Exhibit 10.1

 

CAPRICOR THERAPEUTICS, INC.

 

March 25, 2020

 

Holder of Common Stock Purchase Warrant

 

Re:Inducement Offer to Exercise Common Stock Purchase Warrants

 

Dear Holder:

 

Capricor Therapeutics, Inc. (the “Company”) is pleased to offer to you the
opportunity to exercise all of the Common Stock Purchase Warrants issued on
December 19, 2019 set forth on the signature page hereto (the “Existing
Warrants”) currently held by you (the “Holder”). The Existing Warrants and the
shares underlying the Existing Warrants (“Warrant Shares”) have been registered
pursuant to registration statement Form S-1 (File No. 333-235358) (the
“Registration Statement”). The Registration Statement is currently effective
and, upon exercise of the Existing Warrants pursuant to this letter agreement,
will be effective for the issuance or sale, as the case may be, of the Warrant
Shares. Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Existing Warrant.

 

In consideration for exercising in full all of the Existing Warrants held by you
and set forth on the signature page hereto (the “Warrant Exercise”) at the
Exercise Price plus $0.125 per Warrant Share ($1.225), the Company hereby offers
to issue you or your designee a new Common Stock Purchase Warrant (“New
Warrant”) pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended
(“Securities Act”) to purchase up to a number of shares of Common Stock equal to
100% of the number of Warrant Shares issued pursuant to the Warrant Exercise
hereunder, which New Warrant shall be substantially in the form of the Existing
Warrants (except for customary legends and other language typical for an
unregistered warrant, including cashless exercise if no resale registration
statement covering the Common Stock underlying the New Warrants is effective
after 6 months), will be exercisable immediately, and have a term of exercise of
5.5 years, and an exercise price equal to $1.27. The original New Warrant
certificate(s) will be delivered within two Business Days following the date
hereof. Notwithstanding anything herein to the contrary, in the event the
Warrant Exercise would otherwise cause the Holder to exceed the beneficial
ownership limitations (“Beneficial Ownership Limitation”) set forth in Section
2(e) of the Existing Warrants, the Company shall only issue such number of
Warrant Shares to the Holder that would not cause the Holder to exceed the
maximum number of Warrant Shares permitted thereunder with the balance to be
held in abeyance until notice from the Holder that the balance (or portion
thereof) may be issued in compliance with such limitations, which abeyance shall
be evidenced through the Existing Warrant which shall be deemed prepaid
thereafter, and exercised pursuant to a Notice of Exercise in the Existing
Warrant (provided no additional exercise shall be payable).

 

Expressly subject to the paragraph immediately following this paragraph below,
Holder may accept this offer by signing this letter below, with such acceptance
constituting Holder's exercise in full of the Existing Warrants for an aggregate
exercise price set forth on the Holder’s signature page hereto (the “Warrants
Exercise Price”) on or before 4:00 p.m. Eastern on March 25, 2020.

 

Additionally, the Company agrees to the representations, warranties and
covenants set forth on Annex A attached hereto. Holder represents and warrants
that it is an “accredited investor” as defined in Rule 501 of the Securities
Act, and agrees that the New Warrants will contain restrictive legends when
issued, and neither the New Warrants nor the shares of Common Stock issuable
upon exercise of the New Warrants will be registered under the Securities Act,
except in the discretion of the Company.

 

 

 

 

The Holder understands that the New Warrants and the shares of Common Stock
underlying New Warrants are not, and may never be, registered under the
Securities Act, or the securities laws of any state and, accordingly, each
certificate, if any, representing such securities shall bear a legend
substantially similar to the following:

 

“THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.”

 

Certificates evidencing shares of Common Stock underlying the New Warrants shall
not contain any legend (including the legend set forth above), (i) while a
registration statement covering the resale of such Common Stock is effective
under the Securities Act, (ii) following any sale of such Common Stock pursuant
to Rule 144 under the Securities Act, (iii) if such Common Stock is eligible for
sale under Rule 144, without the requirement for the Company to be in compliance
with the current public information required under Rule 144 as to such Common
Stock and without volume or manner-of-sale restrictions, (iv) if such Common
Stock may be sold under Rule 144 and the Company is then in compliance with the
current public information required under Rule 144 as to such Common Stock, or
(v) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Securities and Exchange Commission (the “Commission”) and the
earliest of clauses (i) through (v), the “Delegend Date”)). The Company shall
cause its counsel to issue a legal opinion to the transfer agent promptly after
the Delegend Date if required by the Company and/or the transfer agent to effect
the removal of the legend hereunder, which opinion shall be in form and
substance reasonably acceptable to the Holder. If such Common Stock may be sold
under Rule 144 without the requirement for the Company to be in compliance with
the current public information required under Rule 144 or if such legend is not
otherwise required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission) then such Common Stock shall be issued free of all legends. The
Company agrees that following the Delegend Date or at such time as such legend
is no longer required under this Section 2.3(b), it will, no later than two (2)
Trading Days following the delivery by the Holder to the Company or the transfer
agent of a certificate representing the Common Stock underlying the New Warrants
issued with a restrictive legend (such second Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to the Holder a certificate
representing such shares that is free from all restrictive and other legends or,
at the request of the Holder shall credit the account of the Holder’s prime
broker with the Depository Trust Company System as directed by the Holder.  

 

 

 

 

In addition to the Holder’s other available remedies, the Company shall pay to a
Holder, in cash, (i) as partial liquidated damages and not as a penalty, for
each $1,000 of Shares or Warrant Shares (based on the VWAP of the Common Stock
on the date such Warrant Shares are submitted to the Transfer Agent) delivered
for removal of the restrictive legend, $10 per Trading Day (increasing to $20
per Trading Day five (5) Trading Days after such damages have begun to accrue)
for each Trading Day after the Legend Removal Date until such certificate is
delivered without a legend and (ii) if the Company fails to (a) issue and
deliver (or cause to be delivered) to the Holder by the Legend Removal Date a
certificate representing the Securities so delivered to the Company by the
Holder that is free from all restrictive and other legends and (b) if after the
Legend Removal Date the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of all or any portion of the number of shares of Common Stock, or a sale
of a number of shares of Common Stock equal to all or any portion of the number
of shares of Common Stock that the Holder anticipated receiving from the Company
without any restrictive legend, then, an amount equal to the excess of the
Holder’s total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so purchased
(including brokerage commissions and other out-of-pocket expenses, if any) (the
“Buy-In Price”) over the product of (A) such number of Warrant Shares that the
Company was required to deliver to the Holder by the Legend Removal Date
multiplied by (B) the lowest closing sale price of the Common Stock on any
Trading Day during the period commencing on the date of the delivery by the
Holder to the Company of the applicable Warrant Shares (as the case may be) and
ending on the date of such delivery and payment under this clause (ii).  

 

If this offer is accepted and the transaction documents are executed on or
before 4:00 p.m. Eastern on March 25, 2020, then on or before 9:00 am ET on the
following Trading Day, the Company shall file a Current Report on Form 8-K with
the SEC disclosing all material terms of the transactions contemplated
hereunder. The Company represents, warrants and covenants that, upon acceptance
of this offer, the shares underlying the Existing Warrants shall be issued free
of any legends or restrictions on resale by Holder and all of the Warrant Shares
shall be delivered electronically through the Depository Trust Company within 1
Business Day of the date the Company receives the Warrants Exercise Price (or,
with respect to Warrant Shares that would otherwise be in excess of the
Beneficial Ownership Limitation, within 2 Business Days of the date the Company
is notified by Holder that its ownership is less than the Beneficial Ownership
Limitation). The terms of the Existing Warrants, including but not limited to
the obligations to deliver the Warrant Shares, shall otherwise remain in effect
as if the acceptance of this offer were a formal Notice of Exercise (including
but not limited to any liquidated damages and compensation in the event of late
delivery of the Warrant Shares).

 

The Company acknowledges and agrees that the obligations of the Holders under
this letter agreement are several and not joint with the obligations of any
other holder or any other holders of Warrants to Purchase Common Stock of the
Company (each, an “Other Holder”) under any other agreement related to the
exercise of such warrants (“Other Warrant Exercise Agreement”), and the Holder
shall not be responsible in any way for the performance of the obligations of
any Other Holder or under any such Other Warrant Exercise Agreement. Nothing
contained in this letter agreement, and no action taken by the Holders pursuant
hereto, shall be deemed to constitute the Holder and the Other Holders as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Holder and the Other Holders are in any way acting
in concert or as a group with respect to such obligations or the transactions
contemplated by this letter agreement and the Company acknowledges that the
Holder and the Other Holders are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by this letter
agreement or any Other Warrant Exercise Agreement. The Company and the Holder
confirm that the Holder has independently participated in the negotiation of the
transactions contemplated hereby with the advice of its own counsel and
advisors. The Holder shall be entitled to independently protect and enforce its
rights, including, without limitation, the rights arising out of this letter
agreement, and it shall not be necessary for any Other Holder to be joined as an
additional party in any proceeding for such purpose.

 

 

 

 

If, and whenever on or after the date hereof until 10 Trading Days after the
date hereof, the Company enters into an Other Warrant Exercise Agreement, then
(i) the Company shall provide notice thereof to the Holder promptly following
the occurrence thereof and (ii) the terms and conditions of this letter
agreement shall be, without any further action by the Holder or the Company,
automatically amended and modified in an economically and legally equivalent
manner such that the Holder shall receive the benefit of the more favorable
terms and/or conditions (as the case may be) set forth in such Other Warrant
Exercise Agreement (including the issuance of additional Warrant Shares),
provided that upon written notice to the Company at any time the Holder may
elect not to accept the benefit of any such amended or modified term or
condition, in which event the term or condition contained in this letter
agreement shall apply to the Holder as it was in effect immediately prior to
such amendment or modification as if such amendment or modification never
occurred with respect to the Holder. The provisions of this paragraph shall
apply similarly and equally to each Other Warrant Exercise Agreement.

 

 

***************

 

 

 

 

Within one business day from the Holder’s execution of this letter, the Holder
shall make available for “Delivery Versus Payment” to the Company immediately
available funds equal to the number of Existing Warrants being exercised
multiplied by $1.225 and the Company shall deliver the Warrant Shares via
“Delivery Versus Payment” to the Holder and shall deliver the New Warrants to
purchase up to ________ shares of Common Stock registered in the name of the
Holder.

 

To accept this offer, Holder must counter execute this letter agreement and
return the fully executed agreement to the Company by e-mail at:
abergmann@capricor.com and placements@hcwco.com, on or before 4 p.m. Eastern on
March 25, 2020.

 

Please do not hesitate to call me if you have any questions.

 

  Sincerely yours,         CAPRICOR THERAPEUTICS, INC.         By:   
                       Name:   [ ]   Title: [ ]

 

Accepted and Agreed to:

 

Name of Holder: ________________________________________________________

Signature of Authorized Signatory of Holder: _________________________________

Name of Authorized Signatory: _______________________________________________

Title of Authorized Signatory: ________________________________________________

Existing Warrant Shares: ______________

 

Aggregate Exercise Price: _____________

 

New Warrants: (100% of total Warrants being exercised): ___________

 

DTC Instructions:

 

BIG BOY REPRESENTATION: The Holder acknowledges that the Company has advised the
Holder that the Company has not yet filed its Annual Report on Form 10-K which
Annual Report may include material non-public information regarding the
Company’s business and prospects not known to the Holder which the Holder may
deem material to its decision to exercise the Existing Warrants if the Holder
were provided with the information (the “Excluded Information”). The Company
does not intend to disclose any of the Excluded Information until it has a duty
to do so under applicable law or the Company otherwise determines it would be in
the best interests of the Company’s shareholders to disclose the Excluded
Information. The Company offered the Holder the opportunity to receive the
Excluded Information prior to the Holder making a commitment to exercise the
Existing Warrants so long as the Holder executed a confidentiality agreement
with the Company. The Holder has elected not to receive or be provided with any
detail concerning the Excluded Information on account of the Holder’s policy
against entering into confidentiality or trading restriction covenants, and
therefore no portion of the Excluded Information has been provided to the
Holder. The Company makes no representations as to the materiality or lack of
materiality of the Excluded Information, insofar as materiality determinations
are inherently subjective and highly dependent on the circumstances of each
investor’s decision, and makes no commitment to disclose the Excluded
Information publicly within any specific timeframe.

 

 

 

 

Annex A

 

Representations, Warranties and Covenants of the Company. The Company hereby
makes the following representations and warranties to the Holder:

 

(a)                Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this letter agreement and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of this letter agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company, its board of directors
or its stockholders in connection therewith. This letter agreement has been duly
executed by the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

(b)                No Conflicts. The execution, delivery and performance of this
letter agreement by the Company and the consummation by the Company of the
transactions contemplated hereby do not and will not: (i) conflict with or
violate any provision of the Company’s certificate or articles of incorporation,
bylaws or other organizational or charter documents; or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any  liens, claims,
security interests, other encumbrances or defects upon any of the properties or
assets of the Company in connection with, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any material agreement, credit facility, debt or
other material instrument (evidencing Company debt or otherwise) or other
material understanding to which such Company is a party or by which any property
or asset of the Company is bound or affected; or (iii) conflict with or result
in a violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the Company
is subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected, except, in the
case of each of clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a material adverse effect upon the business, prospects,
properties, operations, condition (financial or otherwise) or results of
operations of the Company, taken as a whole, or in its ability to perform its
obligations under this letter agreement.