Exhibit 10.1

 

BINDING AGREEMENT OF TERMS FOR JAGUAR ANIMAL HEALTH, INC. ACQUISITION OF NAPO
PHARMACEUTICALS, INC.

FEBRUARY 8, 2017

 

A.                                    Merger:

 

Jaguar Animal Health, Inc., a Delaware corporation (“Jaguar”) will, through Napo
Acquisition Corporation, a to be formed wholly-owned Delaware corporation
(“MergerCo”), acquire all of the issued and outstanding equity of Napo
Pharmaceuticals, Inc., a Delaware corporation (“Napo”), whereby MergerCo will
merge with and into Napo, the separate corporate existence of MergerCo shall
cease and Napo shall become a wholly-owned subsidiary of Jaguar (the “Merger”).
 In order to consummate the Merger, Jaguar and Napo will enter into definitive
legal documentation, including without limitation, a definitive merger
agreement, incorporating the terms and conditions herein and such other terms
reasonably acceptable to each of the Parties, including the Closing Conditions
(the “Merger Documents”).

 

B.                                    Parties:

 

The principal parties (“Parties”) to the Merger are as follows:

 

·                                          Jaguar Animal Health, Inc., a
Delaware corporation (“Jaguar”)

 

·                                          Napo Pharmaceuticals, Inc., a
Delaware corporation (“Napo”)

 

·                                          Napo Acquisition Corp., a to be
newly-created wholly-owned subsidiary of Jaguar (“MergerCo”)

 

C.                                    Exchange Terms:

 

Subject to satisfaction of the Closing Conditions (set forth below), the equity
and  certain debt holders and trade payable accounts of Napo immediately prior
to the Closing will in the aggregate in exchange for such equity and settlement
of such liabilities receive voting Common Stock and convertible non-voting
Common Stock of Jaguar, that, when taken together with approximately 4,011,000
shares of Jaguar Common Stock to be issued to a 3rd party investor in exchange
for $3,000,000 of cash invested in Jaguar and loaned to Napo immediately prior
to the Merger, will be equal to approximately 75% of the outstanding equity of
Jaguar (collectively, the “Transaction Consideration”) on a fully diluted basis
immediately after the Merger (excluding from such calculation approximately
354,000 shares issuable under existing convertible securities of Jaguar with an
exercise or conversion price of $5.00 or more per share), (“Fully Diluted”). 
Upon consummation of the Merger, the existing stockholders of Napo will receive
contingent rights to receive voting Common Stock of Jaguar, which calculated as
of consummation of the Merger (and subject to subsequent dilution like all
Jaguar Common Stock) will entitle such stockholders to receive no  more than
approximately 20.5% of Jaguar Fully Diluted (which 20.5% for clarity purposes
only comprises a portion of the Transaction Consideration, not in addition to).
Any such shares, if any, will be issued on, or before, April, 1, 2020, depending
upon the amount of proceeds received from sales of a portion of the Transaction
Consideration received by Napo’s largest secured creditor during this time
period.

 

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Certain holders of Restricted Stock Units of Napo (certain past and present
executive officers and Directors of Napo)  will provide customary
indemnification of Jaguar for Napo’s breaches of its representations and
warranties, with recourse solely to cancellation of their RSUs of  no more than
approximately $4.25 Million based upon a contractual valuation for each RSU of
$0.935.

 

Jaguar will file an S-4 registration statement with respect to the Common Stock
underlying the contingent rights received by existing stockholders of Napo.  All
other securities issued as Transaction Consideration will be subject to
restrictions prescribed by applicable law (i.e., unregistered at the time of the
Merger, subject to any registration rights offered or assumed by Jaguar).

 

The Parties agree that they will use commercially reasonable efforts to
structure the Merger in a tax efficient manner for the Parties, and that any
such structure will be subject to the mutual agreement of the Parties.

 

D.                                    Due Diligence:

 

The Parties shall provide to each other and to their respective accountants,
attorneys, partners, consultants, financing sources and all other
representatives and agents full access, as reasonably necessary to the other’s
management, consultants, accountants, advisors and all other representatives,
and to all properties, operating and financial data, records, agreements and
other information relating to Napo or Jaguar and to the Merger, to the extent
reasonably requested by Napo or Jaguar.  The Parties will use their best efforts
to keep each other informed of any material changes that have occurred or may
occur affecting the business, results of operations, condition (financial or
otherwise) or prospects of either business.

 

E.                                    Napo Cash/Debt:

 

Upon the closing of the Merger (the “Closing”), unless waived in writing by
Jaguar, Napo will have no less than $500,000 of cash on its balance sheet. The
debt of Napo after taking into consideration all of Napo’s existing secured and
unsecured debt converting into Jaguar’s equity in connection with the Merger
(excluding normal trade payables incurred after January 31, 2017 and Merger
expenses) shall not exceed the following:

 

a.                                      Up to $10 Million of secured debt
convertible at $0.935 per share into Jaguar Common Stock due and payable on, or
before, December 31, 2019; and

 

b.                                      Except for Merger transaction expenses,
no more than $3,000,000 of trade payables and other unsecured debt.

 

F.                                     Pre-Closing Covenants:

 

Prior to the Closing, Napo and Jaguar will:

 

(i)            Not amend their respective Charters or split, combine, reclassify
or subdivide any shares of stock or other equity securities or ownership
interests or  declare, set aside or pay any dividend on or make any other
distributions (whether in cash, stock or other property) or redeem, repurchase
or otherwise acquire, directly or indirectly, any shares of their respective
capital stock or other equity interests, except as provided or contemplated in
this Binding Agreement of Terms or the Merger Documents; and

 

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(ii)           maintain their respective books, records and financials in
accordance with generally accepted accounting principles consistent with past
practice.

 

Prior to the Closing, Napo will:

 

(i)            conduct its business in all material respects in the ordinary
course and in a manner consistent with past practice;

 

(ii)           use its reasonable best efforts to maintain its material assets
and properties in their current condition (normal wear and tear and damage
caused by casualty or by any reason outside of the Napo’s control excepted);

 

(iii)          preserve intact in all material respects its current business
organization, goodwill, ongoing businesses and relationships with third parties,

 

(iv)          maintain all existing insurance policies;

 

(v)           not make any material capital expenditures;

 

(vi)          not sell, lease or license any material portion of its assets;

 

(vii)         not incur any debt other than customary trade payables and Merger
expenses;

 

(viii)        not enter into any material agreements; and

 

(ix)                              not incur, create, assume, refinance, replace
or prepay any indebtedness for borrowed money or issue or amend the terms of any
existing debt securities or assume, guarantee or endorse, or otherwise become
responsible (whether directly, contingently or otherwise) for the indebtedness
of any other person.

 

These and other customary pre-Closing covenants shall be included in the Merger
Documents.

 

G.                                   Closing Conditions:

 

The obligations of the Parties to complete the Merger contemplated herein will
be subject, among other things, to the satisfaction of the following conditions
(“Closing Conditions”):

 

(i)            completion of legal, accounting, regulatory, tax, financial,
technical, and commercial due diligence;

 

(ii)           negotiation, execution and delivery of satisfactory and mutually
acceptable Merger Documents;

 

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(iii)          absence of any material adverse change in the business, results
of operations or condition (financial or otherwise) of any Party;

 

(iv)          receipt of all necessary governmental, board of directors,
investment committee, stockholder and third-party approvals, waivers and
consents;

 

(v)           absence of any action or proceeding against any Party that may
affect the Merger or the value of the surviving business;

 

(vi)          true and correct representations and warranties by each Party;

 

(vii)         as of the Closing Date, Napo shall not have any indebtedness
outstanding in any form , except for indebtedness set forth and identified in
this Binding Agreement of Terms and any indebtedness which may be permitted in
writing by Jaguar, in its sole discretion, pursuant to the Merger Documents; and

 

(viii)        receipt by Jaguar’s Board of Directors on, or immediately prior
to, execution of the Merger Documents of an opinion as to the fairness, from a
financial point of view, to Jaguar of the consideration to be paid by Jaguar to
the holders of common stock of Napo, certain debt holders and certain trade
creditors  in connection with the Merger.

 

H.                                   Representations & Warranties:

 

The Merger Documents will contain covenants, representations and warranties that
are customary for mergers of this size and nature.

 

I.                                        Break-Up Fee

 

If the Merger fails to Close for any reason on, or prior to, July 31, 2017,
other than as a result directly or indirectly of (x) lack of stockholder
approval by either Party or (y) Napo (i) fails to perform in accordance with the
terms and conditions of this Binding Agreement of Terms or the Merger Documents
or (ii) fails to abide by or breaches the provisions or representations,
warranties and covenants of this Binding Agreement of Terms or the Merger
Documents, then on, or before, the close of business on August 7, 2017, Jaguar
shall issue 2,000,000 shares of its restricted Common Stock to Napo (adjusted
appropriately for stock splits, combinations, reclassifications and the like)
(the “Break-Up Fee”).

 

J.                                      Governing Law; Entire Agreement:

 

This Binding Agreement of Terms shall be governed by the laws of the State of
Delaware without regard to its or any other jurisdiction’s conflicts of laws
principles.  For purposes of this Binding Agreement of Terms, it shall be deemed
to have been executed in San Francisco, California.  This Binding Agreement of
Terms supersedes all prior discussions and writings and constitutes the entire
agreement between the Parties with respect to the subject matter hereof.  No
waiver or modification of this Binding Agreement of Terms will be binding upon
either Party unless made in writing and signed by a duly authorized
representative of such Party, and no failure or delay in enforcing any right
will be deemed a waiver.  In addition, this Binding Agreement of Terms may be
executed in two or more counterparts, each of which shall constitute an original
and all of which together shall constitute one and the same instrument.

 

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K.                                   Board of Directors and Officers:

 

Following the Closing, the Board of Directors and executive officers of Jaguar
shall initially consist of the same officers and directors of Jaguar immediately
prior to the Closing, unless otherwise determined in the sole discretion of
Jaguar.

 

L.                                    Exclusivity; Execution and Delivery of
Binding Agreement of Terms and Merger Documents; Closing:

 

Napo agrees to negotiate exclusively with Jaguar with respect to the sale of its
business or any merger negotiations through April 30, 2017, and to cease all
further negotiations with any party with respect to any other merger,
acquisition or equity financing proposals prior to the date of this Binding
Agreement of Terms (the “Standstill Period”).  During the Standstill Period,
Napo will not directly or indirectly (i) solicit, initiate or encourage any
inquiries, discussions or proposals from any other person or entity relating to
a possible acquisition or merger of any part of its business, (ii) continue,
solicit, encourage or enter into negotiations or discussions relating to any
such possible acquisition or merger, (iii) furnish to any other person or entity
any information (not already in the public domain) relating to any of its
business or products or the Merger contemplated hereby, except as required by
applicable law or creditors who are subject to appropriate confidentiality, or
(iv) enter into or consummate any agreement or understanding providing for any
such possible acquisition or merger.  In partial exchange for such grant of
exclusivity and the other provisions of this Binding Agreement of Terms, Jaguar
has agreed to the Break-up Fee.  Jaguar shall endeavor to prepare draft Merger
Documents for review by and negotiation with, Napo and its principals and
creditors.  The Parties shall diligently and in good faith negotiate, and
endeavor to execute and deliver, the Merger Documents on, or before,
February 28, 2017, or another date mutually agreed upon in writing by the
Parties (the “Signing Date”).  The Closing of the Merger (the “Closing Date”)
will occur as soon as is reasonably possible and feasible following the Signing
Date and after all third-party consents and approvals, including stockholder
approvals and similar documents, including but not limited to a joint proxy
statement and S-4 Registration Statement to be filed with the SEC are finalized
and approved by all regulatory constituencies and the other Closing Conditions
have been satisfied or waived.

 

M.                                 Binding Intention of Parties; Termination

 

The Parties acknowledge and agree that this is a binding Binding Agreement of
Terms and shall constitute an obligation for the Parties to enter into a Merger
consistent with the terms and conditions set forth herein.  The Parties further
acknowledge and agree that this Binding Agreement of Terms does not contain all
matters upon which agreement must be reached for the Merger to be consummated. 
The Parties shall negotiate in good faith the definitive agreements to
consummate the Merger as promptly as possible. Notwithstanding any of the
foregoing, Jaguar’s and Napo’s obligations herein are conditioned on the
approval of the board of directors and stockholders of both Jaguar and Napo,
respectively, satisfaction of the Closing Conditions and obtaining any necessary
third party consents or waivers.

 

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Termination of this Binding Agreement of Terms shall not affect any rights or
binding obligations that have accrued or arisen hereunder prior to such
termination, and such rights and binding obligations shall survive the
termination of this Binding Agreement of Terms.

 

Accepted and Agreed, as of February 8, 2017:

 

 

NAPO PHARMACEUTICALS, INC.

 

 

 

/s/ GREG STOCK

 

By: Greg Stock

 

Title: Napo Board Member and Authorized Representative

 

 

 

Date:

February 8, 2017

 

 

 

JAGUAR ANIMAL HEALTH, INC.

 

 

 

/s/ FOLKERT KAMPHUIS

 

By: Folkert Kamphuis

 

Title: Jaguar Independent Board Member and Authorized Representative

 

 

 

Date:

February 8, 2017

 

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