Document:

Exhibit 10.23

 

One Kendall Square, Suite B14202, Cambridge MA 02139 USA

 

 

By Electronic Mail

 

April 15, 2015 (as revised May 15, 2015 and sent by electronic mail c/o James Conroy, Esq.)

Michael R. Jirousek

285 Third Street

Apartment 404

Cambridge, MA 02142

 

Dear Michael:

 

This letter confirms our agreement with respect to your transition and separation from employment with Catabasis Pharmaceuticals, Inc. (the “Company”). Provided that you sign and return this letter agreement to me on or before May 18, 2015 and do not revoke your acceptance, and provided further that you sign and return the Additional Release of Claims attached hereto as Attachment A (the “Additional Release”) on your last day of employment, which the Company will provide to you in final form on or before that day, and do not revoke the Additional Release, you will have the opportunity to remain an employee of the Company for a Transition Period pursuant to the terms and conditions set forth in paragraph 1 below, and you will be eligible to receive the Severance Benefits (as defined below) set forth in paragraph 2 below.

 

By timely signing, returning and not revoking this letter agreement and the Additional Release, you will be entering into binding agreements with the Company and will be agreeing to the terms and conditions set forth herein and therein. Therefore, you are advised to consult with an attorney before signing this letter agreement and the Additional Release, and you are being given at least twenty-one (21) days to do so. If you sign this letter agreement, you may change your mind and revoke your agreement during the seven (7) day period after you have signed it by notifying me in writing by the close of the seventh (7th) day. You may similarly revoke your acceptance of the Additional Release during the seven (7) day period after you have signed it by notifying me in writing by the close of the seventh (7th) day. If you do not so revoke, each of this letter agreement and the Additional Release will become a binding agreement between you and the Company upon the expiration of its respective seven day revocation period.

 

If you choose not to sign and return this letter agreement by May 18, 2015, your employment will end effective as of that date, and you will be eligible to receive only those severance benefits set forth in the Amended and Restated Employment Agreement dated as of April 7, 2010 between you and the Company (the “Employment Agreement”) (the “Old Benefits”) in accordance with the terms of the Employment Agreement. If you timely sign this letter agreement, but revoke it during the applicable revocation period, your employment will end on the date of any such revocation, and you will be eligible to receive only the Old Benefits in accordance with the terms of the Employment Agreement. In addition, if you timely enter into this letter agreement but your employment is terminated for Cause (as defined below), or if you fail to timely sign and return the Additional Release, and/or you revoke your acceptance of the Additional Release, you will not be eligible to receive any severance benefits from the

 

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Company. Regardless of entering into this letter agreement or the Additional Release, you will receive, within thirty (30) days following the termination of your employment, any base salary earned but not paid through the date of termination and any vacation time accrued but not used to that date, as well as any bonus which may have been earned and specifically awarded to you but not yet paid as of the date of termination of your employment. You will also be reimbursed for any business expenses incurred by you but unreimbursed on the date of termination, provided that you have submitted such expenses and documentation required in accordance with Company policy within sixty (60) days following the date of termination.

 

The following numbered paragraphs set forth our agreement:

 

1.                                      Separation Date; Transition Period, SAB Appointment — Except as set forth below, should you timely enter into this letter agreement, your effective date of separation from employment with the Company will be September 30, 2015 or such later date as you and the Company may mutually agree upon in writing (as applicable, the “Separation Date”). The period between the date of this letter agreement and the Separation Date will be a transition period (the “Transition Period”), during which you will remain an employee of the Company and retain the title of Chief Scientific Officer, reporting to me, but will no longer supervise the employees who previously reported to you. During the Transition Period, your duties and responsibilities will consist of you using your best efforts to professionally, timely and cooperatively perform such transition duties as may reasonably be requested by and at the direction of the Company (which shall include, but not be limited to, those duties set forth on Attachment B) (collectively, the “Transition Duties”). During the Transition Period you will continue to receive your current salary and to participate in the Company’s benefit plans (pursuant to the terms and conditions of such plans), but you may use reasonable amounts of time during the Company’s regular business hours to search for new employment. During the Transition Period, the Company will also work with you on the timing and contents of a mutually acceptable notice of departure, in which you may convey that you have decided to leave the Company to pursue other interests or opportunities. As of October 1, 2015, the Company will appoint you as a member of its Scientific Advisory Board (“SAB”) for a term ending on September 30, 2016. Notwithstanding any of the foregoing, however, the Company retains the right to immediately terminate your employment prior to the Separation Date either (1) for “Cause”, which for purposes of this letter agreement shall be defined as (a) a reasonable and good faith determination by the Company that you engaged in fraud or embezzlement, or an act of deliberate gross misconduct that results or resulted in a material adverse effect on the Company, or (b) your conviction or entry of a pleading of guilty or nolo contendere to any crime involving moral turpitude or any felony; or (2) because the Company determines that you have failed to perform your duties during the Transition Period in a professional, timely and cooperative manner, or that it needs to implement cost controls. In the event the Company terminates your employment for Cause or you breach this Agreement by resigning before September 30, 2015, you will not be eligible to receive the Severance Benefits, nor will you receive any further salary payments, benefits, or other compensation from the Company following your last day of employment, nor will you be appointed to the SAB. In the event the Company terminates your employment based on its determination that you failed to perform your duties in a professional, timely or cooperative manner, or that it needs to implement cost controls, the Company will treat your termination as involuntary and (x) you will remain eligible to receive the Severance Benefits, but you will not receive any further salary payments, benefits, or other compensation from the Company

 

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following your last day of employment, and (y) on or before your last day of employment you will be appointed to the SAB for a term ending on September 30, 2016.

 

2.                                      Severance Benefits — Provided you (a) timely sign, return and do not revoke this letter agreement, and comply with all of its provisions, and (b) timely sign, return, and do not revoke the Additional Release (allowing it to become irrevocable at the end of the seven (7) day revocation period described above), the Company will provide you with the following severance benefits (the “Severance Benefits”):

 

(a) The Company will provide you with severance pay in the form of monthly salary continuation payments at your current base salary rate (less all applicable taxes and withholdings) during the period beginning on the first regular payroll date that occurs fifteen (15) days following the date the Additional Release becomes effective and enforceable (unless delayed as provided in the last paragraph of this Section 2) and ending on the date that is the earlier of (x) twelve (12) months thereafter, or (y) sixty (60) days following your commencement of employment substantially similar to your employment by the Company immediately prior to entering this letter agreement (based on responsibility, reporting and compensation)(as applicable, the “Severance Period). You agree that you shall promptly notify the Company of the date of commencement of any new employment should you commence such employment during the Severance Period. For the avoidance of doubt, part time consulting for parties unrelated to the Company will not affect your salary continuation payments.

 

(b) The Company will provide you, within fifteen (15) days following the date the Additional Release becomes effective and enforceable (unless delayed as provided in the last paragraph of this Section 2), a payment equal to fifty percent (50%) of the average annual bonuses paid to you in the three (3) calendar years preceding the calendar year in which your date of termination occurs, prorated by multiplying such amount by a fraction, the numerator of which is the number of days in the calendar year in which your termination occurs that have elapsed since January 1 through such date and the denominator of which is 365. Such payment will be made in one (1) lump sum, less all applicable taxes and withholdings.

 

(c) Should you be eligible for and timely elect to continue receiving group health and/or dental insurance coverage under the law known as COBRA, the Company shall, for the period beginning fifteen (15) days following the date the Additional Release becomes effective and enforceable and ending on the earlier of (x) twelve (12) months thereafter, or (y) the date that you become eligible to enroll in the health (or, if applicable, dental) plan of a new employer (as applicable, the “COBRA Contribution Period”), pay on your behalf the full premium cost for such coverage. You agree that you shall promptly notify the Company of the date on which you become eligible to receive coverage from a new employer hereunder.

 

Other than the Severance Benefits, you will not be eligible for, nor shall you have a right to receive, any payments or benefits from the Company following your last day of employment, other than continued vesting of stock options as a member of the SAB. The payment of the Severance Benefits shall be subject to the terms and conditions set forth in Section 12 of the Employment Agreement (Compliance with Section 409A). The parties agree that your ceasing to be employed at the Separation Date (other than for Cause), your termination by the Company without Cause at that or an earlier date, or your termination as described in the last sentence of

 

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Section 1 would be, under the facts and circumstances, an “involuntary termination” as defined in Section 409A.

 

3.                                      Employee Release — In exchange for the consideration set forth herein, which you acknowledge you would not otherwise be entitled to receive, you hereby fully, forever, irrevocably and unconditionally release, remise and discharge the Company, its affiliates, subsidiaries, parent companies, predecessors, and successors, and all of its and their respective past and present officers, directors, stockholders, investors, partners, members, managers, employees, agents, representatives, plan administrators, attorneys, insurers and fiduciaries (each in their individual and corporate capacities) (collectively, the “Released Parties”) from any and all claims, complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts, agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (including attorneys’ fees and costs), of every kind and nature that you ever had or now have against any or all of the Released Parties, whether known or unknown, including, but not limited to, any and all claims arising out of or relating to your employment with and/or separation from the Company, including, but not limited to, all claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., the Americans With Disabilities Act of 1990, 42 U.S.C. § 12101 et seq., the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., the Genetic Information Nondiscrimination Act of 2008, 42 U.S.C. § 2000ff et seq., the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq., the Worker Adjustment and Retraining Notification Act (“WARN”), 29 U.S.C. § 2101 et seq., the Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq., Executive Order 11246, Executive Order 11141, the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., all as amended; all claims arising out of the Massachusetts Fair Employment Practices Act, Mass. Gen. Laws ch. 151B, § 1 et seq., the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, § 148 et seq. (Massachusetts law regarding payment of wages and overtime), the Massachusetts Civil Rights Act, Mass. Gen. Laws ch. 12, §§ 11H and 11l, the Massachusetts Equal Rights Act, Mass. Gen. Laws. ch. 93, § 102 and Mass. Gen. Laws ch. 214, § 1C, the Massachusetts Labor and Industries Act, Mass. Gen. Laws ch. 149, § 1 et seq., Mass. Gen. Laws ch. 214, § 1B (Massachusetts right of privacy law), the Massachusetts Maternity Leave Act, Mass. Gen. Laws ch. 149, § 105D, and the Massachusetts Small Necessities Leave Act, Mass. Gen. Laws ch. 149, § 52D, all as amended; all common law claims including, but not limited to, actions in defamation, intentional infliction of emotional distress, misrepresentation, fraud, wrongful discharge, and breach of contract (including, without limitation, any claims arising out of or related to the Employment Agreement); all claims to any non-vested ownership interest in the Company, contractual or otherwise; all state and federal whistleblower claims to the maximum extent permitted by law; and any claim or damage arising out of your employment with and/or separation from the Company (including a claim for retaliation) under any common law theory or any federal, state or local statute or ordinance not expressly referenced above; provided, however, that nothing in this letter agreement prevents you from filing a charge with, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission or a state fair employment practices agency (except that you acknowledge that you may not recover any monetary benefits in connection with any such claim, charge or proceeding, and you further waive any rights or claims to any payment, benefit, attorneys’ fees or other remedial relief in connection with any such claim, charge or proceeding and agree that if any such complaint, charge, or proceeding is filed on your behalf, you shall take all reasonable steps necessary to refuse any damages or individualized relief in connection therewith); and provided further, however, that

 

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notwithstanding anything above, nothing in this release affects or releases your rights under or claims related to this letter agreement, nor any future rights you have or may have as a stockholder of the Company or to vested pension or 401(K) benefits, or vested equity rights, or continued vesting of equity rights while you remain an employee of the Company or a member of the SAB. Further, nothing herein shall be construed as a release of any rights or claims you may have under the Company’s certificate of incorporation, by-laws, insurance and/or any indemnification agreement between you and the Company (and/or otherwise under law) for indemnification as an officer of the Company for your service to the Company (recognizing that such indemnification is not guaranteed by this letter agreement and shall be governed by the instrument or law, if any, providing for such indemnification).

 

4.                                      Company Release — In consideration of you entering into this letter agreement, the Company hereby fully, forever, irrevocably and unconditionally releases, remises and discharges you from any and all claims, complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts, agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (including attorneys’ fees and costs), of every kind and nature that it ever had or now has against you, whether known or unknown, including, but not limited to, any and all claims arising out of or relating to your employment with and/or separation from the Company; provided, however, that notwithstanding anything above, nothing in this release (a) releases you from your continuing obligations as set forth in paragraph 5 below, (b) affects or releases the Company’s rights under or claims related to this letter agreement, or (c) releases you from any claims for fraud or embezzlement, or from any civil claims based on any acts and/or omissions that satisfy the elements of a criminal offense, or from any claims arising out of any deliberate misconduct by you that resulted in material injury to the Company (provided, however, that the Company hereby represents that it knows of no such claims).

 

5.                                      Continuing Obligations — You acknowledge and reaffirm your obligation to keep confidential and not to use or disclose any and all non-public information concerning the Company that you acquired during the course of your employment with the Company, including, but not limited to, any non-public information concerning the Company’s business affairs, business prospects, and financial condition. You further acknowledge and reaffirm your obligations set forth in the Non-Competition and Non-Solicitation Agreement and the Invention and Non-Disclosure Agreement that you previously executed in connection with your employment, which remain in full force and effect. The Company acknowledges that it is solely responsible for determining any need for any regulatory filings or amendments to existing regulatory filings concerning or arising out of the termination of your employment or any other provisions of this letter agreement. Notwithstanding the foregoing, you acknowledge that you have responsibility for compliance with your obligations, if any, as a “reporting person” under Section 16 of the Securities Exchange Act of 1934. In the event that Company undertakes and successfully completes an initial public offering of its Common Stock, the Company expects that it will file a registration statement on Form S-8 to register the shares of Common Stock issued to employees upon exercise of stock options and other compensatory awards granted under the Company’s equity compensation plans. You acknowledge that you have entered into a lock-up agreement with certain underwriters and you will remain subject to the terms of that lock-up agreement.

 

6.                                      Non-Disparagement — You understand and agree that, to the extent permitted by law, you will not, in public or private, make any false, disparaging, derogatory or defamatory statements to

 

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any person or entity, including, but not limited to, any media outlet, industry group, financial institution or current or former employee, board member, consultant, client or customer of the Company, regarding the Company or any of the other Released Parties, or regarding the Company’s business affairs, business prospects, or financial condition; provided, however, that nothing herein shall be construed as preventing you from making truthful disclosures to any governmental entity or in any litigation or arbitration. The Company agrees that it will instruct Jill Milne, Ian Sanderson, the members of its Board of Directors, and its officers and employees with knowledge of this letter agreement to refrain from, in public or private, making any false, disparaging, derogatory or defamatory statements to any person or entity, including, but not limited to, any media outlet, industry group, financial institution or current or former employee, board member, consultant, client or customer of the Company about you; provided, however, that nothing herein shall be construed as requiring the Company to instruct any person not to make truthful disclosures to any governmental entity or in any litigation or arbitration.

 

7.                                      Return of Property — You confirm that you will, on the Separation Date or earlier if requested by the Company, return to the Company all keys, files, records (and copies thereof), equipment (including, but not limited to, computer hardware, software and printers, wireless handheld devices, cellular phones, etc.), Company identification and any other Company-owned property in your possession or control and will leave intact all electronic Company documents, including but not limited to those that you developed or helped to develop during your employment. You further confirm that you will, on the Separation Date or earlier if requested by the Company, cancel all accounts for your benefit, if any, in the Company’s name, including but not limited to, credit cards, telephone charge cards, cellular phone and/or wireless data accounts and computer accounts.

 

8.                                      Cooperation — You agree to cooperate fully with the Company, to the extent permitted by law, in the investigation, defense or prosecution of any claims or actions now in existence or that may be brought in the future against the Company by any third party or by or on behalf of the Company against any third party. You agree that your full cooperation in connection with such claims or actions will include being available to meet with the Company’s counsel, at reasonable times and locations designated by the Company, to prepare for discovery, any mediation, arbitration, trial, administrative hearing or other proceeding, and to act as a witness when requested by the Company. You agree that, to the extent permitted by law, you will notify the Company promptly in the event that you are served with a subpoena or in the event that you are asked to provide a third party with information concerning any actual or potential complaint or claim against the Company. You shall be entitled to receive reimbursement of all reasonable out of pocket expenses incurred by you in cooperating hereunder, including expenses related to travel and other expenses while away from home, plus an hourly fee in the amount of your currently weekly base salary, divided by forty (40), provided, however, that the Company will not pay you any fee for time spent providing testimony in any arbitration, trial, administrative hearing or other proceeding.

 

9.                                      Confidentiality — You understand and agree that, to the extent permitted by law, the terms and contents of this letter agreement and Additional Release, and the contents of the negotiations and discussions resulting in this letter agreement and Additional Release, shall be maintained as confidential by you and your agents and representatives and shall not be disclosed except to the extent agreed to in writing by the Company. The Company likewise agrees that, to the extent permitted by law, the terms and contents of this letter agreement and Additional Release, and

 

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the contents of the negotiations and discussions resulting in this letter Agreement and Additional Release, shall be maintained as confidential by the Company and its agents and representatives and shall not be disclosed except to the extent agreed to in writing by you or as the Company believes in good faith to be reasonably necessary for a legitimate business purpose.

 

10.                               Amendment — This letter agreement and the Additional Release shall be binding upon the parties and may not be modified in any manner, except by an instrument in writing of concurrent or subsequent date signed by duly authorized representatives of the parties hereto. This letter agreement and the Additional Release are binding upon and shall inure to the benefit of the parties and their respective agents, assigns, heirs, executors, successors and administrators.

 

11.                               Waiver of Rights — No delay or omission by you or the Company in exercising any right under this letter agreement or the Additional Release shall operate as a waiver of that or any other right. A waiver or consent given by you or the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar to or waiver of any right on any other occasion.

 

12.                               Validity — Should any provision of this letter agreement or the Additional Release be declared or be determined by any court of competent jurisdiction to be illegal or invalid, the validity of the remaining parts, terms or provisions shall not be affected thereby and said illegal or invalid part, term or provision shall be deemed not to be a part of this letter agreement or the Additional Release.

 

13.                               Acknowledgments — You acknowledge that you have been given at least twenty-one (21) days to consider this letter agreement and the Additional Release, and that the Company is hereby advising you to consult with an attorney of your own choosing prior to signing this letter agreement and the Additional Release. You acknowledge and agree that the changes made to the original April 15, 2015 letter agreement and reflected herein were made at your request and that, whether material or immaterial, such changes did not re-start the twenty-one day consideration periods. You understand that you may revoke each of this letter agreement and the Additional Release, respectively, for a period of seven (7) days after signing it by notifying me in writing, and neither this letter agreement nor the Additional Release shall be effective or enforceable until the expiration of its applicable seven (7) day period. You understand and agree that by entering into this letter agreement and the Additional Release you are waiving any and all rights or claims you may have under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, and that you have received consideration beyond that to which you were previously entitled.

 

14.                               Nature of Agreement — Nothing in this letter agreement or the Additional Release constitutes an admission of liability or wrongdoing on the part of the Company or you.

 

15.                               Voluntary Assent — Both parties to this letter agreement affirm that no other promises or agreements of any kind have been made to or with them by any person or entity whatsoever to cause them to sign this letter agreement or the Additional Release, and that they fully understand the meaning and intent of this letter agreement and the Additional Release. The

 

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parties state and represent that they have had an opportunity to fully discuss and review the terms of this letter agreement and the Additional Release with an attorney. The parties further state and represent that they have carefully read this letter agreement and the Additional Release, understand the contents herein, freely and voluntarily assent to all of the terms and conditions hereof, and sign their names of their own free acts.

 

16.                               Applicable Law — This letter agreement and the Additional Release shall be interpreted and construed by the laws of the Commonwealth of Massachusetts, without regard to conflict of laws provisions. You hereby irrevocably submit to and acknowledge and recognize the jurisdiction of the courts of the Commonwealth of Massachusetts, or if appropriate, a federal court located in the Commonwealth of Massachusetts (which courts, for purposes of this letter agreement and the Additional Release, are the only courts of competent jurisdiction), over any suit, action or other proceeding arising out of, under or in connection with this letter agreement or the Additional Release or the subject matter thereof.

 

17.                               Entire Agreement — This letter agreement and the Additional Release, upon its effective date, contain and constitute the entire understanding and agreement between the parties hereto with respect to your severance benefits and the settlement of claims against the Company, and cancel all previous oral and written negotiations, agreements, commitments and writings in connection therewith , including, without limitation, the Employment Agreement, which shall be null and void upon the date this letter agreement becomes effective and enforceable, except as explicitly set forth in paragraph 2 above. Nothing in this paragraph, however, shall modify, cancel or supersede your obligations set forth in paragraph 5 above or the agreements referenced therein.

 

18.                               Tax Provision — In connection with the Severance Benefits to be provided to you pursuant to this letter agreement and the Additional Release, the Company shall withhold and remit to the tax authorities the amounts required under applicable law, and you shall be responsible for all applicable taxes with respect to such Severance Benefits under applicable law, except such taxes for which the Company is directly responsible by law. You acknowledge that you are not relying upon advice or representation of the Company with respect to the tax treatment of the Severance Benefits.

 

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If you have any questions about the matters covered in this letter agreement or the Additional Release, please call me.

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jill C. Milne
    
	
 
    	
 
    	
Jill   C. Milne
    
	
 
    	
 
    	
Chief   Executive Officer
    

 

I hereby agree to the terms and conditions set forth above. I have been given at least twenty-one days to consider this letter agreement and I have chosen to execute this on the date below. I intend that this letter agreement will become a binding agreement if I do not revoke my acceptance within seven (7) days. I further understand that the Severance Benefits referenced in paragraph 2 are conditioned upon my timely execution, return and non-revocation of the Additional Release.

 

	
/s/ Michael R. Jirousek
    	
 
    	
Date
    	
05/18/2015
    
	
Michael   R. Jirousek
    	
 
    

 

 

To be returned in a timely manner as set forth on the first page of this letter agreement.

 

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ATTACHMENT A

 

ADDITIONAL RELEASE OF CLAIMS

 

1.                                      Employee Release — In consideration of the Severance Benefits referenced in the letter agreement to which this Additional Release of Claims (the “Additional Release) is attached, which you (Michael R. Jirousek) acknowledge you would not otherwise be entitled to receive, you hereby fully, forever, irrevocably and unconditionally release, remise and discharge the Company (Catabasis Pharmaceuticals, Inc.), its affiliates, subsidiaries, parent companies, predecessors, and successors, and all of its and their respective past and present officers, directors, stockholders, investors, partners, members, managers, employees, agents, representatives, plan administrators, attorneys, insurers and fiduciaries (each in their individual and corporate capacities) (collectively, the “Released Parties”) from any and all claims, complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts, agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (including attorneys’ fees and costs), of every kind and nature that you ever had or now have against any or all of the Released Parties, whether known or unknown, including, but not limited to, any and all claims arising out of or relating to your employment with and/or separation from the Company, including, but not limited to, all claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., the Americans With Disabilities Act of 1990, 42 U.S.C. § 12101 et seq., the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., the Genetic Information Nondiscrimination Act of 2008, 42 U.S.C. § 2000ff et seq., the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq., the Worker Adjustment and Retraining Notification Act (“WARN”), 29 U.S.C. § 2101 et seq., the Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq., Executive Order 11246, Executive Order 11141, the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., all as amended; all claims arising out of the Massachusetts Fair Employment Practices Act, Mass. Gen. Laws ch. 151B, § 1 et seq., the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, § 148 et seq. (Massachusetts law regarding payment of wages and overtime), the Massachusetts Civil Rights Act, Mass. Gen. Laws ch. 12, §§ 11H and 11I, the Massachusetts Equal Rights Act, Mass. Gen. Laws. ch. 93, § 102 and Mass. Gen. Laws ch. 214, § 1C, the Massachusetts Labor and Industries Act, Mass. Gen. Laws ch. 149, § 1 et seq., Mass. Gen. Laws ch. 214, § 1B (Massachusetts right of privacy law), the Massachusetts Maternity Leave Act, Mass. Gen. Laws ch. 149, § 105D, and the Massachusetts Small Necessities Leave Act, Mass. Gen. Laws ch. 149, § 52D, all as amended; all common law claims including, but not limited to, actions in defamation, intentional infliction of emotional distress, misrepresentation, fraud, wrongful discharge, and breach of contract (including, without limitation, any claims arising out of or related to the Employment Agreement); all claims to any non-vested ownership interest in the Company, contractual or otherwise; all state and federal whistleblower claims to the maximum extent permitted by law; and any claim or damage arising out of your employment with and/or separation from the Company (including a claim for retaliation) under any common law theory or any federal, state or local statute or ordinance not expressly referenced above; provided, however, that nothing in this Additional Release prevents you from filing a charge with, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission or a state fair employment practices agency (except that you acknowledge that you may not recover any monetary benefits in connection with any such claim, charge or proceeding, and you further waive any rights or

 

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claims to any payment, benefit, attorneys’ fees or other remedial relief in connection with any such claim, charge or proceeding and agree that if any such complaint, charge, or proceeding is filed on your behalf, you shall take all reasonable steps necessary to refuse any damages or individualized relief in connection therewith); and provided further, however, that notwithstanding anything above, nothing in this release affects or releases your rights under or claims related to the letter agreement or this Additional Release, nor any future rights you have or may have as a stockholder of the Company or to vested pension or 401(K) benefits, or vested equity rights, or continued vesting of equity rights while you remain a member of the SAB. Further, nothing herein shall be construed as a release of any rights or claims you may have under the Company’s certificate of incorporation, by-laws, insurance and/or any indemnification agreement between you and the Company (and/or otherwise under law ) for indemnification as an officer of the Company for your service to the Company (recognizing that such indemnification is not guaranteed by this letter agreement and shall be governed by the instrument or law, if any, providing for such indemnification).

 

2.                                      Company Release — In consideration of your entering into this Additional Release, the Company hereby fully, forever, irrevocably and unconditionally releases, remises and discharges you from any and all claims, complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts, agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (including attorneys’ fees and costs), of every kind and nature that it ever had or now has against you, whether known or unknown, including, but not limited to, any and all claims arising out of or relating to your employment with and/or separation from the Company; provided, however, that notwithstanding anything above, nothing in this release (a) releases you from your continuing obligations as set forth in paragraph 5 of the letter agreement, (b) affects or releases the Company’s rights under or claims related to the letter agreement and/or to this Additional Release, or (c) releases you from any claims for fraud or embezzlement, or from any civil claims based on any acts and/or omissions that satisfy the elements of a criminal offense, or from any claims arising out of any deliberate misconduct by you that resulted in material injury to the Company.

 

3.                                      Business Expenses and Final Compensation — You acknowledge that you have been reimbursed by the Company for all business expenses incurred in conjunction with the performance of your employment and that no other reimbursements are owed to you. You further acknowledge that you have received payment in full for all services rendered in conjunction with your employment by the Company, including payment for all wages, bonuses, and accrued, unused vacation time, and that no other compensation is owed to you except as provided in the letter agreement.

 

4.                                      Return of Company Property — You confirm that you have returned to the Company all keys, files, records (and copies thereof), equipment (including, but not limited to, computer hardware, software and printers, wireless handheld devices, cellular phones, etc.), Company identification and any other Company-owned property in your possession or control and have left intact all electronic Company documents, including but not limited to those that you developed or helped to develop during your employment. You further confirm that you have cancelled all accounts for your benefit, if any, in the Company’s name, including but not limited to, credit cards, telephone charge cards, cellular phone and/or wireless data accounts and computer accounts.

 

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5.                                      Acknowledgments — You acknowledge that you have been given at least twenty-one (21) days to consider this Additional Release, and that the Company has advised you in writing to consult with an attorney of your own choosing prior to signing this Additional Release. You understand that you may revoke this Additional Release for a period of seven (7) days after you sign it by notifying Jill C. Milne in writing, and the Additional Release shall not be effective or enforceable until the expiration of this seven (7) day revocation period. You understand and agree that by entering into this Additional Release, you are waiving any and all rights or claims you might have under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, and that you have received consideration beyond that to which you were previously entitled.

 

6.                                      Voluntary Assent — Both parties to this Additional Release affirm that no other promises or agreements of any kind have been made to or with them by any person or entity whatsoever to cause them to sign this Additional Release, and that they fully understand the meaning and intent of this Additional Release. The parties state and represent that they have had an opportunity to fully discuss and review the terms of this Additional Release with an attorney. The parties further state and represent that they have carefully read this Additional Release, understand the contents herein, freely and voluntarily assent to all of the terms and conditions hereof, and sign their names of their own free acts.

 

 

	
By:
    	
 
    	
 
    
	
 
    	
Jill   C. Milne
    	
 
    
	
 
    	
Chief   Executive Officer
    	
 
    

 

I hereby provide this Additional Release as of the date below and acknowledge that the execution of this Additional Release is in further consideration of the Severance Benefits, to which I acknowledge I would not be entitled if I did not enter into this Additional Release. I intend that this Additional Release become a binding agreement between the Company and me if I do not revoke my acceptance in seven (7) days.

 

 

	
 
    	
 
    	
 
    
	
Michael   R. Jirousek
    	
 
    	
Date
    

 

To be signed and returned on, but not before, your last day of employment.

 

12

 

ATTACHMENT B

 

Non-Exclusive List of Transition Duties

 

·                       Participate in development and implementation of corporate and R&D strategy

 

·       Active member of leadership team at Catabasis (SMT, ELT member)

 

·                       R&D

 

·       Assist in developing vision and strategy for R&D

·       Participate in program meetings and functional meetings as requested

·       Co-Lead and actively participate in quarterly program reviews (Hub Meetings)

·       Assist in developing KOL network, SAB and advisory boards

·       Participate in SAB, advisory and KOL meetings

 

·                       IP

 

·       Advise on strategy and management of current and future IP portfolio

 

·                       Regulatory

 

·       Advise on strategy and management of regulatory function

·       Review and provide feedback on regulatory documents

·       Help recruit head of regulatory and actively participate in the transition process

 

·                       Business Development

 

·       Participate in preparation for business development interactions

·       Participate in meetings with potential partners as needed 

·       Participate in diligence processes

 

·                       Scientific Publications and Conferences

 

·       Participate in development and implementation of publication strategy

·       Author and submit review article on technology platform

·       Review and edit other manuscripts

·       Represent company at scientific conferences as attendee, KOL, and/or presenter

 

13ex4-1.htm

THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE BORROWER.

	
Principal Amount: $_____ 

	
                                                                                                          Issue Date: May __, 2015

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, FLUOROPHARMA MEDICAL, INC., a Nevada corporation (hereinafter called “Borrower”), hereby promises to pay to the order of __________________ (the “Holder”), address at _________, without demand, the sum of ________________ Dollars ($_____) (“Principal Amount”), with interest accruing at 8% thereon, on May __, 2016 (the “Maturity Date”), if not sooner exchanged as required by in Section 1.1 herein.

This Note has been entered into pursuant to the terms of a note and warrant purchase agreement (the “Purchase Agreement”) dated as of May __, 2015 by and among the Borrower, the Holder and certain other holders (the “Other Holders”) of promissory notes (the “Other Notes”) for an aggregate Principal Amount of up to $2,000,000.  Unless otherwise separately defined herein, each capitalized term used in this Note shall have the same meaning as set forth in the Purchase Agreement. The following terms shall apply to this Note:

ARTICLE I

AUTOMATIC EXCHANGE; INTEREST; CONVERSION; CERTAIN ADJUSTMENTS

1.1           Repayment; Exchange Upon Subsequent Financing.  All principal and accrued interest under this Note (the “Outstanding Balance”) will, at the sole option of the Holder (i) convert into the Borrower’s next equity or equity-linked financing in which the Borrower raises gross proceeds of at least $3,600,000 (the “Subsequent Financing”), without any action on the part of the Holder, into such securities, including warrants of the Borrower as are issued in the Subsequent Financing, the amount of which shall be determined in accordance with the following formula: (the Outstanding Balance as of the closing of the Subsequent Financing) x (1.25) / (the per security price of the securities sold in the Subsequent Financing), or (ii) convert into a new financing in which the Borrower shall issue to the Holder one share of Common Stock and one-half of one warrant at a purchase price no greater than $0.35 per share.  Notwithstanding the foregoing to the contrary and for sole purpose of calculating the formula in subclause (i) of the preceding sentence, the per security price of the securities sold in the Subsequent Financing shall not exceed $0.35. The Holder shall be deemed to be an investor in the Subsequent Financing and subject to the terms of such Subsequent Financing.

 

 

  

  

 

1.2           Interest Payments.  Beginning on the issuance date of this Note, the outstanding principal balance of this Note shall bear interest, in arrears, at a rate per annum equal to eight percent (8%), payable upon the earlier of (i) exchange or conversion of this Note in accordance with the terms hereof and (ii) the Maturity Date.  Interest shall be computed on the basis of a 360-day year of twelve (12) 30-day months and shall accrue commencing on the date of this Note. Furthermore, upon the occurrence of an Event of Default (as defined in Article II hereof), then to the extent permitted by law, the Borrower will pay interest to the Holder on the outstanding principal balance of this Note from the date of the Event of Default until such Event of Default is cured at the rate of the lesser of sixteen percent (16%) and the maximum applicable legal rate per annum. Interest shall be payable hereunder either in cash or in additional shares of Common Stock (the “Interest Shares”) at the sole option of the Holder.  If the Holder elects to receive any accrued interest in Interest Shares, each Holder shall be deemed to be the Holder of record of the Interest Shares issuable with respect to the relevant interest payment notwithstanding that the stock transfer books of the Borrower shall then be closed or that certificates evidencing such Interest Shares shall not have been actually delivered to the Holder. In the event that interest under this Note is paid with Interest Shares, the number of Interest Shares to be issued shall be based on the average of the three lowest VWAPs (as defined below) of the Common Stock for the ten trading days immediately preceding the date such interest payment is due.  For purposes hereof, “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market (as defined below), the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a trading day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Borrower, the fees and expenses of which shall be paid by the Borrower. For purposes hereof, “Trading Market” means whichever of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, the OTC Bulletin Board or any tier of the OTC Markets Group, Inc. (or any successors to any of the foregoing).

1.3           Pari Passu.  All payments made on this Note and the Other Notes and except as otherwise set forth herein all actions taken by the Borrower with respect to this Note and the Other Notes, shall be made and taken pari passu with respect to this Note and the Other Notes.

1.4           Voluntary Conversion; Conversion Price.  The Holder shall have the right, at its option at any time, to convert the principal amount of this Note plus any accrued interest into such number of fully paid and nonassessable whole shares of Common Stock as is obtained by multiplying (i) Outstanding Balance to be converted by (ii) the conversion price of no greater than $0.35 per share or, if there has been an adjustment of the conversion price, by the conversion price as last adjusted and in effect at the date this Note is surrendered for conversion (such price, or such price as last adjusted, being referred to herein as the “Conversion Price”); provided, however, if an Event of Default has occurred and is continuing, the Conversion Price shall be adjusted to $0.15 per share. Holders shall effect conversions by providing the Borrower with written notice of the details of such voluntary conversion, which may be provided by email (“Notice of Conversion”).

1.5           Certain Adjustments.

 

(a)           Adjustments for Stock Splits, Combinations, Certain Dividends and Distributions.  If the Borrower shall, at any time or from time to time after the date hereof, effect a split of the outstanding Common Stock (or any other subdivision of its shares of Common Stock into a larger number of shares of Common Stock), combine the outstanding shares of Common Stock into a smaller number of shares of Common Stock, or make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in shares of Common Stock, then, in each event (i) the number of shares of Common Stock for which this Note shall be convertible immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock that a record holder of the same number of shares of Common Stock for which this Note shall be convertible immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (ii) the Conversion Price then in effect shall be adjusted to equal (A) the Conversion Price then in effect multiplied by the number of shares of Common Stock for which this Note shall be convertible immediately prior to the adjustment divided by (B) the number of shares of Common Stock for which this Note shall be convertible immediately after such adjustment.

 

 

  

  

 

(b)           Adjustment for Other Dividends and Distributions. If the Borrower shall, at any time or from time to time after the date hereof, make or issue or set a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in (i) cash, (ii) any evidences of indebtedness, or any other securities of the Borrower or any property of any nature whatsoever, other than, in each case, shares of Common Stock; or (iii) any warrants or other rights to subscribe for or purchase any evidences of indebtedness, or any other securities of the Borrower or any property of any nature whatsoever, other than, in each case, shares of Common Stock, then, and in each event, (A) the number of shares of Common Stock for which this Note shall be convertible shall be adjusted to equal the product of the number of shares of Common Stock for which this Note shall be convertible immediately prior to such adjustment multiplied by a fraction (1) the numerator of which shall  be the last closing bid price per share of the Common Stock at the date of taking such record and (2) the denominator of which shall be such last closing bid price per share of the Common Stock minus the amount allocable to one share of Common Stock of any such cash so distributable and of the fair value (as determined in good faith by the Board) of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributable, and (B) the Conversion Price then in effect shall be adjusted to equal (1) the Conversion Price then in effect multiplied by the number of shares of Common Stock for which this Note shall be convertible immediately prior to the adjustment divided by (2) the number of shares of Common Stock for which this Note shall be convertible immediately after such adjustment. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Borrower to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 1.4(b) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 1.4(a).

 

(c)           Adjustments for Reclassification, Exchange or Substitution. If the Common Stock for which this Note shall be convertible at any time or from time to time after the date hereof shall be changed to the same or different number of shares of any class or classes of stock, whether by reclassification, exchange, substitution or otherwise (other than by way of a stock split or combination of shares or stock dividends provided for in Section 1.5(a), Section 1.5(b), or a reorganization, merger, consolidation, or sale of assets provided for in Section 1.5(d)), then, and in each event, an appropriate revision to the Conversion Price shall be made and provisions shall be made (by adjustments of the Conversion Price or otherwise) so that, upon any subsequent conversion of this Note, the Holder shall have the right to receive, in lieu of Conversion Shares, the kind and amount of shares of stock and other securities receivable upon reclassification, exchange, substitution or other change, by holders of the number of shares of Common Stock for which this Note was convertible immediately prior to such reclassification, exchange, substitution or other change, all subject to further adjustment as provided herein.

 

(d)           Adjustments for Reorganization, Merger, Consolidation or Sales of Assets. If at any time or from time to time after the date hereof there shall be a capital reorganization of the Borrower (other than by way of a stock split or combination of shares or stock dividends or distributions provided for in Section 1.5(a), and Section 1.5(b), or a reclassification, exchange or substitution of shares provided for in Section 1.5(c)), or a merger or consolidation of the Borrower with or into another Borrower where the holders of the Borrower’s outstanding voting securities prior to such merger or consolidation do not own over 50% of the outstanding voting securities of the merged or consolidated entity, immediately after such merger or consolidation, or the sale of all or substantially all of the Borrower’s properties or assets to any other person (an “Organic Change”), then as a part of such Organic Change an appropriate revision to the Conversion Price shall be made if necessary and provision shall be made if necessary (by adjustments of the Conversion Price or otherwise) so that, upon any subsequent conversion of this Note, the Holder shall have the right to receive, in lieu of Conversion Shares, the kind and amount of shares of stock and other securities or property of the Borrower or any successor Borrower resulting from the Organic Change. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 1.5(d) with respect to the rights of the Holder after the Organic Change to the end that the provisions of this Section 1.5(d) (including any adjustment in the Conversion Price then in effect and the number of shares of stock or other securities deliverable upon conversion of this Note) shall be applied after that event in as nearly an equivalent manner as may be practicable.

 

 

  

  

 

(e)           Adjustments for Issuance of Additional Shares of Common Stock.  In the event the Borrower, shall, at any time, from time to time, issue or sell any additional shares of Common Stock (otherwise than as provided in the foregoing subsections 1.5(a) through (d) or pursuant to Common Stock Equivalents (hereafter defined) granted or issued prior to the date hereof) (“Additional Shares of Common Stock”), other than Excluded Stock (as defined below), at a price per share less than the Conversion Price or without consideration, then the Conversion Price upon each such issuance shall be reduced to a price equal to the consideration per share paid for such Additional Shares of Common Stock.

 

(f)           Issuance of Common Stock Equivalents. The provisions of this Section 1.5(f) shall apply if (a) the Borrower, at any time after the date hereof, shall issue any securities convertible into or exchangeable for, directly or indirectly, Common Stock (“Convertible Securities”), other than Excluded Stock, or (b) any rights or warrants or options to purchase any such Common Stock or Convertible Securities (collectively, the “Common Stock Equivalents”), other than Excluded Stock, shall be issued or sold.  If the price per share for which Additional Shares of Common Stock may be issuable pursuant to any such Common Stock Equivalent shall be less than Conversion Price, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall be less than Conversion Price at the time of such amendment or adjustment, then the applicable Conversion Price upon each such issuance or amendment shall be adjusted as provided in Section 1.5(e). No adjustment shall be made to the Conversion Price upon the issuance of Common Stock pursuant to the exercise, conversion or exchange of any Convertible Security or Common Stock Equivalent where an adjustment to the Conversion Price was made as a result of the issuance or purchase of any Convertible Security or Common Stock Equivalent.

 

(g)           Excluded Stock.  Anything herein to the contrary notwithstanding, the Borrower shall not be required to make any adjustment to the Conversion Price in connection with any issuance of Excluded Stock.  For purposes hereof, “Excluded Stock” means Common Stock or other securities of the Borrower issued or to be issued (i) pursuant to the conversion, exercise or exchange of securities outstanding on the date hereof, (ii) pursuant to the exercise or conversion of any equity securities at an exercise or conversion price greater than the Conversion Price, (iii) in accordance with the Borrower’s stock option plan or stock purchase plan, or otherwise issued to the Borrower’s employees, consultants or directors in transactions not primarily for equity financing purposes and approved by a majority of the members of the Compensation Committee of the Borrower or the Board of Directors, (iv) securities issued in connection with bona fide strategic license agreements or other partnering arrangements so long as such issuances are not for the primary purpose of raising capital, (v) except as otherwise provided herein, and following any applicable adjustment in the Conversion Price, upon the actual issuance of Common Stock or securities convertible into Common Stock at the time of exercise of any rights, options or warrants to purchase Common Stock or any securities convertible into Common Stock, as appropriate, or upon conversion or exchange of securities convertible into Common Stock, (vi) to the extent provided for in the Purchase Agreement or herein, any shares of Common Stock issued as interest or after the date hereof pursuant to the terms therein or herein, or (vii) any non-convertible debt offering arranged by the Borrower, its advisors or bankers.

 

(h)           Calculations. All calculations under this Section 1.5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 1.5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

 (i)           Notice to Holder.

 

(i)           Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 1.5, the Borrower shall promptly email to the Holder a notice setting forth the Conversion Price after such adjustment and any resulting adjustment to the number of Conversion Shares and setting forth a brief statement of the facts requiring such adjustment.

 

 

  

  

 

(ii)           Notice to Allow Exercise by Holder. If (A) the Borrower shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Borrower shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Borrower shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Borrower shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Borrower is a party, any sale or transfer of all or substantially all of the assets of the Borrower, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Borrower shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Borrower, then, in each case, the Borrower shall cause to be mailed to the Holder at its last address as it shall appear upon the Note Register of the Borrower, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Borrower or any of the Subsidiaries, the Borrower shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to convert this Note during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

1.5           Miscellaneous.   Principal on this Note and other payments in connection with this Note shall be payable at the Holder’s offices as designated above in lawful money of the United States of America in immediately available funds without set-off, deduction or counterclaim.  Upon assignment of the interest of Holder in this Note, Borrower shall instead make its payment pursuant to the assignee’s instructions upon receipt of written notice thereof.

ARTICLE II

EVENTS OF DEFAULT

The occurrence of any of the following events of default (“Event of Default”) shall, at the option of the Holder hereof, make all sums of principal then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon demand, without presentment or grace period, all of which hereby are expressly waived, except as set forth below:

2.1           Failure to Pay Principal.  The Borrower fails to pay any installment of principal under this Note within ten (10) business days after such amounts are due.

2.2           Breach of Covenant.  The Borrower breaches any material covenant or other term or condition of the Purchase Agreement, Transaction Documents or this Note, except for a breach of payment, in any material respect and such breach, if subject to cure, continues for a period of twenty (20) days after written notice to the Borrower from the Holder.

2.3           Breach of Representations and Warranties.  The Borrower is advised by written notice from the Holder that a material representation or warranty of the Borrower made herein or in the Purchase Agreement was false or misleading in any material respect as of the date made and the Closing Date.

 

 

  

  

 

2.4           Liquidation.   Any dissolution, liquidation or winding up by Borrower or a Subsidiary of a substantial portion of their business.

 

2.5           Cessation of Operations.   Any cessation of operations by Borrower or a Subsidiary.

 

2.6           Maintenance of Assets.   The failure by Borrower or any Subsidiary to maintain any material intellectual property rights, personal, real property, equipment, leases or other assets which are necessary to conduct its business (whether now or in the future) and such breach is not cured with thirty (30) days after written notice to the Borrower from the Holder.

 

2.7           Judgments.  Any money judgment, writ or similar final process shall be entered or made in a non-appealable adjudication against Borrower or any Subsidiary or any of its property or other assets for more than $250,000 in excess of the Borrower’s insurance coverage, unless stayed vacated or satisfied within 60 days.

2.8           Bankruptcy.

(a)           Borrower files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing; and

(b)           An involuntary petition is filed against Borrower under any bankruptcy statute now or hereafter in effect, and such petition is not dismissed or discharged within 60 days, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of Borrower.

ARTICLE III

MISCELLANEOUS

3.1           Protective Provisions.  So long as at least fifty percent (50%) of the principal amount of the Notes issued pursuant to the Purchase Agreement remain outstanding, the Borrower shall not, without the affirmative vote or consent of the Holders of at least a majority of the principal amount of the Notes outstanding at the time, given in person or by proxy, either in writing or at a meeting, in which the Holders of the Notes vote separately as a class: (i) make any new loans or advances in excess of $100,000 to any person or entity; (ii) guarantee any indebtedness of any person or entity other than the Borrower or its wholly-owned subsidiaries; (iii) make any investment in securities other than wholly-owned subsidiaries; (iv) incur any aggregate incremental indebtedness in excess of $250,000 that is not already included in a budget approved by the Borrower’s board of directors; (v) change the principal business of the Borrower, enter into new lines of business, or exit the Borrower’s current line of business; (vi) sell, assign, license, pledge or encumber material technology or intellectual property, except in the ordinary course of business and consistent with past practice; (vii) enter into any corporate strategic relationships involving the payment, contribution or assignment by the Borrower or to the Borrower of assets greater than $250,000; (viii) decide to liquidate, dissolve, wind up, merge or consolidate the Borrower; or (ix) sell, lease, transfer, license or dispose of all or substantially all of the assets of the Borrower.

 

 

 

  

  

 

3.2           Holder’s Conversion Limitations.  The Borrower shall not effect any conversion of this Note, and a Holder shall not have the right to convert any portion of this Note, to the extent that after giving effect to such issuance after conversion as set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Borrower (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 3.2, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Borrower is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 3.2 applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Note is convertible, in each case subject to the Beneficial Ownership Limitation, and the Borrower shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 3.2, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Borrower’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Borrower or (C) a more recent written notice by the Borrower or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Borrower shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Borrower, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note.  The Holder, upon not less than 61 days’ prior notice to the Borrower, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 3.2, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the provisions of this Section 3.2 shall continue to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Borrower.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3.2 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.

 

3.3           Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.  All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

3.4           Notices.  Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the terms of the Purchase Agreement.

 

 

  

  

 

3.5           Amendment Provision.  The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. This Note may be amended, modified or terminated only by a written instrument executed by the Borrower and the Holders holding a majority of the aggregate principal amount of this Note and the Other Notes.

 

3.6           Assignability.  This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns.  The Borrower may not assign its obligations under this Note.

 

3.7           Cost of Collection.  If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.

 

3.8           Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement must be brought only in the civil or state courts of New York or in the federal courts located in the State and county of New York.  Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts.  The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.  In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower’s obligations to Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other decision in favor of the Holder.  This Note shall be deemed an unconditional obligation of Borrower for the payment of money and, without limitation to any other remedies of Holder, may be enforced against Borrower by summary proceeding pursuant to New York Civil Procedure Law and Rules Section 3213 or any similar rule or statute in the jurisdiction where enforcement is sought.  For purposes of such rule or statute, any other document or agreement to which Holder and Borrower are parties or which Borrower delivered to Holder, which may be convenient or necessary to determine Holder’s rights hereunder or Borrower’s obligations to Holder are deemed a part of this Note, whether or not such other document or agreement was delivered together herewith or was executed apart from this Note.

 

3.9           Non-Business Days.   Whenever any payment or any action to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of New York, such payment may be due or action shall be required on the next succeeding business day.

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IN WITNESS WHEREOF, Borrower has caused this Convertible Promissory Note to be signed in its name by an authorized officer as of the date first above written.

 

 

	 	FLUOROPHARMA MEDICAL, INC.
	 	 
	 	By: ________________________________
	 	Name: Johan M. (Thijs) Spoor
	 	Title: CEO and President

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