Exhibit 10.3

 

FORM OF SHAREHOLDERS AGREEMENT

 

THIS SHAREHOLDERS AGREEMENT (this “Agreement”) is made effective this 30th day
of June, 2017 (the “Effective Date”), by Hoth Therapeutics, Inc., a corporation
organized under the laws of the state of Nevada (the “Corporation”), the persons
named on Exhibit “A” attached hereto and any other persons or entities which
hereafter join in this Agreement (individually, a “Shareholder” and
collectively, the “Shareholders”).

 

RECITALS

 

WHEREAS, a Certificate of Incorporation (as may be amended from time to time,
the “Certificate”) for the Corporation has been filed with the Office of the
Nevada Secretary of State on May 16, 2017 pursuant to the Nevada Revised
Statutes (the “Act”);

 

WHEREAS, the Shareholders are the owners of all of the issued and outstanding
shares of common stock, par value $0.0001 per share (the “Shares”), of the
Corporation;

 

WHEREAS, each Shareholder owns the number of Shares set forth opposite that
Shareholder’s name on Exhibit A (as such exhibit may be amended from
time-to-time); and

 

WHEREAS, the parties desire to enter into an agreement with respect to the
Corporation, governance of the Corporation, transfer or other disposition of the
Shares and with respect to certain other matters as set forth herein.

 

NOW, THEREFORE, the Shareholders hereby agree as follows:

 

ARTICLE 1

RESTRICTIONS ON TRANSFER

 

1.1           Restrictions on Transfer. No Shareholder shall Transfer (as
defined below) the whole or any part of the Shares, or the certificate or
certificates representing the same, now owned by that Shareholder or which that
Shareholder may at any time own or be entitled to in the Corporation, and any
successors of the Corporation, except in accordance with this Agreement, the
Corporation’s Bylaws or with the prior written consent of all the Shareholders.
The Corporation shall not reflect on its books any attempted Transfer of Shares,
or issue any new Shares, except in compliance with all of the applicable
conditions of this Agreement. When used in this Agreement, the term “Transfer”
or “Transferred” shall mean to directly or indirectly sell, assign, give,
mortgage, pledge, hypothecate, bequeath or in any manner encumber or dispose of,
or permit to be sold, assigned, encumbered, attached or otherwise disposed of in
any matter, whether voluntarily or by operation of law. Any attempted Transfer
in violation of the terms of this Agreement shall be null, void and of no
effect.

 

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1.2           Permitted Transfers. Notwithstanding the foregoing, any Transfer
by a Shareholder (i) with respect any Shareholder that is an individual, to a
trust or other entity wholly owned by or established for the benefit of such
Shareholder or exclusively for the benefit of a parent, spouse, sibling or
descendant of such Shareholder or (ii) with respect to any Shareholder that is
an entity, to an affiliated entity controlled by or under common control with
such Shareholder (any such Transferee, a “Permitted Transferee”) shall not
require the consent of any other Shareholders, provided the Shareholder retains
direct or indirect voting control with respect to such Shares, and provided
further that the Corporation is provided with a copy of this Agreement or a
joiner hereto executed by such Permitted Transferee agreeing to be bound by the
terms and conditions of this Agreement; provided, however, that, with respect to
any Shareholder that is an entity that files reports with the Securities and
Exchange Commission pursuant to Securities Exchange Act of 1934, as amended
(“Exchange Act”), or an affiliated entity controlled by or under common control
with such Shareholder, the shareholders of such Shareholder or such affiliated
entity shall be a Permitted Transferee. For the avoidance of doubt, any Transfer
to a Permitted Transferee shall not be subject to the requirements of Sections
2.1, 3.2, 3.3 or 4.1 of this Agreement, but the Shares, and any subsequent
Transfer or attempted Transfer by of the Shares by a Permitted Transferee, shall
remain subject to all restrictions set forth in this Agreement, including
without limitation such Sections.

 

1.3           Legend. Any certificates representing Shares shall contain
substantially the following provision, which shall bind any persons asserting
any interest in the certificates and the Shares they represent:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A CERTAIN
SHAREHOLDERS AGREEMENT, DATED EFFECTIVE JUNE __, 2017 (AS AMENDED FROM
TIME-TO-TIME), BY AND AMONG THE CORPORATION AND ITS SHAREHOLDERS, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION. NEITHER THIS
CERTIFICATE NOR THE SHARES EVIDENCED HEREBY NOR ANY PORTION THEREOF, MAY BE
OFFERED, PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN VIOLATION OF SAID
AGREEMENT, AND ANY SUCH PURPORTED TRANSFER SHALL BE NULL, VOID AND OF NO EFFECT.

 

Each Shareholder shall deliver to the Corporation all certificates representing
that Shareholder’s Shares, and the Corporation shall place the above legend on
the certificates and return them to the Shareholders. Certificates representing
any new Shares issued by the Corporation while this Agreement is in effect shall
bear the above legend.

 

ARTICLE 2
GOVERNANCE

 

2.1          Shareholder and Director Voting. The Shareholders covenant and
agree, one to the other, that they shall, at all times and from time to time, if
lawfully permitted to do so, vote or cause to be voted their Shares and, if
applicable, vote as a Director of the Corporation, to propose or approve any
action required to be taken by the Corporation pursuant to this Agreement,
including any amendments of the Certificate or Bylaws of the Corporation,
reduction of its capital, reappraisal of its assets, or other corporate action
that may be necessary in order to lawfully effectuate any action specifically
required to be taken by the Corporation pursuant to this Agreement.

 

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2.2          Directors.

 

(a)          Number. Notwithstanding anything to the contrary in the
Corporation’s Bylaws, the Board of Directors shall consist of the four (4)
individuals and the directors shall be those individuals named on Exhibit “A” as
directors as of the Effective Date. The number of directors comprising the Board
of Directors shall not be increased or decreased without the unanimous consent
of the Board of Directors.

 

(b)          Designated Director. Spherix Incorporated (“Spherix”) shall have
the right to appoint one director to the Board of Directors. For so long as
Spherix owns at least 10% of the issued and outstanding shares of common stock
of the Corporation, Spherix shall have the right to designate one director to
the Board of Directors (such person, “Spherix Director”) at each election of the
Board of Directors, and the Shareholders covenant and agree that, during such
period, they shall vote or cause to be voted their Shares in favor of the
director designated by Spherix at each election of the Board of Directors. A
Spherix Director may be removed from the Board of Directors at any time, with or
without cause, only at the direction of Spherix. If a vacancy is created on the
Board of Directors as a result of the death, disability, retirement, resignation
or removal of a Spherix Director, Spherix shall have right to designate a
director to fill such vacancy.

 

(c)          Election of Board. After the Board of Directors has completed its
term, the Shareholders may elect directors by unanimous written consent or by
secret ballot, with those individuals receiving the most votes being deemed
elected, subject to Spherix’s right to designate the Spherix Director pursuant
to Section 2.2(b). In the event of a tie, a runoff election will be held within
forty-eight (48) hours of the first vote among those individuals receiving the
same number of votes to determine the remaining Directors of the Board.

 

(d)          Term. Directors shall serve a one (1) year term. Newly elected
Directors shall take office at the next regularly scheduled meeting of the Board
of Directors following their election.

 

(e)          Quorum. Seventy five percent (75%) of the number of Directors
prescribed by this Agreement constitutes a quorum for the transaction of
business. Unless otherwise restricted by the Certificate, Directors of the Board
may participate in a meeting of the Board by means of telephonic or video
conference or other communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.

 

(f)          Voting. If a quorum is present when a vote is taken, the
affirmative vote of more than fifty percent (50%) of the number of Directors
present, shall be an act of the Board of Directors. Each Director shall have one
vote.

 

2.3          Devotion of Time. The Directors shall not be obligated to devote
all of their time or business efforts to the Corporation’s affairs, but shall
devote that amount of their time, effort and skill to the Corporation as may be
reasonably necessary for the ongoing operations of the Corporation’s affairs.

 

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2.4           Remuneration.

 

(a)          Reimbursement. The Corporation shall reimburse a Director for all
reasonable and ordinary expenses that such Director incurs or pays in connection
with managing the Corporation’s business and affairs and otherwise rendering the
services as and when required of such Director hereunder, including expenses
relating to travel, meals, marketing and promotional efforts.

 

(b)          No Other Remuneration. Except as provided above in this Section 2.4
or elsewhere in this Agreement, neither a Director nor any affiliate of a
Director shall be entitled to remuneration for services rendered or goods
provided to or for the benefit of the Corporation unless otherwise determined by
Shareholders’ approval.

 

2.5           Distributions. The Shareholders acknowledge and agree that it
shall be the policy of the Corporation that the Corporation will not pay any
dividends or other distributions to the Shareholders until after the first
anniversary of its date of incorporation. After such date, any dividends
declared by the Corporation to be paid to the Shareholders shall be determined
by the Board of Directors, in its sole and absolute discretion, on a quarterly
basis out of funds legally available therefore, after the establishment of
adequate reserves set in good faith by the Board of Directors.

 

ARTICLE 3
PRE-EMPTIVE, DRAG ALONG & TAG ALONG RIGHTS

 

3.1           Preemptive Rights.

 

(a)          In the event that the Corporation proposes to issue additional
shares of its capital stock, whether or not currently authorized, as well as
rights, options, or warrants to purchase any equity securities of the
Corporation, or securities of any type whatsoever that are, or may become,
convertible or exchangeable into or exercisable (in each case, directly or
indirectly) for such equity securities (“New Shares”) at a time when any
Shareholder who has executed this Agreement continues to be an owner of Shares,
the Corporation shall provide to each such Shareholder a notice which shall
constitute an offer to such Shareholder to purchase (for the price and on the
terms established by the Corporation for all purchasers of New Shares as set
forth in the notice) such portion of the New Shares so offered for sale as the
number of Shares owned by him or her at such time shall bear to the total number
of Shares owned by all shareholders of the Corporation (such Shareholder’s “Pro
Rata Portion”). Each such Shareholder shall inform the Corporation of his or her
election to exercise its preemptive right under this Section 3.1 with respect to
all or any portion of his or her Pro Rata Portion within fifteen (15) days of
receipt of the Corporation’s notice.

 

(b)          If all New Shares referred to in the Corporation’s notice are not
elected to be purchased or acquired by the Shareholders pursuant to Section
3.1(a), the Corporation may, following the expiration of the fifteen (15) day
period provided in Section 4.1(a), offer and sell the remaining unsubscribed
portion of such New Shares to any person or persons at a price not less than,
and upon terms no more favorable to the offeree than, those specified in the
Shareholders’ offer notices. If the Corporation does not enter into an agreement
for the sale of the New Shares within sixty (60) days, or if such agreement is
not consummated within thirty (30) days of the execution thereof, the preemptive
right provided hereunder shall be deemed to be revived and such New Shares shall
not be offered unless first reoffered to the Shareholders again in accordance
with this Section 3.1.

 

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3.2           Drag-Along Right.

 

(a)          In the event the holders of a majority or more of the voting shares
of the Corporation (the “Control Group”) elect to transfer all of the shares of
stock owned by them to an unaffiliated third party (a “Third Party”) (including
any transfer of shares that is being effected by a merger or consolidation of
the Corporation with another person), the Control Group shall have the right
(the “Drag-Along Right”) to cause each of the Shareholders as a group to
transfer all of their Shares to the Third Party (or to exchange such shares
pursuant to the terms of such merger or consolidation) at the same price and on
the same terms and conditions as the Control Group proposes to transfer their
Shares.

 

(b)          The Control Group may elect to exercise the Drag-Along Right by
delivering written notice to the Shareholders and the Corporation thirty (30)
days prior to the consummation of the transfer described in Section 3.2(a)
above. The notice delivered pursuant to this subsection will contain a copy of
the definitive documentation pursuant to which the Shares will be transferred to
the Third Party and will state (i) the bona fide intention of the Control Group
to effect the transfer described in Section 3.2(a) above, (ii) the name and
address of the Third Party, and (iii) the expected closing date of such
transfer.

 

(c)          Each Shareholder as part of its participation in the transfer
pursuant to the Drag-Along Right hereby agrees with respect to all Shares which
he or she owns or otherwise exercises voting or dispositive authority if the
transaction is structured as (i) a merger or consolidation, to vote (in person,
by proxy or by action by written consent, as applicable) in favor of such merger
or consolidation and to refrain from exercising any dissenters’ rights or rights
of appraisal under applicable law at any time with respect thereto, and (ii) a
sale of stock, to sell all of its Shares on the terms and conditions approved by
the Control Group.

 

(d)          Each Shareholder shall deliver to the Third Party at a closing to
be held at the offices of the Corporation (or such other place as the parties
agree), one or more certificates, properly endorsed for transfer, which
represent all the Shares owned by such Shareholder and each Shareholder shall
make such representations and warranties, and shall enter into such agreements,
as are customary and reasonable in the context of the proposed sale, including,
without limitation, representations and warranties (and indemnities with respect
thereto) that the transferee of the Shares (or interests therein) is receiving
good and marketable title to such Shares (or interests therein), free and clear
of all pledges, security interests, or other liens; provided, however, that with
respect to any matter as to which a Shareholder shall agree to provide
indemnification (other than its own title to such Shares), such Shareholder
shall in no event be required to provide indemnification in an amount that would
exceed its pro rata portion of the total liability for which such
indemnification is sought, which pro rata portion shall be determined on the
basis of the percentage of the total Shares involved in such transfer that are
represented by the Shares owned by such Shareholder. In addition, each
Shareholder and the Control Group shall reasonably cooperate and consult with
each other in order to effect the transfer described in this Section 4.2, and
each Shareholder shall provide reasonable assistance to the Control Group in
connection with the preparation of disclosure schedules relating to
representations and warranties to be made to the Third Party involved in such
transfer and in the determination of the appropriate scope of, or limitations or
exceptions to, such representations and warranties.

 

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3.3           Tag-Along Right.

 

(a)          In the event the Control Group elects to transfer all or a portion
of the Shares of stock owned by them to a Third Party and the Control Group has
not exercised the Drag-Along Right pursuant to Section 3.2 hereof, all other
Shareholders shall have the right to cause the Control Group to effect the
transfer of such Shareholders’ respective Shares to such Third Party at the same
price and on the same terms and conditions as the Control Group proposes to
transfer their Shares to such Third Party (the “Tag-Along Right”) in full if all
of the Shares of the Control Group are being transferred or in proportionate
amount if some of the Shares of the stock of the Control Group are being
transferred.

 

(b)          If the Control Group does not intend to deliver a Drag-Along notice
to the other Shareholders pursuant to Section 3.2 hereof, the Control Group must
deliver a Tag-Along notice to such Shareholders and the Corporation within
thirty (30) days prior to the consummation of the transfer described in Section
3.3(a) above. The notice delivered pursuant to this Section 3.3(b) will state
(i) the bona fide intention of the Control Group to effect the transfer
described in Section 3.3(a) above, (ii) the name and address of the Third Party,
(iii) the expected closing date of such transfer, and (iv) the terms of such
sale. In order for the Tag-Along Rights to be applicable, Shareholders who
choose to participate must deliver a written request for inclusion in such sale
to the Control Group within ten (10) days from the date of receipt of notice
from the Control Group. To the extent one or more of the Shareholders exercise
such right of participation in accordance with the terms and conditions set
forth herein, the number of shares that the selling Control Group may sell to
the Third Party shall be correspondingly reduced unless the Third Party
purchaser agrees to purchase the increased number of offered shares.

 

(c)          Each Shareholder, who timely exercises his or her Tag-Along Rights
under this Section 3.3 by delivering the written request provided for above in
Section 3.3(b), as part of its participation in the transfer pursuant to the
Tag-Along Right shall deliver to the Third Party at a closing to be held at the
offices of the Corporation (or such other place as the parties agree), one or
more certificates, properly endorsed for transfer, which represent all the
Shares owned by such Shareholder and each Shareholder shall make such
representations and warranties, and shall enter into such agreements, as are
customary and reasonable in the context of the proposed sale, including without
limitation representations and warranties and indemnities with respect thereto
that the transferee of the Shares (or interests therein) is receiving good and
marketable title to such Shares (or interests therein), free and clear of all
pledges, security interests, or other liens; provided, however, that with
respect to any matter as to which a Shareholder shall agree to provide
indemnification (other than its own title to such Shares), such Shareholder
shall in no event be required to provide indemnification in an amount that would
exceed its pro rata portion of the total liability for which such
indemnification is sought, which pro rata portion shall be determined on the
basis of the percentage of the total Shares involved in such transfer that are
represented by the Shares owned by such Shareholder. In addition, each
Shareholder and the Control Group shall reasonably cooperate and consult with
each other in order to effect the transfer described in this Section 3.3, and
each Shareholder shall provide reasonable assistance to the Control Group in
connection with the preparation of disclosure schedules relating to
representations and warranties to be made to the Third Party involved in such
transfer and in the determination of the appropriate scope of, or limitations or
exceptions to, such representations and warranties.

 

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ARTICLE 4
TRANSFER OF SHARES DURING SHAREHOLDER’S LIFETIME

 

4.1           First Right of Refusal.

 

(a)          Offer to Corporation to Purchase Shares. If, during his or her
lifetime, a Shareholder (“Selling Shareholder”) receives a written offer to
purchase all or a portion of Selling Shareholder’s Shares that the Selling
Shareholder intends to accept if the right of first refusal provided in this
Section 4.1 is not exercised (a “Bona Fide Offer”), Selling Shareholder shall
first offer to sell the Shares to the Corporation at the same price and upon the
same terms as are contained in the Bona Fide Offer. Any provision in the Bona
Fide Offer to the effect that the prospective purchaser reserves the right to
make a further offer or give additional consideration, any non-monetary-term and
any side agreement or separate arrangement shall be disregarded for purposes of
this Agreement. Selling Shareholder’s offer to sell the Shares to Corporation
shall be accompanied by a written statement of the name and address of the
person or entity making the Bona Fide Offer to purchase Shares owned by Selling
Shareholder and shall state the price, terms and conditions set forth in the
Bona Fide Offer. Corporation shall have thirty (30) days following Selling
Shareholder’s offer within which to accept all or any part of the Shares so
offered.

 

(b)          Offer to Shareholders to Purchase Shares. If Corporation fails to
accept all or any part of the Shares offered pursuant to Section 4.1(a), within
the time provided in Section 4.1(a), or notifies Selling Shareholder in writing
before the end of the time provided in Section 4.1(a) that it will not purchase
all or any portion of the offered Shares, Selling Shareholder shall then offer
to sell the Shares not accepted by Corporation to the other Shareholders
(“Non-Selling Shareholders”). Each Non-Selling Shareholder shall have thirty
(30) days within which to accept his or her Proportionate Interest (as defined
below) or such other proportion as Non-Selling Shareholders shall agree upon, of
the Shares not purchased by Corporation at the same price and upon the same
terms and conditions set forth in the Bona Fide Offer. Selling Shareholder’s
offer to sell the Shares to Non-Selling Shareholders shall be accompanied by a
written statement of the name and address of the person or entity making the
Bona Fide Offer and shall state the price, terms and conditions set forth in the
Bona Fide Offer. If any of the Non-Selling Shareholders fails to accept such an
offer, either in whole or in part, within a thirty (30) day period, and if
Non-Selling Shareholders have failed to agree on a disproportionate purchase of
all the Shares held by Selling Shareholder, then, for a reasonable period of
time (not to exceed an additional thirty (30) days), the Shares not accepted may
be purchased by the other Non-Selling Shareholders in proportion to their
shareholdings and, if any Shares remain unaccepted, this procedure shall be
repeated as many times as necessary (within the period specified above) to
permit the purchase of as many Shares as possible. When used in this Agreement,
the term “Proportionate Interest” shall mean the proportion of the Shares
offered by a Selling Shareholder that the Shares of each Non-Selling Shareholder
bears to the total Shares owned by all Non-Selling Shareholders.

 

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(c)          Acceptances Conditional. If Corporation and Non-Selling
Shareholders fail to accept all of the Shares offered by Selling Shareholder
pursuant to Sections 4.1(a) and (b), then Selling Shareholder may refuse to sell
to Corporation and/or Non-Selling Shareholders such partial amount of the Shares
that was conditionally accepted by Corporation and/or Non-Selling Shareholders.
In this event, the parties’ rights under this Agreement shall be determined as
though there were no acceptances of Selling Shareholder’s offers pursuant to
Sections 4.1(a) and (b).

 

(d)          No Acceptances of Offers. If Corporation and Non-Selling
Shareholders fail to accept any part of the Shares offered by Selling
Shareholder or if Selling Shareholder refuses to sell (under the terms of
Section 4.1(c)) because the acceptances of Corporation and Non-Selling
Shareholders were partial acceptances, Selling Shareholder shall be free to sell
those Shares that were offered and not accepted (including those Shares which
were conditionally accepted by Corporation or Non-Selling Shareholders but which
conditional acceptance was rejected by Selling Shareholder pursuant to Section
4.1(c)) to the person or entity making the Bona Fide Offer in accordance with
the price, terms and conditions of the Bona Fide Offer. Provided, however, if
the sale is not completed within thirty (30) days after the last day that a
Non-Selling Shareholder could accept Selling Shareholder’s offer pursuant to
Section 4.1(b), then Selling Shareholder shall not Transfer the Shares without
again complying with the terms and conditions of this Section 4.1. A sale is
“completed,” for this purpose, when Selling Shareholder has received the full
consideration (a note is “received,” for this purpose, when it is delivered,
even if some installments are to be paid later). Any purchaser of Shares
pursuant to a Bona Fide Offer who is not already a Shareholder shall, at the
Closing (as defined in Article 8) of his or her purchase, execute, deliver and
become a party to this Agreement.

 

4.2           Prohibited and Involuntary Transfers. If, despite the provisions
and intent of this Agreement, any Shares are Transferred (or purported to have
been Transferred) in violation of the terms of this Agreement, the Corporation
and Non-Selling Shareholders have all rights under this Agreement or under
applicable law, including, but not limited to, the right to treat any Transfer
or purported Transfer in violation of this Agreement as void, the right to
specific performance, and the right to act as attorney-in-fact for any
Shareholder (including, but not limited to, any putative Shareholder to whom
Shares were Transferred or purportedly Transferred in violation of this
Agreement) with respect to the sale of that Shareholder’s Shares pursuant to
this Agreement.

 

ARTICLE 5
TERMINATION

 

5.1           Termination.

 

(a)          Events of Termination. This Agreement, and the rights and
obligations of the parties under it, shall terminate immediately, without
further liability, upon the first occurrence of any one of the following events:

 

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(i)          Mutual written agreement of the then current parties to this
Agreement;

 

(ii)         The death of all but one of Shareholders who have executed or
otherwise become bound by the terms of this Agreement after full performance of
the Agreement by the surviving Shareholder(s);

 

(iii)        The Corporation is declared to be bankrupt under federal law, makes
an assignment for the benefit of creditors, or is otherwise found insolvent;

 

(iv)        The Corporation dissolves or winds up its affairs, whether
voluntarily or involuntarily;

 

(v)         A merger, consolidation or other reorganization involving
Corporation and another entity pursuant to which all the Shares are exchanged
for or converted into shares of stock of another entity that are unrestricted
and readily tradeable on an established securities market;

 

(vi)        On the consummation of the Corporation’s initial public offering of
shares of common stock, if any; or

 

(vii)       The date on which the Corporation becomes subject to the reporting
requirements of the Exchange Act.

 

(b)          Effect of Termination. The termination of this Agreement shall not
affect any rights or obligations that shall have arisen or accrued prior to the
date of termination. Upon termination of this Agreement, each Shareholder shall
surrender to the Corporation all of the Shares issued by the Corporation
represented by any certificate that contains the legend set forth in Article 1.
The Corporation shall issue to each Shareholder a new certificate for the Shares
that shall not bear such legend.

 

5.2           Death Within Sixty Days. This Agreement shall be of no force or
effect if all Shareholders die in or as a result of a common disaster or
accident or die within sixty (60) days of each other.

 

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ARTICLE 6
MISCELLANEOUS

 

6.1           Indemnification.

 

(a)          The Corporation shall indemnify, defend, protect and hold harmless
each Shareholder and each Director, and each of their respective principals,
partners, shareholders, controlling persons, trustees, officers, directors,
heirs, trustees, beneficiaries, administrators, executors, employees, agents,
representatives, successors and assigns, from and against any and all demands,
judgments, settlements, penalties, claims, lawsuits, liabilities, damages,
costs, losses, expenses, obligations and fines, including reasonable attorneys’,
accountants’ and other professional fees, costs and expenses (collectively,
“Claims and Liabilities”), that such person may suffer or incur by reason of or
in connection with his, her or its management of, ownership in, involvement in
or affiliation with the Corporation’s business or affairs. Such indemnity shall
be permitted, however, only if the person seeking indemnity (i) acted in
accordance with the terms of this Agreement and otherwise in a manner he, she or
it reasonably believed to be in, or not opposed to, the Corporation’s best
interests, (ii) was not guilty of gross negligence, and (iii) with respect to
any criminal proceeding, had no reasonable cause to believe his, her or its
conduct was unlawful. The termination of a proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere, or its equivalent,
shall not, of itself, create a presumption that such person did not meet such
standards, unless it is finally adjudicated that such person did not meet such
standards.

 

(b)          The Corporation may also indemnify any person who was or is, or is
threatened to be made, a party to any threatened, pending or completed action
because such person is or was an officer, employee or agent of the Corporation.
The foregoing indemnity shall be permitted only if approved by the Directors and
if such person acted in good faith and in a manner such person reasonably
believed to be in, or not opposed to, the Corporation’s best interests. If such
person is adjudged to be liable for misconduct in performing his, her or its
duty to the Corporation, such indemnity shall be permitted only to the extent
that the court in which such Claims and Liabilities was brought, or another
court of appropriate jurisdiction, determines that, despite the adjudication of
liability, but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses that such court shall
deem proper. In no event, however, shall any person be entitled to
indemnification under this paragraph for any Claims and Liabilities arising from
such person’s gross negligence, willful misconduct or reckless disregard in
performing such person’s duties on the Corporation’s behalf.

 

(c)          If approved by the Directors, the Corporation may pay expenses
(including attorneys’ fees) incurred in defending any proceeding under Sections
6.1(a) or (b) in advance of the final disposition of such proceeding if the
person entitled to indemnification agrees to repay such amount if it is
ultimately determined that such person is not entitled to such indemnification.

 

(d)          The indemnification provided by this Section 6.1 shall not be
deemed to be exclusive of any other rights or remedies to which the indemnified
person may be entitled, whether by agreement or as a matter of law.

 

(e)          The Directors shall have power to purchase and maintain insurance,
at the Corporation’s expense, on behalf of the persons who may be entitled to
indemnification under this Section 6.1. That insurance may cover amounts for
which the Corporation may be liable under this Section 6.1.

  

 -10- 

 

 

6.2           Restrictive Covenants.

 

(a)          Confidential Information. Each Shareholder agrees that, both while
such person is a Shareholder or Director and thereafter, such Shareholder or
Director shall not divulge, furnish or make accessible to anyone or use in any
way (other than in the ordinary course of the business of the Corporation or its
subsidiaries, affiliates and divisions) any of Corporation’s Confidential
Information. As used in this Agreement, “Corporation’s Confidential Information”
means any confidential or secret information regarding the Corporation,
Corporation trade secrets, and any other confidential or secret aspect of the
business of the Corporation. Without limiting the generality of the foregoing,
the parties agree the Corporation’s Confidential Information includes (a) any
knowledge or information concerning the Corporation’s business, whether
developed by a Shareholder or Director, or by others, and whether developed or
acquired by the Corporation or from others, (b) the Corporation’s planned
business operations and business plan for future operations, (c) the
Corporation’s confidential or secret development or research work (including
information concerning any future or proposed services or products), (d) all of
the Corporation’s accounting, cost, revenue and other financial records and
documents, as well as the contents of such information, and (e) the
Corporation’s documents, contracts, agreements, correspondence and other similar
business records. Notwithstanding anything to the contrary in this Agreement,
any knowledge or information that is part of the public domain shall not be
deemed Confidential Information. The Shareholders and the Directors agree that
monetary damages would be an inadequate remedy for any breach of the provisions
of this paragraph and that the Corporation may, therefore, seek injunctive
relief in the case of any such breach or threatened breach.

 

(b)          Non-disparagement. Each Shareholder agrees that, both while such
person is a Shareholder or Director and thereafter, such Shareholder shall not
take any action that is intended to diminish the value of the Corporation or
that would interfere with the business of the Corporation, including disparaging
the name or business of the Corporation or its affiliates, or their respective
employees or business relationships.

 

(c)          Non-solicitation. Each Shareholder agrees that, both while such
person is a Shareholder or Director and for a period of one (1) year thereafter,
such Shareholder shall not interfere, solicit, disrupt or attempt (directly or
indirectly) to make any contact, deal or be involved in any transaction with or
otherwise disrupt the relationship, contractual or otherwise, between the
Corporation and any individual who is employed by the Corporation on or within
six (6) months prior to the date such Shareholder ceased to be a Shareholder.

 

(d)          Non-competition. Each Shareholder agrees that, both while such
person is a Shareholder or Director and for a period of one (1) year thereafter,
such Shareholder shall not, directly or indirectly, whether individually or
through a corporation, partnership, limited liability company or other business
entity, or as a partner, member, shareholder, director, manager, officer,
employee or agent of any of the foregoing, have any business interests or engage
in business activities in direct competition with the Corporation’s business in
any location in the world where the Corporation shall operate as of the date the
Shareholder ceases to be a Shareholder; provided that a Shareholder shall be
entitled to own up to 5% of any class of securities of any entity, whether or
not it may compete with the Corporation, which are publicly traded on a national
or regional stock exchange or on the over-the-counter market.

 

 -11- 

 

 

(e)          It is expressly understood and agreed that although the
Shareholders consider the non-competition, non-disparagement and
non-solicitation restrictions contained in this Agreement to be reasonable, if a
final judicial determination is made by a court of competent jurisdiction that
the time or territory or any other restriction in that regard is an
unenforceable restriction against a Shareholder, the provisions of this
Agreement shall not be rendered void but shall be deemed amended to apply as to
such maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any such restriction is unenforceable, and
such restriction cannot be amended so as to make it enforceable, such finding
shall not affect the enforceability of any of the other restrictions contained
herein.

 

6.3           Amendment. This Agreement may be amended only in writing and only
with the unanimous consent of Shareholders.

 

6.4           Intentionally Omitted.

 

6.5           Governing Law; Jurisdiction, Etc. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law.

 

6.6           Limitation of Liability. Notwithstanding anything to the contrary
in this Agreement, the Corporation’s debts, obligations and liabilities shall be
solely the Corporation’s debts, obligations and liabilities, and neither a
Director nor any Shareholder shall be obligated personally for any Corporation
debt, obligation or liability solely by reason of being a Director or a
Shareholder.

 

6.7           Attorneys’ Fees. If an action is brought to interpret or enforce
any of the terms of this Agreement, or because of a party’s breach of any
provision of this Agreement, the losing party shall pay the prevailing party’s
reasonable attorneys’ fees, costs and expenses, court costs and other costs of
action incurred in connection with the prosecution or defense of such action,
whether or not the action is prosecuted to a final judgment. In addition to the
foregoing award of attorneys’ fees, the prevailing party shall be entitled to
its reasonable attorneys’ fees incurred in any post judgment proceeding to
enforce any judgment in connection with this Agreement. This paragraph is
separate and several and shall survive the merger of this paragraph into any
judgment.

 

 -12- 

 

 

6.8           Binding Effect. Subject to the restrictions on transfer set forth
in this Agreement, this Agreement shall be binding on and inure to the benefit
of the Shareholders and their respective transferees, successors, assigns and
legal representatives.

 

6.9           Covenant of Married Shareholders.

 

(a)          Each Shareholder covenants and agrees that, if there is a legal
separation, divorce or division of property between the Shareholder and his
spouse, domestic partner or legal beneficiary, the Shareholder will make
provisions in any property settlement agreement as may be necessary to eliminate
any interest of the Shareholder’s spouse in the Corporation's Shares.

 

(b)          By executing this Agreement, each Shareholder represents and
warrants that he has secured the permission and consent of his spouse, domestic
partner or legal beneficiary to enter into this Agreement and fully perform his
obligations under this Agreement. Each Shareholder will obtain the signature of
his spouse, domestic partner or legal beneficiary on the consents attached
hereto and incorporated herein as Exhibit B.

 

6.10         Notices. All notices, requests, consents and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given (i) if delivered personally, when delivered; (ii)
if delivered by overnight carrier, on the first business day following such
delivery; (iii) if delivered by registered or certified mail, return receipt
requested, on the third business day after having been mailed in Los Angeles,
California; or (iv) if delivered by electronic transmission, at the time when
sent, provided that a copy of the item delivered is sent to the addressee by
first class mail. All such communications, if to the Corporation or the
Directors, shall be delivered to the Corporation’s principal office, as set
forth above, or if to any Shareholder, shall be delivered to the Shareholder’s
address at his, her or its address as set forth in the Corporation’s records or
at such other place as such party may notify the Corporation in accordance with
this paragraph.

 

6.11         Waiver or Termination. No waiver or termination of this Agreement,
or any part hereof, shall be effective unless made in writing and signed by the
party or parties sought to be bound thereby. No failure to pursue or elect any
remedy shall constitute a waiver of any default under or breach of any provision
of this Agreement, nor shall any waiver of any such default or breach be deemed
to be a waiver of any other subsequent default or breach.

 

6.12         Further Assurances. The parties shall execute and deliver any
further instruments or documents and perform any additional acts that are or may
become necessary to effectuate and carry on the Corporation as contemplated by
this Agreement.

 

6.13         Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and together which
shall constitute one and the same instrument.

 

 -13- 

 

 

6.14         Incorporation by Reference. The exhibits and schedules attached to
this Agreement are incorporated into this Agreement by this reference.

 

6.15         Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the other provisions, and this Agreement
shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.

 

6.16         Rights of Others. Except as expressly provided, nothing expressed
or implied in this Agreement is intended or shall be construed to confer upon or
give to any person, firm or corporation, other than the parties to this
Agreement, or other persons who become bound by the terms of this Agreement, any
rights or remedies under or by reason of any term, provision, condition, or
agreement contained in this Agreement; provided, however, that it is expressly
understood and agreed that the provisions, terms and conditions of this
Agreement shall be binding upon and shall inure to the benefit of and shall be
enforceable by the Corporation, Shareholders and/or beneficiaries or the estate
of any deceased Shareholder and the successors or assigns of the Corporation.

 

6.17         Specific Performance. The parties agree that the Shares are unique
and that failure to perform the obligations under this Agreement will result in
irreparable damage to the other parties and that the parties shall be entitled
to the specific performance of such obligations.

 

6.18         Entire Agreement. This instrument contains the entire understanding
and agreement among the parties concerning the subject matter of this Agreement,
and this Agreement supersedes and merges herein all prior and contemporaneous
understandings, agreements, covenants, negotiations and representations
concerning the subject matter of this Agreement.

 

 -14- 

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
Effective Date set forth above.

 

“CORPORATION”           HOTH THERAPEUTICS, INC.           By:      
    Its:  Chief Executive Officer               “SHAREHOLDERS”           If
Shareholder is an individual:   Title:             Name:               If
Shareholder is an entity:           Name of Shareholder:                        
  By:       Name:      

 

[Signature Page to Hoth Therapeutics Shareholders Agreement]