Document:

sldb-ex1036_175.htm

 

DocuSign Envelope ID: CAC664B5-1FF0-45DE-8483-C7B718F3A856

Exhibit 10.36

FIRST AMENDMENT

TO THE LICENSE AGREEMENT 

DATED OCTOBER 1srn, 2015

BETWEEN THE CURATORS OF THE UNIVERSITY OF MISSOURI 

AND SOLID GT, LLC

 

This FIRST AMENDMENT to the License Agreement dated October 15th, 2015 ("ORIGINAL LICENSE AGREEMENT") is made the date of last signature ("FIRST AMENDMENT EFFECTIVE DATE") by and between THE CURATORS OF THE UNIVERSITY

OF MISSOURI, a public corporation of the State of Missouri having an office at Technology Advancement Office, Mizzou North, Room 706, 115 Business Loop 70 W, Columbia, MO 65211 ("UNIVERSITY") and SOLID BIOSCIENCES INC. (f/k/a SOLID, GT, LLC) having offices at 141 Portland Street, 5th Floor, Cambridge, MA 02139 ("LICENSEE"). UNIVERSITY and LICENSEE may sometimes be referred to herein as a "PARTY" or "PARTIES" as the case may be.

 

WHEREAS, the PARTIES acknowledge that LICENSEE has sublicensed certain rights to the PATENT RIGHTS to Ultragenyx Pharmaceutical Inc. ("UG") pursuant to a collaboration and licensing agreement and related stock purchase agreement in which UG purchased forty million dollars of LICENSEE common stock at a 33% premium to the volume weighted average price of the LICENSEE'S common stock for the ten (10) trading days prior to the date of sale (the "UG AGREEMENTS"); and

 

WHEREAS, LICENSEE is and UNIVERSITY are desirous of amending certain terms of the ORIGINAL LICENSE AGREEMENT in light of the UG AGREEMENTS;

 

NOW, THEREFORE, in consideration of the foregoing premises and the covenants, representations and warranties contained herein, the PARTIES agree to amend the ORIGINAL LICENSE AGREEMENT as follows:

 

	
1.
	
Definitions. For all purposes of this FIRST AMENDMENT, all capitalized terms used herein shall have the meanings attributed to them by the ORIGINAL LICENSE AGREEMENT unless otherwise amended herein.

Section 1.03 (Licensed Product) is amended by adding the following to the end of the section: For the purposes of ULTRAGENYX PRODUCT, "LICENSED PRODUCT" means:

(a)Any product, apparatus, kit, composition, or component thereof (i) whose use, sale, offer for sale, or importation of which is covered, in whole or in part, by any VALID CLAIM contained in the PATENT RIGHTS or (ii) which is made by any method, procedure, process, or step which is covered, in whole or in part, by any VALID CLAIM contained in the PATENT RIGHTS; or

(b)An isolated synthetic nucleic acid molecule comprising a synthetic mini-dystrophin or micro-dystrophin gene encoding a synthetic, non-full-length, dystrophin protein that is able to restore nNOS to the sarcolemma, wherein the non-full-length dystrophin protein comprises, from the N terminus to the C terminus:

 

 

DocuSign Envelope ID: CAC664B5-1FF0-45DE-8483-C7B718F3A856

	
 
	
1.
	
the N-terminal domain of the dystrophin protein or a modified N-terminal domain of the dystrophin protein,

	
 
	
11.
	
at least two repeats of the mid-rod domain of the dystrophin protein, wherein said at least two repeats comprise R16 and Rl 7,

	
 
	
111.
	
at least 2 hinge regions of the dystrophin protein, whereas said at least two hinge regions comprise HI and H4, and

	
 
	
1v.
	
the cysteine-rich domain of the dystrophin protein;

wherein the mini- or micro-dystrophin gene is between 5 kb to about 8 kb in length or less than 5 kb in length, respectively.

	
2.
	
New Section 1.12 shall be added as follows:

"REGULATORY EXCLUSIVITY" means, with respect to an ULTRAGENYX PRODUCT in a country, any data exclusivity rights, market exclusivity rights, or other exclusive right, other than a patent, granted, conferred or afforded by any regulatory authority in such country or otherwise under applicable law with respect to such ULTRAGENYX PRODUCT in such country, which either confers exclusive marketing rights with respect to a product or prevents another party or the applicable regulatory authority from using or otherwise relying on the data supporting the approval of the marketing approval for a product without the prior written authorization of the marketing approval holder, as applicable, such as new chemical entity exclusivity, exclusivity associated with new clinical trials necessary for approval of a change to the label (e.g., new Indication or use), orphan drug exclusivity, non-patent-related pediatric exclusivity, or any other applicable marketing or data exclusivity, including any such periods under national implementations in the EU of Article 10 of Directive 2001/83/EC, Article 14(11) of Parliament and Council Regulation (EC) No 26/2004, Parliament and Council Regulation (EC) No 141/2000 on orphan medicines, Parliament and Council Regulation (EC) No 1901/2006 on medicinal products for pediatric use and all international equivalents.

	
3.
	
New Section 1.13 shall be added as follows:

"ULTRAGENYX ROYALTY TERM" means, on an ULTRAGENYX PRODUCT-by­ ULTRAGENYX PRODUCT and country-by-country basis, the period commencing on the date of the first commercial sale of such ULTRAGENYX PRODUCT in such country and ending upon the latest of: (a) the tenth (10th) anniversary of the first commercial sale of such ULTRAGENYX PRODUCT in such country; (b) the date on which the exploitation of such ULTRAGENYX PRODUCT in the country of sale is no longer covered by a VALID CLAIM of the PATENT RIGHTS; or (c) expiration of all forms of REGULATORY EXCLUSIVITY in such country with respect to such ULTRAGENYX PRODUCT.

	
4.
	
New Section 1.14 shall be added as follows:

"ULTRAGENYX PRODUCT" means any LICENSED PRODUCT commercialized by Ultragenyx Pharmaceutical Inc., its affiliates or permitted sublicensees pursuant to the Collaboration and License Agreement, dated October 22, 2020, by and between Ultragenyx Pharmaceutical Inc. and LICENSEE.

	
5.
	
Section 3.0l(c) (Running Royalty/Earned Royalty) is amended and replaced in its entirety to read as follows:

 

 

DocuSign Envelope ID: CAC664B5-1FF0-45DE-8483-C7B718F3A856

(c) Running Royalty/ Earned Royalty. LICENSEE shall pay UNIVERSITY a running royalty equal to Three percent (3.0%) of NET SALES (hereinafter "SALES ROYALTY") for LICENSED PRODUCTS SOLD by LICENSEE or SUBLICENSEES. A SALES ROYALTY accrues when LICENSED PRODUCTS are invoiced or shipped, whichever occurs first.

LICENSEE  shall  pay  SALES  ROYALTIES  to UNIVERSITY  on an  ULTRAGENYX PRODUCT-by-ULTRAGENYX PRODUCT, and a country-by-country basis during the ULTRAGENYX ROYALTY TERM for such ULTRAGENYX PRODUCT in such country. For clarity, other than with respect to SALES ROYALTIES payable on ULTRAGENYX PRODUCTS during the applicable ULTRAGENYX ROYALTY TERM, LICENSEE's obligation to make SALES ROYALTY payments to UNIVERSITY for LICENSED PRODUCTS  SOLD    which  are  not  ULTRAGENYX  PRODUCTS  by  LICENSEE  or SUBLICENSEES shall not apply to any product that is not covered by any VALID CLAIM contained in the PATENT RIGHTS.

If LICENSEE or SUBLICENSEE is required to pay royalties to one or more third parties in consideration of a license or similar right in order to make, use, or sell LICENSED PRODUCTS, LICENSEE shall be entitled to credit up to fifty percent (50%) of the amounts actually paid by LICENSEE or SUBLICENSEE to such third parties against the royalties due to UNIVERSITY under this AGREEMENT in the same ROYALTY PERIOD; provided, however, that in no event will the royalties due to UNIVERSITY, when aggregated with any other offsets and credits allowed under this AGREEMENT, be less than fifty percent (50%) of the SALES ROYALTY on NET SALES, as defined above, in any REPORTING PERIOD. For clarity, the maximum adjusted royalty in Section 3.0l(c) are one and one half percent (1.5%).

If during any period within the applicable ULTRAGENYX ROYALTY TERM for a country,

(a) no VALID CLAIM in the PATENT RIGHTS covers (i) the use, sale, offer for sale, or importation of such ULTRAGENYX PRODUCT or (ii) any method, procedure, process or step used in the making of such ULTRAGENYX PRODUCT, in each case ((i) and (ii)) in such country and all forms of REGULATORY EXCLUSIVITY with respect to such ULTRAGENYX PRODUCT in such country have expired, then the SALES ROYALTY applied to NET  SALES of such UL TRAQENYX  PRODUCT in such country will be reduced by fifty percent (50%) for purposes of calculating the SALES ROYALTY owed under this Section 3.0l(c) for the remainder of the ULTRAGENYX ROYALTY TERM for such ULTRAGENYX PRODUCT in such country, or (b) no VALID CLAIM in the PATENT RIGHTS covers (i) the use, sale, offer for sale, or importation of such ULTRAGENYX PRODUCT or (ii) any method, procedure, process or step used in the making of such ULTRAGENYX PRODUCT, in each case ((i) and (ii)) in such country but REGULATORY EXCLUSIVITY has not expired with respect to such ULTRAGENYX PRODUCT in such country, then the royalty rate applied to NET SALES of such ULTRAGENYX PRODUCT in such country will be reduced by twenty-five percent (25%) for purposes of calculating the SALES ROYALTY owed under this Section 3.0l(c) until the sooner of clause (a) of this paragraph applies or the remainder of the ULTRAGENYX ROYALTY TERM for such ULTRAGENYX PRODUCT in such country.

LICENSEE or its SUBLICENSEE(S) (as applicable) will promptly notify UNIVERSITY should a compulsory license be granted, or be the subject of a possible grant, by LICENSEE or a SUBLICENSEE to a third party under the applicable laws, rules, regulations, guidelines, or other directives of any governmental or supranational agency in the LICENSED TERRITORY under the PATENT RIGHTS, and the total amount payable under this Section 3.01(c) with respect to the SALES ROYALTY in such country will be adjusted to match any lower amount such third party may be allowed to pay solely with respect to the NET SALES of such LICENSED PRODUCT in such country, but not any other countries.

 

 

DocuSign Envelope ID: CAC664B5-1FF0-45DE-8483-C7B718F3A856

	
6.
	
Section 3.0l(e) (Milestone Payments) is amended and replaced in its entirety to read as follows:

(e) Milestone Payments. LICENSEE shall pay UNIVERSITY a milestone payment fee in accordance with the following schedule for each LICENSED PRODUCT developed.

 

	
Event
	
 
	
Amount

	
IND Open (FDA letter- clear to proceed)
	
$
	
10,000

	
First patient dosed in a combined Phase 11/111 Clinical Trial
	
$
	
25,000

	
BLA or MAA filed
	
$
	
400,000

	
First Product launch in US or EU
	
$
	
1,500,000

 

For the sake of clarity, whether (i) separate Phase II and Phase III clinical trials are performed or (ii) a combined Phase 11/111 clinical trial is performed, in each case using LICENSED PRODUCT, LICENSEE will owe twenty-five thousand dollars ($25,000) solely following the first patient dosed in the first such clinical trial for such LICENSED PRODUCT.

 

Milestone fees are non-refundable. Royalty payments in a given license year shall not be creditable against any milestone fees.

 

	
7.
	
Section 3.02(b) (Other Sublicensee Payments) is amended and replaced in its entirety to read as follows:

(b)Other Sublicensee Payments.

i.General. In consideration of rights granted by UNIVERSITY to LICENSEE under this AGREEMENT, in addition to the sublicensee earned royalty of Section 3.02(a), LICENSEE further agrees to pay UNIVERSITY a specified portion of other revenue or consideration (other than in respect of the EQUITY PREMIUM CONSIDERATION (as defined below)) received from any SUBLICENSEE as consideration for the sublicense of PATENT RIGHTS to SUBLICENSEES as per the following schedule.

 

	
Event
	
Specified Portion

	
Until and inclusive of IND, or equivalent in Europe, filed
	
50%

	
After IND, or equivalent filed, and until BLA or equivalent filed
	
20%

	
after BLA or equivalent filed
	
10%

 

Such revenue or other consideration attributable to the SUBLICENSE of PATENT RIGHTS ("SUBLICENSE REVENUE") shall include, but not be limited to, all option fees, license issue fees (up-front payments), license maintenance fees, milestone payments, payments for equity in excess of fair market value, joint marketing fees and research and development funding in excess of LICENSEE's cost of performing such research and development (other than the earned royalty specified in Section 3.02(a)). In the event that LICENSEE agrees to receive only equity at fair market value from the SUBLICENSEE for development rights and as payment for all milestone events per agreement between LICENSEE and SUBLICENSEE, UNIVERSITY is entitled to a portion of that equity equal to the specified portion percentage for sublicenses listed above or may opt to receive a cash equivalent based on the estimated fair market value at time agreement is signed. For clarity, SUBLICENSE REVENUE shall not include (1) research and development funding provided to LICENSEE by SUBLICENSEE, (2) payments made as consideration for the issuance of equity or debt securities of LICENSEE at 

 

 

DocuSign Envelope ID: CAC664B5-1FF0-45DE-8483-C7B718F3A856

fair market value; provided that, if a SUBLICENSEE pays more than fair market value for equity or debt securities, only the portion in excess of fair market value shall be considered revenue, and (3) payments received from SUBLICENSEE and applied to reimburse LICENSEE for any out-of-pocket expenses related to the filing, prosecution, protection, defense and maintenance of patents and patent applications.

 

In addition, for each LICENSED PRODUCT developed, if LICENSEE receives from a SUBLICENSEE under any sublicense & a payment that constitutes SUBLICENSE REVENUE and which payment is directly attributable to the occurrence of a milestone or event substantially equivalent to a milestone triggering a payment under Section 3.0 l (e), and LICENSEE has paid to UNIVERSITY the corresponding Specified Portion of the amount of SUBLICENSE REVENUE that is attributable to such payment as set forth in Section 3.02(b), then such payment to UNIVERSITY from LICENSEE shall be fully creditable against the milestone payment owing from LICENSEE to UNIVERSITY under Section 3.0l(e) for that applicable milestone.

 

ii.Exception. LICENSEE represents and warrants that as of the FIRST AMENDMENT EFFECTIVE DATE, LICENSEE has filed an IND such that the Specified Portion is twenty percent (20%). Solely in connection with the two million dollars in SUBLICENSE REVENUE  due  to  be   paid   by  LICENSEE   to   UNIVERSITY   associated   with  the  20%  of the 33% premium paid by UG to LICENSEE as part of the forty million dollar investment under the UG AGREEMENTS (such SUBLICENSEE REVENUE, the "EQUITY PREMIUM CONSIDERATION"), LICENSEE shall instead pay to UNIVERSITY the following amounts per the following schedule:

 

		
	
Event
	
Amount Due

	
By January 31, 2021
	
$750,000

	
Earliest occurrence of:

(a)By January 31, 2022; or

(b)Closing of the first public offering (other than sales made in an "at the market offering" as defined in Rule 415 promulgated under the Securities Act of 1933) of LICENSEE's equity

securities resulting in gross proceeds to LICENSEE of
	
 

 

$1,300,000

 

 

 

DocuSign Envelope ID: CAC664B5-1FF0-45DE-8483-C7B718F3A856

 

		
	
$50,000,000 or greater following the execution of the UG AGREEMENTS

(c) First patient dosed by UG, its affiliates or sublicensees in a Phase II or combined Phase II/III Clinical Trial using a LICENSED PRODUCT developed by UG, its affiliates or

sublicensees pursuant to the UG Agreements.
	
 

 

All other SUBLICENSE REVENUE payments to UNIVERISTY set forth in Section 3.02(b)(i) remain unchanged.

 

	
8.
	
Section 10.01 (Term) is amended and replaced in its entirety to read as follows:

Term. This AGREEMENT shall become effective upon the EFFECTIVE DATE and, unless sooner terminated in accordance with any of the provisions herein, shall remain in full force in the LICENSED TERRITORY until the expiration of the ULTRAGENYX ROYALTY TERM.

 

	
9.
	
LICENSEE certifies that it, and any company affiliated with it, does not boycott Israel and will not boycott Israel during the term of the ORIGINAL LICENSE AGREEMENT. In this paragraph, the terms "company" and "boycott Israel" shall have the meanings described in Section 34.600 of the Missouri Revised Statutes.

 

	
10.
	
All other terms and conditions of the ORIGINAL LICENSE AGREEMENT are hereby ratified and reaffirmed and continue in full force and effect. This FIRST AMENDMENT does not act to change any other provisions or alter the timing of any other payments or diligence items due in the ORIGINAL LICENSE AGREEMENT except as expressly provided herein.

 

[Signature Page Follows]

 

 

 

DocuSign Envelope ID: CAC664B5-1FF0-45DE-8483-C7B718F3A856

IN WITNESS WHEREOF, the PARTIES hereto have executed this FIRST AMENDMENT by their duly authorized officers or representatives.

 

 

 

 

	
THE CURATORS OF THE UNIVERSITY OF MISSOURI
	
LICENSEE

	
 
	
 
	
 
	
 
	
 
	
 

	
BY:
	
 
	
Lisa Lorenzen
	
BY:
	
 
	
Joel Schneider

	
NAME:
	
 
	
Lisa Lorenzen, PhD
	
NAME:
	
 
	
Joel Schneider, PhD

	
TITLE:
	
 
	
Assistant Vice Chancellor, TAO
	
TITLE:
	
 
	
Chief Technology Officer

	
DATE
	
 
	
1/27/2021
	
DATE
	
 
	
1/27/2021ex_233025.htm

 

 

EXHIBIT 4.1

 

DESCRIPTION OF SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

 

As of March 15, 2021, BioSig Technologies, Inc., a Delaware corporation (“we,” “our” and the “Company”) has our common stock, par value $0.001 per share registered under Section 12 of the Securities Exchange Act of 1934, as amended. 

 

The foregoing description is intended as a summary and is qualified in its entirety by reference to our amended and restated certificate of incorporation, as amended (the “Amended and Restated Certificate of Incorporation”) and the by-laws, as amended (the “By-laws”) as currently in effect, copies of which are filed as exhibits to this Annual Report on Form 10-K and are incorporated by reference herein. 

 

Authorized Capital Stock

 

We have authorized 201,000,000 shares of capital stock, par value $0.001 per share, of which 200,000,000 are shares of common stock and 1,000,000 are shares of “blank check” preferred stock, of which 200 are authorized as Series A Preferred Stock, 600 are authorized as Series B Preferred Stock, 4,200 are authorized as Series C Preferred Stock, 1,400 are authorized as Series D Preferred Stock and 1,000 are authorized as Series E Preferred Stock. As of March 12, 2021, there were 31,789,781 shares of common stock issued and outstanding, 105 shares of Series C Preferred Stock issued and outstanding and no shares of our Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E Convertible Preferred Stock, or Series F Junior Participating Preferred Stock issued and outstanding. The authorized and unissued shares of common stock and the authorized and undesignated shares of preferred stock are available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange on which our securities may be listed. Unless approval of our stockholders is so required, our board of directors does not intend to seek stockholder approval for the issuance and sale of our common stock or preferred stock.

 

Common Stock

 

The holders of common stock are entitled to one vote per share on all matters to be voted upon by stockholders. Holders of our common stock are entitled to receive ratably dividends as may be declared by the board of directors out of funds legally available for that purpose. We have not paid any dividends since our inception, and we presently anticipate that all earnings, if any, will be retained for development of our business. Even if we are permitted to pay cash dividends in the future, any future disposition of dividends will be at the discretion of our board of directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.

 

Each share of common stock entitles the holder to one vote, either in person or by proxy, at meetings of stockholders. The holders are not permitted to vote their shares cumulatively. Accordingly, the stockholders of our common stock who hold, in the aggregate, more than fifty percent of the total voting rights can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding shares of common stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.

 

Holders of our common stock have no preemptive rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Subject to the rights of the holders of our preferred stock, upon our liquidation, dissolution or winding up, the holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities. There are no provisions in our Amended and Restated Certificate of Incorporation or our By-laws that would prevent or delay a change in our control.

 

The transfer agent and registrar for our common stock is Action Stock Transfer Corporation. The transfer agent’s address is 2469 East Fort Union Blvd., Suite 214, Salt Lake City, UT 84121. Our common stock is listed on the Nasdaq Capital Market under the symbol “BSGM.”

 

 

 

 

Preferred Stock

 

The board of directors is authorized, subject to any limitations prescribed by law, without further vote or action by the stockholders, to issue from time to time shares of preferred stock in one or more series. Each such series of preferred stock shall have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights. Issuance of preferred stock by our board of directors may result in such shares having dividend and/or liquidation preferences senior to the rights of the holders of our common stock and could dilute the voting rights of the holders of our common stock.

 

Series C Preferred Stock

 

Each share of the Series C Preferred Stock is entitled to a nine percent (9%) annual dividend on the $1,000 per share stated value. Unless the Series C Preferred Stock is converted into shares of common stock, the dividends shall accrue and be payable in cash or, subject to the satisfaction of certain conditions, in pay-in-kind shares. Such cumulative dividends are payable quarterly, commencing on September 30, 2013 and on each conversion date. The terms of the Series C Preferred Stock were amended on March 27, 2014 and August 15, 2014. The description herein reflects such amended terms.

 

In the event that:

 

	 	
			(i)

				
			we fail to, or announce our intention not to, deliver common stock share certificates upon conversion of our Series C Preferred Stock prior to the seventh trading day after such shares are required to be delivered,

			

 

	 	
			(ii)

				
			we fail for any reason to pay in full the amount of cash due pursuant to our failure to deliver common stock share certificates upon conversion of our Series C Preferred Stock within five calendar days after notice therefor is delivered,

			

 

	 	
			(iii)

				
			we fail to have available a sufficient number of authorized and unreserved shares of common stock to issue upon a conversion of our Series C Preferred Stock,

			

 

	 	
			(iv)

				
			we fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of our obligations under, the securities purchase agreement, the registration rights agreement, the certificate of designation or the warrants entered into pursuant to the private placement transaction for our Series C Preferred Stock, which failure or breach could have a material adverse effect, and such failure or breach is not cured within 30 calendar days after written notice was delivered,

			

 

	 	
			(v)

				
			we are party to a change of control transaction,

			

 

	 	
			(vi)

				
			we file for bankruptcy or a similar arrangement or are adjudicated insolvent, or

			

 

	 	
			(vii)

				
			we are subject to a judgment, including an arbitration award against us, of greater than $100,000, and such judgment remains unvacated, unbonded or unstayed for a period of 45 calendar days, the holders of the Series C Preferred Stock are entitled, among other rights, to redeem their shares of Series C Preferred Stock at any time for greater than their stated value or increase the dividend rate on their shares of Series C Preferred Stock to 18%.

			

 

In the event of our liquidation or winding up of affairs, the holders of the Series C Preferred Stock will be entitled to a liquidation preference of the stated value plus any accrued but unpaid dividends or any other fees due the holder. The shares of the Series C Preferred Stock rank senior to the rights of the common stock and all other securities exercisable or convertible into shares of common stock.

 

Any holder of Series C Preferred Stock is entitled at any time to convert any whole or partial number of shares of Series C Preferred Stock into shares of our common stock at a price of $3.75 per share, subject to the beneficial ownership limitation described below. The Series C Preferred Stock is subject to full ratchet anti-dilution price protection upon the issuance of equity or equity-linked securities at an effective common stock purchase price of less than $3.75 per share as well as other customary anti-dilution protection.

 

In the event we issue any equity or equity-linked securities with terms more favorable than those of the Series C Preferred Stock, any holder of the Series C Preferred Stock may request to amend the terms of such holder’s Series C Preferred Stock to be equivalent to the terms of such issued equity or equity-linked securities, subject to certain exempted issuances.

 

 

 

 

The holders of the Series C Preferred Stock vote together with the holders of our common stock on an as-converted basis but may not vote the Series C Preferred Stock in excess of the beneficial ownership limitation of the Series C Preferred Stock. The beneficial ownership limitation is 4.99% of our then outstanding shares of common stock following such conversion or exercise, which may be increased to up to 9.99% of our then outstanding shares of common stock following such conversion or exercise upon the request of an individual holder. The beneficial ownership limitation is determined on an individual holder basis, such that the as-converted number of shares of one holder is not included in the shares outstanding when calculating the limitation for a different holder. In addition, absent the approval of holders representing at least 67% of the outstanding shares of the Series C Preferred Stock, we may not (i) increase the number of authorized shares of preferred stock, (ii) amend our charter documents, including the terms of the Series C Preferred Stock, in any manner adverse to the holders of the Series C Preferred Stock, including authorizing or creating any class of stock ranking senior to, or otherwise pari passu with, the shares of Series C Preferred Stock as to dividends, redemption or distribution of assets upon a liquidation.

 

Delaware Anti-Takeover Law and Provisions of our Amended and Restated Certificate of Incorporation and By-laws

 

Section 203 of the Delaware General Corporation Law, in general, prohibits a business combination between a corporation and an interested stockholder within three years of the time such stockholder became an interested stockholder, unless:

 

	 	
			●

				
			prior to such time the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

			

 

	 	
			●

				
			upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, exclusive of shares owned by directors who are also officers and by certain employee stock plans; or

			

 

	 	
			●

				
			at or subsequent to such time, the business combination is approved by the board of directors and authorized by the affirmative vote at a stockholders’ meeting of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.

			

 

The term “business combination” is defined to include, among other transactions between an interested stockholder and a corporation or any direct or indirect majority owned subsidiary thereof: a merger or consolidation; a sale, lease, exchange, mortgage, pledge, transfer or other disposition (including as part of a dissolution) of assets having an aggregate market value equal to 10% or more of either the aggregate market value of all assets of the corporation on a consolidated basis or the aggregate market value of all the outstanding stock of the corporation; certain transactions that would result in the issuance or transfer by the corporation of any of its stock to the interested stockholder; certain transactions that would increase the interested stockholder’s proportionate share ownership of the stock of any class or series of the corporation or such subsidiary; and any receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation or any such subsidiary.

 

In general, Section 203 defines an “interested stockholder” as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with, or controlling, or controlled by, the entity or person. The term “owner” is broadly defined to include any person that individually, with or through that person’s affiliates or associates, among other things, beneficially owns the stock, or has the right to acquire the stock, whether or not the right is immediately exercisable, under any agreement or understanding or upon the exercise of warrants or options or otherwise or has the right to vote the stock under any agreement or understanding, or has an agreement or understanding with the beneficial owner of the stock for the purpose of acquiring, holding, voting or disposing of the stock.

 

The restrictions in Section 203 do not apply to corporations that have elected, in the manner provided in Section 203, not to be subject to Section 203 of the Delaware General Corporation Law or, with certain exceptions, which do not have a class of voting stock that is listed on a national securities exchange or held of record by more than 2,000 stockholders. Our Amended and Restated Certificate of Incorporation and By-laws do not opt out of Section 203.

 

Section 203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

 

 

 

 

Provisions of our Amended and Restated Certificate of Incorporation and By-laws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our Amended and Restated Certificate of Incorporation and By-laws:

 

	 	
			●

				
			do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);

			

 

	 	
			●

				
			provide that special meetings of our stockholders may be called only by our board of directors, chairman, chief executive officer, president or secretary; and

			

 

	 	
			●

				
			provide advance notice provisions with which a stockholder who wishes to nominate a director or propose other business to be considered at a stockholder meeting must comply.

			

 

The Indemnification of Directors and Officers

 

Pursuant to Section 145 of the Delaware General Corporation Law, a corporation has the power to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a third-party action, other than a derivative action, and against expenses actually and reasonably incurred in the defense or settlement of a derivative action, provided that there is a determination that the individual acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe the individual’s conduct was unlawful. Such determination will be made, in the case of an individual who is a director or officer at the time of such determination:

 

	 	
			●

				
			by a majority of the disinterested directors, even though less than a quorum;

			

 

	 	
			●

				
			by a committee of such directors designated by a majority vote of such directors, even though less than a quorum

			

 

	 	
			●

				
			if there are no disinterested directors, or if such directors so direct, by independent legal counsel; or

			

 

	 	
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			by a majority vote of the stockholders, at a meeting at which a quorum is present.

			

 

Without court approval, however, no indemnification may be made in respect of any derivative action in which such individual is adjudged liable to the corporation.

 

The Delaware General Corporation Law requires indemnification of directors and officers for expenses relating to a successful defense on the merits or otherwise of a derivative or third-party action.

 

The Delaware General Corporation Law permits a corporation to advance expenses relating to the defense of any proceeding to directors and officers contingent upon such individuals’ commitment to repay any advances unless it is determined ultimately that such individuals are entitled to be indemnified.

 

Under the Delaware General Corporation Law, the rights to indemnification and advancement of expenses provided in the law are non-exclusive, in that, subject to public policy issues, indemnification and advancement of expenses beyond that provided by statute may be provided by law, agreement, vote of stockholders, disinterested directors or otherwise.

 

 

 

 

Limitation of Personal Liability of Directors

 

The Delaware General Corporation Law provides that a corporation’s certificate of incorporation may include a provision limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. However, no such provision can eliminate or limit the liability of a director for:

Our Amended and Restated Certificate of Incorporation provides that our directors will not be personally liable to us or any of our stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by the Delaware General Corporation Law.

 

Disclosure of Commission Position on Indemnification for Securities Act Liabilities

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to our directors, officers and persons controlling us, we have been advised that it is the Securities and Exchange Commission’s opinion that such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.

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