYEE BENEFITS.

 

(a)            BENEFIT PLANS. The Executive shall be entitled to participate in all employee benefit plans that the Company generally makes available to its senior executives (other than severance plans) from time to time, including any group health plans, dental plans, life, disability and AD&D insurances, a 401(k) plan, tuition reimbursement, recreation allowance, parking or public transportation and various types of paid time off, subject to the terms and conditions of such benefit plans.

 

(b)           VACATION. The Executive shall be entitled to twenty-five (25) days of paid vacation per year, in accordance with the Company’s vacation policy. Vacation may be taken at such times as the Executive elects with due regard to the needs of the Company.

 

(c)            BUSINESS EXPENSES. The Company will reimburse the Executive for all reasonable business expenses incurred by the Executive in connection with the discharge of his duties for the Company, subject to the Company’s expense reimbursement policy in effect from time to time.

 

(d)           INDEMNIFICATION. The Company shall indemnify the Executive to the maximum extent that its officers, directors and employees are entitled to indemnification pursuant to the Company’s Certificate of Incorporation and Bylaws for any acts or omissions by reason of being a director, officer or employee of the Company as of the Effective Date. The Company shall also execute in favor of Executive the Company’s standard Form of Indemnification Agreement (as of the Effective Date, the Company’s standard Form of Indemnification Agreement is files as Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on December 22, 2017, SEC File No. 001-31326). At all times during the Employment Term, the Company shall maintain in effect a comprehensive director and officers liability insurance policy with the Executive as a covered officer and director, as applicable.

 

7.              TERMINATION. The Executive’s employment and the Employment Term shall terminate on the first of the following to occur:

 

(a)            DISABILITY. Upon the 30th day following the Executive’s receipt of notice of the Company’s intention to terminate the Executive’s employment due to Disability (as defined in this Section 7(a)); provided that, the Executive has not returned to full-time performance of his duties within 30 days after receipt of such notice. If the Company determines in good faith that the Executive’s Disability has occurred during the term of this Agreement, it will give the Executive written notice of its intention to terminate his employment.  For purposes of this Agreement, “Disability” shall mean the Executive’s inability to substantially perform the essential duties of his job with or without reasonable accommodation on a full-time basis for 180 calendar days during any consecutive twelve-month period or for 90 consecutive days as a result of incapacity due to mental or physical illness.

 

(b)           DEATH. Automatically on the date of death of the Executive.

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(c)            CAUSE. Immediately upon written notice by the Company to the Executive of a termination for Cause. “Cause” shall mean (i) the Executive’s commission of an act of fraud, embezzlement or theft against the Company or its subsidiaries; (ii) the Executive’s conviction of, or a plea of no contest to, a felony; (iii) willful nonperformance by the Executive (other than by reason of disability or illness) of his material duties as an employee of the Company, which, to the extent it is curable by the Executive, is not cured within thirty (30) days after written notice thereof is given to the Executive by the Company; (iv) the Executive’s material breach of this Agreement or any other material agreement between the Executive and the Company or any of its subsidiaries, including the Confidentiality Agreement, which, to the extent it is curable by the Executive, is not cured within thirty (30) days after written notice thereof is given to the Executive by the Company; or (v) the Executive’s gross negligence, willful misconduct or any other act of willful disregard for the Company’s or any of its subsidiaries’ best interests, which, to the extent it is curable by the Executive, is not cured within thirty (30) days after written notice thereof is given to the Executive by the Company.

 

(d)           WITHOUT CAUSE. Upon written notice by the Company to the Executive no earlier than eighteen (18) months after the Effective Date of an involuntary termination without Cause and other than due to death or Disability.

 

(e)            GOOD REASON. “Good Reason” for the Executive to terminate the Executive’s employment hereunder shall mean the occurrence of any of the following conditions during the Employment Term without the Executive’s express written consent; provided that any resignation by the Executive due to any of the following conditions shall only be deemed for Good Reason if: (i) the Executive gives the Company written notice of the intent to terminate for Good Reason within sixty (60) days following the first occurrence of the condition(s) that the Executive believes constitutes Good Reason, which notice shall describe such condition(s); (ii) the Company fails to remedy, if remediable, such condition(s) within thirty (30) days following receipt of the written notice (the “Cure Period”) of such condition(s) from the Executive; and (iii) the Executive actually resigns his employment within the first thirty (30) days after expiration of the Cure Period:

 

(1)           any material reduction by the Company of the Executive’s Base Salary or Target Bonus as initially set forth herein or as the same may be increased from time to time;

 

(2)           any material diminution in the Executive’s duties, title, responsibilities or authority;

 

(3)           a requirement that the Executive report to a corporate officer or employee other than the Company’s Chief Executive Officer;

 

(4)           any material breach of this Agreement, including a breach of the Company’s obligations under Section 4, 5 or 11(b); or

 

(5)           a requirement that the Executive relocate to a principal place of employment more than twenty-five (25) miles from Watertown, Massachusetts.

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(f)            WITHOUT GOOD REASON. The Executive shall provide two (2) weeks’ prior written notice (the “Transition Period”) to the Company of the Executive’s intended termination of employment without Good Reason (“Voluntary Termination”). During the Transition Period, the Executive shall assist and advise the Company in any transition of business, customers, prospects, projects and strategic planning, and the Company shall pay the pro rata portion of the Executive’s Base Salary and benefits through the end of the Transition Period. The Company may, in its sole discretion, upon written notice to the Executive, make such termination of employment effective earlier than the expiration of the Transition Period (“Early Termination Right”), but it shall pay the pro rata portion of the Executive’s Base Salary and benefits through the earlier of: the end of the Transition Period, or the date that the Executive accepts employment or a consulting engagement from a third party.

 

8.              CONSEQUENCES OF TERMINATION. Any termination payments made and benefits provided under this Agreement to the Executive shall be in lieu of any termination or severance payments or benefits for which the Executive may be eligible under any of the severance plans, policies or programs of the Company or its affiliates as may be in effect from time to time, but shall be in addition to any termination benefits available under any equity award or other vested benefits retained under any benefit plans of the Company or its affiliates. Subject to satisfaction of each of the conditions set forth in Section 9, the following amounts and benefits shall be due to the Executive:

 

(a)            DISABILITY. Upon employment termination due to Disability, the Company shall pay or provide the Executive: (i) any unpaid Base Salary through the date of termination and any accrued vacation; (ii) reimbursement for any unreimbursed expenses owed to Executive; and (iii) all other payments and benefits to which the Executive is entitled under the terms of any applicable compensation arrangement or benefit, equity or other plan or program, including but not limited to any applicable insurance benefits, payable on the next regularly scheduled Company payroll date following the date of termination or earlier if required by applicable law (collectively, “Accrued Amounts”). In addition, upon the Executive’s termination due to Disability, the Company shall pay the amounts described in Sections 8(d)(3) and 8(d)(4) to the Executive.

 

(b)           DEATH. In the event the Employment Term ends on account of the Executive’s death, the Executive’s estate (or to the extent a beneficiary has been designated in accordance with a program, the beneficiary under such program) shall be entitled to any Accrued Amounts, including but not limited to proceeds from any Company sponsored life insurance programs. In addition, upon the Executive’s death, the Company shall pay the amounts described in Sections 8(d)(3) and 8(d)(4) to the Executive’s estate.

 

(c)            TERMINATION FOR CAUSE OR WITHOUT GOOD REASON. If the Executive’s employment should be terminated (i) by the Company for Cause, or (ii) by the Executive without Good Reason, the Company shall pay to the Executive any Accrued Amounts only, and shall not be obligated to make any additional payments to the Executive.

 

(d)           TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If the Executive’s employment by the Company is terminated by the Company other than for Cause (and not due to Disability or death) or by the Executive for Good Reason, other than in circumstances described in Section 8(e), then the Company shall pay or provide the Executive with the Accrued Amounts and subject to compliance with Section 9:

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(1)           the Executive’s Base Salary as in effect immediately preceding the last day of the Employment Term for a period of twelve (12) months following the termination date (the “Salary Severance Period”) payable in a lump sum in cash promptly following the termination date (for purposes of calculating the Executive’s severance benefits, the Executive’s Base Salary shall be calculated based on the rate in effect prior to any material reduction in Base Salary that would give the Executive the right to resign for Good Reason (as provided in Section 7(e)(1)));

 

(2)           if the Executive timely elects continued coverage under COBRA for himself and his covered dependents under the Company’s group health plans following such termination, then the Company shall pay the COBRA premiums necessary to continue the Executive’s and his covered dependents’ health insurance coverage in effect on the termination date until the earliest of (i) twelve (12) months following the termination date (the “COBRA Severance Period”); (ii) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment; or (iii) the date the Executive ceases to be eligible for COBRA continuation coverage for any reason, including plan termination (such period from the termination date through the earlier of (i)-(iii), the “COBRA Payment Period”). Notwithstanding the foregoing, if at any time the Company determines that its payment of COBRA premiums on the Executive’s behalf would result in a violation of applicable law (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of paying COBRA premiums pursuant to this Section 8(d)(2), the Company shall pay the Executive on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to applicable tax withholding (such amount, the “Special Severance Payment”), such Special Severance Payment to be made without regard to the Executive’s payment of COBRA premiums. Nothing in this Agreement shall deprive the Executive of his rights under COBRA or ERISA for benefits under plans and policies arising under his employment by the Company.

 

(3)           in the event that the Executive’s employment is terminated after December 31 of any performance year, but prior to the Annual Bonus payment date for such performance year, the Executive shall receive: (i) the amount of the Annual Bonus as determined by the Board in good faith for the performance year immediately prior to the year in which the Executive’s termination occurs if the Company has not determined the amount of the Executive’s Annual Bonus as of the date of the Executive’s termination; or (ii) the amount of the Annual Bonus as already determined by the Board in good faith for the performance year immediately prior to the year in which the Executive’s termination occurs if the Company has already determined the amount of the Executive’s Annual Bonus as of the date of the Executive’s termination, payable in either case as a lump sum at the same time annual bonuses are paid to the Company’s executives generally, but no later than March 15 of the calendar year immediately following the calendar year in which the Annual Bonus is being measured;

 

(4)           in the event that the Executive’s employment is terminated: (i) on or before the date Annual Bonus performance goals are established for the performance year in which the Executive’s termination occurs, the Executive shall receive a pro-rata portion of the Executive’s Target Bonus for the performance year in which the Executive’s termination occurs, with such pro-rata portion calculated based upon the number of days that the Executive was employed during such performance year divided by the total number of days in such performance year; or (ii) after the date Annual Bonus performance goals are established for the performance year in which the Executive’s termination occurs (but on or before December 31 of such performance year), the Executive shall receive a pro-rata portion of the Executive’s Target Bonus for the performance year in which the Executive’s termination occurs, with such pro-rata portion calculated based upon the Executive’s achievement of performance goals as determined by the Board in good faith, payable in either case as a lump sum payment on the Company’s first ordinary payroll date occurring on or after the General Release effective date (namely, the date it can no longer be revoked) or as soon thereafter as is reasonable practicable thereafter; and

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(5)           if such termination occurs prior to the second anniversary of the Effective Date, an additional fifty percent (50%) of the shares subject to all stock options, restricted stock units and other equity awards which are time-based and are then held by the Executive shall vest and become exercisable or payable, as applicable, and an additional fifty percent (50%) of the performance-based awards shall vest based on target performance and (z) if such termination occurs on or after the second anniversary of the Effective Date, all of the shares subject to all stock options, restricted stock units and other equity awards which are time-based and are then held by the Executive shall vest and become exercisable or payable, as applicable, and all performance-based awards shall vest based on target performance. In addition, the time period that the Executive may have to exercise any stock options shall be extended for a period equal to the shorter of (i) one (1) year or (ii) the remaining term of the award; provided, however, that if any particular equity or equity-based award provides for more favorable termination treatment, then the more favorable treatment provided therein will apply.

 

(e)            TERMINATION WITHOUT CAUSE OR FOR GOOD REASON FOLLOWING A CORPORATE TRANSACTION. If the Executive’s employment by the Company is terminated by the Company other than for Cause (and not due to Disability or death), or by the Executive for Good Reason, in either case on or within twenty-four (24) months immediately following a Corporate Transaction, then the Company shall pay or provide the Executive with the Accrued Amounts and all of the benefits described in Section 8(d) above, subject to compliance with Section 9; provided that: (i) the Salary Severance Period defined in Section 8(d)(1) shall be increased to a total of eighteen (18) months following the termination date; (ii) the COBRA Severance Period defined in Section 8(d)(2) shall be increased to a total of eighteen (18) months following the termination date; and (iii) in lieu of the pro-rata bonus described in Section 8(d)(4), the Company shall pay the Executive the full Target Bonus for the performance year in which the Executive’s termination occurs, payable as a lump sum payment on the Company’s first ordinary payroll date occurring on or after the General Release effective date (namely, the date it can no longer be revoked).

 

9.              CONDITIONS. Any payments or benefits made or provided pursuant to Section 8 (other than Accrued Amounts) are subject to the Executive’s (or, in the event of the Executive’s death, the beneficiary’s or estate’s, or in the event of the Executive’s Disability, the guardian’s):

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(a)            compliance with the provisions of Section 10 hereof;

 

(b)           delivery to the Company of the executed Agreement and General Release (the “General Release”), which shall be in the form attached hereto as Appendix A (with such changes therein or additions thereto as needed under then applicable law to give effect to its intent and purpose) within 21 days following the date of termination of employment, and permitting the General Release to become effective in accordance with its terms; and

 

(c)            delivery to the Company of a resignation from all offices, directorships and fiduciary positions with the Company, its affiliates and employee benefit plans, by no later than 90 days following termination of employment.

 

Notwithstanding the due date of any post-employment payments, any amounts due following a termination under this Agreement (other than Accrued Amounts) shall not be due until after the expiration of any revocation period applicable to the General Release without the Executive having revoked such General Release, and any such amounts shall be paid or commence being paid to the Executive on the Company’s first ordinary payroll date occurring on or after the expiration of such revocation period without the occurrence of a revocation by the Executive (or such later date as may be required under Section 17 or the final sentence of this Section 9). Nevertheless (and regardless of whether the General Release has been executed by the Executive), upon any termination of Executive’s employment, Executive shall be entitled to receive any Accrued Amounts, payable after the date of termination in accordance with the Company’s applicable plan, program, policy or payroll procedures. Notwithstanding anything to the contrary in this Agreement, if any severance pay or benefits are deferred compensation under Section 409A (as defined below), and the period during which the Executive may sign the General Release begins in one calendar year and ends in another, then the severance pay or benefit shall not be paid or the first payment shall not occur until the later calendar year.

 

10.           CONFIDENTIALITY AND POST-EMPLOYMENT OBLIGATIONS. As a condition of employment, the Executive agrees to execute and abide by the Company’s current form of Confidentiality and Non-Competition Agreement (“Confidentiality Agreement”), which may be amended by the parties from time to time without regard to this Agreement. The Confidentiality Agreement contains provisions that are intended by the parties to survive and do survive termination of this Agreement.

 

11.           ASSIGNMENT.

 

(a)            The Executive may not assign or delegate any rights or obligations hereunder without first obtaining the written consent of the Company.

 

(b)           This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns and legal representatives. The Company will require any acquirer or successor of the Company in any merger, consolidation, sale, or acquisition of the Company, or a similar transaction to assume the Company’s obligations under this Agreement, and any failure to do so shall constitute a material breach of this Agreement.

 

12.           NOTICE. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of delivery if delivered by hand, (b) on the date of transmission, if delivered by confirmed facsimile, (c) on the first business day following the date of deposit if delivered by guaranteed overnight delivery service, or (d) on the fourth business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: at the address (or to the facsimile number) shown on the records of the Company.

 9 

 

If to the Company:

 

Eloxx Pharmaceuticals, Inc.

950 Winter Street

Waltham, MA 02451

 

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

13.           SECTION HEADINGS; INCONSISTENCY. The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. If there is any inconsistency between this Agreement and any other agreement plan, program, policy or practice (collectively, “Other Provision”) of the Company the terms of this Agreement shall control over such Other Provision.

 

14.           SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity of unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, that provision shall be enforced to the maximum extent permitted by law and shall be deemed revised as near as possible to attain the intent of the parties, and all other provisions of this Agreement shall remain in full force and effect.

 

15.           COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instruments. One or more counterparts of this Agreement may be delivered by facsimile, with the intention that delivery by such means shall have the same effect as delivery of an original counterpart thereof.

 

16.           MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or director of the Company as may be designated or authorized by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement together with all exhibits hereto and the Confidentiality Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Massachusetts without regard to its conflicts of law principles.

 10 

 

17.           SECTION 409A.

 

(a)            Notwithstanding anything to the contrary herein, the following provisions apply to the extent severance benefits provided herein are subject to Section 409A of Code and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”). Severance benefits payable upon a termination of employment shall not commence until Executive has a “separation from service” for purposes of Section 409A. Each installment of severance benefits is a separate “payment” for purposes of Treas. Reg. Section 1.409A-2(b)(2)(i), and the severance benefits are intended to satisfy the exemptions from application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if such exemptions are not available and Executive is, upon separation from service, a “specified employee” for purposes of Section 409A, then, solely to the extent necessary to avoid adverse personal tax consequences under Section 409A, the timing of the severance benefits shall be delayed until the earlier of (i) six (6) months and one day after Executive’s separation from service, or (ii) Executive’s death. Any payment or benefit otherwise payable or to be provided in the six (6) month period following separation from service that is not so paid or provided by reason of this Section 17 shall be accumulated and paid or provided in a single lump sum, as soon as practicable (and in all events within 15 days) after the date that is six (6) months after Executive’s separation from service (or, if earlier, as soon as practicable, and in all events within 15 days, after the date of Executive’s death)

 

(b)           It is intended that this Agreement shall comply with the requirements of Section 409A, and any ambiguity contained herein shall be interpreted in such manner so as to avoid adverse personal tax consequences under Section 409A. Notwithstanding the foregoing, the Company shall in no event be obligated to indemnify the Executive for any taxes or interest that may be assessed by the IRS pursuant to Section 409A of the Code on payments made pursuant to this Agreement.

 

18.           MITIGATION OF DAMAGES. In no event shall the Executive be obliged to seek other employment or take any other action by way of mitigation of the severance benefits payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any severance benefit hereunder be reduced by any compensation earned by the Executive as a result of employment by another employer, except as set forth in this Agreement.

 

19.           REPRESENTATIONS. The Executive represents and warrants to the Company that the Executive has the legal right to enter into this Agreement and to perform all of the obligations on the Executive’s part to be performed hereunder in accordance with its terms and that the Executive is not a party to any agreement or understanding, written or oral, which could prevent the Executive from entering into this Agreement or performing all of the Executive’s obligations hereunder. The Executive further represents and warrants that he has been advised to consult with an attorney and that he has been represented by the attorney of his choosing during the negotiation of this Agreement (or chosen not to be so represented), that he has consulted with his attorney before executing this Agreement (or chosen not to consult an attorney), that he has carefully read and fully understand all of the provisions of this Agreement and that he is voluntarily entering into this Agreement.

 11 

 

20.           NON-DISPARAGEMENT. Both during and after the Employment Term, the Executive and the Company (through its officers and directors) agree not to disparage the other party, and the other party’s officers, directors, employees, shareholders, affiliates and agents, in any manner likely to be harmful to them or their business, business reputation or personal reputation; provided that both the Executive and the Company may respond accurately and fully to any question, inquiry or request for information when required by legal process and provided further that nothing in this Section 20 shall preclude any party from making truthful statements that are reasonably necessary or to enforce or defend the party’s rights under this Agreement.

 

21.           WITHHOLDING. The Company may withhold from any and all amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

 

22.           SURVIVAL. The respective obligations of, and benefits afforded to, the Company and the Executive which by their express terms or clear intent survive termination of the Executive’s employment with the Company, including, without limitation, the provisions of Sections 8 through 24, inclusive, of this Agreement, will survive termination of the Executive’s employment with the Company, and will remain in full force and effect according to their terms.

 

23.           AGREEMENT OF THE PARTIES. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent. Neither the Executive nor the Company shall be entitled to any presumption in connection with any determination made hereunder in connection with any arbitration, judicial or administrative proceeding relating to or arising under this Agreement.

 

24.           DISPUTE RESOLUTION. In the event of any controversy, dispute or claim between the parties under, arising out of or related to this Agreement (including but not limited to, claims relating to breach, termination of this Agreement, or the performance of a party under this Agreement) whether based on contract, tort, statute or other legal theory (collectively referred to hereinafter as “Disputes”), the parties shall follow the dispute resolution procedures set forth below. Any Dispute shall be finally settled by arbitration in accordance with the Employment Arbitration Rules & Procedures of JAMS (“JAMS”) then in force, and that the arbitration hearings shall be held in Boston, Massachusetts. The parties agree to (i) appoint an arbitrator who is knowledgeable in employment and human resource matters and, to the extent possible, the industry in which the Company operates, and instruct the arbitrator to follow substantive rules of law; (ii) require the testimony to be transcribed; and (iii) require the award to be accompanied by findings of fact and a statement of reasons for the decision. The arbitrator shall have the authority to permit discovery, to the extent deemed appropriate by the arbitrator, upon request of a party, but such discovery process shall continue for no more than thirty (30) days. The arbitrator shall have no power or authority to add to or detract from the written agreement of the parties. If the parties cannot agree upon an arbitrator within ten (10) days after demand by either of them, either or both parties may request JAMS name a panel of five (5) arbitrators. The Company shall strike the names of two (2) off this list; then, the Executive shall strike two (2) of the remaining names; and the remaining name shall be the arbitrator. The Company shall pay for both parties’ reasonable attorneys’ fees and expenses and all JAMS fees and expenses. Any award shall be final, binding and conclusive upon the parties and a judgment rendered thereon may be entered in any court having jurisdiction thereof. This Section shall not limit the right of any party to sue for injunctive relief for a breach of the obligations of this Agreement.

 

[signature page follows]

 12 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, effective as of the date first written above.

 

  ELOXX PHARMACEUTICALS, INC.
     
     
  By: /s/ Tomer Kariv
    Tomer Kariv
    Its: Chairman of the Board of Directors
     
     
     
  EXECUTIVE
   
   
  /s/ Vijay Modur
  Vijay Modur

 

 

[Signature Page to Employment Agreement]

 

 

APPENDIX A

 

FORM OF RELEASE

 

AGREEMENT AND GENERAL RELEASE

 

Eloxx Pharmaceuticals, Inc. (the “Company”) and Vijay Modur (“Executive”) agree:

 

1.              Last Day of Employment. Executive’s last day of employment with Employer was [INSERT DATE] (the “Termination Date”). In addition, effective as of the Termination Date, Executive ceased to serve as the General Counsel of the Company and its affiliates and ceased to be eligible for any benefits or compensation from the Company and its affiliates other than as specifically provided in Section 8 of the Executive Employment Agreement between the Company and Executive dated as of April 1, 2021 (the “Employment Agreement”). Executive further acknowledges and agrees that from and after the date Executive executes this Agreement and General Release, Executive will not represent (and since the Termination Date the Executive has not represented) the Executive as being a director, employee, officer, trustee, agent or representative of the Company or its affiliates for any purpose. In addition, effective as of Termination Date, Executive resigns from all offices, directorships, trusteeships, committee memberships and fiduciary capacities held with, or on behalf of, the Company and its affiliates or any benefit plans of the Company and its affiliates. These resignations will become irrevocable as set forth in Section 3 below.

 

2.              Consideration. The parties acknowledge that this Agreement and General Release is being executed in accordance with Section 9 of the Employment Agreement.

 

3.              Revocation. Executive may revoke this Agreement and General Release for a period of seven (7) calendar days following the day Executive executes this Agreement and General Release. Any revocation within this period must be submitted in writing to the Company and state, “I hereby revoke my acceptance of our Agreement and General Release.” The revocation must be delivered to the Company, Eloxx Pharmaceuticals, Inc., 950 Winter Street, Waltham, MA 02451, or any executive officer of the Company. This Agreement and General Release shall become effective and irrevocable on the eighth (8th) day after Executive executes it, unless earlier revoked by Executive in accordance with this Section 3 (the “Effective Date”).

 

4.              General Release of Claims. (A) Executive and the Executive’s heirs, executors, administrators, successors and assigns (collectively referred to throughout this Agreement as “Employee”) knowingly and voluntarily release and forever discharge the Company and its affiliates, subsidiaries, divisions, benefit plans, successors and assigns in such capacity, and the current, future and former employees, officers, directors, trustees and agents thereof (collectively referred to as “Employer”) from any and all actions, causes of action, contributions, indemnities, duties, debts, sums of money, suits, controversies, restitutions, understandings, agreements, promises, claims regarding stock, stock options or other forms of equity compensation, commitments, damages, fees and liabilities, responsibilities and any and all claims, demands, executions and liabilities of whatsoever kind, nature or description, oral or written, known or unknown, matured or unmatured, suspected or unsuspected at the present time, in law or in equity, whether known and unknown, against Employer, which the Employee has, has ever had or may have as of the date of Executive’s execution of this Agreement and General Release, including, but not limited to, any alleged violation of:

 1 

 

-Title VII of the Civil Rights Act of 1964, as amended;

 

-The Civil Rights Act of 1991;

 

-Sections 1981 through 1988 of Title 42 of the United States Code, as amended;

 

-The Employee Retirement Income Security Act of 1974, as amended;

 

-The Immigration Reform and Control Act, as amended;

 

-The Americans with Disabilities Act of 1990, as amended;

 

-The Age Discrimination in Employment Act of 1967, as amended;

 

-The Older Workers Benefit Protection Act of 1990;

 

-The Worker Adjustment and Retraining Notification Act, as amended;

 

-The Occupational Safety and Health Act, as amended;

 

-The Family and Medical Leave Act of 1993;

 

-The Massachusetts Wage Act;

 

-Massachusetts anti-discrimination laws, M.G.L Chapter 151B- Any wage payment and collection, equal pay and other similar laws, acts and statutes of the Commonwealth of Massachusetts or the United States;

 

-Any other federal, state or local civil or human rights law or any other local, state or federal law, regulation or ordinance;

 

-Any public policy, contract, tort, or common law; or

 

-Any allegation for costs, fees, or other expenses including attorneys’ fees incurred in these matters.

 

Notwithstanding anything herein to the contrary, the sole matters to which the Agreement and General Release do not apply are: (i) Employee’s express rights or claims for accrued vested benefits under any employee benefit plan, policy or arrangement maintained by Employer or under COBRA; (ii) Employee’s rights under the provisions of the Employment Agreement which are intended to survive termination of employment; ; or (iii) any rights of the Executive to indemnification as a Director or Officer of the Company.

 

5.              No Claims Permitted. Employee waives Executive’s right to file any charge or complaint against Employer arising out of Executive’s employment with or separation from Employer before any federal, state or local court or any state or local administrative agency, except where such waivers are prohibited by law (with the understanding that that this Agreement and General Release bars the Executive from recovering monetary relief from Employer in connection with any charges or complaints which are not waived hereunder).

 2 

 

Furthermore, nothing in this Agreement or General Release and Waiver of Claims prohibits Executive from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. Executive does not need the prior authorization of the Company to make any such reports or disclosures and Executive is not required to notify the Company that Executive has made such reports or disclosures.

 

6.              Affirmations. Employee affirms Executive has not filed, has not caused to be filed, and is not presently a party to, any claim, complaint, or action against Employer in any forum. Employee further affirms that the Executive has been paid and/or has received all compensation, wages, bonuses, commissions, and/or benefits to which Executive may be entitled and no other compensation, wages, bonuses, commissions and/or benefits are due to Executive, except as provided in Section 8 of the Employment Agreement. Employee also affirms Executive has no known workplace injuries.

 

7.              Cooperation; Return of Property. Employee agrees to reasonably cooperate with Employer and its counsel in connection with any investigation, administrative proceeding or litigation relating to any matter that occurred during Executive’s employment in which Executive was involved or of which Executive has knowledge. Employer will reimburse the Employee for any reasonable out-of-pocket travel, delivery or similar expenses incurred in providing such service to Employer. Employee represents that Employee has returned to Employer all property belonging to Employer, including but not limited to any leased vehicle, laptop, cell phone, keys, access cards, phone cards and credit cards, provided that Executive may retain, and Employer shall cooperate in transferring, Executive’s cell phone number and Executive’s personal rolodex and other address books.

 

8.              Governing Law and Interpretation. This Agreement and General Release shall be governed and conformed in accordance with the laws of the Commonwealth of Massachusetts without regard to its conflict of laws provisions. In the event Employee or Employer breaches any provision of this Agreement and General Release, Employee and Employer affirm either may institute an action to specifically enforce any term or terms of this Agreement and General Release. Should any provision of this Agreement and General Release be declared illegal or unenforceable by any court of competent jurisdiction and should the provision be incapable of being modified to be enforceable, such provision shall immediately become null and void, leaving the remainder of this Agreement and General Release in full force and effect. Nothing herein, however, shall operate to void or nullify any general release language contained in the Agreement and General Release.

 

9.              No Admission of Wrongdoing. Employee agrees neither this Agreement and General Release nor the furnishing of the consideration for this Agreement and General Release shall be deemed or construed at any time for any purpose as an admission by Employer of any liability or unlawful conduct of any kind.

 3 

 

10.           Non-Disparagement. Employee and Employer (through its officers and directors) agree not to disparage the other party, and the other party’s officers, directors, employees, shareholders and agents, in any manner likely to be harmful to them or their business, business reputation or personal reputation; provided that both Employee and Employer may respond accurately and fully to any question, inquiry or request for information when required by legal process and provided further that nothing in this Section 10 shall preclude Employer or Employee from making truthful statements that are reasonably necessary or to enforce or defend the party’s rights under this Agreement and General Release.

 

11.           Amendment. This Agreement and General Release may not be modified, altered or changed except upon express written consent of both parties wherein specific reference is made to this Agreement and General Release.

 

12.           Entire Agreement. This Agreement and General Release and the Confidentiality Agreement (as defined in the Employment Agreement) sets forth the entire agreement between the parties hereto and fully supersedes any prior agreements or understandings between the parties; provided, however, that notwithstanding anything in this Agreement and General Release, the provisions in the Employment Agreement which are intended to survive termination of the Employment Agreement, including but not limited to those contained in Section 10 thereof, shall survive and continue in full force and effect. Employee acknowledges Executive has not relied on any representations, promises, or agreements of any kind made to Executive in connection with Executive’s decision to accept this Agreement and General Release.

 

13.           ADEA. Employee understands and acknowledges that Employee is waiving and releasing any rights Executive may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary. Employee understands and agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the date Executive signs this Agreement and General Release. Employee understands and acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Employee was already entitled. Employee further understands and acknowledges that Employee has been advised by this writing that nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law.

 

[signature page follows]

 4 

 

EMPLOYEE HAS BEEN ADVISED THAT EXECUTIVE HAS UP TO TWENTY-ONE (21) CALENDAR DAYS TO REVIEW THIS AGREEMENT AND GENERAL RELEASE AND HAS BEEN ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTION OF THIS AGREEMENT AND GENERAL RELEASE.

 

EMPLOYEE AGREES ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT AND GENERAL RELEASE DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE (21) CALENDAR DAY CONSIDERATION PERIOD. IN THE EVENT EMPLOYEE SIGNS THIS AGREEMENT AND GENERAL RELEASE AND RETURNS IT TO THE COMPANY IN LESS THAN THE TWENTY-ONE (21) DAY PERIOD IDENTIFIED ABOVE, EMPLOYEE HEREBY ACKNOWLEDGES THAT EMPLOYEE HAS FREELY AND VOLUNTARILY CHOSEN TO WAIVE THE TIME PERIOD ALLOTTED FOR CONSIDERING THIS AGREEMENT AND GENERAL RELEASE.

 

HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THE SUMS AND BENEFITS SET FORTH IN THE EMPLOYMENT AGREEMENT, EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS EXECUTIVE HAS OR MIGHT HAVE AGAINST EMPLOYER.

 

IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Agreement and General Release as of the date set forth below:

 

  ELOXX PHARMACEUTICALS, INC.
   
  By:  
    Name:
    Its:
       
    Date:
       
       
       
  EXECUTIVE
   
   
  Vijay Modur
       
       
  Date:  
     

 

Exhibit 10.3

 

 

EXECUTION COPY

 

 

SEPARATION AGREEMENT AND GENERAL RELEASE

 

This Separation Agreement and General Release (this “Agreement”), dated as of the date set forth on the signature page hereto, is entered into by and between Eloxx Pharmaceuticals, Inc. (the “Company”) and Gregory C. Williams (“Williams”).

 

WHEREAS, Williams has been employed by the Company as the Company’s Chief Executive Officer pursuant to that certain Employment Agreement by and among the Company and Williams, dated as of February 25, 2020 (the “Employment Agreement”);

 

WHEREAS, the parties acknowledge that they have reached a mutual agreement that Williams will resign from his position as the Chief Executive Officer of the Company and will terminate employment with the Company effective as of the Termination Date (as defined below).

 

NOW, THEREFORE, in consideration of the covenants below, including the General Release of Claims, and for other good and valuable consideration, Williams and the Company agree as follows:

 

1.              Last Day of Employment. Williams’ last day of employment with the Company, and with all of its affiliates, was April 1, 2021 (the “Termination Date”). In addition, effective as of the Termination Date, Williams ceased to serve as the Chief Executive Officer of the Company and its affiliates and ceased to be eligible for any benefits or compensation from the Company and its affiliates other than as specifically provided in Section 8(d) of the Employment Agreement, as modified by Section 2 of this Agreement. Williams further acknowledges and agrees that from and after the date Williams executes this Agreement, Williams will not represent (and since the Termination Date, Williams has not represented) Williams as being a director, employee, officer, trustee, agent or representative of the Company or its affiliates for any purpose.  In addition, effective as of Termination Date, Williams resigns from all offices, directorships, trusteeships, committee memberships and fiduciary capacities held with, or on behalf of, the Company and its affiliates or any benefit plans of the Company and its affiliates.  

 

2.              Consideration by the Company. In addition to the “Accrued Amounts” (as defined in the Employment Agreement and which will be payable in accordance with the Employment Agreement), as consideration for this Agreement, subject to and conditioned upon Williams’ continued compliance with the provision of Section 10 of the Employment Agreement, and Williams’ (x) continued compliance with the confidentiality obligations and restrictive covenants to which Williams is subject, (y) timely execution and delivery (without revocation) to the Company of this Agreement and (z) material compliance with the other terms and conditions of this Agreement, Williams shall be entitled to the following consideration:

 

(a)            a cash payment of $221,668 in respect of the “Base Salary” (as defined in the Employment Agreement) that would have been payable to Williams for the period from the Termination Date through August 25, 2021, payable in a lump sum in cash on the first regular payroll date following the date that this Agreement becomes effective and irrevocable;

 

 

(b)           the number of shares subject to all stock options, restricted stock units and other equity awards held by Williams as of April 1, 2021, that would have vested and become exercisable or payable between April 1, 2021 and August 25, 2021, shall vest and become exercisable or payable, as applicable, effective as of the date that this Agreement becomes effective and irrevocable, and otherwise subject to their terms; and

 

(c)            the payments and benefits set forth in Section 8(d) of the Employment Agreement (“Termination Without Cause or for Good Reason”); provided that (i) for purposes of Section 8(d)(2) of the Employment Agreement, the “COBRA Severance Period” under Section 8(d)(2)(i) of the Employment Agreement shall be the period from the Termination Date through August 25, 2022; (ii) for purposes of Section 8(d)(4) of the Employment Agreement, the pro-rata portion of Williams’ Target Bonus (which, for clarity, is sixty percent (60%) of Base Salary, as approved by the Board on February 10, 2021) that is eligible to be earned subject to Williams’ achievement of performance goals as determined in accordance with Section 8(d)(4) of the Employment Agreement, will be determined by applying to the Target Bonus a fraction, the numerator of which is 237 (the number of days between January 1, 2021 and August 25, 2021) and the denominator of which is 365; and (iii) the time period that Williams may have to exercise any stock options shall be extended for a period ending on May 25, 2022 or, if earlier, the end of the remaining term of the applicable stock option, in each case with such payments and benefits to be paid or provided in accordance with the Employment Agreement.

 

Except as expressly provided in this Section 2, Williams shall not be entitled to any further payments or benefits in connection with his termination of employment, whether under his Employment Agreement or hereunder.

 

3.              General Release of Claims. Williams and Williams’ heirs, executors, administrators, successors and assigns (collectively, the “Williams Releasor Parties”) knowingly and voluntarily release and forever discharge the Company and its affiliates, subsidiaries, divisions, benefit plans, successors and assigns in such capacity, and the current, future and former employees, officers, directors, trustees and agents thereof (collectively referred to as the “Employer Released Parties”) from any and all actions, causes of action, contributions, indemnities, duties, debts, sums of money, suits, controversies, restitutions, understandings, agreements, promises, claims regarding stock, stock options or other forms of equity compensation, commitments, damages, fees and liabilities, responsibilities and any and all claims, demands, executions and liabilities of whatsoever kind, nature or description, oral or written, known or unknown, matured or unmatured, suspected or unsuspected at the present time, in law or in equity, whether known and unknown, against the Employer Released Parties, which the Williams Releasor Parties have, have ever had or may have as of the date of Williams’ execution of this Agreement, including, but not limited to, any alleged violation of:

 2 

 

-Title VII of the Civil Rights Act of 1964, as amended;

 

-The Civil Rights Act of 1991;

 

-Sections 1981 through 1988 of Title 42 of the United States Code, as amended;

 

-The Employee Retirement Income Security Act of 1974, as amended;

 

-The Immigration Reform and Control Act, as amended;

 

-The Americans with Disabilities Act of 1990, as amended;

 

-The Age Discrimination in Employment Act of 1967, as amended;

 

-The Older Workers Benefit Protection Act of 1990;

 

-The Worker Adjustment and Retraining Notification Act, as amended;

 

-The Occupational Safety and Health Act, as amended;

 

-The Family and Medical Leave Act of 1993;

 

-The Massachusetts Wage Act;

 

-Massachusetts anti-discrimination laws, M.G.L Chapter 151B-Any wage payment and collection, equal pay and other similar laws, acts and statutes of the Commonwealth of Massachusetts or the United States;

 

-Any other federal, state or local civil or human rights law or any other local, state or federal law, regulation or ordinance;

 

-Any public policy, contract, tort, or common law; or

 

-Any allegation for costs, fees, or other expenses including attorneys’ fees incurred in these matters.

 

Notwithstanding anything herein to the contrary, the sole matters to which the Agreement do not apply are: (i) Williams’ express rights or claims for accrued vested benefits under any employee benefit plan, policy or arrangement maintained by the Company or under COBRA; (ii) Williams’ rights under the provisions of the Employment Agreement which are intended to survive termination of employment; or (iii) any rights of Williams to indemnification as a Director or Officer of the Company.

 

4.              Revocation. Williams may revoke the release of claims in the foregoing Section 3 for a period of seven (7) calendar days following the day Williams executes this Agreement. Any revocation within this period must be submitted in writing to the Company and state, “I hereby revoke my acceptance of the release of claims contained in the Separation Agreement and General Release.” The revocation must be delivered to the Company, Eloxx Pharmaceuticals, Inc., 950 Winter Street, Waltham, MA 02451, or any executive officer of the Company. The release contained in this Agreement shall become effective and irrevocable on the eighth (8th) day after Williams executes it, unless earlier revoked by Williams in accordance with this Section 4.

 3 

 

5.              No Claims Permitted. The Williams Releasor Parties waive the right of the Williams Releasor Parties to file any charge or complaint against the Employer Released Parties arising out of Williams’ employment with or separation from the Company before any federal, state or local court or any state or local administrative agency, except where such waivers are prohibited by law (with the understanding that that this Agreement bars the Williams Releasor Parties from recovering monetary relief from Employer Released Parties in connection with any charges or complaints which are not waived hereunder).

 

Furthermore, nothing in this Agreement or the release of claims contained herein prohibits Williams from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. Williams does not need the prior authorization of the Company to make any such reports or disclosures and Williams is not required to notify the Company that Williams has made such reports or disclosures. In addition, under the Federal Defend Trade Secrets Act of 2016, Williams shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (a) (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; (b) to Williams’ attorney in relation to a lawsuit for retaliation against Williams for reporting a suspected violation of law; or (c) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

6.              Affirmations. Williams affirms that the Williams Releasor Parties have not filed, have not caused to be filed, and are not presently a party to, any claim, complaint, or action against the Employer Released Parties in any forum. Williams further affirms that Williams has been paid and/or has received all compensation, wages, bonuses, commissions, and/or benefits to which Williams may be entitled and no other compensation, wages, bonuses, commissions and/or benefits are due to Williams, except as otherwise contemplated in this Agreement or the Employment Agreement (after giving effect to this Agreement). Williams also affirms Williams has no known workplace injuries.

 

7.              Cooperation; Return of Property. Williams agrees to reasonably cooperate with Company and its counsel in connection with any investigation, administrative proceeding or litigation relating to any matter that occurred during Williams’ employment in which Williams was involved or of which Williams has knowledge. The Company will reimburse Williams for any reasonable out-of-pocket travel, delivery or similar expenses incurred in providing such service to the Company. Williams represents that Williams has returned to the Company all property belonging to the Company, including but not limited to any leased vehicle, laptop, cell phone, keys, access cards, phone cards and credit cards, provided that Williams may retain, and the Company shall cooperate in transferring, Williams’ cell phone number and Williams’ personal rolodex and other address books.

 

8.              Governing Law and Interpretation. This Agreement shall be governed and conformed in accordance with the laws of the Commonwealth of Massachusetts without regard to its conflict of laws provisions. In the event Williams or the Company breaches any provision of this Agreement, Williams and the Company affirm that either may institute an action to specifically enforce any term or terms of this Agreement. Should any provision of this Agreement be declared illegal or unenforceable by any court of competent jurisdiction and should the provision be incapable of being modified to be enforceable, such provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect. Nothing herein, however, shall operate to void or nullify any general release language contained in the Agreement.

 4 

 

9.              No Admission of Wrongdoing. Williams and the Company each agrees neither this Agreement nor the furnishing of any consideration hereunder shall be deemed or construed at any time for any purpose as an admission by the Company or by Williams of any liability or unlawful conduct of any kind.

 

10.           Non-Disparagement. Williams and the Company (through its officers and directors) agree not to disparage the other party, and the other party’s officers, directors, employees, shareholders and agents, in any manner likely to be harmful to them or their business, business reputation or personal reputation; provided that both Williams and the Company may respond accurately and fully to any question, inquiry or request for information when required by legal process and provided further that nothing in this Section 10 shall preclude the Company or Williams from making truthful statements that are reasonably necessary or to enforce or defend the party’s rights under this Agreement.

 

11.           Dispute Resolution. In the event of any controversy, dispute or claim between the parties under, arising out of or related to this Agreement (including but not limited to, claims relating to breach, termination of this Agreement, or the performance of a party under this Agreement) whether based on contract, tort, statute or other legal theory (collectively referred to hereinafter as “Disputes”), the parties shall follow the dispute resolution procedures set forth below. Any Dispute shall be finally settled by arbitration in accordance with the Employment Arbitration Rules & Procedures of JAMS (“JAMS”) then in force, and that the arbitration hearings shall be held in Boston, Massachusetts. The parties agree to (a) appoint an arbitrator who is knowledgeable in employment and human resource matters and, to the extent possible, the industry in which the Company operates, and instruct the arbitrator to follow substantive rules of law; (b) require the testimony to be transcribed; and (c) require the award to be accompanied by findings of fact and a statement of reasons for the decision. The arbitrator shall have the authority to permit discovery, to the extent deemed appropriate by the arbitrator, upon request of a party, but such discovery process shall continue for no more than thirty (30) days. The arbitrator shall have no power or authority to add to or detract from the written agreement of the parties. If the parties cannot agree upon an arbitrator within ten (10) days after demand by either of them, either or both parties may request JAMS name a panel of five (5) arbitrators. The Company shall strike the names of two (2) off this list; then, Williams shall strike two (2) of the remaining names; and the remaining name shall be the arbitrator. Any award shall be final, binding and conclusive upon the parties and a judgment rendered thereon may be entered in any court having jurisdiction thereof. This Section shall not limit the right of any party to sue for injunctive relief for a breach of the obligations of this Agreement

 

12.           Prevailing Party. The prevailing party in a dispute between the parties (the party receiving substantially the relief sought) shall recover his or its reasonable fees and expenses incurred in connection with any arbitration or litigation.

 5 

 

13.           Amendment. This Agreement may not be modified, altered or changed except upon express written consent of both parties wherein specific reference is made to this Agreement.

 

14.           Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of delivery if delivered by hand, (b) on the date of transmission, if delivered by confirmed facsimile or by e-mail, (c) on the first business day following the date of deposit if delivered by guaranteed overnight delivery service, or (d) on the fourth business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to Williams: at the address (or to the facsimile number) shown on the records of the Company.

 

If to the Company:

 

Eloxx Pharmaceuticals, Inc.
950 Winter Street
Waltham, MA 02451
Attention: General Counsel

 

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

15.           Section Headings; Inconsistency. The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. If there is any inconsistency between this Agreement and any other agreement plan, program, policy or practice (collectively, “Other Provision”) of the Company the terms of this Agreement shall control over such Other Provision.

 

16.           Severability. The provisions of this Agreement shall be deemed severable and the invalidity of unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, that provision shall be enforced to the maximum extent permitted by law and shall be deemed revised as near as possible to attain the intent of the parties, and all other provisions of this Agreement shall remain in full force and effect.

 

17.           Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instruments. One or more counterparts of this Agreement may be delivered by facsimile, with the intention that delivery by such means shall have the same effect as delivery of an original counterpart thereof.

 

18.           Entire Agreement. This Agreement, the Confidentiality Agreement (as defined in the Employment Agreement), and the provisions of the Employment Agreement expressly referenced herein (as modified by this Agreement), set forth the entire agreement between the parties hereto and fully supersedes any prior agreements or understandings between the parties; provided, however, that notwithstanding anything in this Agreement, the provisions in the Employment Agreement which are intended to survive termination of the Employment Agreement, including but not limited to those contained in Sections 8(d), 10 and 11 thereof, shall survive and continue in full force and effect. Williams acknowledges Williams has not relied on any representations, promises, or agreements of any kind made to Williams in connection with Williams’ decision to accept this Agreement.

 6 

 

19.           ADEA. Williams understands and acknowledges that Williams is waiving and releasing any rights Williams may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary. Williams understands and agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the date Williams signs this Agreement. Williams understands and acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Williams was already entitled. Williams further understands and acknowledges that Williams has been advised by this writing that nothing in this Agreement prevents or precludes Williams from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law.

 

20.           Withholding. The Company may withhold from any and all amounts payable under this Agreement such federal, state and local taxes as the Company determines may be required to be withheld pursuant to any applicable law or regulation.

 

21.           Section 409A.

 

(a)            Notwithstanding anything to the contrary herein, the following provisions apply to the extent severance benefits provided herein are subject to Section 409A of Internal Revenue Code of 1986 (as amended) and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”). Severance benefits payable upon a termination of employment shall not commence until Williams has a “separation from service” for purposes of Section 409A. Each installment of severance benefits is a separate “payment” for purposes of Treas. Reg. Section 1.409A-2(b)(2)(i), and the severance benefits are intended to satisfy the exemptions from application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if such exemptions are not available and Williams is, upon separation from service, a “specified employee” for purposes of Section 409A, then, solely to the extent necessary to avoid adverse personal tax consequences under Section 409A, the timing of the severance benefits shall be delayed until the earlier of (i) six (6) months and one day after Williams’ separation from service, or (ii) Williams’ death. Any payment or benefit otherwise payable or to be provided in the six (6) month period following separation from service that is not so paid or provided by reason of this Section 21 shall be accumulated and paid or provided in a single lump sum, as soon as practicable (and in all events within 15 days) after the date that is six (6) months after Williams’ separation from service (or, if earlier, as soon as practicable, and in all events within 15 days, after the date of Williams’ death). Notwithstanding anything to the contrary in this Agreement, if any severance pay or benefits are deferred compensation under Section 409A, and the period during which Williams may sign this Agreement begins in one calendar year and ends in another, then the severance pay or benefit shall not be paid or the first payment shall not occur until the later calendar year.

 7 

 

(b)           It is intended that this Agreement shall comply with or be exempt from the requirements of Section 409A, and any ambiguity contained herein shall be interpreted in such manner so as to avoid adverse personal tax consequences under Section 409A. Notwithstanding the foregoing, neither the Company nor any of its affiliates, directors, officers or advisors shall be obligated to indemnify Williams for any taxes or interest that may be assessed by the IRS pursuant to Section 409A of the Code on payments made pursuant to this Agreement.

 

[signature page follows]

 8 

 

WILLIAMS HAS BEEN ADVISED THAT WILLIAMS HAS UP TO TWENTY-ONE (21) CALENDAR DAYS TO REVIEW THE RELEASE CONTAINED IN THIS AGREEMENT AND HAS BEEN ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTION OF THIS AGREEMENT.

 

WILLIAMS AGREES ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE (21) CALENDAR DAY CONSIDERATION PERIOD. IN THE EVENT WILLIAMS SIGNS THIS AGREEMENT AND RETURNS IT TO THE COMPANY IN LESS THAN THE TWENTY-ONE (21) DAY PERIOD IDENTIFIED ABOVE, WILLIAMS HEREBY ACKNOWLEDGES THAT WILLIAMS HAS FREELY AND VOLUNTARILY CHOSEN TO WAIVE THE TIME PERIOD ALLOTTED FOR CONSIDERING THIS AGREEMENT.

 

HAVING ELECTED TO EXECUTE THIS AGREEMENT AND THE RELEASE OF CLAIMS CONTAINED HEREIN, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THE SUMS AND BENEFITS SET FORTH HEREIN, WILLIAMS FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS WILLIAMS HAS OR MIGHT HAVE AGAINST THE EMPLOYED RELEASED PARTIES THROUGH THE DATE HEREOF.

 

IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Agreement as of the date set forth below:

 

  ELOXX PHARMACEUTICALS, INC.
     
     
  By: /s/ Tomer Kariv
  Name: Tomer Kariv
  Its: Chairman of the Board of Directors
     
     
     
  WILLIAMS
     
     
  /s/ Gregory C. Williams
  Gregory C. Williams
     
     
  Date:  April 1, 2021

 

 

Exhibit 99.1

Creating a Leader in Ribosomal RNA - Targeted Genetic Therapy Eloxx A cquires Zikani Therapeutics April 1, 2021

 

 

This presentation contains forward - looking statements, which are generally statements that are not historical facts . Forward - looking statements can be identified by the words "expects," "anticipates," "believes," "intends," "estimates," "plans," "will," "outlook" and similar expressions . Forward - looking statements are based on management's current plans, estimates, assumptions and projections, and speak only as of the date they are made . We undertake no obligation to update any forward - looking statement in light of new information or future events, except as otherwise required by law . Forward - looking statements involve inherent risks and uncertainties, most of which are difficult to predict and are generally beyond our control . Actual results or outcomes may differ materially from those implied by the forward - looking statements as a result of the impact of a number of factors, including : the development of the Company’s readthrough technology ; the approval of the Company’s patent applications ; the Company’s ability to successfully defend its intellectual property or obtain necessary licenses at a cost acceptable to the Company, if at all ; the successful implementation of the Company’s research and development programs and collaborations ; the Company’s ability to obtain applicable regulatory approvals for its current and future product candidates ; the acceptance by the market of the Company’s products should they receive regulatory approval ; the timing and success of the Company’s preliminary studies, preclinical research, clinical trials, and related regulatory filings ; the ability of the Company to consummate additional financings as needed ; the impact of global health concerns, such as the COVID - 19 global pandemic, on our ability to continue our clinical and preclinical programs and otherwise operate our business effectively ; including successfully integrating the combined companies ; as well as those discussed in more detail in our Annual Report on Form 10 - K and our other reports filed with the Securities and Exchange Commission . Forward - looking statements 2

 

 

• President and CEO: Sumit Aggarwal • Head of R&D: Dr. Vijay Modur • TURBO - ZM TM : Proprietary synthetic chemistry platform to design novel macrolide - based oral small molecules • Ribosome Modulating Agents (RMAs): Potent oral ribosome modulators with favorable therapeutic index Eloxx + Zikani : Positioned to be the world leader in ribosome RNA - targeted genetic therapies • ELX - 02 : in Phase 2 development for Cystic Fibrosis (CF) • Preclinical CF program from Zikani pipeline • ELX - 02 data readout in 2H 2021 • Expect to file IND for RDEB* and JEB* program in 2022 • Advance programs in inherited and advanced colon cancer targeted at restoring APC* tumor suppressor protein 3 Strengthened leadership Rare disease and oncology pipeline Compelling assets in CF Complementary platforms targeting the human ribosome *RDEB and JEB: Recessive Dystrophic and Junctional Epidermolysis Bullosa *APC: Adenomatous Polyposis Coli

 

 

Zikani leadership team to join Eloxx Dr. Vijay Modur Head of Research & Development • 20+ years in translation and drug development • Led Venglustat rare disease program at Sanofi • 30+ years building companies • Closed $2B in equity and debt financings for public and private companies Daniel Geffken Interim Chief Financial Officer Dr. Roger Clark Head of Discovery Sciences • 20+ years medicinal chemistry • Architect of Zikani RMAs Sumit Aggarwal President and CEO • 20+ years investing and transforming healthcare companies • Raised >$150M • Biotech Investor 4 Significantly expands and strengthens leadership team

 

 

Transaction overview  Eloxx issued ~ 7.6 million shares  Zikani stockholders have pro forma ownership ~ 16% of Eloxx Consideration  Silvia Noiman, Ph.D ., and Martijn Kleijwegt stepped down from Eloxx Board  Alan Walts, Ph.D., and Raj Parekh, Ph.D., current Zikani directors, appointed to fulfill vacancies and serve out remaining terms Board changes 5

 

 

Acquisition combines complementary platforms in targeting the human ribosome Genetic nonsense mutations • Premature stop codon • Less than full length protein formed = loss of function ERSG RMA Dysregulated Ribosomes • Onco - and mitoribosomes • Selective translation of oncogenic proteins • Aids hyperproliferative phenotype ELX - 02 • ELX - 02 has shown clinically relevant readthrough of CFTR in pre - clinical models Ribosome = “Protein Factory” 6 RMA: Ribosome Modulating Agent ERSG: Eukaryotic Ribosome Selective Glycoside

 

 

• S welling response in Class 1 CF patient organoids • Induces CFTR activity of up to 30 % of normal; confirmed in Ussing Chamber • Active across broad range of mutations Demonstrated efficacy in clinically relevant pre - clinical models • Generally well - tolerated for chronic dosing • Consistent pharmacokinetics across both single and multiple - dose accumulations Safety demonstrated in clinical studies • Study designed to confirm safety and changes in sweat chloride confirming biological activity Phase 2 CF trials designed for rapid clinical signal ELX - 02: Potential for transformative efficacy in Class 1 CF patients Expect to complete enrollment in Phase 2 clinical trials by midyear and report data in 2H 2021 7

 

 

Target Indication Discovery Early research Lead optimization IND enabling Phase 1 - First in Human Phase 2 Nonsense Readthrough : Rare Disease CFTR Class 1 CF Collagen VII A1/LAMB3 RDEB/JEB CFTR Class 1 CF PKD1, PKD2 and Oca2 ADPKD/ Inherited Retinal Diseases Nonsense Readthrough : Oncology APC FAP and CRC Undisclosed Pan cancer/IO combination Protein translation inhibition Onco - ribosome and Mito - ribosome mutations Undisclosed ZKN013/ZKN034 ZKN013/ZKN074 ERSG RMA RMA Deep pipeline of synergistic potential first - in - class therapies ELX02 RMA 8 *Class 1 CF: Cystic fibrosis patients with Class1 mutations ADPKD : Autosomal Dominant Polycystic Kidney Disease FAP: Familial Adenomatous Polyposis CRC: Colorectal Cancer

 

 

Zikani Therapeutics Introduction

 

 

10 TURBO - ZM TM (Tuning the Ribosome with Zikani Molecules) platform fully unlocks the potential of macrolides Optimize for: • Readthrough • Protein translation inhibition Interact with the peptide sequence Modulate: • PK • Safety: cardiac, liver • Oral bioavailability RMA core required for ribosomal binding A B C D F E X O TURBO - ZM TM : Applying Macrolide SAR to RMA Design TURBO - ZM E ssential for ribosomal binding Modulate cytoplasm and mitochondrial ribosome binding activity

 

 

11 Strong rationale for macrolides to bind the human ribosome Nascent peptide exit tunnel in E. coli vs. Human ribosomes 1 1 Nucleic Acids Res. 2019;47(8):4198 - 4210 H. sapiens E. coli Macrolide binding site in prokaryotic (bacterial) ribosome 75% of binding site conserved in the human (eukaryotic) ribosome 1 First constriction site Second constriction site

 

 

12 Growing library of RMAs with drug - like properties Zikani RMA Library (2000+)

 

 

13 RMAs show superior readthrough to alternatives Readthrough Emax of selected RMA hits relative luciferase units compared to DMSO in W134X Nanoluc reporter assay 3,005 5,613 1,791 18,188 7,420 14,811 10,157 8,597 24,330 12,614 ZKN - 3 ZKN - 1 ZKN - 5 ZKN - 2 ZKN - 4 ZKN - 6 +710% +333% ZKN - 7 G418 (100µM) Active control 1 Active control 2

 

 

14 RDEB/JEB: Clinically validated path for RMAs in rare skin disease targeting patients with nonsense mutations 1 Woodley, DT. J Clin Investig 2017, 127, 3028 - 3038; 2Hammersen, Johanna et al. Dermatology May 2019 RDEB and JEB • Mutations in COL7A1 gene (Collagen) and LAMB3(Laminin) • Most RDEB patient develop skin cancer by age 35 • Average mortality of JEB patients is 18 months ~4,000 patients, $1.5B TAM RDEB and JEB: Recessive Dystrophic and Junctional Epidermolysis Bullosa RDEB Gentamicin treatment of RDEB patients (0.1% gentamicin ointment tid for 2 weeks; n=5) 1 Wound closure at 3 months, % Total blistering events at 3 months 13 4 Placebo Gentamicin - 69% 47 78 Gentamicin Placebo +66%

 

 

15 RDEB: RMAs restore functional collagen protein in primary patient cells comparable to high dose gentamicin COL7 with 48 hr. exposure in RDEB patient derived primary fibroblasts* * Fibroblasts isolated from patients two and five in gentamicin clinical trial. J Clin Invest 2017, 127, 3028 - 3038 ** 48 hours treatment with media and compounds replaced and refreshed at 24 hours. Study repeated twice with equivalent resul ts. Full length protein in Hom R578X COL7A Fibroblasts** Full length protein in R613X/R1683X COL7A Fibroblasts** • Assay with proven translation to clinic • 30 to 60 - day Col7 protein half - life • RMAs compounds exceed clinical efficacy threshold of 10% Gentamicin 845uM Data generated in collaboration with academic partner

 

 

16 Class 1 CF: RMA lead showed highest ever readthrough preclinical Ussing chamber assay Summary of Class 1 CF data * Forskolin 10 µM/1µM VX - 770 - both chambers ** VX 809 and RMA data averaged from 2 separate Ussing chamber results • Submitted $2.5M grant to CF Foundation to support through development candidate Data generated at Chantest Het G542X Human Broncho Epithelial (HBE) cells Ussing Chamber Steady state modulator response measurement** RMA (15 uM) DMSO RMA (30 uM) VX - 809 (3uM) G418 (50 uM) G418 (100 uM) +47% “ ” Never seen before impressive single agent activity from non aminoglycoside class – need to advance this program – CF Foundation Encouraged to apply for “Path to Cures” Isc Chloride Transport (µA/cm 2 )

 

 

17 APC readthrough: Supported by positive prior clinical success of Erythromycin in FAP 1 Kariv, R. Int J Cancer. 2019 doi: 10.1002/ijc.32557 Clinical trial success in FAP with Erythromycin Erythromycin treatment (250 mg/day po for 4 months) Change in polyp burden at 12 months 1 Change in polyp number - 55% 35% Change in polyp cumulative size 46% - 42% - 1 yr to baseline 8 months post treatment APC mutant Familial Adenomatous Polyposis (FAP) and CRC • Mutations in the Adenomatous Polyposis Coli (APC) gene (tumor suppressor gene) • FAP patients develop CRC by age 40 • 80% of CRC patients have an APC mutation 8,000 - 12,5000 FAP patients in the US/EU; 210,000 CRC patients WW

 

 

18 Clear path in treating FAP supported by efficacy in APC mutant cancer patient tumor grafts Efficacy of ZN013 in colorectal cancer patient derived tumor grafts ex - vivo • Ex - vivo sensitivity assessment in tumor grafts • Potent tumor growth inhibition – GI 50 <15uM • Cancer xenograft studies planned in 2021 ZNK013

 

 

Strengthened leadership Rare disease and oncology pipeline Compelling assets in CF Complementary platforms targeting the human ribosome 20 Eloxx + Zikani : Positioned to be the world leader in ribosome RNA - targeted genetic therapies

 

 

21

 

 

 

 

Exhibit 99.2

 

 

 

Eloxx Pharmaceuticals Acquires Zikani Therapeutics

 

 

Combined Company to be Leader in Ribosomal RNA-Targeted Genetic Therapy Bringing Together Complementary Platforms

 

Maximizes Potential for ELX-02 for Cystic Fibrosis in Phase 2 Development

 

Adds Preclinical Stage Pipeline in Rare Diseases and Oncology Targeting RNA
and Ribosomal Mutations

 

Expect to File IND for First Oral Drug to Treat Patients with Recessive Dystrophic
and Junctional Epidermolysis Bullosa (RDEB and JEB)

 

Sumit Aggarwal, Zikani President and CEO, to Lead the Combined Company

 

Eloxx to Issue Approximately 7.6 Million Shares to Zikani Stockholders

 

Company to Host Investor Call at 8:30 a.m. ET, April 1

 

WALTHAM, MA and WATERTOWN, MA – APRIL 1, 2021 – Eloxx Pharmaceuticals, Inc. (NASDAQ: ELOX) today announced it has acquired Zikani Therapeutics, Inc. in an all-stock transaction, with the potential to create a leader in ribosomal RNA-targeted therapies for treatment of rare diseases and oncology. Sumit Aggarwal, previously the President and Chief Executive Officer of Zikani, has been named President and Chief Executive Officer of Eloxx, and Vijay Modur, M.D., Ph.D., who was Zikani’s Chief Scientific and Medical Officer, has been named Eloxx’s Head of Research and Development.

 

“With the strength of our ELX-02 program for cystic fibrosis, this acquisition provides us with the opportunity to amplify the potential of our innovative science by developing a new class of therapies to treat diseases with limited to no treatment options under the stewardship of leaders with a proven ability to translate technology into treatments for patients,” said Tomer Kariv, Eloxx Chairman.

 

“We are excited about the potential of ELX-02 and combining the companies opens the door to build a leadership position in genetic therapy by rapidly developing treatments that can restore functional proteins in patients with nonsense mutations in their RNA,” said Aggarwal. “The combined capabilities of Eloxx and Zikani in chemistry, biology, regulatory and drug development, including Zikani’s TURBO-ZMTM synthetic chemistry platform for designing macrolide-based Ribosome Modulating Agents (RMAs), along with a committed leadership team and talented employees, will further accelerate our ability to impact the lives of those who have rare diseases with the type of urgency and novel thinking that they deserve,” added Aggarwal.

 

  

 

 

 

 

ELX-02 is currently in Phase 2 clinical trials in Cystic Fibrosis (CF) patients affected by nonsense mutations in the cystic fibrosis transmembrane conductance regulator (CFTR) gene. The investigational therapy has shown strong activity across a full range of mutations in CF preclinical models. In Phase 1 testing, ELX-02 was generally well- tolerated and demonstrated high bioavailability with consistent pharamacokinetics across both single and multiple-dose studies.

 

“The Phase 2 trials are designed to validate the safety of ELX-02 and assess its biological activity. We look forward to completing enrollment in the first four treatment arms by mid-year and reporting data from these treatment arms in the second half of this year,” said Dr. Modur.

 

In addition to CF, the company plans to file an IND in 2022 for what could potentially become the first oral therapy for protein restoration for patients with nonsense mutations in Recessive Dystrophic Epidermolysis Bullosa (RDEB) and Junctional Epidermolysis Bullosa (JEB). RDEB is an incurable, extremely painful and often fatal skin blistering condition caused by a lack of collagen type VII that is estimated to affect more than 3,000 people worldwide. JEB is the most severe form of EB, with most patients dying in infancy.

 

By extending the application of ribosomal RNA modulation to the readthrough of nonsense mutations in tumor suppressor genes, the company is also rapidly advancing preclinical research for familial adenomatous polyposis (FAP), an inherited pre-cancerous colorectal disease frequently caused by nonsense mutations in the adenomatous polyposis coli (APC) gene.

 

Nonsense mutations cause approximately 10-12 percent of rare inherited diseases. ELX-02 along with the TURBO-ZMTM library of compounds are anticipated to significantly expand to include the treatment of many other rare diseases and certain cancers.

 

Acquisition Terms

 

Under the terms of the merger agreement, stockholders of Zikani received approximately 7.6 million Eloxx common shares and own approximately 16 percent of the combined company.

 

Board and Management Changes

 

In connection with the acquisition, Silvia Noiman, Ph.D., and Martijn Kleijwegt have stepped down from the Eloxx Board. Alan Walts, Ph.D., and Raj Parekh, Ph.D., who have both served as Zikani directors, were appointed to fulfill the vacancies and serve out the remaining terms of office.

 

  

 

 

 

 

“We’re pleased to welcome Sumit and Vijay to the Eloxx leadership team. They demonstrated their ability to transform Zikani by following the science and pursuing the creation of a new class of therapies on behalf of patients with unmet medical need. We want to extend our thanks and appreciation to Dr. Greg Williams for his stewardship of Eloxx and his commitment to advancing the critical work of the company. We are pleased that Greg will continue to advise Eloxx to facilitate a smooth transition” said Kariv.

 

Conference Call Information

 

Date: Thursday, April 1, 2021

 

Time: 8:30 a.m. ET

 

Domestic Dial-in Number: (866) 913-8546

 

International Dial-in Number: (210) 874-7715

 

Conference ID: 8180169

 

Live Webcast: accessible from the Company's website at www.eloxxpharma.com under Events and Presentations or by clicking here. A replay of this conference call will be available on the Eloxx and Zikani websites.

 

Leadership Profiles

 

Sumit Aggarwal

 

Sumit Aggarwal served as Zikani’s President and CEO. He has led the transformation of Zikani from an early-stage technology company to a development-stage rare disease and oncology focused organization. Under Aggarwal’s leadership, Zikani has concentrated its focus on demonstrating pre-clinical proof of efficacy across several disease states using its TURBO-ZM™ technology platform.

 

In his more than 20 years in pharmaceutical and biotechnology commercial operations, investment management and management consulting, Aggarwal has been successful in transforming companies by re-invigorating innovation, growth and profitability, and raising capital for promising technology companies.

 

Prior to joining Zikani, he reinvigorated growth and profitability at Progenity, raised $125 million in capital and built a novel drug delivery-based GI pipeline. He also held leadership roles in healthcare and biotechnology at Adage Capital and as an Associate Partner at McKinsey & Company in its healthcare practice.

 

Aggarwal has an MBA with distinction from the Johnson School, Cornell University, and a Bachelor of Technology with Honors in Chemical Engineering from the Indian Institute of Technology, Kharagpur.

 

  

 

 

 

 

Vijay Modur, M.D., Ph.D.

 

Vijay Modur, M.D., Ph.D., served as Zikani’s Chief Scientific and Medical Officer and has led the scientific efforts to transform medicines based on ribosomal modulation using Zikani’s proprietary TURBO-ZM™ technology platform.

 

In his more than 20 years in pharmaceutical and diagnostic roles in R&D, he has successfully translated research discovery efforts into products that have impacted medical practice.

 

Prior to joining Zikani, Dr. Modur led the venglustat rare disease program at Sanofi across multiple rare disease indications into Phase 2 and Phase 3 clinical development along with leading other early development programs. Prior to Sanofi, he held leadership roles in HTG Molecular, Novartis Oncology and Merck Research Labs.

 

Dr. Modur obtained his MBBS from Karnatak University and his Ph.D. from the University of Utah. He was a resident in Clinical Pathology at Washington University School of Medicine where he also completed his post-doctoral fellowship.

 

About Eloxx Pharmaceuticals

 

Eloxx Pharmaceuticals, Inc. is a clinical-stage biopharmaceutical company developing novel RNA-modulating drug candidates (designed to be eukaryotic ribosomal selective glycosides) that are formulated to treat rare and ultra-rare premature stop codon diseases. Premature stop codons are point mutations that disrupt protein synthesis from messenger RNA. As a consequence, patients with premature stop codon diseases have reduced or eliminated protein production from the mutation bearing allele accounting for some of the most severe phenotypes in these genetic diseases. These premature stop codons have been identified in over 1,800 rare and ultra-rare diseases. Read-through therapeutic development is focused on extending mRNA half-life and increasing protein synthesis by enabling the cytoplasmic ribosome to read through premature stop codons to produce full-length proteins. Eloxx’s lead investigational product candidate, ELX-02, is a small molecule drug candidate designed to restore production of full-length functional proteins. ELX-02 is in the early stages of clinical development focusing on cystic fibrosis. ELX-02 is an investigational drug that has not been approved by any global regulatory body. Eloxx’s preclinical candidate pool consists of a library of novel drug candidates designed to be eukaryotic ribosomal selective glycosides identified based on readthrough potential. Eloxx also has preclinical programs focused on kidney diseases including autosomal dominant polycystic kidney disease, as well as rare ocular genetic disorders. Eloxx is headquartered in Waltham, MA, with operations in Rehovot, Israel, and Morristown, NJ. For more information, please visit www.eloxxpharma.com.

 

  

 

 

 

 

About Zikani Therapeutics

 

Zikani Therapeutics is an emerging leader in the science of ribosome modulation, leveraging its innovative TURBO-ZMTM chemistry technology platform to develop novel Ribosome Modulating Agents (RMAs) as therapeutics for people with limited treatment options. Zikani’s TURBO-ZMTM platform allows rapid synthesis of novel compounds that can be optimized to modulate the ribosome in a disease specific manner. As the company evolves its focus from early-stage to clinical-stage research, Zikani is actively moving into pre-clinical development to target select rare diseases including inherited diseases and cancers caused by nonsense mutations. For more information, visit zikani.com.

 

Forward-Looking Statements

 

This press release contains forward-looking statements, which are generally statements that are not historical facts. Forward-looking statements can be identified by the words "expects," "anticipates," "believes," "intends," "estimates," "plans," "will," "outlook" and similar expressions. Forward-looking statements are based on management's current plans, estimates, assumptions and projections, and speak only as of the date they are made. We undertake no obligation to update any forward-looking statement in light of new information or future events, except as otherwise required by law. Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Actual results or outcomes may differ materially from those implied by the forward-looking statements as a result of the impact of a number of factors, including: the development of the Company’s readthrough technology; the approval of the Company’s patent applications; the Company’s ability to successfully defend its intellectual property or obtain necessary licenses at a cost acceptable to the Company, if at all; the successful implementation of the Company’s research and development programs and collaborations; the Company’s ability to obtain applicable regulatory approvals for its current and future product candidates; the acceptance by the market of the Company’s products should they receive regulatory approval; the timing and success of the Company’s preliminary studies, preclinical research, clinical trials, and related regulatory filings; the ability of the Company to consummate additional financings as needed; the impact of global health concerns, such as the COVID-19 global pandemic, on our ability to continue our clinical and preclinical programs and otherwise operate our business effectively, including successfully integrating the combined companies; as well as those discussed in more detail in our Annual Report on Form 10-K and our other reports filed with the Securities and Exchange Commission.

 

  

 

 

 

 

Contact

 

Investors

John Woolford

john.woolford@westwicke.com

443.213.0506

 

Media

Laureen Cassidy

laureen@outcomescg.com

 

  

 

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