Document:

Exhibit 10.3

 

NEOS THERAPEUTICS, INC.

 

2009 EQUITY PLAN

 

EMPLOYEE NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

 

Pursuant to this Non-Qualified Stock Option Award Agreement, executed by Neos Therapeutics, Inc. (the “Company”) and              (the “Optionee”), an employee of the Company or one of its Subsidiaries (the “Award Agreement”), the Company hereby grants to the Optionee on                (the “Grant Date”), a right (the “Award”) to purchase from the Company up to, but not exceeding in the aggregate,           shares of Stock at       per share (the “Exercise Price”), which has been determined to be no less than the Fair Market Value per share of the Stock on the Grant Date, pursuant to the Neos Therapeutics, Inc. 2009 Equity Plan (the “Plan”), with such number of shares and such price per share being subject to adjustment as provided in the Plan, and further subject to the following terms and conditions. The Award is not intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code.

 

1.                                      Relationship to Plan. The Award is subject to all of the terms, conditions and provisions of the Plan and administrative interpretations thereunder, if any, which have been adopted by the Committee and are in effect on the date hereof. Except as defined herein, capitalized terms shall have the same meanings ascribed to them under the Plan. For purposes of this Award Agreement:

 

(a)                            “Employment” means employment with the Company or any of its Subsidiaries.

 

(b)                            “Option Period” means the period commencing upon the Grant Date and ending on the date on which the Award expires pursuant to paragraph 3.

 

(c)                             “Option Shares” means the shares of Stock covered by the Award Agreement.

 

2.                               Exercise and Vesting Schedule

 

(a)                                      Schedule. The Award shall vest and may be exercised in installments in accordance with the following schedule:

 

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Date Vested
    	
 
    	
Percentage of Option Shares
   Vested and Exercisable
    	
 
    
	
First (1st) Anniversary of   the Grant Date
    	
 
    	
33 1/3 %
    	
 
    
	
Second (2nd) Anniversary   of the Grant Date
    	
 
    	
33 1/3 %
    	
 
    
	
Third (3rd) Anniversary of   the Grant Date
    	
 
    	
33 1/3 %
    	
 
    

 

As of the third (3rd) anniversary of the Grant Date, all Option Shares covered by the Award shall be 100% vested and exercisable. The Optionee must be in continuous Employment from the Grant Date through the date of exercisability in order for the Award to become vested and exercisable with respect to additional shares of Stock on such date.

 

(b)                                      Expiration. To the extent the Option Shares covered by the Award become vested and exercisable, such Award may be exercised in whole or in part (at any time or from time to time, except as otherwise provided herein) for whole Option Shares until expiration of the Award pursuant to the terms of the Award Agreement or the Plan.

 

3.                                    Repurchase Right. Upon a Repurchase Event, the Company has the right and option to repurchase from Optionee some or all of the Option Shares at the Option Shares Repurchase Price during the Option Shares Repurchase Period.

 

4.                                    Termination of Award

 

(a)                            Expiration Date. The Option Period shall expire on the tenth (10th) anniversary of the Grant Date, except as otherwise provided in this paragraph 4.

 

(b)                            Termination Event. Upon a Termination Event:

 

(i)                                               any unvested Option Shares shall be immediately forfeited as of the date of such Termination Event and no further vesting shall occur;

 

(ii)                                            any vested Option Shares shall be exercisable until the earlier of (A) 90 day following such Employment termination date or (B) the expiration of the Option Period, and thereafter the Award shall expire, terminate and be of no further force and effect; and

 

(iii)                                         if Optionee’s Termination Event is by the Company for Cause, the vested and unvested portions of all Option Shares held by Optionee shall immediately terminate and be of no further force and as of the date of Optionee’s Termination Event.

 

5.                                    Exercise of Award. Subject to the limitations set forth herein and in the Plan, the Award may be exercised by completing in writing the Stock Option Award Exercise Notice, in the form prescribed by the Committee (the “Notice”), and submitting the Notice to the Company

 

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as set forth in paragraph 6. The Notice shall (a) state the number of shares of Stock with respect to which the Award is being exercised, (b) be accompanied by (i) cash, a certified or bank check, (ii) if the Board expressly authorized the loan of funds to the Optionee to assist Optionee in exercising the Option, a promissory note, or (iii) with the consent of the Committee, delivery (or attestation to the ownership) of shares of Stock (not subject to limitations on transfer) in the full amount of the purchase price for any shares of Stock being acquired, and (c) be accompanied by cash, check or Stock in the full amount of all federal and state withholding, local or other employment taxes applicable to the taxable income of such Optionee resulting from such exercise (or instructions to satisfy such withholding obligation by withholding Option Shares in accordance with paragraph 9); provided, however, that any shares of Stock delivered in payment of the option price must be shares that the Optionee has owned for a period of at least six (6) months prior to the date of exercise. For the purpose of determining the amount, if any, of the purchase price satisfied by payment in Stock, such Stock shall be valued at its Fair Market Value on the date of exercise.

 

Notwithstanding anything to the contrary contained herein, the Optionee agrees that he or she will not exercise the Award granted pursuant hereto, and the Company will not be obligated to issue any Option Shares pursuant to the Award Agreement, if the exercise of the Award or the issuance of such Option Shares would constitute a violation by the Optionee or by the Company of any provision of any law or regulation of any governmental authority or any stock exchange or transaction quotation system. If any law or regulation requires the Company to take any action with respect to the shares specified in such notice, the time for delivery thereof, which would otherwise be as promptly as possible, shall be postponed for the period of time necessary to take such action.

 

6.                            Notices. The Notice for exercise of the Award (with payment) must be made in the following manner:

 

(a)                                 by registered or certified United States mail, postage prepaid, to Neos Therapeutics, Inc., Attention: President, 2940 N. Hwy 360, Suite 100, Grand Prairie, Texas 75050, in which case the date of exercise shall be the date of mailing; or

 

(b)                            by hand delivery or overnight mail to Neos Therapeutics, Inc., Attention: President, 2940 N. Hwy 360, Suite 100, Grand Prairie, Texas 75050, in such case, the date of exercise shall be the date when receipt is acknowledged by the Company.

 

Notwithstanding the foregoing, in the event that the address of the Company is changed prior to the date of any exercise of the Award, notice of exercise shall instead be made pursuant to the foregoing provisions at the Company’s current address.

 

Any other notices provided for in the Award Agreement or in the Plan shall be given in writing and shall be deemed effectively delivered or given upon receipt, or in the case of notices delivered by the Company to the Optionee, five (5) days after deposit in the United States mail, postage prepaid, addressed to the Optionee at the address specified at the end of the Award Agreement or at such other address as the Optionee hereafter  designates by written notice to the Company.

 

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7.                            Assignment of Award. Except as otherwise permitted by the Committee, the Optionee’s rights under the Plan and the Award Agreement are personal; no assignment or transfer of the Optionee’s rights under and interest in the Award may be made by the Optionee other than by will or by the laws of descent and distribution or by qualified domestic relations order. The Award will be exercisable during Optionee’s lifetime only by Optionee or by Optionee’s guardian or legal representative. No right or benefit hereunder shall in any manner be liable for or subject to any debts, contracts, liabilities, or torts of Optionee.

 

8.                            Delivery of Stock. No certificates representing shares of Stock purchased hereunder shall be delivered to or in respect of an Optionee unless

 

(a)                            the Optionee has remitted to the Company the full Exercise Price for such Option Shares;

 

(b)                            the Optionee has executed and delivered to the Company the Common Stock Purchase Agreement;

 

(c)                             the Optionee has executed and delivered to the Company the Stockholders Agreement;

 

(d)                            the Optionee represents in writing, in form and substance satisfactory to the Company, that he is acquiring such shares for his or her own account for investment and not with a view to, or for sale in connection with, the distribution of such shares or any part thereof;

 

(e)                             any certificate representing the Stock issued pursuant to the exercise of the Award bears all legends required by law and necessary or advisable to effectuate the provisions of the Plan and the Award.

 

The Company may place a “stop transfer” order against shares of the Stock issued pursuant to the exercise of the Award until all restrictions and conditions set forth in the Plan or the Award Agreement and in the legends referred to in this paragraph 8 have been complied with.

 

9.                            Withholding. No certificates representing shares of Stock purchased hereunder shall be delivered to or in respect of an Optionee unless the amount of all federal, state and other governmental withholding tax requirements imposed upon the Company with respect to the issuance of such shares of Stock has been remitted to the Company or unless provisions to pay such withholding requirements have been made to the satisfaction of the Committee. The Company shall have the right to (i) make deductions from the number of Option Shares otherwise deliverable upon exercise of the Award in an amount sufficient to satisfy withholding of any federal, state and other governmental tax required by law, or (ii) take such other action as may be necessary or appropriate to satisfy any such tax to withholding obligations. The Optionee may pay all or any portion of the taxes required to be withheld by the Company or paid by the Optionee in connection with the exercise of all or any portion of the Award by delivering cash, or, with the Committee’s approval, by electing to have the Company withhold shares of Stock, or by delivering previously owned shares of Stock, having a Fair Market Value equal to the amount required to be withheld or paid. The Optionee may only request withholding Option Shares having a Fair Market Value equal to the statutory minimum withholding amount. The Optionee

 

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must make the foregoing election on or before the date that the amount of tax to be withheld is determined. If the Optionee is subject to the short-swing profits recapture provisions of Section 16(b) of the Exchange Act, any such election shall be subject to such other restrictions as may be established by the Committee in order that satisfaction of withholding tax obligations with shares of Stock might be exempt from the operation of Section 16(b) of the Exchange Act in whole or in part.

 

10.                          Shareholder Rights. The Optionee shall have no rights of a shareholder with respect to shares of Stock subject to the Award unless and until such time as the Award has been exercised and ownership of such shares of Stock has been transferred to the Optionee.

 

11.                          Successors and Assigns. The Award Agreement shall bind and inure to the benefit of and be enforceable by the Optionee, the Company and their respective permitted successors and assigns (including personal representatives, heirs and legatees), except that the Optionee may not assign any rights or obligations under the Award Agreement except to the extent and in the manner expressly permitted herein.

 

12.                          No Employment Guaranteed. The Award shall not confer upon Optionee any right with respect to continuance of Employment or other service with Company or a Subsidiary, nor shall it interfere in any way with any right the Company or a Subsidiary would otherwise have to terminate such Optionee’s Employment or other service at any time.

 

13.                          Governing Law. The Award Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware.

 

14.                          Amendment. The Award Agreement cannot be modified, altered or amended except by an agreement, in writing, signed by the Optionee and a duly authorized representative of the Company.

 

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NEOS   THERAPEUTICS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
					

 

The Optionee hereby accepts the Award, subject to the terms and provisions of the Award Agreement, Plan and administrative interpretations thereof referred to above.

 

	
 
    	
OPTIONEE:
    
	
 
    	
 
    
	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
 
    
				

 

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NEOS THERAPEUTICS,  INC.

2009 EQUITY PLAN

 

RESTRICTED STOCK AGREEMENT

 

This Restricted Stock Agreement (this “Agreement”) is made as of                                                2009, by and between Neos Therapeutics, Inc., a Delaware corporation (the “Company”), and                                (“Holder”).

 

WHEREAS, the Company has adopted the Neos Therapeutics, Inc. 2009 Equity Plan (the “Plan”), a copy of which is attached hereto as Exhibit “A”  and by this reference made a part hereof, for the benefit of eligible employees, directors, consultants and independent contractors of the Company and its Subsidiaries; and

 

WHEREAS, pursuant to the provisions of the Plan, the Committee, which administers the Plan, has determined to issue and sell Holder                          shares of common stock, par value $0.001  per share, of the Company (“Purchased Shares”), pursuant to a Restricted Stock Award, as of                                 , 2009 (“Grant Date”) upon the terms set forth below in this Agreement and the Plan and subject to Holder’s purchase of the Purchased Shares (as of the date of this Agreement)  pursuant to the Common Stock Purchase Agreement of even date herewith (the “CSPA”), which are divided into two tranches of Stock,                        being referred to herein as the “Primary Shares,”  and                  being referred to herein as the “Secondary Shares;” and

 

WHEREAS, the Company has previously raised, and may in the future raise, capital through the issuance of shares of Series A Preferred Stock, par value $0.001  per share (the “Series A Preferred Stock”), and shares of Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”)  and, together with the Series A Preferred Stock, (the “Preferred Stock”), pursuant to that certain Preferred Stock Purchase Agreement (as amended, the “Purchase Agreement”), dated as of June 19, 2009, among the Company and the investors party thereto (the “Investors”); and

 

WHEREAS, pursuant to Section 1.2(b) of the Purchase Agreement, at any time and from time to time during the 90 day period immediately following the Initial Closing (as such term is defined in the Purchase Agreement) (which period may be extended at the sole discretion of the Board for up to two additional 90 day periods), the Company may, at one or more additional closings (each such closing, an “Additional Initial Closing”), offer and sell to (i) one or more existing holders of shares of Series B Preferred Stock and (ii)  one or more other investors approved by the Board, in any case at a price of $5.00 per share, up to that number of shares of Series B Preferred Stock, if any, that is equal to 5,800,000 shares of Series B Preferred Stock less the number of shares of Series B Preferred Stock actually issued and sold by the Company at the Initial Closing and at any prior Additional Initial Closing (“Preferred B Additional Initial Closing Shares”); and

 

WHEREAS, pursuant to Section 1.3 of the Purchase Agreement, each person or entity who or which purchased shares of Series B Preferred Stock at the Initial Closing or any Additional Initial Closing will have the right to purchase a number of additional shares of Series

 

 

B Preferred Stock, not to exceed the number of shares of Series B Preferred Stock set forth opposite such person or entity’s name on Schedule A thereto under the heading “Additional Shares”, at a purchase price equal to $5.00  per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or similar recapitalization affecting such shares)  of Series B Preferred Stock (“Preferred B Option Shares”) at one or more subsequent closings (each such closing, a “Subsequent Closing”).

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants and other agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.                           Recitals;  Definitions.  The recitals set forth above are true and correct and are hereby incorporated in and made a part of this Agreement by this reference.  Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Plan or the Purchase Agreement, as applicable.  For purposes of this Agreement, the term “Shares” refers to the Purchased Shares.

 

2.                             Limitations on Transfer.  In addition to any other limitation on transfer created by applicable securities laws, Holder shall not transfer, assign, encumber or dispose of any interest in the Shares except as and to the extent permitted by the Plan; provided, however, that as a condition to the transfer, assignment, encumbrance or disposition of any of the Shares by Holder as permitted by the Plan, the transferee or other recipient shall agree in writing to receive and hold the Shares so transferred subject to the provisions of this Agreement (including, without limitation, the Company’s Repurchase Right under Section 3 hereof).

 

3.                             Repurchase Right and Accelerated Release.

 

(a)                                  Upon a Repurchase Event, the Company has the right and option to repurchase from Holder some or all of the Unreleased Shares (as defined below) at the Non-Option Shares Repurchase Price during the Non-Option Shares Repurchase Period (the “Repurchase Right”), in accordance with the Repurchase Right terms of the Plan.

 

(b)                                  The Primary Shares shall vest and be released from the Repurchase Right as follows: in equal monthly installments over a thirty-six month period (i.e. - 2.778%  at the end of each monthly period following the Grant Date).

 

(c)                                   Right as follows: The Secondary Shares shall be vest and be released from the Repurchase

 

(i)                                    Upon each Additional Initial Closing following the Grant Date and each Subsequent Closing, if any, a number of Secondary Shares equal to (A)  the total number of Secondary Shares, multiplied by (B) the ratio of the number of Preferred B Additional Initial Closing Shares or Preferred B Option Shares, as applicable, sold at such closing divided by 4,800,000  shall become eligible for monthly vesting; and

 

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(ii)                                 Any Secondary Shares that become eligible for monthly vesting pursuant to Section 3(d)(i) above shall vest (or be deemed to be vested) and be released from the Repmchase Right in equal monthly installments over a thirty-six month period beginning as of the Grant Date (i.e. - 2.778% at the end of each monthly period following the date hereof).  For example, if 2,400,000 of the Preferred B Option Shares are purchased on the one year anniversary of the Grant Date, Holder shall be vested as of such date in a number of Secondary Shares equal to the product of (w) 0.5  [50%] times (x) the total number of Secondary Shares times (y) 0.02778 [2.778%] times (z) twelve (12) [number of months elapsed].  2.778% of such Secondary Shares will vest each subsequent month thereafter.

 

(d)                                  Any Shares which have not vested (or are not deemed to have vested) and have not accordingly been released from the Repurchase Right in accordance with Section 3(b), 3(c) and 3(d) are referred to herein as “Unreleased Shares.”  Upon the termination of the option period set forth in Section 1.3 of the Purchase Agreement, any Secondary Shares that have not become eligible for monthly vesting pursuant to Section 3(d)(i) above shall be repurchased by the Company at a purchase price of $0.001 per share.

 

4.                             Representation of Ownership.  In connection with the grant of the Shares, Holder represents and warrants to the Company that he is the sole legal and beneficial owner of the Shares, that no other person or entity has any interest in the Shares and that he owns the Shares free and clear of any liens or encumbrances.

 

5.                             No Employment, Consultancy or Other Rights.  Nothing in this Agreement shall imply a right to employment, consultancy or other similar relationship with the Company.

 

6.                             Miscellaneous.

 

(a)                                  Entire Agreement.  The Plan, this Agreement and the CSPA constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.  This Agreement and the award granted hereunder are made pursuant to the Plan, are subject to all of the terms and provisions of the Plan as if the same were fully set forth herein and in the event that any provision of this Agreement conflicts with the Plan, the provisions of the Plan shall control.

 

(b)                                  Assignment of Rights.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement.

 

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(c)                                   Withholding.  With respect to applicable income, employment and/or social insurance or social security withholding obligations, the Company may, in its sole discretion, withhold a sufficient number of Shares that are otherwise issuable to Holder pursuant to this Agreement to satisfy any such withholding obligations.  If necessary, the Company also reserves the right to withhold from Holder’s regular earnings an amount sufficient to meet the withholding obligations.

 

(d)                                  Severability.  The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

 

(e)                                   Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

 

(f)                                    Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convemence only and are not to be considered in construing or interpreting this Agreement.

 

(g)                                   Counterparts;  Facsimile.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may also be executed and delivered by facsimile or PDF signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

(h)                                  Specific Performance.  In addition to any and all other remedies that may be available at law in the event of any breach of this Agreement, the Company shall be entitled to specific performance of the agreements and obligations of Holder hereunder and to such other injunction or other equitable relief as may be granted by a court of competent jurisdiction.

 

(i)                                      Consent of Spouse.  If Holder is married on the date of this Agreement, Holder’s spouse shall execute and deliver to the Company a consent of spouse in the form of Exhibit “B” hereto (“Consent of Spouse”), effective on the date hereof.  Notwithstanding the execution and delivery thereof, such consent shall not be deemed to confer or convey to the spouse any rights in Holder’s Shares that do not otherwise exist by operation of law or the agreement of the parties.  If Holder should marry or remarry subsequent to the date of this Agreement, Holder shall within thirty (30) days thereafter obtain his/her new spouse’s acknowledgement of and consent to the existence and binding effect of all restrictions contained in this Agreement by causing such spouse to execute and deliver a Consent of Spouse acknowledging the restrictions and obligations contained in this Agreement and agreeing and consenting to the same.

 

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[Execution Page Follows]

 

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IN WI1NESS HEREOF, the parties have executed this Agreement as of the date first set forth above.

 

	
 
    	
COMPANY
    
	
 
    	
 
    
	
 
    	
NEOS   THERAPEUTICS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HOLDER:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Name]
    

 

NEOS THERAPEUTICS, INC.

RESTRICTED STOCK AGREEMENTExhibit 10.6

 

 

NEOS THERAPEUTICS, INC.

 

THIRD AMENDED AND RESTATED

SUBORDINATED PROMISSORY NOTE

 

	
$5,935,227
    	
Santa Barbara, California
    
	
 
    	
December 31, 2013
    

 

FOR VALUE RECEIVED, NEOS THERAPEUTICS, INC., a Delaware corporation (the “Maker”), promises to pay to the order of ESSEX CAPITAL CORPORATION, a California corporation (“Essex”), in the manner and at the place hereinafter provided, the principal amount of FIVE MILLION NINE HUNDRED THIRTY-FIVE THOUSAND TWO HUNDRED TWENTY-SEVEN DOLLARS ($5,935,227), together with interest as calculated below.

 

1.                                      Calculation of Interest. Interest on the principal amount of this Note outstanding from time to time shall accrue from the date hereof until paid in full. The interest rate shall be ten percent (10%) per annum, compounded monthly; provided that any principal amount not paid when due and, to the extent permitted by applicable law, any interest not paid when due, in each case whether at maturity, by notice of prepayment, by acceleration or otherwise (both before as well as after judgment), shall bear interest payable upon demand at a rate which is five percent (5%) per annum in excess of the rate of interest otherwise payable under this Note. All computations of interest shall be made on the basis of a 360-day year, for the actual number of days elapsed in the relevant period (including the first day but excluding the last day).

 

2.                                      Payment Terms.

 

2.1                               Payments of Principal. Except as otherwise provided in this Note, the full principal amount of this Note shall be paid on March 31, 2017.

 

2.2                               Payments of Interest. Interest on this Note shall be payable (i) in arrears on the last day of each calendar month, (ii) upon any prepayment of this Note pursuant to Section 2.4, and (iii) at maturity. The foregoing notwithstanding, monthly interest payments pursuant to clause (i) shall not commence until the last day of the month in which Maker has generated, in each of the three consecutive months ending on the last day of such month, EBITDA equal to or greater than the amount required to make current interest payments in cash hereunder. Maker shall not be required to make a monthly interest payment pursuant to clause (i) for any subsequent month in which it fails to generate EBITDA equal to or greater than the amount required to make current interest payments in cash hereunder and any such interest payable pursuant to this sentence which is deferred may, at the election of the Maker, be deemed paid by application to the outstanding principal amount of this Note, which application shall have the effect of increasing the outstanding principal amount hereof. Nothing in this Section 2.2 shall be deemed to limit the accrual of interest pursuant to Section 1 of this Note. “EBITDA” for a given period shall mean the amount of net income (or net loss) of Maker and its subsidiaries for such period, as determined on a consolidated and combined basis in accordance with GAAP, plus (i) the interest expense (both expensed and capitalized), income tax expense, depreciation expense, and amortization expense of Maker and its subsidiaries for such period, as determined

 

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on a consolidated and combined basis in accordance with GAAP, and plus or minus (as the case may be) (ii) any other non-cash charges (including non-cash expenses related to stock options) which have been added or subtracted, as the case may be, in calculating net income for such period. “GAAP” shall mean United States generally accepted accounting principles as in effect on the date hereof, consistently applied.

 

2.3                               Manner of Payment. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America, at Essex’s option, by check mailed to the office of Essex at 1486 East Valley Road, 2nd Floor, Santa Barbara, California 93108 (or such other place as shall be designated in a written notice from Essex delivered to Maker) or by wire transfer to an account designated by Essex. Each payment made hereunder shall be credited first to any collection costs then due under Section 7.6, then to interest then due, and the remainder of such payment shall be credited to principal, and interest shall thereupon cease to accrue upon the principal so credited.

 

2.4                               Prepayments. Maker shall have the right at any time and from time to time, to prepay the principal of this Note in whole or in part without premium or penalty. Each prepayment hereunder must be accompanied by payment of (i) all interest on this Note that has accrued but not been paid pursuant to Section 2.2 (but excluding interest which has been capitalized pursuant to Section 2.2), and (ii) interest on the principal amount of the Note being prepaid to the date of prepayment.

 

3.                                      Subordination.

 

3.1                               Subordination to Senior Indebtedness. This Note is subordinate to certain indebtedness for money borrowed by Maker from time to time (the “Senior Indebtedness”) from Midcap Financial SBIC, LP or any bank, financial institution, insurance company or other institutional lender in replacement thereof (“Senior Lender”) including pursuant to that certain Loan and Security Agreement dated August 20, 2012, among Neos Therapeutics, Inc and its subsidiaries, and Midcap Financial SBIC, LP, as amended through the date hereof, or any renewal or extension thereof (together, the “Senior Loan Agreement”), between Maker and Senior Lender. Essex may receive payments of principal and interest under this Note so long as no “Event of Default” (as defined in the Senior Loan Agreement or other documents evidencing the Senior Indebtedness) has occurred and is continuing.

 

3.2                               Series A, B, B-1 and C Preferred Stock (“Preferred Stock”). In the event that the holders (the “Holders”) of Maker’s shares of Preferred Stock (as defined in Maker’s Amended and Restated Certificate of Incorporation (the “Charter”)) do not receive the full “Preferred Liquidation Preference” (as defined in the Charter) upon (i) any voluntary or involuntary liquidation, dissolution or winding up of Maker or (ii) a “Deemed Liquidation Event” (as defined in the Charter) requiring Maker to pay the Preferred Liquidation Preference to such Holders, then any remaining payments under this Note shall be subordinate to the payment to the Holders of an amount equal to the difference between the full Preferred Liquidation Preference and the amount actually received by the Holders. Essex may receive payments of principal and interest under this Note prior to the date, if any, that the Holders fail to receive the full Preference Liquidation Preference when required to be paid.

 

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4.                                      Covenants. Maker covenants and agrees that until this Note is paid in full:

 

4.1                               Information. Maker will promptly provide to Essex financial and other information customarily prepared by Maker and reasonably related to the performance of the Maker’s obligations under this Note as Essex may request. Without limiting the foregoing, within thirty (30) days after the end of each calendar month, Maker will provide Essex with a computation of EBITDA for such month in form and detail reasonably satisfactory to Essex.

 

4.2                               Notice of Default. Promptly after the occurrence of an Event of Default or an event, act or condition which, with notice or lapse of time or both, would constitute an Event of Default, Maker will provide Essex with a certificate of the chief executive officer or chief financial officer of Maker specifying the nature thereof and Maker’s proposed response thereto.

 

5.                                      Events of Default. The occurrence of any of the following events shall constitute an “Event of Default”:

 

5.1                               Default-Payment. The failure of Maker to pay any principal under this Note when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise or the failure of Maker to pay any interest or other amount due under this Note within ten days after the date due.

 

5.2                               Default-Covenants. Failure on the part of Maker duly to observe or perform any of the other covenants or agreements on the part of Maker contained in this Note, and such failure shall continue unremedied for a period of ten days after the date on which written notice specifying such failure, and requiring Maker to remedy the same, shall have been given to Maker by Essex.

 

5.3                               Involuntary Bankruptcy. A decree or order for relief in respect of Maker or any of its subsidiaries or approving as properly filed a petition seeking reorganization of Maker in an involuntary case under Title 11 of the United States Bankruptcy Code, as amended (hereinafter “Bankruptcy Code”), or any other similar applicable Federal or State law shall have been entered by a court having jurisdiction in the premises, and such decree or order shall have continued in force undischarged and unstayed for a period of sixty (60) days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of Maker or any of its subsidiaries or their property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued in force undischarged and unstayed for a period of sixty (60) days.

 

5.4                               Voluntary Bankruptcy. Maker or any of its subsidiaries shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Bankruptcy Code or any other similar applicable Federal or State law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due.

 

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5.5                               Liquidation. Any voluntary or involuntary liquidation, dissolution or winding up of Maker or a “Deemed Liquidation Event” (as defined in the Charter).

 

5.6                               Acceleration under Senior Loan Agreement. The Senior Lender shall declare the entire principal amount under the Senior Loan Agreement to be due and payable as a result of an event of default thereunder.

 

6.                                      Remedies. Upon the occurrence of any Event of Default specified in Sections 5.3, 5.4 or 5.5, the principal amount of this Note together with accrued interest thereon shall become immediately due and payable, without presentment, demand, notice, protest or other requirements of any kind (all of which are hereby expressly waived by Maker), and upon the occurrence and during the continuance of any other Event of Default Essex may, by written notice to Maker, declare the principal amount of this Note together with accrued interest thereon to be due and payable, and the principal amount of this Note together with such interest shall thereupon immediately become due and payable without presentment, further notice, protest or other requirements of any kind (all of which are hereby expressly waived by Maker).

 

7.                                      General Provisions.

 

7.1                               Use of Proceeds. The proceeds of this Note are to be used by Maker exclusively for commercial, business or investment purposes.

 

7.2                               Usury Limitations. All agreements between Maker and Essex are expressly limited, so that in no event or contingency whatsoever, whether by reason of the advancement of the proceeds of this Note, acceleration of maturity of the unpaid principal balance, or otherwise, shall the amount paid or agreed to be paid to Essex for the use, forbearance or detention of the money advanced under this Note exceed the highest lawful rate permissible under applicable usury laws. If, under any circumstances whatsoever, the fulfillment of any provision of this Note, after timely performance of such provision is due, shall involve transcending the limit of validity prescribed by law which a court of competent jurisdiction deems applicable, then, ipso facto, the obligations to be fulfilled shall be reduced to the limit of such validity, and if, under any circumstances whatsoever, Essex shall ever receive as interest an amount that exceeds the highest lawful rate, the amount that would be excessive interest shall be applied to the reduction of the unpaid principal balance under this Note and to the payment of interest, or, if such excessive interest exceeds the unpaid balance of principal of this Note, such excess shall be refunded to Maker. This provision shall control every other provision of this Note.

 

7.3                               Waiver. Maker, for itself and its respective legal representatives, successors, and assigns, expressly waives demand, notice of nonpayment, presentment for demand, presentment for the purpose of accelerating maturity, dishonor, notice of dishonor, protest, notice of protest, notice of maturity, and diligence in collection.

 

7.4                               Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, excluding any laws that direct the application of another jurisdiction’s laws.

 

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7.5                               Captions. The section and subsection headings in this Note are included for purposes of convenience and reference only and shall not affect in any way the meaning or interpretation of this Note.

 

7.6                               Collection Costs. Maker agrees to pay all court costs and attorneys’ fees if counsel is engaged to assist in the collection of this Note after an Event of Default hereunder, or to reclaim, protect, preserve or enforce Essex’s interests hereunder, or if any action is commenced to construe or enforce the terms of this Note.

 

7.7                               Replacement of Original Note. This Third Amended and Restated Subordinated Promissory Note is made in replacement of that certain Second Amended and Restated Subordinated Promissory Note dated as of December 21, 2012, in the original principal amount of $5,328,540, made by the Maker payable to KF Leasing Partners, LP.

 

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, Maker has caused this Note to be executed and delivered by its duly authorized officer as of the day and year and at the place first above written.

 

	
 
    	
NEOS   THERAPEUTICS, INC.
    
	
 
    	
a Delaware corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Alan Heller
    
	
 
    	
 
    	
Alan Heller, Chairman of   the Board
    

 

6

 

AMENDMENT TO

THIRD AMENDED AND RESTATED SUBORDINATED PROMISSORY NOTE

(Subordinated Note Amendment”)

 

FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which are hereby acknowledged, the undersigned, ESSEX CAPITAL CORPORATION, a California corporation (“Essex”) and NEOS THERAPEUTICS, INC., a Delaware corporation, (the “Maker”), hereby agree to the following modifications of that certain Third Amended and Restated Subordinated Promissory Note, dated December 31, 2013, made by the Maker and payable to the order of Essex, under which $6,271,157 in principal and accrued interest is outstanding as of July 18, 2014 (the “Note”):

 

1.                                      Beginning on the date of this Subordinated Note Amendment and until the Reduction Termination Date (as defined below), normal interest on the Note shall be calculated using an interest rate of six percent (6%) per annum, rather than the interest rate of ten percent (10%) per annum that is set forth in the second sentence of Section 1 of the Note (such reduction in the interest rate, the “Rate Reduction”). From and after the Reduction Termination Date, normal interest on the Note shall again be calculated using an interest rate of ten (10%) percent per annum. The term “Reduction Termination Date” as used herein shall mean the date that the aggregate savings in interest accrued attributable to the Rate Reduction equals $256,000, which is estimated to occur on July 31, 2015.

 

2.                                      The Rate Reduction is in consideration of the Maker’s payment of $128,000 to Essex, which Essex will apply to the paid settlement of any claims held by Hopen Therapeutics, LLC against either Essex or the Maker, pursuant to the terms of that certain Settlement Agreement and Release of Claims of even date hereof, by and among Essex, the Maker, Hopen Therapeutics, LLC, Neostx, Inc. and Ralph T. Iannelli.

 

3.                                      Notwithstanding the language of the second sentence of Section 1 of the Note, the interest accruing on the principal of the Note shall be compounded monthly and the interest rate has not been, and shall not be, compounded during the term of the Note. This modification is to correct the provision that states that the interest rate is compounded monthly.

 

4.                                      Except as expressly modified by the provisions of this Subordinated Note Amendment, the terms and the conditions of the Note shall continue unchanged and remain in full force and effect.

 

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Subordinated Note Amendment to Third Amended and Restated Subordinated Promissory Note as of July 21, 2014.

 

 

	
ESSEX   CAPITAL CORPORATION, 
    	
 
    	
NEOS   THERAPEUTICS, INC.
    
	
a California corporation 
    	
 
    	
a Delaware corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By: 
    	
/s/ Ralph T. Iannelli
    	
 
    	
By:
    	
/s/ Vipin Garg
    
	
 
    	
Ralph T. Iannelli,   President 
    	
 
    	
Vipin Garg, Chief   Executive Officer
    

 

 

SECOND AMENDMENT TO

THIRD AMENDED AND RESTATED SUBORDINATED PROMISSORY NOTE

(“Subordinated Note Amendment”)

 

FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which are hereby acknowledged, the undersigned, ESSEX CAPITAL CORPORATION, a California corporation (“Essex”) and NEOS THERAPEUTICS, INC., a Delaware corporation, (the “Maker”), hereby agree to the following modification of that certain Third Amended and Restated Subordinated Promissory Note, dated December 31, 2013, made by the Maker and payable to the order of Essex, as amended on July 21, 2014, under which $6,523,216 in principal and accrued interest is outstanding as of March 12, 2015 (as so amended, the “Note”):

 

1.                                      The Note is hereby amended as follows. Immediately following Section 7.7 of the Note, a new Section 7.8 is hereby added, and it shall read in its entirety as follows:

 

7.8                               Assignments, Pledges and Grants. Upon prior written consent of Maker’s Senior Lender, Essex may assign, pledge and/or grant security interests in this Note and its rights and remedies hereunder. Essex shall give prompt written notice to Maker of any such assignment, pledge and/or grant. Notwithstanding anything to the contrary in this Note, including, without limitation, Section 2.3, in the event that Essex directs the Maker to make payments in respect of this Note to any party other than Essex (the “Payee”), then (i) the Maker shall make all payments in respect of this Note to the Payee (subject however to the limitations set forth in Sections 3.1, 3.2, and 2.1 hereof, any rate reduction and the other terms and conditions of this Note (as amended); and (ii) the Maker shall not make any such payments to any other party, including, without limitation, Essex, without the prior written consent of the Payee, such consent to be granted or withheld in its sole and absolute discretion.

 

2.                                      Except as expressly modified by the provisions of this Second Amendment to Third Amended and Restated Subordinated Promissory Note, the terms and the conditions of the Note shall continue unchanged and remain in full force and effect.

 

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Second Amendment to Third Amended and Restated Subordinated Promissory Note as of March 13 , 2015.

 

	
ESSEX CAPITAL CORPORATION,
    	
 
    	
NEOS THERAPEUTICS, INC.
    
	
a California corporation
    	
 
    	
a Delaware corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Ralph T. Iannelli
    	
 
    	
By:
    	
/s/ Richard I. Eisenstadt
    
	
 
    	
Ralph T. Iannelli
    	
 
    	
 
    	
Richard I. Eisenstadt
    
	
 
    	
President
    	
 
    	
 
    	
Chief Financial Officer

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