Exhibit 1.1

 

CUE BIOPHARMA, INC.

 

UNDERWRITING AGREEMENT

 

Cambridge, Massachusetts

[●], 2017

 

MDB Capital Group, LLC

As Representative of the several Underwriters named on Schedule 1 attached hereto

2425 Cedar Springs Road

Dallas, Texas 75201

 

Ladies and Gentlemen:

 

The undersigned, Cue Biopharma, Inc., a Delaware corporation (the “Company”), hereby confirms its agreement with MDB Capital Group, LLC (hereinafter referred to as “you” (including its correlatives) or the “Representative”), and with the other underwriters named on Schedule 1 hereto for which the Representative is acting as representative (the Representative and such other underwriters being collectively called the “Underwriters” or, individually, an “Underwriter”), as follows:

 

1.            Qualified QIU. The Company hereby confirms its engagement of Feltl and Company, Inc. (“Feltl”) as, and Feltl hereby confirms its agreement with the Company to render services as, a “qualified independent underwriter” within the meaning of FINRA Rule 5121(f)(12) with respect to the offering and sale of the Shares (as hereafter defined). Feltl, in its capacity as qualified independent underwriter and not otherwise, is referred to herein as the “QIU.” Feltl hereby consents to the reference to it as set forth under the heading “Underwriting (Conflicts of Interest)” in the Statutory Prospectus and the Prospectus (as defined in Section 3.1.1 below) and any amendment or supplement thereto.

 

2.            Purchase and Sale of Shares.

 

2.1         Best Efforts. The Company proposes to issue and sell an aggregate of up to [●] shares of its common stock, par value $0.001 per share (“Common Stock”), to investors deemed acceptable by the Company (the “Investors”). The shares of Common Stock to be sold by the Company are collectively called the “Shares.” The Underwriters have agreed to act, severally and not jointly, on a best efforts basis during the Offering Period (as defined in Section 2.1.2(iv) below), in connection with the offering and sale of the Shares (the “Offering”). 

 

2.1.1       Nature and Purchase of Shares.

 

(i)          On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell the Shares, and on the basis of the representations, warranties and agreements herein contained, and the Underwriters agree, severally and not jointly, to use their best efforts to arrange for the sale of the Shares to the Investors. The Underwriters are under no obligation to arrange for the sale of any minimum number or dollar amount of Shares, and the Company agrees and acknowledges that there is no guarantee of the successful sale of the Shares, or any portion thereof. It is understood and agreed that none of the Underwriters are under any obligation to financially underwrite or purchase any of the Shares for its own account or otherwise provide any financing. The Underwriters shall act solely as the Company’s agents and not as principals. The Underwriters shall have no authority to bind the Company with respect to any prospective offer to purchase Shares and the Company shall have the sole right to accept offers to purchase Shares and may reject any such offer, in whole or in part. 

 

 

(ii)         The Underwriters agree to exercise their best efforts to arrange for the purchase by the Investors from the Company, the number of the Shares set forth opposite its name on Schedule 1 attached hereto and made a part hereof, at a purchase price of $         per share (the “Purchase Price”). The Shares are to be offered initially to the public at the Purchase Price, it being understood that the Purchase Price is not in excess of the price recommended by the QIU.

 

2.1.2       Shares Payment and Delivery.

 

(i)          The purchase of Shares by each of the Investors shall be evidenced by the execution of a subscription agreement by each such Investor and the Company. The Underwriters shall use reasonable best efforts to assist the Company in obtaining performance by each Investor whose offer to purchase Shares has been solicited by the Underwriters and accepted by the Company, it being understood that the Underwriters shall not, except as otherwise provided herein, be obligated to disclose the identity of any potential investor not previously identified to the Company or have any liability to the Company in the event any investment is not consummated for any reason. In the event that the any of the Underwriters receives any payment from an Investor in connection with the purchase of any Shares by such Investor, such payment shall be promptly transmitted to and deposited into the escrow account (the “Escrow Account”) established by the Company in connection with this offering with Continental Stock Transfer & Trust Company, as escrow agent (the “Escrow Agent”) pursuant to an escrow agreement the form of which is attached as an exhibit to the Registration Statement (the “Escrow Agreement”). Among other things, the Underwriters shall forward any checks so received by the Underwriters to the Escrow Agent by noon of the next business day. The Underwriters and the Company shall instruct Investors to make wire transfer payments to JP Morgan Chase, for credit to Continental Stock Transfer & Trust Company as Escrow Agent for Cue Biopharma and MDB Capital Group Escrow Account, Account No. [●], with the name and address of the Investor making payment. Payment by the Investors out of the Escrow Account for the Shares to be sold by the Company shall be made at the Closing Date to the Company in straight compliance with Rule 15c2-4 of the Commission.

 

(ii)         Delivery and payment for the Shares shall be made at 10:00 a.m., Eastern time, on a date mutually agreed to between the Company and the Underwriters (the time and date of such closing are called the “Closing Date”) at the offices of LKP Global Law, LLP, counsel to the Representative (“Representative’s Counsel”), or at such other place (or remotely by facsimile or other electronic transmission) as shall be agreed upon by the Representative and the Company.

 

(iii)        Delivery of the Shares shall be made through the facilities of the Depository Trust Company (“DTC”) unless the Underwriters shall otherwise instruct. The Shares shall be registered in such name or names and in such authorized denominations as the Underwriters may request in writing at least two (2) full Business Days prior to the Closing Date. The term “Business Day” means any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions are authorized or obligated by law to close in New York, New York.

 

 

(iv)        The “Offering Period” shall commence on the day that the Prospectus is first made available to Investors in connection with the Offering and shall continue until the “Offering Termination Date,” which shall be the earliest of (i) such date as jointly determined by the Company and the Representative when at least [●] of the Shares have been subscribed for by Investors and accepted by the Company (the “Minimum Amount”), (ii) the date that all of the Shares have been subscribed for by Investors and accepted by the Company, or (iii) [●], 2018. The Company and the Representative agree that unless the Minimum Amount is sold on or before the Offering Termination Date, all funds then held in the Escrow Account shall be returned promptly to the respective Investors as provided in the Escrow Agreement.

 

2.2       Underwriters’ Warrants. The Company hereby agrees to issue and sell to the Underwriters (and/or their designees) on the Closing Date warrants to purchase that number of shares of Common Stock equal to an aggregate of 10% of the amount of Shares sold in the Offering (the “Underwriters’ Warrants”). The Underwriters’ Warrants as evidenced by the Underwriters’ Warrant Agreement in the form attached hereto as Exhibit A, shall be exercisable, in whole or in part, commencing one hundred eighty (180) days after the effective date of the Registration Statement (the “Effective Date”) and expiring five (5) years after the Effective Date at an initial exercise price per share of Common Stock of $[●]) (125% of the public offering price of the Shares). The Underwriters’ Warrants and the shares of Common Stock of the Company issuable upon exercise thereof (“Warrant Shares”) are sometimes referred to herein collectively as the “Warrant Securities.” Each Underwriter understands and agrees that there are significant restrictions pursuant to FINRA Rule 5110 against transferring the Warrant Securities and by its acceptance thereof shall agree that it will not, sell, transfer, assign, pledge or hypothecate the Warrant Securities, or any portion thereof, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities other than in accordance with FINRA Rule 5110.

 

2.3         Underwriter’s Commissions. As compensation for services rendered, on the Closing Date, the Company shall pay to the QIU, by wire transfer of immediately available funds on the Closing Date, a fee of $275,000 (the “QIU Fee”), and to the Representative, by wire transfer of immediately available funds on the Closing Date, a selling commission computed at the rate of [___] percent ([__]%) of the gross proceeds of the Shares sold in that Closing (the “Selling Commission”). The Selling Commission shall be paid to the Representative and split among the Underwriters and selected dealers in such amounts as agreed to among them.

 

3.            Representations and Warranties of the Company. The Company represents and warrants to the Underwriters and the QIU as of the Applicable Time (as defined below) and as of the Closing Date, as follows:

 

 

3.1         Filing of Registration Statement.

 

3.1.1       Pursuant to the Act. The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement and an amendment or amendments thereto, on Form S-1 (File No. 333-220550), including any related preliminary prospectus (the “Preliminary Prospectus”, which for purposes of this Agreement, includes any prospectus that is included in the Registration Statement immediately prior to the effectiveness of the Registration Statement for the registration of the Shares under the Securities Act of 1933, as amended (the “Act”), which registration statement and amendment or amendments have been prepared by the Company in conformity with the requirements of the Act, and the rules and regulations (the “Regulations”) of the Commission under the Act. The conditions for use of Form S-1 to register the Shares under the Act, as set forth in the General Instructions to such Form, have been satisfied. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement becomes effective (including the Preliminary Prospectus, Statutory Prospectus, Prospectus, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of such time pursuant to Rule 430A of the Regulations), is hereinafter called the “Registration Statement,” and the form of the final prospectus dated the Effective Date included in the Registration Statement (or, if applicable, the form of final prospectus containing information permitted to be omitted at the time of effectiveness by Rule 430A of the Regulations filed with the Commission pursuant to Rule 424 of the Regulations), together with any “issuer free writing prospectus” (as defined in Rule 433 of the Regulations) relating to the Shares, is hereinafter called the “Prospectus.” For purposes of this Agreement, “Applicable Time”, as used in the Act, means [5:00 p.m., New York City] time, on the date of this Agreement. Prior to the Applicable Time, the Company prepared a Preliminary Prospectus, dated [●], 2017, and made available one or more issuer free writing prospectuses (as set forth on Schedule 2 hereto or as otherwise agreed to in writing between the Company and the Representative) for distribution by the Underwriters (taken together the “Statutory Prospectus”). If the Company has filed, or is required pursuant to the terms hereof to file, a registration statement pursuant to Rule 462(b) of the Regulations registering the Shares (a “Rule 462(b) Registration Statement”), then, unless otherwise specified, any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462(b) Registration Statement. Other than a Rule 462(b) Registration Statement, which, if filed, becomes effective upon filing, and any correspondence filings with the staff of the Commission, no other document with respect to the Registration Statement has heretofore been filed with the Commission. All of the Shares have been registered under the Act pursuant to the Registration Statement or, if any Rule 462(b) Registration Statement is filed, will be duly registered under the Act with the filing of such Rule 462(b) Registration Statement. The Registration Statement (without including any 462(b) Registration Statement) has been declared effective by the Commission on the date hereof. If, subsequent to the date of this Agreement, the Company or the Underwriters have determined that at the Applicable Time the Statutory Prospectus included an untrue statement of a material fact or omitted a statement of material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and have agreed to provide an opportunity to the Investors to terminate their old subscription agreements and enter into new subscription agreements, the Statutory Prospectus will be deemed to include any additional information available to the Investors at the time of entry into the first such new subscription agreements.

 

3.1.2       Registration under the Exchange Act and Stock Exchange Listing. The Company has filed with the Commission a Form 8-A12B (File Number [●]), as amended, providing for the registration under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the Common Stock. The registration of the Shares under the Exchange Act is effective. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is listed on The NASDAQ Capital Market (“NASDAQ”), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from NASDAQ, nor has the Company received any notification that the Commission or NASDAQ is contemplating terminating such registration or listing except as described in the Registration Statement and Prospectus.

 

3.2         No Stop Orders, etc. Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Statutory Prospectus, Prospectus or the Registration Statement or has instituted or, to the Company’s knowledge, threatened to institute any proceedings with respect to such an order.

 

 

3.3         Disclosures in Registration Statement.

 

3.3.1       10b-5 Representation. At the time of effectiveness of the Registration Statement at [TIME] [a.m./p.m.], Eastern time (or at the time of any post-effective amendment to the Registration Statement), on the date of this Agreement, and at the Closing Date, as the case may be, the Registration Statement and any post-effective amendment thereto contained or will contain all material statements that are required to be stated therein in accordance with the Act and the Regulations, and did or will, in all material respects, conform to the requirements of the Act and the Regulations. On the Effective Date, the Registration Statement did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. As of the Closing Date, the Prospectus (together with any supplement thereto) did not and will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of its date of filing, the Statutory Prospectus did not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The representations and warranties made in this Section 3.3.1 do not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Underwriters expressly for use in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or Prospectus or any amendment thereof or supplement thereto, which information, it is agreed, shall consist solely of (i) the names of the Underwriters and the QIU appearing under “Underwriting (Conflicts of Interest)”, (ii) the [fourth] paragraph under “Underwriting (Conflicts of Interest),” and (iii) the statements in “Underwriting (Conflicts of Interest) – Conflicts of Interest” and similar statements in the [sixth] paragraph of the cover and “Prospectus Summary – The Offering – Conflicts of Interest”, excluding statements expressing the number of shares of Common Stock held by the Representative and its associated persons as a percentage of outstanding shares of Common Stock prior to the Offering (“Underwriters’ Information”).

 

3.3.2       Disclosure of Agreements. The agreements and documents described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus conform to the descriptions thereof contained therein and there are no agreements or other documents required by the Act and the Regulations to be described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which its property or business is or may be bound or affected and (i) that is referred to in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or the Prospectus or attached as an exhibit thereto, or (ii) is material to the Company’s business, has been duly and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefore may be brought, and none of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in material breach or default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a material breach or default thereunder. To the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a material violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses, including, without limitation, those relating to environmental laws and regulations.

 

3.3.3       Regulations. The disclosures in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus concerning the effects of Federal, state and local regulation on the Company’s business as currently contemplated fairly summarize, to the Company’s knowledge, such effects and do not omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.

 

 

3.3.4       Testing-the-Waters Communications. The Company (i) has not engaged in any testing-the-waters communication and (ii) has not authorized anyone to engage in testing-the-waters communications.

 

3.3.5       Company Not Ineligible Issuer. At the time of filing the Registration Statement, at the earliest time thereafter that the Company or another Offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Regulations) of the Shares and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405 of the Regulations, without taking account of any determination by the Commission pursuant to Rule 405 of the Regulations that it is not necessary that the Company be considered an ineligible issuer.

 

3.3.6       Issuer Free Writing Prospectuses. No issuer free writing prospectus conflicts with the information contained in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or the Prospectus (excluding any issuer free writing prospectus), and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified. The Company has made available any electronic road show in compliance with Rule 433(d)(8)(ii) of the Regulations such that no filing of any “road show” (as defined in Rule 433(h) of the Regulations) is required in connection with the Offering of the Shares, as such regulations were promulgated under the Act.

 

3.3.7       Emerging Growth Company Status. From the time of the initial submission of the Registration Statement to the Commission through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Act.

 

3.3.8       Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Act and Section 21E of the Exchange Act) contained in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

 

3.4         Changes after Dates in Registration Statement.

 

3.4.1       No Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, except as otherwise specifically stated therein: (i) there has been no material adverse change in the condition, financial or otherwise, of the Company (a “Material Adverse Effect”); (ii) there have been no material transactions entered into by the Company required to be disclosed in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or the Prospectus, other than as contemplated pursuant to this Agreement; and (iii) no member of the Company’s board of directors or management has resigned from any position with the Company; and (iv) no event or occurrence has taken place which materially impairs or would likely materially impair the ability of the members of the Company’s board of directors or management to act in their capacities with the Company as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, it being understood that the lapse of NASDAQ’s phase-in rules with respect to board and board committee member independence may affect the eligibility of certain members of the Company’s board of directors to continue to act in their capacity.

 

3.4.2       Recent Securities Transactions, etc. Subsequent to the respective dates as of which information is given in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, and except as may otherwise be indicated or contemplated herein or therein, the Company has not: (i) issued any securities (other than shares of Common Stock that may be issued upon conversion of the Company’s outstanding indebtedness) or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.

 

 

3.5         Independent Accountants. To the knowledge of the Company, Gumbiner Savett Inc. (“Gumbiner Savett”), whose report is filed with the Commission as part of the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, are independent registered public accountants as required by the Act and the Regulations. To the knowledge of the Company, Gumbiner Savett is registered with and in good standing with the PCAOB. Except for the preparation of federal tax returns and services provided to the Company in relation to the preparation of the Cold Comfort Letter described in Section 5.3, Gumbiner Savett has not, during the periods covered by the financial statements included in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.

 

3.6         Financial Statements, Statistical Data.

 

3.6.1       Financial Statements. Excluding the pro forma information and the notes and assumptions thereto, the financial statements, including the notes thereto and supporting schedules, if any, included in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus fairly present the financial position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”), consistently applied throughout the periods involved. The Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus disclose all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. Except as disclosed in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, (a) the Company has not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, other than in the ordinary course of business, (b) the Company has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock, except as disclosed in Section 3.4.2; (c) there has not been any change in the capital stock of the Company or any material additional grants under any stock compensation plan and, (d) there has not been any material adverse change in the Company’s long-term or short-term debt.

 

3.6.2       Statistical Data. The statistical, industry-related and market-related data included in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate, and such data agree in all material respects with the sources from which they are derived.

 

3.7         Authorized Capital; Options, etc. The Company had at the date or dates indicated in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, as the case may be, duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, the Company will have on the Closing Date the adjusted stock capitalization set forth therein. Other than as disclosed in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus on the Effective Date and the Closing Date, there will be no material increase in the options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued Common Stock of the Company or any security convertible into Common Stock of the Company, or any contracts or commitments to issue or sell Common Stock or any such options, warrants, rights or convertible securities.

 

 

3.8         Valid Issuance of Securities, etc.

 

3.8.1       Outstanding Securities. All issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and, with respect to all issued and outstanding shares of capital stock of the Company, are fully paid and non-assessable; to the Company’s knowledge, the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized shares of Common Stock conform in all material respects to all statements relating thereto contained in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus. The offers and sales of the outstanding securities were at all relevant times either registered under the Act and the applicable state securities or Blue Sky laws or, based in part on the representations and warranties of the purchasers of such securities, exempt from such registration requirements.

 

3.8.2       Securities Sold Pursuant to this Agreement. The Shares have been duly authorized and reserved for issuance and when issued and paid for, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Shares are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Shares has been duly and validly taken. The Shares conform in all material respects to all statements with respect thereto contained in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, as the case may be. The Warrant Shares issuable upon exercise of the Underwriters’ Warrant Agreement have been reserved for issuance upon the exercise thereof and, when issued in accordance with the terms of such securities, will be duly and validly authorized, validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders. The Warrant Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, as the case may be.

 

3.8.3       No Integration. Neither the Company nor any of its affiliates has, prior to the date hereof, made any offer or sale of any securities which are required to be “integrated” pursuant to the Act or the Regulations with the offer and sale of the Shares pursuant to the Registration Statement.

 

3.9         Registration Rights of Third Parties. Except as set forth in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or the Prospectus, no holders of any securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Act or to include any such securities in a registration statement to be filed by the Company.

 

3.10       Validity and Binding Effect of Agreements. This Agreement and the Underwriters’ Warrant Agreement have been duly and validly authorized by the Company, and, when executed and delivered, will constitute, valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

 

 

3.11       No Conflicts, etc. The execution, delivery, and performance by the Company of this Agreement, the Underwriters’ Warrant Agreement and all ancillary documents, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a material breach of, or conflict with any of the terms and provisions of, or constitute a material default under, or result in the creation, modification, termination or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any agreement or instrument to which the Company is a party; (ii) result in any violation of the provisions of the Company’s Certificate of Incorporation (as the same may be amended from time to time, the “Certificate of Incorporation”); or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or body or court, domestic or foreign, having jurisdiction over the Company or any of its properties or business constituted as of the date hereof.

 

3.12       No Defaults; Violations. No material default exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the properties or assets of the Company is subject. The Company is not in material violation of any term or provision of its Certificate of Incorporation, or in material violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any governmental agency or body or court, domestic or foreign, having jurisdiction over the Company or any of its properties or businesses.

 

3.13       Corporate Power; Licenses; Consents.

 

3.13.1     Conduct of Business. The Company has all requisite corporate power and authority, and has all necessary authorizations, approvals, orders, licenses, certificates and permits of and from all governmental regulatory officials and bodies that it needs as of the date hereof to conduct its business purpose as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus (the “Authorization”), except where the absence of the Authorization would not have a Material Adverse Effect. To the knowledge of the Company, the disclosures in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus concerning the effects of foreign, federal, state and local regulation on this Offering and the Company’s business purpose as currently contemplated are correct in all material respects and do not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

3.13.2     Transactions Contemplated Herein. The Company has all corporate power and authority to enter into this Agreement and the Underwriters’ Warrant Agreement and to carry out the provisions and conditions hereof and thereof, and all consents, authorizations, approvals and orders required in connection therewith have been obtained. No consent, authorization or order of, and no filing with, any court, government agency or other body is required for the valid issuance, sale and delivery of the Shares and the consummation of the transactions and agreements contemplated by this Agreement and the Underwriters’ Warrant Agreement, except with respect to applicable federal and state securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”).

 

 

3.14       D&O Questionnaires. To the knowledge of the Company, all information contained in the questionnaires completed by each of the Company’s directors and officers and 5% and greater stockholders (the “Insiders”), prior to the Offering (the “Questionnaires”) as well as in the Lock-Up Agreement provided to the Representative is true and correct in all material respects, and the Company has not become aware of any information which would cause the information disclosed in the Questionnaires completed by each Insider to become inaccurate and incorrect. To the extent that information in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus differs from the information provided in a Questionnaire, the information in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus will be deemed to supersede and replace the information in the Questionnaires.

 

3.15       Litigation; Governmental Proceedings. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding (other than the Company’s NASDAQ listing application) pending or, to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s knowledge, any Insider that is required to be disclosed in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus which has not been disclosed therein.

 

3.16       Good Standing. The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of the State of Delaware as of the date hereof, and is duly qualified to do business and is in good standing in each jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify would not have a Material Adverse Effect on the assets, business or operations of the Company.

 

3.17       Transactions Affecting Disclosure to FINRA.

 

3.17.1     Finder’s Fees. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by the Company or any Insider with respect to the sale of the Shares hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its stockholders that may affect the Underwriters’ compensation, as determined by FINRA.

 

3.17.2     Payments Within Twelve Months. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (i) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) to any FINRA member; or (iii) to the knowledge of the Company, to any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the twelve months prior to the Effective Date. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, to the Company’s knowledge, no officer, director, or beneficial owner of 5% or more of any class of the Company’s securities (whether debt or equity, registered or unregistered, regardless of the time acquired or the source from which derived) (any such individual or entity, a “Company Affiliate”) is a member, a person associated, or affiliated with a member of the FINRA. For purposes of the meaning of “beneficial owner” as used in this Section, the definition of Rule 13d-3, promulgated by the Securities and Exchange Commission (the “SEC”) under the Exchange Act shall apply.

 

3.17.3     Company Affiliate Membership. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, to the knowledge of the Company, no Company Affiliate is an owner (of record or beneficially) of stock or other securities of any member of the FINRA (other than securities purchased on the open market).

 

 

3.17.4     Subordinated Loans. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, to the knowledge of the Company, no Company Affiliate has made a subordinated loan to any member of the FINRA.

 

3.17.5     Use of Proceeds. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, no proceeds from the sale of the Shares (excluding underwriting compensation) will be paid to any FINRA member or to any persons associated or affiliated with a member of the FINRA.

 

3.17.6     No other Options, etc. Except with respect to the Underwriters’ Warrant Agreement, the Company has not issued any warrants or other securities, or granted any options, directly or indirectly to anyone who is a potential underwriter in the Offering or a related person (as defined by FINRA rules) of such an underwriter within the 180-day period prior to the initial filing date of the Registration Statement.

 

3.17.7     FINRA Relationship. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, to the knowledge of the Company, no person to whom securities of the Company have been privately issued within the 180-day period prior to the initial filing date of the Registration Statement has any relationship or affiliation or association with any member of the FINRA.

 

3.17.8     FINRA Conflicts. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, no FINRA member intending to participate in the Offering has a conflict of interest with the Company. For this purpose, a “conflict of interest” exists when a member of the FINRA and its associated persons, parent or affiliates in the aggregate beneficially own 10% or more of the Company’s outstanding subordinated debt or common equity, or 10% or more of the Company’s preferred equity. “Members participating in the Offering” include managing agents, syndicate group members and all dealers which are members of the FINRA.

 

3.17.9     Other Arrangements. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus and except with respect to the Underwriters in connection with the Offering, the Company has not entered into any agreement or arrangement (including, without limitation, any consulting agreement or any other type of agreement) during the 180-day period prior to the initial filing date of the Registration Statement, which arrangement or agreement provides for the receipt of any item of value and/or the transfer of any warrants, options, or other securities from the Company to a FINRA member or, the knowledge of the Company, any person associated with a member (as defined by FINRA rules), any potential underwriters in the Offering and any related persons.

 

3.18       Foreign Corrupt Practices Act. Neither the Company, nor to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company, is aware of or has taken any action directly or indirectly, that would result in a material violation by such persons of the FCPA (as defined below), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company has conducted its business in compliance in all material respects with the FCPA and instituted and maintained policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance in all material respects therewith. “FCPA” means the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.

 

 

3.19       Money Laundering Laws. Neither the Company nor to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company has made any payment of funds of the Company or received or retained any funds in violation of any law, rule or regulation relating to the “know your customer” and anti-money laundering laws of any United States or non-United States jurisdiction (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any governmental agency or body involving the Company with respect to the Money Laundering Laws is pending or, to the Company’s knowledge, threatened.

 

3.20       OFAC. Neither the Company nor to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company is currently the target of or reasonably likely to become the target of any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”); and the Company will not directly or indirectly use the proceeds of the Offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently the target of any U.S. sanctions administered by OFAC.

 

3.21       Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to you or Representative’s Counsel shall be deemed a representation and warranty by the Company to the Underwriters and the QIU as to the matters covered thereby.

 

3.22       Lock-Up Period. (i) Each of the Company’s officers, directors and employees, and each beneficial owner of at least 5% of the Company’s outstanding Common Stock (or securities convertible into Common Stock at any time), excluding any who purchased shares of Common Stock in the Company’s June 2015 and December 2016 private placements of Common Stock, have agreed pursuant to executed Lock-Up Agreements that for a period of one year from the date of this Agreement (the “12-Month Lock-Up Period” and the parties subject to such lock-ups the “Lock-Up Parties”), (ii) the holders who purchased shares of Common Stock in the Company’s June 2015 private placement (the “180-day Lock-Up Shareholders”) have agreed pursuant to executed agreements that for a period of 180 days from the date of this Agreement (the “6-Month Lock-Up Period”), and (iii) the holders who purchased shares of Common Stock in the Company’s December 2016 private placement (together with the 180-day Lock-Up Shareholders, the “Lock-Up Shareholders”) have agreed pursuant to executed agreements that for a period of 90 days from the date of this Agreement (the “3-Month Lock-Up Period”), that such persons and their affiliated parties shall not offer, pledge, sell, contract to sell, grant, lend or otherwise transfer or dispose of, directly or indirectly, any Common Stock, or any securities convertible into or exercisable or exchangeable for Common Stock, acquired by such persons prior to the Closing Date, without the consent of the Representative, except for the exercise or conversion of currently outstanding warrants, options and convertible debentures, as applicable and the exercise of options under an acceptable stock incentive plan. The Representative may consent to an early release from the 3-Month Lock-Up Period, the 6-Month Lock-Up Period or the 12-Month Lock-Up Period, as the case may be. The Company has caused each of the Lock-Up Parties and Lock-Up Shareholders to deliver to the Representative the agreements of each of the Lock-Up Parties or the Lock-Up Shareholders to the foregoing effect prior to the date that the Company requests that the Commission declare the Registration Statement effective under the Act.

 

3.23       Subsidiaries. The Company does not have any direct or indirect subsidiary.

 

 

3.24       Related Party Transactions. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business), credit arrangements, or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members. There are no business relationships or related party transactions involving the Company or any other person required to be described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus that have not been described as required.

 

3.25       Board of Directors. The Board of Directors of the Company is comprised of the persons set forth under the heading of the Statutory Prospectus and the Prospectus captioned “Management.” The qualifications of the persons serving as board members and the overall composition of the board comply with the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder applicable to the Company and the rules of NASDAQ. At least one member of the Board of Directors of the Company qualifies as a “financial expert” as such term is defined under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and the rules of NASDAQ. In addition, in accordance with the phase-in rule of NASDAQ, at least a majority of the persons serving on the Board of Directors will qualify as “independent” as defined under the rules of NASDAQ within one year of the Effective Date.

 

3.26       Sarbanes-Oxley Compliance.

 

3.26.1     Disclosure Controls. After the Offering, the Company will develop and maintain disclosure controls and procedures that will comply with Rule 13a-15 or 15d-15 of the Exchange Act, and such controls and procedures will be effective to ensure that all material information concerning the Company will be made known on a timely basis to the individuals responsible for the preparation of the Company’s Exchange Act filings and other public disclosure documents.

 

3.26.2     Compliance. The Company is, or on the Effective Date will be, in material compliance with the provisions of the Sarbanes-Oxley Act of 2002 applicable to it, and will implement such programs and taken reasonable steps to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefore) with all the provisions of the Sarbanes-Oxley Act of 2002.

 

3.27       No Investment Company Status. The Company is not and, after giving effect to the Offering and sale of the Shares and the application of the proceeds thereof, will not be, an “investment company” as defined in the Investment Company Act of 1940, as amended.

 

3.28       No Labor Disputes. No labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent.

 

3.29       Employment Laws Compliance. The Company has not violated, or received notice of any violation with respect to, any law, rule, regulation, order, decree or judgment applicable to it and its business, including those relating to transactions with affiliates, environmental, safety or similar laws, federal or state laws relating to discrimination in the hiring, promotion or pay of employees, federal or state wages and hours law, the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations promulgated thereunder, except for those violations that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

 

 

3.30       Intellectual Property. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, none of the Intellectual Property necessary for the conduct of the business of the Company, as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, is (i) infringing, or otherwise in conflict with the Intellectual Property rights of any other person or entity; or (ii) to the Company’s knowledge, is being infringed, misappropriated or otherwise violated by any other person or entity. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, no Intellectual Property is required in order to carry on the business currently carried on by the Company as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus. The Company owns or has the right or license to use all of its Intellectual Property used in the conduct of the business of the Company as currently carried on by the Company, as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, but subject to such liens, charges, claims, encumbrances, pledges, security interests, defects or other restrictions or adverse rights of another person or entity, which, to the extent material, are described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus. Except as disclosed in the Registration Statement, Preliminary Prospectus, the Statutory Prospectus and the Prospectus, the Company is not obligated to pay any royalties, license fees or similar payment to any other person or entity with respect to any Intellectual Property. For the purposes of this Section and this Agreement, the term “Intellectual Property” means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations in part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets, know-how (including all other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) and confidential business information (including ideas, research and development, know how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, diagrams, specifications, customer and supplier lists, catalogs, pricing and cost information, and business and marketing plans and proposals), (f) all computer software (including data and related documentation) (whether purchased or internally developed), (g) all information systems and management procedures, (h) all other proprietary rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium).

 

3.31       Taxes. The Company has filed all returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. The Company has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. Except as disclosed in writing to the Underwriters, (i) no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company. The term “taxes” mean all federal, state, local, foreign, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments, or charges of any kind whatever, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements, and other documents required to be filed in respect to taxes.

 

 

3.32       Compliance with Food and Drug Laws. Except as described in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, the conduct of the preclinical testing and clinical trials and manufacture of the products of the Company is in compliance, in all material respects, with all laws, rules and regulations applicable to such activities, including without limitation applicable good laboratory practices, good clinical practices and good manufacturing practices. The descriptions of the results of such tests and trials contained in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus are accurate in all material respects. The Company has not received a warning letter or clinical hold notice from the U.S. Food and Drug Administration (the “FDA”) or any non-U.S. counterpart of any of the foregoing, or any untitled letter or other correspondence or notice from the FDA or any other governmental authority or agency or any institutional or ethical review board alleging or asserting noncompliance with any law, rule or regulation applicable in any jurisdiction. The Company has not, either voluntarily or involuntarily, initiated, conducted or issued, or caused to be initiated, conducted or issued, any recall, field correction, market withdrawal or replacement, safety alert, warning, “dear doctor” letter, investigator notice, or other notice or action relating to an alleged or potential lack of safety or efficacy of any product or potential product of the Company, any alleged defect of any product of the Company, or any violation of any material applicable law, rule, regulation or any clinical trial or marketing license, approval, permit or authorization for any product of the Company. The Company has not received any written notices, correspondence or other communication from the FDA or other governmental regulatory agency or subdivision thereof, or any institutional or ethical review boards, asserting non-compliance with any applicable statutes, rules, regulations, orders, or other laws, or requiring or requesting the termination, suspension or modification of any preclinical or clinical studies, tests, investigations, or trials conducted by, or on behalf of, the Company or in which the Company has participated.

 

4.            Covenants of the Company. The Company covenants and agrees as follows:

 

4.1         Amendments to Registration Statement. The Company will deliver to the Underwriters, prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representative shall reasonably object in writing.

 

4.2         Federal Securities Laws.

 

4.2.1       Compliance. During the time when a Prospectus is required to be delivered under the Act, the Company will use its reasonable best efforts to comply with all requirements imposed upon it by the Act, the Regulations and the Exchange Act and by the regulations under the Exchange Act, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Shares in accordance with the provisions hereof and the Prospectus. If at any time when a Prospectus relating to the Shares is required to be delivered under the Act, any event shall have occurred as a result of which, in the opinion of counsel for the Company or Representative’s Counsel, the Prospectus, as then amended or supplemented, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Act, the Company will notify the Representative promptly and prepare and file with the Commission, subject to Section 4.1 hereof, an appropriate amendment or supplement in accordance with Section 10 of the Act.

 

4.2.2       Filing of Final Prospectus. The Company will file the Prospectus (in form and substance satisfactory to the Underwriters) with the Commission pursuant to the requirements of Rule 424 of the Regulations.

 

 

4.2.3       Exchange Act Registration. For a period of five (5) years from the Effective Date, the Company will use its commercially reasonable efforts to maintain the registration of the Common Stock under the Exchange Act.

 

4.2.4       Sarbanes-Oxley Compliance. The Company shall take all actions necessary to maintain compliance with each applicable provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder and related or similar rules and regulations promulgated by any other governmental or self-regulatory entity or agency with jurisdiction over the Company, including maintenance of a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

4.2.5       Issuer Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representative, it will not make any offer relating to the Shares that would constitute an issuer free writing prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433 of the Regulations. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to as an “issuer free writing prospectus,” as defined in Rule 433 of the Regulations, and that it has complied and will comply with the applicable requirements of Rule 433 of the Regulations with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an issuer free writing prospectus there occurs an event or development as a result of which such issuer free writing prospectus would conflict with the information contained in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or the Prospectus or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in each case when taken together with the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representative and will promptly amend or supplement, at its own expense, such issuer free writing prospectus to eliminate or correct such conflict, untrue statement or omission.

 

4.3         Delivery to the Underwriters of Prospectuses. The Company will deliver to the Underwriters, without charge, from time to time during the period when the Prospectus is required to be delivered under the Act or the Exchange Act such number of copies of each Preliminary Prospectus, Statutory Prospectus and Prospectus as the Underwriters may reasonably request and, as soon as the Registration Statement or any amendment or supplement thereto becomes effective, deliver to the Representative two original executed Registration Statements, including exhibits, and all post-effective amendments thereto and copies of all exhibits filed therewith or incorporated therein by reference and all original executed consents of certified experts.

 

 

4.4         Effectiveness and Events Requiring Notice to the Representative. The Company will use its reasonable commercial efforts to cause the Registration Statement to remain effective with a current prospectus for at least nine (9) months from the Applicable Time and will notify the Representative immediately and confirm the notice in writing: (i) of the effectiveness of the Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Shares for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (iv) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for any additional information from the Commission; and (vi) of the happening of any event during the period described in this Section 4.4 hereof that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or the Prospectus untrue or that requires the making of any changes in the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company will make every reasonable effort to obtain promptly the lifting of such order.

 

4.5         Payment of General Expenses Related to the Offering. The Company hereby agrees to pay on the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the Shares to be sold in the Offering with the Commission; (b) all fees and expenses relating to the listing of the Common Stock on NASDAQ; (c) all FINRA Public Offering System filing fees associated with the review of the Offering by FINRA; (d) all fees, expenses and disbursements relating to the registration or qualification of the Shares under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate; (e) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Shares under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (f) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney), Registration Statements, Preliminary Prospectuses, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary, (g) the costs of preparing, printing and delivering certificates representing the Shares, to the extent any of the shares are certificated; (h) fees and expenses of the transfer agent for the Common Stock; (i) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (j) the fees and expenses of the Company’s accountants; (k) the Company’s actual “road show” expenses for the Offering, and (l) the fees and expenses of the Company’s legal counsel and other agents and representatives (collectively, the “Company Expenses”). Furthermore, the Company hereby agrees to pay on the Closing Date and in addition to the Company Expenses, a non-accountable expense allowance in an amount equal to [●]% of the Purchase Price for all expenses of the Underwriters incurred in connection with the Offering, including (i) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors and the Company, (ii) the Underwriters’ use of i-Deal’s book-building, prospectus tracking and compliance software for the Offering, (iii) the Underwriters’ actual “road show” expenses for the Offering, (iv) the Underwriters’ costs of mailing prospectuses to prospective investors, and (v) the fees and disbursements of the Representative’s Counsel in connection with the Offering. The Representative may deduct from the net proceeds of the Offering the foregoing fees and expenses, other than the Company Expenses, subject to deduction for any amounts previously advanced, payable by the Company on the Closing Date. 

 

4.6         Application of Net Proceeds. The section of the Prospectus, “Use of Proceeds,” will indicate the intended uses of the net proceeds from the Offering. The Company will apply the net proceeds from the Offering received by it in a manner consistent with the application described under the caption “Use of Proceeds” in the Prospectus.

 

 

4.7         Delivery of Earnings Statements to Security Holders. The Company will make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth full calendar month following the Effective Date, an earnings statement (which need not be certified by independent public or independent certified public accountants unless required by the Act or the Regulations, but which shall satisfy the provisions of Rule 158(a) of the Regulations) covering a period of at least twelve consecutive months beginning after the Effective Date.

 

4.8         Background Searches. Not later than the Effective Date, at the expense of the Company, the Representative will have obtained a background search, that is reasonably acceptable to the Representative, of each senior officer and director of the Company, giving a report of the person’s employment, education, business endeavors, and credit history among other things.

 

4.9         Stabilization. Neither the Company, nor, to its knowledge, any of its employees, directors or stockholders (without the consent of the Representative) has taken or will take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares.

 

4.10       Accountants. The Company shall retain a Public Company Accounting Oversight Board (PCAOB) registered independent certified public accounting firm after the Effective Date. The Representative acknowledges that Gumbiner Savett is acceptable to the Underwriters.

 

4.11       Director and Officer Insurance. As of the Closing, the Company will have obtained director and officer insurance in an aggregate coverage amount of not less than $5,000,000, to be effective as of the Closing, under a form of insurance policy that is reasonably acceptable to the Representative.

 

4.12       FINRA. The Company shall advise the Representative (who shall make an appropriate filing with FINRA) and the QIU if it becomes aware that any 5% or greater stockholder of the Company becomes an affiliate or associated person of an FINRA member participating in the distribution of the Shares.

 

4.13       Electronic Prospectus. The Company shall cause to be prepared and delivered to the Representative, at the Company’s expense, promptly, but in no event later than two (2) Business Days from the effective date of this Agreement, an Electronic Prospectus to be used by the Underwriters in connection with the Offering. As used herein, the term “Electronic Prospectus” means a form of prospectus, and any amendment or supplement thereto, that meets each of the following conditions: (i) it shall be encoded in an electronic format, satisfactory to the Representative, that may be transmitted electronically by the other Underwriters to offerees and purchasers of the Shares for at least the period during which a prospectus relating to the Shares is required to be delivered under the Act; (ii) it shall disclose the same information as the paper prospectus and prospectus filed pursuant to EDGAR, except to the extent that graphic and image material cannot be disseminated electronically, in which case such graphic and image material shall be replaced in the electronic prospectus with a fair and accurate narrative description or tabular representation of such material, as appropriate; and (iii) it shall be in or convertible into a paper format or an electronic format, satisfactory to the Representative, that will allow recipients thereof to store and have continuously ready access to the prospectus at any future time, without charge to such recipients (other than any fee charged for subscription to the Internet as a whole and for on-line time). The Company hereby confirms that it has included or will include in the Prospectus filed pursuant to EDGAR or otherwise with the Commission and in the Registration Statement at the time it was declared effective an undertaking that, upon receipt of a request by an investor or his or her representative within the period when a prospectus relating to the Shares is required to be delivered under the Act, the Company shall transmit or cause to be transmitted promptly, without charge, a paper copy of the Prospectus.

 

 

4.14       Reservation of Shares. The Company will reserve and keep available that maximum number of its authorized but unissued securities which are issuable upon exercise of the Underwriters’ Warrants outstanding from time to time.

 

5.            Conditions of Underwriters’ Obligations. The several obligations of the Underwriters and the QIU, as provided herein, shall be subject to (i) the continuing accuracy of the representations and warranties of the Company as of the date hereof and, as of the Closing Date; (ii) the accuracy of the statements of officers of the Company made pursuant to the provisions hereof; (iii) the performance by the Company of its obligations hereunder, and (iv) the following conditions:

 

5.1         Regulatory Matters.

 

5.1.1       Effectiveness of Registration Statement. The Registration Statement shall have become effective not later than 5:00 P.M., Eastern time, on [●], 2017 or such later date and time as shall be consented to in writing by you, and, at the Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or shall be pending or contemplated by the Commission and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of K&L Gates LLP.

 

5.1.2       FINRA Clearance. By the Effective Date, the Representative shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.

 

5.1.3       Exchange Stock Market Clearance. On the Closing Date, the Common Stock, including the Shares, shall have been approved for listing on NASDAQ.

 

5.2         Company Counsel Matters.

 

5.2.1       Closing Date Opinion of Counsel. On the Closing Date, the Representative shall have received the opinion of K&L Gates LLP, counsel to the Company, and letter of negative assurance, in each case addressed to the Representative on its own behalf and on behalf of the Underwriters, dated the Closing Date and in form and substance reasonably satisfactory to the Representative.

 

5.2.2       Reliance. In rendering such opinions, such counsel may rely: (i) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to the Representative) of other counsel reasonably acceptable to the Representative, familiar with the applicable laws; and (ii) as to matters of fact, to the extent they deem proper, on certificates or other written statements of officers of the Company and officers of departments of various jurisdiction having custody of documents respecting the corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to Representative’s Counsel if requested.

 

5.3         Cold Comfort Letter. At the time this Agreement is executed, and at the Closing Date, the Representative shall have received a cold comfort letter, addressed to them, and in form and substance reasonably satisfactory in all respects to the Representative and Representative’s Counsel, from Gumbiner Savett dated, respectively, as of the date of this Agreement and as of the Closing Date.

 

 

5.4         Officers’ Certificates.

 

5.4.1       Officers’ Certificate. At the Closing Date, the Representative shall have received a certificate of the Company signed by the Chairman of the Board and Chief Executive Officer of the Company, dated the Closing Date, respectively, to the effect that the Company has performed all covenants and complied with all conditions required by this Agreement to be performed or complied with by the Company prior to and as of the Closing Date, and that the conditions set forth in Section 5.5 hereof have been satisfied as of such date and that, as of the Closing Date, the representations and warranties of the Company set forth in Section 3 hereof are true and correct. In addition, the Representative will have received such other and further certificates of officers of the Company as the Representative may reasonably request.

 

5.4.2       Secretary’s Certificate. At the Closing Date, the Representative shall have received a certificate of the Company signed by the Secretary or Assistant Secretary of the Company, dated the Closing Date certifying: (i) that the Certificate of Incorporation is true and complete, has not been modified and is in full force and effect; (ii) that the resolutions of the Company’s Board of Directors relating to the Offering contemplated by this Agreement are in full force and effect and have not been modified; (iii) as to the accuracy and completeness of all correspondence between the Company or its counsel and the Commission; and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.

 

5.5         No Material Changes. Prior to and on the Closing Date: (i) there shall have been no material adverse change or development involving a prospective material adverse change in the condition or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement, the Statutory Prospectus and the Prospectus; (ii) no action, suit or proceeding, at law or in equity, shall have been pending or, to the knowledge of the Company, threatened against the Company or any Insider before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations or financial condition or income of the Company, except as set forth in the Registration Statement, the Statutory Prospectus and the Prospectus; (iii) no stop order shall have been issued under the Act and no proceedings therefore shall have been initiated or threatened by the Commission; and (iv) the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Act and the Regulations and shall conform in all material respects to the requirements of the Act and the Regulations, and the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or the Prospectus and any amendment or supplement thereto shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

5.6         Delivery of Agreements.

 

5.6.1       Effective Date Deliveries. On or prior to the Effective Date, the Company shall have delivered to the Representative and the QIU executed copies of this Agreement and to the Representative, the applicable Lock-Up Agreements from the Lock-Up Parties and the Lock-Up Shareholders.

 

5.6.2       Closing Date Deliveries. On the Closing Date, the Company shall have delivered to the Representative an executed copy of the Underwriters’ Warrant Agreement.

 

 

6.            Indemnification.

 

6.1         Indemnification of the Underwriters.

 

6.1.1       General. Subject to the conditions set forth below, the Company agrees to indemnify and hold harmless each Underwriter and each dealer selected by such Underwriter that participates in the offer and sale of the Shares (each a “Selected Dealer”) and each of their respective directors, officers and employees and each person, if any, who controls within the meaning of Section 15 of the Act or Section 20 of the Exchange Act (“Controlling Person”), such Underwriter and the dealer, and the successors and assigns of all of the foregoing persons, against any and all loss, liability, claim, damage and expense whatsoever (including but not limited to any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between such Underwriter and the Company or between such Underwriter and any third party or otherwise) to which they or any of them may become subject under the Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or the Prospectus (as from time to time each may be amended and supplemented, and including without limitation any free writing prospectus); (ii) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering of the Shares, including any “road show” or investor presentations made to investors by the Company (whether in person or electronically); or (iii) any application or other document or written communication (in this Section 6, collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Shares under the securities laws thereof or filed with the Commission, any state securities commission or agency, NASDAQ or any securities exchange; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon and in conformity with “Underwriters’ Information” (as described in Section 3.3.1) furnished to the Company by the Underwriters. The Company agrees promptly to notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or Controlling Persons in connection with the issue and sale of the Shares or in connection with the Registration Statement, any Preliminary Prospectus, the Statutory Prospectus or the Prospectus.

 

6.1.2       Indemnification of the QIU. Without limitation of and in addition to its obligations under the other paragraphs of this Section 6, the Company agrees to indemnify, defend and hold harmless the QIU, its directors, officers, employees and each Controlling Person of the QIU, if any, and the successors and assigns of all of the foregoing persons, from and against any loss, damage, expense, liability or claim (including the reasonable cost of investigation) which, jointly or severally, the QIU or any such person may incur, insofar as such loss, damage, expense, liability or claim arises out of or is based upon the QIU’s acting as a “qualified independent underwriter” (within the meaning of FINRA Rule 5121) in connection with the Offering contemplated by this Agreement, and the Company agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, damage, expense, liability or claim; provided, however, that the Company will not be liable in any such case to the extent that any such loss, damage, expense, liability or claim resulted primarily from the gross negligence or willful misconduct of the QIU or any of its directors, officers, employees, Controlling Persons or any of the successors or assigns of any of the foregoing persons.

 

 

6.1.3       Procedure. If any action is brought against an Underwriter, a Selected Dealer, the QIU or a Controlling Person in respect of which indemnity may be sought against the Company pursuant to Section 6.1.1 or 6.1.2, such Underwriter, the QIU, such Selected Dealer or Controlling Person, as the case may be, shall promptly notify the Company in writing of the institution of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of such Underwriter, the QIU, such Selected Dealer or Controlling Person, as the case may be) and payment of actual expenses. Any delay in notice will not relieve the Company of any liability to an indemnified party, except to the extent that the Company demonstrates that the delay prejudiced the defense of the action. Any indemnified person shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel which are incurred after the Company assumes the defense of the action shall be at the expense of such Underwriter, the QIU, such Selected Dealer or Controlling Person unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company in connection with the defense of such action, or (ii) the Company fails to assume the defense or to employ counsel to have charge of the defense of such action within a reasonable time after notice of the action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Company (in which case the Company shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events the reasonable fees and expenses of not more than one additional firm of attorneys (in addition to local counsel) selected by such Underwriter, the QIU, such Selected Dealer and/or Controlling Person in their sole discretion shall be borne by the Company and paid as incurred or, at the option of the indemnified party, advanced pursuant to Section 6.1.6.

 

6.1.4       Settlement. The Company will not effect any settlement of a proceeding in respect of which indemnification may be sought hereunder (whether or not any indemnified person is a party therein) unless the Company has given an Underwriter, the QIU, a Selected Dealer or Controlling Person, as the case may be, reasonable prior written notice thereof and such settlement, compromise, consent or termination includes an unconditional release of each indemnified party from any liabilities arising out of such proceeding. The Company will not permit any such settlement, compromise, consent or termination to include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of any indemnified party, without that party’s prior written consent. Notwithstanding anything to the contrary contained herein, if an Underwriter, the QIU, a Selected Dealer or Controlling Person shall conduct the defense of an action as provided in Section 6.1.3, the Company shall have the right to approve the terms of any settlement of such action, which approval shall not be unreasonably withheld, except that if the Company is required to and nonetheless fails to reimburse or advance the expenses of such defense, then the Company shall be bound by any determination made in the action or by any compromise or settlement made by the indemnified party without the Company’s written consent, subject to the requirements of Section 6.1.5.

 

6.1.5       Settlement without Consent if Failure to Reimburse or Advance. If at any time an Underwriter, the QIU, a Selected Dealer or a Controlling Person shall have requested the Company to reimburse or advance to the indemnified party its fees and expenses, including those of counsel, the Company agrees that it shall be liable for any settlement of the nature contemplated by Section 6.1.4 effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by the Company of the aforesaid request, (ii) the Company shall have received notice of the terms of such settlement at least 45 days prior to such settlement being entered into, and (iii) the Company shall not have reimbursed or advanced to such Underwriter, the QIU, such Selected Dealer or Controlling Person in accordance with such request prior to the date of such settlement, unless such failure to reimburse or advance to such Underwriter, the QIU, such Selected Dealer or Controlling Person is based on a dispute with a good faith basis as to either the obligation of the Company arising under this Section 6 to indemnify such Underwriter, the QIU, such Selected Dealer or Controlling Person or the amount of such obligation, and the Company shall have notified such Underwriter, the QIU, such Selected Dealer or Controlling Person of such good faith dispute prior to the date of such settlement.

 

 

6.1.6       Advances. Notwithstanding any other provision hereof, the Company shall advance, to the extent not prohibited by law, all expenses reasonably anticipated to be incurred by or on behalf of an Underwriter, the QIU, a Selected Dealer or Controlling Person in connection with any proceeding, whether pending or threatened, within fifteen (15) days of receipt of a statement or statements from such indemnified parties, or any of them, requesting such advances from time to time. This advancement obligation shall include any retainers of counsel engaged by indemnified parties. Any statement requesting advances shall evidence the expenses anticipated or incurred by the indemnified party with reasonable particularity and may include only those expenses reasonably expected to be incurred within the 90-day period following each statement. In the event some portion of the amounts advanced are unused, or in the event a court of ultimate jurisdiction determines that the indemnified parties are not entitled to be indemnified against certain expenses, the recipient shall return the unused or disallowed portion of any advances within thirty (30) days of the final disposition of any proceeding to which such advances pertain.

 

6.2         Indemnification of the Company. Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, officers and employees and agents who control the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the Underwriters, as incurred but only with respect to untrue statements or omissions, or alleged untrue statements or omissions made in any Preliminary Prospectus, the Registration Statement, Statutory Prospectus or Prospectus or any amendment or supplement thereto or in any application, made in reliance upon and in strict conformity with the “Underwriters’ Information” furnished by the Underwriters to the Company expressly for use in such Preliminary Prospectus, the Registration Statement, the Statutory Prospectus or the Prospectus or any amendment or supplement thereto or in any such application. In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement, the Statutory Prospectus or the Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against an Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to such Underwriter, by the provisions of Section 6.1.3.

 

6.3         Contribution.

 

6.3.1       Contribution Rights. In order to provide for just and equitable contribution under the Act in any case in which (i) any person entitled to indemnification under this Section 6 makes claim for indemnification pursuant hereto but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 6 provides for indemnification in such case, or (ii) contribution under the Act, the Exchange Act or otherwise may be required on the part of any such person in circumstances for which indemnification is provided under this Section 6, then, and in each such case, the Company and the Underwriters shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreement incurred by the Company and the Underwriters, as incurred, in such proportions that the Underwriters are responsible for that portion represented by the percentage that the underwriting discount appearing on the cover page of the Prospectus bears to the initial offering price appearing thereon and the Company is responsible for the balance; provided, that, no person guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding the provisions of this Section 6.3.1, no Underwriter shall be required to contribute any amount in excess of the amount the underwriting commission received by it exceeds the amount of any damages that such Underwriter has otherwise been required to pay in respect of such losses, liabilities, claims, damages and expenses. For purposes of this Section, each director, officer and employee of the Underwriters or the Company, as applicable, and each person, if any, who controls the Underwriter or the Company, as applicable, within the meaning of Section 15 of the Act shall have the same rights to contribution as the Underwriters or the Company, as applicable. The QIU, in its capacity as “qualified independent underwriter” (within the meaning of FINRA Rule 5121), shall in no event be required to contribute any amount in excess of the amount the compensation received by the QIU for acting in such capacity exceeds the amount of any damage which the QIU has otherwise been required to pay by reason of the QIU’s acting in such capacity in connection with the Offering contemplated by this Agreement.

 

 

6.3.2       Contribution Procedure. Within fifteen days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (“contributing party”), notify the contributing party of the commencement thereof, but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid fifteen days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section 6.3.2 are intended to supersede, to the extent permitted by law, any right to contribution under the Act, the Exchange Act or otherwise available.

 

7.            Additional Covenants.

 

7.1         Board Composition and Board Designations. The Company shall ensure that: (i) the qualifications of the persons serving as board members and the overall composition of the board comply with the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and with the listing requirements of NASDAQ or any other national securities exchange or national securities association, as the case may be, in the event the Company seeks to have its Shares listed on another exchange or quoted on an automated quotation system, and (ii) if applicable, at least one member of the board of directors qualifies as a “financial expert” as such term is defined under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.

 

7.2         Prohibition on Press Releases and Public Announcements. The Company will not issue press releases or engage in any other publicity, without the Representative’s prior written consent, for a period ending at 5:00 p.m. Eastern time on the first business day following the 25th day following the Closing Date, other than normal and customary releases issued in the ordinary course of the Company’s business.

 

8.            Effective Date of this Agreement and Termination Thereof.

 

8.1         Effective Date. This Agreement shall become effective when the Company, the Representative and the QIU have executed the same and delivered counterparts of such signatures to the other parties.

 

 

8.2         Termination. You shall have the right to terminate this Agreement at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in your reasonable opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the New York Stock Exchange, the NASDAQ Global Market or the NASDAQ Capital Market or NYSE MKT shall have been noticed for or actually suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction, or (iii) if the United States shall have become involved in a new war or a substantial increase in major hostilities, or (iv) if a banking moratorium has been declared by a New York State or federal authority or foreign authority which has a substantial disruptive effect on or adversely impacts the United States securities markets, or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets, or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in your reasonable opinion, make it inadvisable to proceed with the delivery of the Shares, or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder, or (viii) if the Representative shall have become aware after the date hereof of such a material adverse change in the conditions of the Company, or such adverse material change in general market conditions as in the Representative’s good faith judgment would make it impracticable to proceed with the offering, sale and/or delivery of the Shares or to enforce subscriptions made by the Investors for the purchase of the Shares.

 

8.3         Expenses. In the event that this Agreement shall not be carried out, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Underwriters their actual and accountable out-of-pocket expenses related to the transactions contemplated herein then due and payable (including the actual and accountable out-of-pocket expenses related to its legal counsel, Representative’s Counsel), up to $[●] minus the advances made by the Company; provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement.

 

8.4         Indemnification. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Section 6 shall not be in any way effected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof.

 

9.            Miscellaneous.

 

9.1         Notices. All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed (registered or certified mail, return receipt requested), personally delivered or sent by facsimile transmission and confirmed and shall be deemed given when so delivered or faxed and confirmed or if mailed, two days after such mailing.

 

If to the Representative:

 

MDB Capital Group, LLC

2425 Cedar Springs Road

Dallas, Texas 75201

Attn: General Counsel

Fax No.: (310) 526-5020

 

Copy to (which shall not constitute notice):

 

LKP Global Law, LLP

1901 Avenue of the Stars, Suite 480

Los Angeles, CA 90067

Attn: Kevin Leung, Esq.

Fax: (424) 239-1882

 

 

If to the QIU:

 

Feltl and Company, Inc.

10900 Wayzata Blvd

Suite 200

Minnetonka, MN 55305

Attn: Chief Executive Officer

Fax No.: (612) 492-8899

 

If to the Company:

 

Cue Biopharma, Inc.

675 W. Kendall St.

Cambridge, MA 02142

Attn: Chief Executive Officer

Fax No.:             

 

Copy to (which shall not constitute notice):

K&L Gates LLP

214 North Tryon Street, 47th Floor

Charlotte, NC 28202

Attn.: Mark R. Busch, Esq.

Fax No.: (704) 353-3694

 

9.2         Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.

 

9.3         Amendment. This Agreement may only be amended by a written instrument executed by each of the parties hereto.

 

9.4         Entire Agreement. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof, including without limitation the Engagement Agreement between the Company and the Representative dated April 13, 2015, each of which is hereby terminated and shall have no further force or effect except with respect to the Company’s indemnification obligations thereunder, which obligations shall continue as provided therein with respect to any acts or omissions that have occurred prior to the execution and delivery of this Agreement.

 

9.5         Binding Effect. This Agreement shall inure solely to the benefit of and shall be binding upon the Underwriters, the QIU, the Company and the directors, officers and Controlling Persons referred to in Section 6 hereof, and their respective successors, legal representatives and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from the Underwriters.

 

 

9.6         Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement, the Underwriters’ Warrants or the transactions contemplated hereby.

 

9.7         Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Delivery of a signed counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and sufficient delivery thereof.

 

9.8         Waiver, etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

 

9.9         No Fiduciary Relationship. The Company hereby acknowledges that each Underwriter is acting solely as placement agent on a best effort basis, and the QIU is acting solely as a “qualified independent underwriter” within the meaning of FINRA Rule 5121, in connection with the Offering of the Shares. The Company further acknowledges that the Underwriters and the QIU are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis and in no event do the parties intend that the Underwriters or the QIU act or be responsible as a fiduciary to the Company, its management, stockholders, creditors or any other person in connection with any activity that the Underwriters or the QIU may undertake or have undertaken in furtherance of the Offering of the Shares, either before or after the date hereof. The Representative on its own behalf and on behalf of the Underwriters, and the QIU hereby each expressly disclaims any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company hereby confirms its understanding and agreement to that effect. The Company, the Representative on its own behalf and on behalf of the Underwriters, and the QIU agree that they are each responsible for making their own independent judgments with respect to any such transactions, and that any opinions or views expressed by the Underwriters or the QIU to the Company regarding such transactions, including but not limited to any opinions or views with respect to the price or market for the Company’s securities, do not constitute advice or recommendations to the Company. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters or the QIU with respect to any breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.

 

9.10       Enforcement of Agreement. The Company acknowledges and agrees that the Underwriters would be irreparably damaged if any of the Company’s covenants hereunder, including without limitations those set forth in Section 4, is not performed in accordance with its specific terms and that any such breach of covenant could not be adequately compensated in all cases by monetary damages alone. Accordingly, in addition to any other right or remedy to which the Underwriters may be entitled, at law or in equity, it shall be entitled to seek enforcement of any covenant of the Company hereunder by a decree of specific performance and to seek temporary, preliminary and permanent injunctive relief to prevent a breach or threatened breach by the Company of any such covenant, without posting any bond or other undertaking.

 

[SIGNATURE PAGE FOLLOWS]

 

 

If the foregoing correctly sets forth the understanding among the Underwriter, the QIU and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.

 

	Very truly yours,
	CUE BIOPHARMA, INC.
	By:
		Name:
		Title:

 

Accepted on the date first above written.
MDB CAPITAL GROUP, LLC
as Representative of the Underwriters named on Schedule 1 hereto
By:
	Name: Gary Schuman
	Title: CFO and CCO
FELTL AND COMPANY, INC.
as the Qualified Independent Underwriter
By:
	Name:
	Title:

 

 

Schedule 1

 

Underwriter
MDB Capital Group, LLC
[●]

 

 

 

Exhibit 3.4

 

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION
OF
CUE BIOPHARMA, INC.

 

The present name of the corporation is Cue Biopharma, Inc. The corporation was incorporated under the name “Imagen Biopharma, Inc.” by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on December 31, 2014. This Amended and Restated Certificate of Incorporation of the corporation, which restates and integrates and also further amends the provisions of the corporation’s Certificate of Incorporation was duly adopted in accordance with the provisions of Sections 242 and 245 of the Delaware General Corporation Law and by the written (or electronic) consent of its stockholders in accordance with Section 228 of the Delaware General Corporation Law. The Certificate of Incorporation of the corporation is hereby amended, integrated and restated to read in its entirety as follows:

 

ARTICLE I

 

Identification

 

SECTION 1.01. Name. The name of the Corporation is “Cue Biopharma, Inc.” (the “Corporation”).

 

ARTICLE II

 

Purpose

 

SECTION 2.01. Purpose. The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law (“DGCL”).

 

ARTICLE III

 

Capital Stock

 

SECTION 3.01. Amount. The total number of shares which the Corporation has authority to issue is 60,000,000 shares, consisting of: 10,000,000 shares designated as Preferred Stock, par value of $0.001 per share (“Preferred Stock”), and 50,000,000 shares designated as Common Stock, par value of $0.001 per share (“Common Stock”).

 

SECTION 3.02. Preferred Stock. Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors (or any committee to which it may duly delegate the authority granted in this Article III) is hereby empowered to authorize the issuance from time to time of shares of Preferred Stock in one or more series, for such consideration and for such corporate purposes as the Board of Directors (or such committee thereof) may from time to time determine, and by filing a certificate (a “Preferred Stock Designation”) pursuant to applicable law of the State of Delaware, as it presently exists or may hereafter be amended, to establish from time to time for each such series the number of shares to be included in each such series and to fix the designations, powers, rights, and preferences of the shares of each such series, and the qualifications, limitations, and restrictions thereof to the fullest extent now or hereafter permitted by this Amended and Restated Certificate of Incorporation and the laws of the State of Delaware, including, without limitation, voting rights (if any), dividend rights, dissolution rights, conversion rights, exchange rights, and redemption rights thereof, as shall be stated and expressed in a resolution or resolutions adopted by the Board of Directors (or such committee thereof) providing for the issuance of such series of Preferred Stock. Each series of Preferred Stock shall be distinctly designated.

 

 

SECTION 3.03. Common Stock.

 

(A)       The holders of shares of Common Stock shall be entitled to one vote for each such share on each matter submitted to the stockholders on which the holders of shares of Common Stock are entitled to vote. Except as otherwise required by law or this Amended and Restated Certificate of Incorporation, and subject to the rights of the holders of Preferred Stock, at any annual or special meeting of the stockholders the holders of shares of Common Stock shall have the right to vote for the election of directors and on all other matters submitted to a vote of the stockholders; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation that relates solely to the terms, number of shares, powers, designations, preferences, or relative participating, optional, or other special rights (including, without limitation, voting rights), or to qualifications, limitations, or restrictions thereon, of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including, without limitation, by any Preferred Stock Designation or pursuant to the DGCL.

 

(B)       Subject to the rights of the holders of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive such dividends and other distributions (payable in cash, property, or capital stock of the Corporation) when, as and if declared thereon by the Board of Directors from time to time out of any assets or funds of the Corporation legally available therefor, and shall share equally on a per share basis in such dividends and distributions.

 

(C)       In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, and subject to the rights of the holders of Preferred Stock in respect thereof, the holders of shares of Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock held by them.

 

ARTICLE IV

 

Directors

 

SECTION 4.01. Management of the Corporation. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors of the Corporation.

 

 

SECTION 4.02. Number. The number of directors of the Corporation shall be determined exclusively by resolution adopted by a majority of the Whole Board. For purposes of this Amended and Restated Certificate of Incorporation, the term “Whole Board” means the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.

 

SECTION 4.03. Election of Directors. The directors shall be elected at the annual meeting of stockholders by such stockholders as have the right to vote on such election. Directors need not be stockholders of the Corporation. Unless required by the Bylaws, the election of the Board of Directors need not be by written ballot.

 

SECTION 4.04. Vacancies. Any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board of Directors, may be filled only by vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director.

 

SECTION 4.05. Amendment of the Bylaws by the Board. The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation.

 

ARTICLE V

 

Indemnification

 

SECTION 5.01. Right to Indemnification and Advancement. The Corporation shall indemnify (and advance expenses to) its officers and directors to the fullest extent permitted by the DGCL, as amended from time to time.

 

ARTICLE VI

 

Director Liability

 

SECTION 6.01. Waiver of Liability. A director of the Corporation shall not be personally liable either to the Corporation or to any of its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL. Any amendment or modification or repeal of the foregoing sentence or of the DGCL shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification, or repeal. If the DGCL hereafter is amended to further eliminate or limit the liability of a director, then a director of the Corporation, in addition to the circumstances in which a director is not personally liable as set forth in the preceding sentence, shall not be liable to the fullest extent permitted by the amended DGCL.

 

ARTICLE VII

 

Registered Agent and Registered Office

 

SECTION 7.01. Registered Agent and Office. The name and street address of the registered agent at the Corporation’s registered office are:

 

 

National Registered Agents, Inc.

160 Greentree Drive, Suite 101

Dover, DE 19904

County of Kent

 

ARTICLE VIII

 

Quorum Requirement

 

SECTION 8.01. Quorum. The holders representing a majority of the combined voting power of the capital stock issued and outstanding and entitled to vote at a meeting, present in person or represented by proxy, shall constitute a quorum.

 

ARTICLE IX

 

Cumulative Voting

 

SECTION 9.01. No Cumulative Voting. No holder of any shares of any class of stock of the Corporation shall be entitled to cumulative voting rights in any circumstances.

 

ARTICLE X

 

Preemptive Rights

 

SECTION 10.01. No Preemptive Rights. No stockholder shall have any preemptive rights to acquire unissued shares of the Corporation or securities of the Corporation convertible into or carrying a right to subscribe to or acquire shares.

 

ARTICLE XI

 

Internal Corporate Claims

 

SECTION 11.01. Venue for Internal Corporate Claims. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for all “internal corporate claims.” “Internal corporate claims” mean claims, including claims in the right of the Corporation, (i) that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity or (ii) as to which Title 8 of the Delaware Code confers jurisdiction upon the Court of Chancery, except for, as to each of (i) through (ii) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. If any provision or provisions of this Article XI shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article XI (including, without limitation, each portion of any sentence of this Article XI containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

 

 

ARTICLE XII

 

Supermajority Provisions

 

SECTION 12.01. Amendment of the Certificate of Incorporation by Stockholders. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation; provided, however, that, notwithstanding any other provision of the Amended and Restated Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of the outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal, or adopt any provision of this Amended and Restated Certificate of Incorporation inconsistent with Articles IV, V, XI and XII.

 

SECTION 12.02. Amendments to Bylaws by Stockholders. The stockholders shall also have the power to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Amended and Restated Certificate of Incorporation, the amendment of the Bylaws by the Corporation’s stockholders shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.

 

 

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this ___ day of December, 2017.

 

	By:
	Name: Daniel Passeri
	Title: President and CEO

 

 

 

Exhibit 3.5

 

AMENDED AND RESTATED

 

BYLAWS OF CUE BIOPHARMA, INC.

 

ARTICLE I

 

Meeting of Stockholders

 

Section 1.1. Annual Meetings. If required by applicable law, an annual meeting of stockholders shall be held for the election of directors at such date, time and place, if any, either within or without the State of Delaware, as may be designated by resolution of the board of directors (the “Board of Directors”) of Cue Biopharma, Inc. (the “Corporation”) from time to time. Any other proper business may be transacted at the annual meeting.

 

Section 1.2. Special Meetings.

 

(A)     Special meetings of stockholders for any purpose or purposes, unless otherwise prescribed by statute or by the Corporation’s certificate of incorporation, as amended, restated, supplemented or otherwise modified (the “Certificate of Incorporation”), (1) may be called at any time by the order of a majority of the Whole Board, the Chairman of the Board, the Chief Executive Officer or the President (in the absence of a chief executive officer), and (2) shall be called by the Secretary upon the written request of the holders of record of at least twenty percent (20%) of the outstanding shares of common stock of the Corporation (the “Requisite Percentage”), subject to and in compliance with these Bylaws. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. For purposes of these bylaws, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.

 

(B)     Any request by stockholders to call a special meeting in accordance with Section 1.2(A)(2) of these Bylaws shall (1) be delivered to, or mailed to and received by, the Secretary of the Corporation at the Corporation’s principal executive offices, (2) be signed by each stockholder, or a duly authorized agent of such stockholder, requesting the special meeting, (3) set forth the purpose or purposes of the meeting, and (3) include all of the information required by Section 1.13(A)(2) as to any nominations proposed to be presented and any other business proposed to be conducted at such special meeting and as to the stockholder(s) proposing such business or nominations, and a representation by the stockholder(s) proposing such business that within five business days after the record date for any such special meeting it will provide such information as of the record date for such special meeting. A special meeting requested by stockholders shall be held at such date, time and place within or without the State of Delaware as may be fixed by the Board of Directors; provided, however, that the date of any such special meeting shall not be more than ninety (90) days after the request to call the special meeting is received by the Corporate Secretary.

 

(C)     Notwithstanding the foregoing, a special meeting requested by stockholders in accordance with Section 1.2(A)(2) of these Bylaws shall not be held if: (1) the stated business to be brought before the special meeting is not a proper subject for stockholder action under applicable law, (2) the Board of Directors has called or calls for an annual or special meeting of stockholders to be held within one hundred twenty (120) days after the request for the special meeting is delivered to or received by the Secretary and the Board of Directors determines in good faith that the business of such annual or special meeting includes (among any other matters properly brought before the annual or special meeting) the purpose specified in the request, (3) an annual or special meeting was held not more than one hundred twenty (120) days before the request to call the special meeting was received by the Corporation which included the purpose specified in the request, and (4) the special meeting requested by stockholders involves or was made in a manner that involved a violation of or does or did not comply with the Certificate of Incorporation, these Bylaws, Regulation 14A under the Exchange Act (as hereinafter defined) or other applicable law.

 

 

(D)     A stockholder may revoke a request for a special meeting at any time by written revocation delivered to, or mailed to and received by, the Secretary. If, at any time after receipt by the Secretary of the Corporation of a proper request for a special meeting of stockholders, there are no longer valid requests from stockholders holding in the aggregate at least the Requisite Percentage, whether because of revoked requests or otherwise, the Board of Directors, in its discretion, may cancel the special meeting (or, if the special meeting has not yet been called, may direct the Chairman of the Board or the Secretary of the Corporation not to call such a meeting).

 

Section 1.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a notice of the meeting shall be given that shall state the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting) and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the Certificate of Incorporation or these bylaws, the notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at the meeting as of the record date for determining the stockholders entitled to notice of the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation.

 

Section 1.4. Adjournments. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board of Directors shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting.

 

Section 1.5. Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of not less than one-third in voting power of the outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. In the absence of a quorum, then either (i) the chairperson of the meeting or (ii) a majority in voting power of the stockholders so present (in person or by proxy) and entitled to vote may adjourn the meeting from time to time in the manner provided in Section 1.4 of these bylaws until a quorum shall attend. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any subsidiary of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

 

 

Section 1.6. Organization. Meetings of stockholders shall be presided over by the Chairman of the Board of Directors or, in his or her absence, by the Chief Executive Officer or, in his or her absence, by the President or, in his or her absence, by a Vice President or, in the absence of the foregoing persons, by a chairman designated by the Board of Directors or, in the absence of such designation, by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

 

Section 1.7. Voting; Proxies. Except as otherwise provided by or pursuant to the provisions of the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of the proxy or a new proxy bearing a later date. Voting at meetings of stockholders need not be by written ballot. At all meetings of stockholders for the election of directors at which a quorum is present a plurality of the votes cast shall be sufficient to elect. All other elections and questions presented to the stockholders at a meeting at which a quorum is present shall, unless otherwise provided by the Certificate of Incorporation, these bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or applicable law or pursuant to any regulation applicable to the Corporation or its securities, be decided by the affirmative vote of the holders of a majority in voting power of the shares of stock of the Corporation which are present in person or by proxy and entitled to vote thereon.

 

Section 1.8. Fixing Date for Determination of Stockholders of Record.

 

(A)     In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

 

 

(B)     In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than sixty (60) days prior to such other action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

Section 1.9. List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting at least ten (10) days prior to the meeting (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of meeting or (ii) during ordinary business hours at the principal place of business of the Corporation. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 1.9 or to vote in person or by proxy at any meeting of stockholders.

 

Section 1.10. Action by Written or Electronic Consent of Stockholders. Any action which is required to be or may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice to stockholders and without a vote if consents in writing or by electronic communication, setting forth the action so taken, shall have been signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or to take such action at a meeting at which all shares entitled to vote thereon were present and voted.

 

 

Section 1.11. Inspectors of Election. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election, who may be employees of the Corporation, to act at the meeting or any adjournment thereof and to make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. In the event that no inspector so appointed or designated is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector or inspectors so appointed or designated shall (i) ascertain the number of shares of capital stock of the Corporation outstanding and the voting power of each such share, (ii) determine the shares of capital stock of the Corporation represented at the meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares of capital stock of the Corporation represented at the meeting and such inspectors' count of all votes and ballots. Such certification and report shall specify such other information as may be required by law. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the Corporation, the inspectors may consider such information as is permitted by applicable law. No person who is a candidate for an office at an election may serve as an inspector at such election.

 

Section 1.12. Conduct of Meetings. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the presiding person of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

Section 1.13. Notice of Stockholder Business and Nominations.

 

(A)     Annual Meetings of Stockholders. (1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only (a) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (b) by or at the direction of the Board of Directors or any committee thereof or (c) by any stockholder of the Corporation who was a stockholder of record of the Corporation at the time the notice provided for in this Section 1.13 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.13.

 

 

(2) For any nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Section 1.13, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such proposed business (other than the nominations of persons for election to the Board of Directors) must constitute a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90^th) day, nor earlier than the close of business on the one hundred twentieth (120^th) day, prior to the first anniversary of the preceding year's annual meeting (provided, however, that in the event that no annual meeting was held in the previous year or if the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth (120^th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90^th) day prior to such annual meeting or the tenth (10^th) day following the day on which public announcement of the date of such meeting is first made by the Corporation). In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth: (a) as to each person whom the stockholder proposes to nominate for election as a director (i) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Section 14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder, and (ii) such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the bylaws of the Corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such stockholder and/or such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing, including, in the case of a nomination, the nominee, (iv) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder's notice by, or on behalf of, such stockholder and such beneficial owners, whether or not such instrument or right shall be subject to settlement in underlying shares of capital stock of the Corporation, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to securities of the Corporation, (v) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, (vi) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies or votes from stockholders in support of such proposal or nomination, and (vii) any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder. The foregoing notice requirements of this Section 1.13 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder's proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as the Corporation may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

 

 

(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 1.13 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation at the annual meeting is increased effective after the time period for which nominations would otherwise be due under paragraph (A)(2) of this Section 1.13 and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 1.13 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10^th) day following the day on which such public announcement is first made by the Corporation.

 

(B)      Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (1) by or at the direction of the Board of Directors or any committee thereof or (2) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 1.13 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 1.13. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder's notice required by paragraph (A)(2) of this Section 1.13 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120^th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90^th) day prior to such special meeting or the tenth (10^th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above.

 

 

(C)     General. (1) Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with the procedures set forth in this Section 1.13 shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.13. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.13 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholder's nominee or proposal in compliance with such stockholder's representation as required by clause (A)(2)(c)(vi) of this Section 1.13) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section 1.13, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 1.13, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 1.13, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.

 

(2) For purposes of this Section 1.13, "public announcement" shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or other national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

 

(3) Notwithstanding the foregoing provisions of this Section 1.13, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 1.13; provided however, that any references in these bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 1.13 (including paragraphs (A)(1)(c) and (B) hereof), and compliance with paragraphs (A)(1)(c) and (B) of this Section 1.13 shall be the exclusive means for a stockholder to make nominations or submit other business (other than, as provided in the penultimate sentence of (A)(2), business other than nominations brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time). Nothing in this Section 1.13 shall be deemed to affect any rights (a) of stockholders to request inclusion of proposals or nominations in the Corporation’s proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act or (b) of the holders of any series of Preferred Stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.

 

 

ARTICLE II

 

Board of Directors

 

Section 2.1. Number; Qualifications. Subject to the Certificate of Incorporation, the Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by resolution of the Whole Board. Directors need not be stockholders.

 

Section 2.2. Election; Resignation; Vacancies. The Board of Directors shall initially consist of the persons named as directors in the Certificate of Incorporation or elected by the incorporator of the Corporation, and each director so elected shall hold office until the first annual meeting of stockholders or until his or her successor is duly elected and qualified. At the first annual meeting of stockholders and at each annual meeting thereafter, the stockholders shall elect directors each of whom shall hold office for a term of one year or until his or her successor is duly elected and qualified, subject to such director's earlier death, resignation, disqualification or removal. Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. Such resignation shall take effect when such notice is given unless the notice specifies (a) a later effective date, or (b) an effective date determined upon the happening of an event or events, such as the failure to receive the required vote for reelection as a director and the acceptance of such resignation by the Board of Directors. Unless otherwise specified in the notice of resignation, the acceptance of such resignation shall not be necessary to make it effective. Unless otherwise provided by law or the Certificate of Incorporation, any newly created directorship or any vacancy occurring in the Board of Directors for any cause may be filled only by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, and each director so elected shall hold office until the expiration of the term of office of the director whom he or she has replaced or until his or her successor is elected and qualified.

 

Section 2.3. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board of Directors may from time to time determine.

 

Section 2.4. Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chief Executive Officer, the Secretary, or by any two members of the Board of Directors. Notice of a special meeting of the Board of Directors shall be given by the person or persons calling the meeting at least twenty-four hours before the special meeting.

 

Section 2.5. Telephonic Meetings Permitted. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting.

 

 

Section 2.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors the directors entitled to cast a majority of the votes of the Whole Board shall constitute a quorum for the transaction of business. Except in cases in which the Certificate of Incorporation, these bylaws or applicable law otherwise provides, a majority of the votes entitled to be cast by the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

 

Section 2.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board of Directors or, in his or her absence, by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence, the chairman of the meeting may appoint any person to act as secretary of the meeting.

 

Section 2.8. Action by Unanimous Consent of Directors. Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmissions are filed with the minutes of proceedings of the board or committee in accordance with applicable law.

 

Section 2.9. Chairman of the Board and Vice-Chairman of the Board. The Board of Directors may elect one or more of its members to serve as Chairman or Vice-Chairman of the Board and may fill any vacancy in such position at such time and in such manner as the Board of Directors shall determine. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors at which he or she is present and shall perform such duties and possess such powers as are designated by the Board of Directors. If the Board of Directors appoints a Vice-Chairman of the Board, he or she shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall perform such other duties and possess such other powers as may from time to time be designated by the Board of Directors. The fact that a person serves as either Chairman of Vice-Chairman of the Board shall not make such person considered an Officer of the Corporation.

 

ARTICLE III

 

Committees

 

Section 3.1. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it.

 

Section 3.2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these bylaws.

 

 

ARTICLE IV

 

Officers

 

Section 4.1           Officers. The officers of the Corporation shall consist of a Chief Executive Officer, a Chief Financial Officer, a President, one or more Vice Presidents, a Secretary, a Treasurer and such other officers as the Board of Directors may from time to time determine, which may include, without limitation, one or more Vice Presidents, Assistant Secretaries or Assistant Treasurers. Each of the Corporation’s officers shall be elected by the Board of Directors, each to have such authority, functions or duties as set forth in these bylaws or as determined by the Board of Directors. Each officer shall be chosen by the Board of Directors and shall hold office for such term as may be prescribed by the Board of Directors and until such person's successor shall have been duly chosen and qualified, or until such person's earlier death, disqualification, resignation or removal.

 

Section 4.2           Removal, Resignation and Vacancies. Any officer of the Corporation may be removed, with or without cause, by the Board of Directors, without prejudice to the rights, if any, of such officer under any contract to which it is a party. Any officer may resign at any time upon notice given in writing or by electronic transmission to the Corporation. Such resignation shall take effect when such notice is given unless the notice specifies (a) a later effective date, or (b) an effective date determined upon the happening of an event or events, such as the failure to receive the required vote for reelection as a director and the acceptance of such resignation by the Board of Directors. Unless otherwise specified in the notice of resignation, the acceptance of such resignation shall not be necessary to make it effective. If any vacancy occurs in any office of the Corporation, the Board of Directors may elect a successor to fill such vacancy for the remainder of the unexpired term and until a successor shall have been duly chosen and qualified.

 

Section 4.3           Chief Executive Officer. The Chief Executive Officer shall have general supervision and direction of the business and affairs of the Corporation, shall be responsible for corporate policy and strategy, and shall report directly to the Chairman of the Board of Directors. Unless otherwise provided in these bylaws, all other officers of the Corporation shall report directly to the Chief Executive Officer or as otherwise determined by the Chief Executive Officer. The Chief Executive Officer shall, if present and in the absence of the Chairman of the Board of Directors, preside at meetings of the stockholders and of the Board of Directors.

 

Section 4.4           President. The President shall be the chief operating officer of the Corporation, with general responsibility for the management and control of the operations of the Corporation. The President shall have the power to affix the signature of the Corporation to all contracts that have been authorized by the Board of Directors or the Chief Executive Officer. The President shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Chief Executive Officer or as the Board of Directors may from time to time determine. In the absence of a separately appointed President, the Chief Executive Officer shall be the President.

 

 

Section 4.5           Chief Financial Officer. The Chief Financial Officer shall exercise all the powers and perform the duties of the office of the chief financial officer and in general have overall supervision of the financial operations of the Corporation and shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The Chief Financial Officer shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Chief Executive Officer or as the Board of Directors may from time to time determine. In the absence of a separately appointed Treasurer, the Chief Financial Officer shall be the Treasurer.

 

Section 4.6           Vice Presidents. The Vice President shall have such powers and duties as shall be prescribed by his or her superior officer or the Chief Executive Officer. A Vice President shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Chief Executive Officer or as the Board of Directors may from time to time determine.

 

Section 4.7           Treasurer. The Treasurer shall supervise and be responsible for all the funds and securities of the Corporation, the deposit of all moneys and other valuables to the credit of the Corporation in depositories of the Corporation, borrowings and compliance with the provisions of all indentures, agreements and instruments governing such borrowings to which the Corporation is a party, the disbursement of funds of the Corporation and the investment of its funds, and in general shall perform all of the duties incident to the office of the Treasurer. The Treasurer shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Chief Executive Officer or as the Board of Directors may from time to time determine.

 

Section 4.8           Secretary. The powers and duties of the Secretary are to: (i) act as Secretary at all meetings of the Board of Directors, of the committees of the Board of Directors and of the stockholders and to record the proceedings of such meetings in a book or books to be kept for that purpose; (ii) see that all notices required to be given by the Corporation are duly given and served; (iii) act as custodian of the seal of the Corporation and affix the seal or cause it to be affixed to all certificates of stock of the Corporation and to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these bylaws; (iv) have charge of the books, records and papers of the Corporation and see that the reports, statements and other documents required by law to be kept and filed are properly kept and filed; and (v) perform all of the duties incident to the office of Secretary. The Secretary shall, when requested, counsel with and advise the other officers of the Corporation and shall perform such other duties as such officer may agree with the Chief Executive Officer or as the Board of Directors may from time to time determine.

 

Section 4.9           Additional Matters. The Chief Executive Officer and the Chief Financial Officer of the Corporation shall have the authority to designate employees of the Corporation to have the title of Assistant Vice President, Assistant Treasurer or Assistant Secretary. Any employee so designated shall have the powers and duties determined by the officer making such designation. The persons upon whom such titles are conferred shall not be deemed officers of the Corporation unless elected by the Board of Directors.

 

 

Section 4.10         Execution of Contracts and Instruments. All contracts, deeds, mortgages, bonds, certificates, checks, drafts, bills of exchange, notes and other instruments or documents to be executed by or in the name of the Corporation shall be signed on the corporation’s behalf by such officer or officers, or other person or persons, as may be so authorized (i) by the Board of Directors, or (ii) subject to such limitations, if any, as the Board of Directors may impose, by the Chief Executive Officer. Such authority may be general or confined to specific instances and, if the Board of Directors or Chief Executive Officer (whichever grants authority) so authorizes or otherwise directs, may be delegated by the authorized officers to other persons. Unless otherwise provided in such resolution, any resolution of the Board of Directors or a committee thereof authorizing the Corporation to enter into any such instruments or documents or authorizing their execution by or on behalf of the Corporation shall be deemed to authorize the execution thereof on its behalf by the Chief Executive Officer, the President, Chief Financial Officer or any Vice President (an “Authorized Officer”). Furthermore, each Authorized Officer shall be authorized to enter into any contract or execute any instrument in the name of and on behalf of the Corporation in matters arising in the ordinary course of the Corporation’s business and to the extent incident to the normal performance of such Authorized Officer’s duties.

 

ARTICLE V

 

Stock

 

Section 5.1. Certificates. The shares of the Corporation may be certificated or uncertificated in accordance with the Delaware General Corporation Law, and shall be entered in the books of the Corporation and registered as they are issued. The issue of shares in uncertificated form shall not affect shares represented by a certificate until the certificate is surrendered to the Corporation. Any certificates representing shares of the Corporation’s stock shall be in such form as may be prescribed by law and by the Board of Directors, certifying the number and class of shares owned by such stockholder in the Corporation. Every holder of stock represented by certificates shall be entitled to have a certificate signed by any two authorized officers of the Corporation certifying the number of shares owned by such holder in the Corporation. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent, or registrar at the date of issue.

 

Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue (i) a new certificate of stock or (ii) uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

 

 

ARTICLE VI

 

Indemnification and Advancement of Expenses

 

Section 6.1. Right to Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a "Covered Person") who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 6.3, the Corporation shall be required to indemnify a Covered Person in connection with a proceeding (or part thereof) commenced by such Covered Person only if the commencement of such proceeding (or part thereof) by the Covered Person was authorized in the specific case by the Board of Directors of the Corporation.

 

Section 6.2. Prepayment of Expenses. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys' fees) incurred by a Covered Person in defending any proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article VI or otherwise.

 

Section 6.3. Claims. If a claim for indemnification (following the final disposition of such proceeding) or advancement of expenses under this Article VI is not paid in full within thirty (30) days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by law. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law.

 

Section 6.4. Nonexclusivity of Rights. The rights conferred on any Covered Person by this Article VI shall not be exclusive of any other rights which such Covered Person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

 

Section 6.5. Other Sources. The Corporation’s obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.

 

 

Section 6.6. Amendment or Repeal. Any right to indemnification or to advancement of expenses of any Covered Person arising hereunder shall not be eliminated or impaired by an amendment to or repeal of these bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought.

 

Section 6.7. Other Indemnification and Advancement of Expenses. This Article VI shall not limit the right of the Corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.

 

ARTICLE VII

 

Miscellaneous

 

Section 7.1. Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board of Directors.

 

Section 7.2. Seal. The corporate seal shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors.

 

Section 7.3. Method of Notice. Whenever notice is required by law, the Certificate of Incorporation or these bylaws to be given by the Corporation to any director, committee member or stockholder, personal notice shall not be required and any such notice may be given in writing (a) by mail, addressed to such director, committee member or stockholder at his or her address as it appears on the books of the Corporation, or (b) by any other method permitted by law (including, but not limited to, overnight courier service, facsimile, electronic mail or other means of electronic transmission) directed to the addressee at his, her or its address most recently provided to the Corporation. Any notice given by the Corporation by mail shall be deemed to have been given at the time when deposited in the United States mail. Any notice given by the Corporation by overnight courier service shall be deemed to have been given when delivered to such service. Any notice given by the Corporation by facsimile, electronic mail or other means of electronic transmission that generally can be accessed by or on behalf of the receiving party at substantially the same time as it is transmitted shall be deemed to have been given when transmitted, unless the Corporation receives a prompt reply that such transmission is undeliverable to the address to which it was directed.

 

Section 7.4. Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, or a waiver by electronic transmission by the person entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

 

Section 7.5. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time.

 

 

Section 7.6. Amendment of Bylaws. Subject to any additional votes set forth in the Certificate of Incorporation, these bylaws may be altered, amended or repealed or new bylaws may be adopted by the stockholders or by the Board of Directors.

 

Section 7.7. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

Section 7.8. Facsimile Signature. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

 

 

 

Exhibit 4.1

 

 

 

 

Exhibit 4.2

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAWS, OR (2) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

IN ADDITION, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED, OR BE THE SUBJECT OF ANY HEDGING, SHORT SALE, DERIVATIVE, PUT, OR CALL TRANSACTION THAT WOULD RESULT IN THE EFFECTIVE ECONOMIC DISPOSITION OF SUCH SECURITIES BY ANY PERSON FOR A PERIOD OF ONE HUNDRED EIGHTY (180) DAYS IMMEDIATELY FOLLOWING THE DATE OF EFFECTIVENESS OF THE PUBLIC OFFERING OF THE COMPANY’S SECURITIES PURSUANT TO REGISTRATION STATEMENT NO.: 333-208694 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, EXCEPT IN ACCORDANCE WITH FINRA RULE 5110(G)(2).

 

CUE BIOPHARMA, INC.

 

UNDERWRITER WARRANT

 

Warrant No. U2017-1

 

[●] shares of Common Stock

 

[_______], 2017

 

This UNDERWRITER WARRANT (this “Warrant”) of Cue Biopharma, Inc., a corporation duly organized and validly existing under the laws of the State of Delaware (the “Company”), is being issued pursuant to that certain Underwriting Agreement, dated [_______], 2017 (the “Underwriting Agreement”), between the Company and MDB Capital Group, LLC as representative of the underwriters (the “Underwriters”) relating to a best efforts public offering (the “Offering”) of shares of common stock, $0.001 par value, of the Company (the “Common Stock”).

 

FOR VALUE RECEIVED, the Company hereby grants to [__________] and its permitted successors and assigns (collectively, the “Holder”) the right to purchase from the Company up to [●] shares of Common Stock (such shares underlying this Warrant, the “Warrant Shares”), at a per share purchase price equal to $[125% of the Public Offering Price] (the “Exercise Price”), subject to the terms, conditions and adjustments set forth below in this Warrant.

 

 

1.           Date of Warrant Exercise. This Warrant shall become exercisable one hundred eighty (180) days after the Base Date (the “Exercise Date”). As used in this Warrant, the term “Base Date” shall mean [_______], 2017 (the effective date of the registration statement). Except as otherwise provided for herein or as permitted by applicable rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”), this Warrant and the underlying Warrant Shares shall not be sold, transferred, assigned, pledged or hypothecated prior to the date that is one hundred eighty (180) days immediately following the Base Date pursuant to FINRA Rule 5110(g)(1), except as permitted under FINRA Rule 5110(g)(2).

 

2.           Expiration of Warrant. This Warrant shall expire on the five (5) year anniversary of the Base Date (the “Expiration Date”).

 

3.           Exercise of Warrant. This Warrant shall be exercisable pursuant to the terms of this Section 3.

 

3.1         Manner of Exercise.

 

(a)          This Warrant may only be exercised by the Holder hereof on or after the Exercise Date and on or prior to the Expiration Date, in accordance with the terms and conditions hereof, in whole or in part (but not as to fractional shares) with respect to any portion of this Warrant, during the Company’s normal business hours on any day other than a Saturday or a Sunday or a day on which commercial banking institutions in New York, New York are authorized by law to be closed (a “Business Day”), by surrender of this Warrant to the Company at its office maintained pursuant to Section 10.2(a) hereof, accompanied by a written exercise notice in the form attached as Exhibit A to this Warrant (or a reasonable facsimile thereof) duly executed by the Holder, together with the payment of the aggregate Exercise Price for the number of Warrant Shares purchased upon exercise of this Warrant. Upon surrender of this Warrant, the Company shall cancel this Warrant document and shall, in the event of partial exercise, replace it with a new Warrant document in accordance with Section 3.3. The Exercise Price may be paid in a “cashless” or “cash” exercise or a combination thereof pursuant to Section 3.1(b) and Section 3.1(c) below; provided, however, that, if at any time during the term of this Warrant there is no effective registration statement registering the Warrant Shares under the Securities Act, or no current prospectus available for, the issuance or resale of the Warrant Shares by the Holder, then this Warrant may only be exercised at such time by means of a “cashless” exercise.

 

(b)          Except as provided for in Section 3.1(c) below, each exercise of this Warrant must be accompanied by payment in full of the aggregate Exercise Price in cash by check or wire transfer in immediately available funds for the number of Warrant Shares being purchased by the Holder upon such exercise.

 

 

(c)          Subject to Section 3.1(a) and the other terms and conditions of this Warrant, the aggregate Exercise Price for the number of Warrant Shares being purchased may also be paid in full or in part on a “cashless” basis:

 

(i)

in the form of Common Stock owned by the Holder (based on the Fair Market Value (as defined below) of such Common Stock on the date of exercise);

 

(ii)

in the form of Warrant Shares withheld by the Company from the Warrant Shares otherwise to be received upon exercise of this Warrant having an aggregate Fair Market Value on the date of exercise equal to the aggregate Exercise Price of the Warrant Shares being purchased by the Holder; or

 

(iii)

by a combination of the foregoing, provided that the combined value of all cash and the Fair Market Value of any shares surrendered to the Company is at least equal to the aggregate Exercise Price for the number of Warrant Shares being purchased by the Holder.

 

For purposes of this Warrant, the term “Fair Market Value” shall be the closing price on the trading day immediately preceding the applicable exercise herein as officially reported by the principal securities exchange on which the Common Stock is then listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any securities exchange as determined in good faith by resolution of the Board of Directors of the Company, based on the best information available to it.

 

To illustrate a cashless exercise of this Warrant under Section 3.1(c)(ii) (or for a portion thereof for which cashless exercise treatment is requested as contemplated by Section 3.1(c)(iii) hereof), the calculation of such exercise shall be as follows:

 

X = Y (A-B)/A

 

where:

 

X =

the number of Warrant Shares to be issued to the Holder (rounded to the nearest whole share).

 

Y =

the number of Warrant Shares with respect to which this Warrant is being exercised.

 

A =

the Fair Market Value of the Common Stock.

 

B =

the Exercise Price.

 

 

(d)          For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended, understood, and acknowledged that the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction as described in Section 3.1(c) above shall be deemed to have been acquired at the time this Warrant was issued. Moreover, it is intended, understood, and acknowledged that the holding period for the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction as described in Section 3.1(c) above shall be deemed to have commenced on the date this Warrant was issued.

 

3.2         When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been duly exercised as provided in Sections 3.1 and 12 hereof, and, at such time, the Holder in whose name any certificate or certificates for Warrant Shares shall be issuable upon exercise as provided in Section 3.3 hereof shall be deemed to have become the holder or holders of record thereof of the number of Warrant Shares purchased upon exercise of this Warrant.

 

3.3         Delivery of Common Stock Certificates and New Warrant. As soon as reasonably practicable after each exercise of this Warrant, in whole or in part, and in any event within three (3) Business Days thereafter, the Company, at its expense (including the payment by it of any applicable issue taxes), will cause to be issued in the name of and delivered to the Holder hereof or, subject to Sections 9 and 10 hereof, as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct:

 

(a)          a certificate or certificates (with appropriate restrictive legends, as applicable) for the number of duly authorized, validly issued, fully paid and non-assessable Warrant Shares to which the Holder shall be entitled upon exercise; and

 

(b)          in case exercise is in part only, a new Warrant document of like tenor, dated the date hereof, for the remaining number of Warrant Shares issuable upon exercise of this Warrant after giving effect to the partial exercise of this Warrant (including the delivery of any Warrant Shares as payment of the Exercise Price for such partial exercise of this Warrant).

 

 

4.           Certain Adjustments. For so long as this Warrant is outstanding:

 

4.1         Mergers or Consolidations. If at any time after the date hereof there shall be a capital reorganization (other than a combination or subdivision of Common Stock otherwise provided for herein) resulting in a reclassification to or change in the terms of securities issuable upon exercise of this Warrant (a “Reorganization”), or a merger or consolidation of the Company with another corporation, association, partnership, organization, business, individual, government or political subdivision thereof or a governmental agency (a “Person” or the “Persons”) (other than a merger with another Person in which the Company is a continuing corporation and which does not result in any reclassification or change in the terms of securities issuable upon exercise of this Warrant or a merger effected exclusively for the purpose of changing the domicile of the Company) (a “Merger”), then, as a part of such Reorganization or Merger, lawful provision and adjustment shall be made so that the Holder shall thereafter be entitled to receive, upon exercise of this Warrant, the number of shares of stock, equity or debt securities, cash or other property receivable upon such Reorganization or Merger by a holder of the number of shares of Common Stock which might have been purchased upon exercise of this Warrant immediately prior to such Reorganization or Merger. In any such case, appropriate adjustment shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the Reorganization or Merger to the end that the provisions of this Warrant (including adjustment of the Exercise Price then in effect and the number of Warrant Shares) shall be applicable after that event, as near as reasonably may be, in relation to any shares of stock, equity or debt securities, cash or other property thereafter deliverable upon exercise of this Warrant. The provisions of this Section 4.1 shall similarly apply to successive Reorganizations and/or Mergers.

 

4.2         Splits and Subdivisions; Dividends. In the event the Company should at any time or from time to time effectuate a split or subdivision of the outstanding shares of Common Stock or pay a dividend in or make a distribution payable in additional shares of Common Stock or other securities, or rights convertible into, or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock (hereinafter referred to as “Common Stock Equivalents”) without payment of any consideration by such holder for the additional shares of Common Stock or Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of the applicable record date (or the date of such distribution, split or subdivision if no record date is fixed), the per share Exercise Price shall be appropriately decreased and the number of Warrant Shares shall be appropriately increased in proportion to such increase (or potential increase) of outstanding shares; provided, however, that no adjustment shall be made in the event the split, subdivision, dividend or distribution is not effectuated. Notwithstanding the foregoing or anything else to the contrary herein, in no event shall the per share Exercise Price be reduced below the par value of one Common Share or of such other securities as may be issued upon exercise of the Warrant.

 

Pursuant to the adjustment terms of this Section 4.2, provided that the shareholders are proportionally affected by such split or subdivision, dividend, distribution, or other similar event, the Holder may receive a greater number of Warrant Shares or the per share Exercise Price may be lower than originally contemplated by this Warrant. Additionally, the Holder shall not have the right to accrue cash dividends prior to the exercise or conversion of the Warrant.

 

 

4.3         Combination of Shares. If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, the per share Exercise Price shall be appropriately increased and the number of shares of Warrant Shares shall be appropriately decreased in proportion to such decrease in outstanding shares.

 

4.4         Adjustments for Other Distributions. In the event the Company shall declare a distribution payable in securities of other Persons, evidences of indebtedness issued by the Company or other Persons, assets (excluding cash dividends or distributions to the holders of Common Stock paid out of current or retained earnings and declared by the Company’s Board of Directors) or options or rights not referred to in Sections 4.2 or 4.3 then, in each such case for the purpose of this Section 4.4, upon exercise of this Warrant, the Holder shall be entitled to a proportionate share of any such distribution as though the Holder was the actual record holder of the number of Warrant Shares as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such distribution.

 

5.           No Impairment. The Company will not, by amendment of its certificate of incorporation or by-laws or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all of the terms and in the taking of all actions necessary or appropriate in order to protect the rights of the Holder against impairment.

 

6.           Notice as to Adjustments. With respect to each adjustment pursuant to Section 4 of this Warrant, the Company, at its expense, will promptly compute the adjustment or re-adjustment in accordance with the terms of this Warrant and furnish the Holder with a certificate certified and confirmed by the Secretary or Chief Financial Officer of the Company setting forth, in reasonable detail, the event requiring the adjustment or re-adjustment and the amount of such adjustment or re-adjustment, the method of calculation thereof and the facts upon which the adjustment or re-adjustment is based, and the Exercise Price and the number of Warrant Shares or other securities purchasable hereunder after giving effect to such adjustment or re-adjustment, which report shall be mailed by first class mail, postage prepaid to the Holder.

 

 

7.           Reservation of Shares. The Company shall, solely for the purpose of effecting the exercise of this Warrant, at all times during the term of this Warrant, reserve and keep available out of its authorized shares of Common Stock, free from all taxes, liens and charges with respect to the issue thereof and not subject to preemptive rights of shareholders of the Company, such number of its shares of Common Stock as shall from time to time be sufficient to effect in full the exercise of this Warrant. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect in full the exercise of this Warrant, in addition to such other remedies as shall be available to Holder, the Company will promptly take such corporate action as may, in the opinion of its counsel, be necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including without limitation, using its Reasonable Commercial Efforts (as defined in Section 14 hereof) to obtain the requisite shareholder approval necessary to increase the number of authorized shares of Common Stock. The Company hereby represents and warrants that all shares of Common Stock issuable upon proper exercise of this Warrant shall be duly authorized and, when issued and paid for upon proper exercise, shall be validly issued, fully paid and nonassessable.

 

8.           Registration and Listing.

 

8.1         Definition of Registrable Securities; Majority. As used herein, the term “Registrable Securities” means any shares of Common Stock issuable upon the exercise of this Warrant until the date (if any) on which such shares shall have been transferred or exchanged and new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of the shares shall not require registration or qualification under the Securities Act or any similar state law then in force. For purposes of this Warrant, the term “Majority Holders” shall mean holders of in excess of fifty percent (50%) of the then outstanding Warrant Shares covered by original Warrant No. U2017-1 (assuming the exercise of the entire Warrant).

 

8.2         Demand Registration Rights.

 

(a)          If at any time after the date hereof and on or before the Expiration Date there is no effective registration statement registering the Warrant Shares under the Securities Act, or no current prospectus available for, the issuance or resale of the Warrant Shares by the Holder, the Company, upon written demand (“Demand Notice”) of the Majority Holders, agrees to register on one occasion all of the Registrable Securities (a “Demand Right”). On such occasion, the Company will file a registration statement or a post-effective amendment to the Registration Statement covering the Registrable Securities within forty-five (45) days after receipt of a Demand Notice and use its Reasonable Commercial Efforts to have such registration statement or post-effective amendment declared effective as soon as possible thereafter. The Company covenants and agrees to give written notice of its receipt of any Demand Notice by any Holder(s) to all other registered Holders of the Warrants and/or the Registrable Securities within ten (10) days from the date of the receipt of any such Demand Notice.

 

 

(b)          Registration of Registrable Securities under this Section 8.2 shall be on such appropriate registration form: (i) as shall be selected by the Company; and (ii) as shall permit the disposition of such Registrable Securities in accordance with this Section 8.2. The Company agrees to include in any such registration statement all information which the requesting holders of Registrable Securities shall reasonably request, which is required to be contained therein. The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 8.2, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. The Company agrees to use its Reasonable Commercial Efforts to qualify or register the Registrable Securities in such states as are reasonably requested by the Majority Holder(s); provided, however, that in no event shall the Company be required to register the Registrable Securities in a state in which such registration would cause (i) the Company to be obligated to register, license or qualify to do business in such state, submit to general service of process in such state or would subject the Company to taxation as a foreign corporation doing business in such jurisdiction, or (ii) the principal stockholders of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration statement or post-effective amendment filed pursuant to the demand right granted under Section 8.2(a) to remain effective for a period of nine consecutive months from the effective date of such registration statement or post-effective amendment. The Holders shall only use the prospectuses provided by the Company to sell the Registrable Securities covered by such registration statement, and will immediately cease to use any prospectus furnished by the Company if the Company advises the Holder that such prospectus may no longer be used due to a material misstatement or omission.

 

8.3         Incidental Registration Rights.

 

(a)          If the Company, for a period of seven (7) years commencing from the Base Date, proposes to register any of its securities under the Securities Act (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act, pursuant to registration on Form S-4 or S-8 or any successor forms) whether for its own account or for the account of any holder or holders of its shares other than Registrable Securities (any shares of such holder or holders (but not those of the Company and not Registrable Securities) with respect to any registration are referred to herein as, “Other Shares”), the Company shall at each such time give prompt (but not less than thirty (30) days prior to the anticipated effectiveness thereof) written notice to the holders of Registrable Securities of its intention to do so. The holders of Registrable Securities shall exercise the “piggy-back” rights provided herein by giving written notice within ten (10) days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such holder). Except as set forth in Section 8.3(b), the Company will use its Reasonable Commercial Efforts to effect the registration under the Securities Act of all of the Registrable Securities which the Company has been so requested to register by such holder, to the extent required to permit the disposition of the Registrable Securities so to be registered, by inclusion of such Registrable Securities in the registration statement which covers the securities which the Company proposes to register. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities pursuant to this Section 8.3.

 

 

(b)          If the Company at any time proposes to register any of its securities under the Securities Act as contemplated by this Section 8.3 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by a holder of Registrable Securities, use its Reasonable Commercial Efforts to arrange for such underwriters to include all the Registrable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters, provided that if the managing underwriter of such underwritten offering shall inform the Company by letter of its belief that inclusion in such distribution of all or a specified number of such securities proposed to be distributed by such underwriters would interfere with the successful marketing of the securities being distributed by such underwriters (such letter to state the basis of such belief and the approximate number of such Registrable Securities, such Other Shares and shares held by the Company proposed so to be registered which may be distributed without such effect), then the Company may, upon written notice to such holder, the other holders of Registrable Securities, and holders of such Other Shares, reduce pro rata in accordance with the number of shares of Common Stock desired to be included in such registration (if and to the extent stated by such managing underwriter to be necessary to eliminate such effect) the number of such Registrable Securities and Other Shares the registration of which shall have been requested by each holder thereof so that the resulting aggregate number of such Registrable Securities and Other Shares so included in such registration, together with the number of securities to be included in such registration for the account of the Company, shall be equal to the number of shares stated in such managing underwriter’s letter.

 

8.4         Registration Procedures. Whenever the holders of Registrable Securities have properly requested that any Registrable Securities be registered pursuant to the terms of this Warrant, the Company shall use its Reasonable Commercial Efforts to effect the registration for the sale of such Registrable Securities in accordance with the intended method of disposition thereof, and pursuant thereto the Company shall as expeditiously as possible:

 

(a)          prepare and file with the Securities and Exchange Commission (“SEC”) a registration statement with respect to such Registrable Securities and use its Reasonable Commercial Efforts to cause such registration statement to become effective;

 

(b)          notify such holders of the effectiveness of each registration statement filed hereunder and prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to (i) keep such registration statement effective and the prospectus included therein usable for a period commencing on the date that such registration statement is initially declared effective by the SEC and ending on the date when all Registrable Securities covered by such registration statement have been sold pursuant to the registration statement or cease to be Registrable Securities, and (ii) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement;

 

 

(c)          furnish to such holders such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such holders;

 

(d)          use its Reasonable Commercial Efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as such holders reasonably request and do any and all other acts and things which may be reasonably necessary or advisable to enable such holders to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holders, including, without limitation, any applicable FINRA filings within the time mandated by applicable FINRA rules, including without limitations Rule 5110(b); provided, however, that the Company shall not be required to: (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph; (ii) subject itself to taxation in any such jurisdiction; or (iii) consent to general service of process in any such jurisdiction;

 

(e)          notify such holders, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any material fact necessary to make the statements therein, in light of the circumstances in which they are made, not materially misleading, and, at the reasonable request of such holders, the Company shall prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances in which they are made, not materially misleading;

 

(f)          provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement;

 

(g)         make available for inspection by any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by any such underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors, managers, employees and independent accountants to supply all information reasonably requested by any such underwriter, attorney, accountant or agent in connection with such registration statement;

 

 

(h)         otherwise use its Reasonable Commercial Efforts to comply with all applicable rules and regulations of the SEC, and make available to such holders, as soon as reasonably practicable, an earnings statement of the Company, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and, at the option of the Company, Rule 158 thereunder;

 

(i)          in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Registrable Securities included in such registration statement for sale in any jurisdiction, the Company shall use its Reasonable Commercial Efforts promptly to obtain the withdrawal of such order; and

 

(j)          if the offering is underwritten, use its Reasonable Commercial Efforts to furnish on the date that Registrable Securities are delivered to the underwriters for sale pursuant to such registration, an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters covering such issues as are customarily addressed in opinions to underwriters in public offerings and reasonably required by such underwriters.

 

8.5         Expenses. The Company shall pay all Registration Expenses relating to the registration and listing obligations set forth in this Section 8. For purposes of this Warrant, the term “Registration Expenses” means: (a) all registration, filing and FINRA fees; (b) all reasonable fees and expenses of complying with securities or blue sky laws; (c) all word processing, duplicating and printing expenses; (d) the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance; (e) premiums and other costs of policies of insurance (if any) against liabilities arising out of the public offering of the Registrable Securities being registered if the Company desires such insurance, if any; and (f) fees and disbursements of one counsel for the selling holders of Registrable Securities. Further, the Company shall pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual or quarterly review, the expense of any liability insurance and the expenses and fees for listing the Registrable Securities on each security exchange on which the Common Stock is then listed. Registration Expenses shall not include any underwriting discounts and commissions which may be incurred in the sale of any Registrable Securities and transfer taxes of the selling holders of Registrable Securities.

 

8.6         Listing. The Company shall secure the listing of the Common Stock underlying this Warrant upon each national securities exchange or automated quotation system upon which shares of Common Stock are then listed or quoted (subject to official notice of issuance) and shall maintain such listing of shares of Common Stock. For so long as any of the Company’s Common Stock is listed on The NASDAQ Stock Market (or such other national securities exchange or market, as applicable), the Company shall comply in all material respects with the Company’s reporting, filing and other obligations under the by-laws or rules of The NASDAQ Stock Market (or such other national securities exchange or market.

 

 

8.7         Information Provided by Holders. Any holder of Registrable Securities included in any registration shall furnish to the Company such information as the Company may reasonably request in writing, including, but not limited to, a completed and executed questionnaire requesting information customarily sought of selling security holders, to enable the Company to comply with the provisions hereof in connection with any registration referred to in this Warrant. In the event that a holder of Registrable Securities fails to provide such information on a timely basis, and in any event within seven (7) Business Days of the Company’s written request, then the Company shall be entitled to exclude the Registrable Securities of such holder from such registration and the Company shall nevertheless be deemed to have satisfied its obligations hereunder with respect to such registration.

 

8.8         Effectiveness Period. The Company shall use its Reasonable Commercial Efforts to keep each registration statement contemplated hereunder continuously effective under the Securities Act until the date which is the earlier date of when (i) all Registrable Securities covered by such Registration Statement have been sold, or (ii) all Registrable Securities covered by such Registration Statement may be sold immediately without registration under the Securities Act and without volume restrictions pursuant to Rule 144 under the Securities Act, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and reasonably acceptable to the Company’s transfer agent and the affected holders of Registrable Securities.

 

8.9         Net Cash Settlement. Notwithstanding anything herein to the contrary, in no event will the Holder hereof be entitled to receive a net-cash settlement as liquidated damages in lieu of physical settlement in shares of Common Stock, regardless of whether the Common Stock underlying this Warrant is registered pursuant to an effective registration statement; provided, however, that the foregoing will not preclude the Holder from seeking other remedies at law or equity for breaches by the Company of its registration obligations hereunder.

 

8.10       Termination of Registration Rights. The registration rights afforded to the Holder under this Section 8 shall terminate on the earliest date when all Registrable Securities of the Holder either: (i) have been publicly sold by the Holder pursuant to a Registration Statement, (ii) have been covered by an effective Registration Statement on Form S-1 or Form S-3 (or successor form), which may be kept effective as an evergreen Registration Statement, or (iii) may be sold by the Holder within a 90 day period without registration pursuant to Rule 144 or consistent with applicable SEC interpretive guidance (including CD&I no. 201.04 (April 2, 2007) or similar interpretive guidance).

 

 

9.           Restrictions on Transfer.

 

9.1         Restrictive Legends. This Warrant and each Warrant issued upon transfer or in substitution for this Warrant pursuant to Section 10 hereof, each certificate for Common Stock issued upon the exercise of the Warrant and each certificate issued upon the transfer of any such Common Stock shall be transferable only upon satisfaction of the conditions specified in this Section 9. Each of the foregoing securities shall be stamped or otherwise imprinted with a legend reflecting the restrictions on transfer set forth herein and any restrictions required under the Securities Act or other applicable securities laws.

 

9.2         Notice of Proposed Transfer. Prior to any transfer of any securities which are not registered under an effective registration statement under the Securities Act (“Restricted Securities”), which transfer may only occur if there is an exemption from the registration provisions of the Securities Act and all other applicable securities laws, the Holder shall complete the form attached as Exhibit B to this Warrant and give written notice to the Company of the Holder’s intention to effect a transfer (and shall describe the manner and circumstances of the proposed transfer). The following provisions shall apply to any proposed transfer of Restricted Securities:

 

(a)          If in the opinion of counsel for the Holder reasonably satisfactory to the Company the proposed transfer may be effected without registration of the Restricted Securities under the Securities Act (which opinion shall state in detail the basis of the legal conclusions reached therein), the Holder shall, upon delivery of an executed original of such opinion, thereupon be entitled to transfer the Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Company. Each certificate representing the Restricted Securities issued upon or in connection with any transfer shall bear the restrictive legends required by Section 9.1 hereof.

 

(b)          If the opinion called for in (i) above is not delivered, the Holder shall not be entitled to transfer the Restricted Securities until either: (x) receipt by the Company of a further notice from such Holder pursuant to the foregoing provisions of this Section 9.2 and fulfillment of the provisions of clause (i) above; or (y) such Restricted Securities have been effectively registered under the Securities Act.

 

9.3         Certain Other Transfer Restrictions. Notwithstanding any other provision of this Warrant: (i) prior to the Exercise Date, this Warrant or the Restricted Securities thereunder may only be transferred or assigned to the persons permitted under FINRA Rule 5110(g); and (ii) subject at all times to FINRA Rule 5110(g), no opinion of counsel shall be necessary for a transfer of Restricted Securities by the holder thereof to any Person employed by or owning equity in the Holder, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if the transferee were the original purchaser hereof and such transfer is permitted under applicable securities laws.

 

 

9.4         Termination of Restrictions. Except as set forth in Section 9.3 hereof and subject at all times to FINRA Rule 5110(g), the restrictions imposed by this Section 9 upon the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities: (a) which shall have been effectively registered under the Securities Act; or (b) when, in the opinion of counsel for the Company, such restrictions are no longer required in order to insure compliance with the Securities Act or Section 10 hereof. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the Holder thereof shall be entitled to receive from the Company, without expense (other than applicable transfer taxes, if any), new securities of like tenor not bearing the applicable legends required by Section 9.1 hereof.

 

10.         Ownership, Transfer, Sale and Substitution of Warrant.

 

10.1       Ownership of Warrant. The Company may treat any Person in whose name this Warrant is registered in the Warrant Register maintained pursuant to Section 10.2(b) hereof as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary. Subject to Sections 9 and 10 hereof, this Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued.

 

10.2       Office; Exchange of Warrant.

 

(a)          The Company will maintain its principal office at the location identified in the prospectus relating to the Offering or at such other offices as set forth in the Company’s most current filing (as of the date notice is to be given) under the Securities Exchange Act of 1934, as amended, or as the Company otherwise notifies the Holder.

 

(b)          The Company shall cause to be kept at its principal office a Warrant Register for the registration and transfer of the Warrant. The name and address of the holder of the Warrant, the transfers thereof and the name and address of the transferee of the Warrant shall be registered in such Warrant Register. The Person in whose name the Warrant shall be so registered shall be deemed and treated as the owner and holder thereof for all purposes of this Warrant, and the Company shall not be affected by any notice or knowledge to the contrary.

 

(c)          Upon the surrender of this Warrant, properly endorsed, for registration of transfer or for exchange at the office of the Company maintained pursuant to Section 10.2(a) hereof, the Company at its expense will (subject to compliance with Section 9 hereof, if applicable) execute and deliver to or upon the order of the Holder thereof a new Warrant of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face thereof for the number of shares of Common Stock called for on the face of the Warrant so surrendered (after giving effect to any previous adjustment(s) to the number of Warrant Shares).

 

 

10.3       Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, upon delivery of indemnity reasonably satisfactory to the Company in form and amount or, in the case of any mutilation, upon surrender of this Warrant for cancellation at the office of the Company maintained pursuant to Section 10.2(a) hereof, the Company will execute and deliver, in lieu thereof, a new Warrant of like tenor and dated the date hereof.

 

10.4       Opinions. In connection with the sale of the Warrant Shares by Holder, the Company agrees to cooperate with the Holder if the Company’s counsel determines such opinion is appropriate, and at the Company’s expense, to have its counsel provide any legal opinions required to remove the restrictive legends from the Warrant Shares in connection with a sale, transfer or legend removal request of Holder.

 

11.         No Rights or Liabilities as Stockholder. Except as provided in Section 4.4, no Holder shall be entitled to vote or receive dividends or distributions or be deemed the holder of any equity securities which may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or distributions, or to share in the assets of the Company in the event of a liquidation, dissolution or the winding up of the Company, until the Warrant shall have been exercised and the shares of Common Stock purchasable upon the exercise hereof shall have become deliverable, as provided herein.

 

 

12.         Notices. Any notice or other communication in connection with this Warrant shall be given in writing and directed to the parties hereto as follows: (a) if to the Holder, at the address of the holder in the warrant register maintained pursuant to Section 10 hereof; or (b) if to the Company, to the attention of its Chief Executive Officer at its office maintained pursuant to Section 10.2(a) hereof; provided that the exercise of the Warrant shall also be effected in the manner provided in Section 3 hereof. Notices shall be deemed properly delivered and received when delivered to the notice party (i) if personally delivered, upon receipt or refusal to accept delivery, (ii) if sent via facsimile, upon mechanical confirmation of successful transmission thereof generated by the sending telecopy machine, (iii) if sent by a commercial overnight courier for delivery on the next Business Day, on the first Business Day after deposit with such courier service, or (iv) if sent by registered or certified mail, five (5) Business Days after deposit thereof in the U.S. mail.

 

13.         Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the issuance of shares of Common Stock underlying this Warrant upon exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the transfer or registration of this Warrant or any certificate for shares of Common Stock underlying this Warrant in a name other that of the Holder. The Holder is responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving shares of Common Stock underlying this Warrant upon exercise hereof.

 

14.         Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company and the Majority Holders. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of New York. The section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof. When used herein, the term “Reasonable Commercial Efforts” means, with respect to the applicable obligation of the Company, reasonable commercial efforts for similarly situated, publicly-traded companies.

 

(Signature on Following Page)

 

 

IN WITNESS WHEREOF, the Company has caused this Underwriter Warrant to be duly executed as of the date first above written.

 

	CUE BIOPHARMA, INC.
	By:
	Name:
	Title:

 

 

EXHIBIT A

FORM OF EXERCISE NOTICE

[To be executed only upon exercise of Warrant]

 

To CUE BIOPHARMA, INC.:

 

The undersigned registered holder of the within Warrant hereby irrevocably exercises the Warrant pursuant to Section 3.1 of the Warrant with respect to [_____] Warrant Shares, at an exercise price of $[____] per share, and requests that the certificates for such Warrant Shares be issued, subject to Sections 9 and 10, in the name of and delivered to:

 

The undersigned is hereby making payment for the Warrant Shares in the following manner:

[check one]

 

¨

by cash in accordance with Section 3.1(b) of the Warrant

 

¨

via cashless exercise in accordance with Section 3.1(c) of the Warrant in the following manner:

 

The undersigned hereby represents and warrants that it is, and has been since its acquisition of the Warrant, the record and beneficial owner of the Warrant.

 

Dated:

 

Print or Type Name
(Signature must conform in all respects to name of holder as specified on the face of Warrant)
(Street Address)
(City)	(State)	(Zip Code)

 

 

EXHIBIT B

FORM OF ASSIGNMENT

[To be executed only upon transfer of Warrant]

 

For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto_____________________[include name and addresses] the rights represented by the Warrant to purchase__________ shares of Common Stock of CUE BIOPHARMA, INC. to which the Warrant relates, and appoints Attorney to make such transfer on the books of CUE BIOPHARMA, INC. maintained for the purpose, with full power of substitution in the premises.

 

Dated:

(Signature must conform in all respects to name of holder as specified on the face of Warrant)
(Street Address)
(City)	(State)	(Zip Code)

 

Signed in the presence of:

 

(Signature of Transferee)
(Street Address)
(City)	(State)	(Zip Code)

 

Signed in the presence of:

 

 

Exhibit 5.1

 

K&L Gates llp Hearst Tower 47th Floor 214 North Tryon Street Charlotte, NC 28202 T 704.331.7400    F 704.331.7598   klgates.com

 

December 4, 2017

 

Cue Biopharma, Inc.

675 W. Kendall St.

Cambridge, MA 02142

 

Ladies and Gentlemen:

 

We have acted as counsel to Cue Biopharma, Inc., a Delaware corporation (the “Company”), in connection with the filing by the Company of a Registration Statement on Form S-1 (File No. 333-220550) originally filed with the Securities and Exchange Commission (the “SEC”) on September 21, 2017 and amended on November 2, 2017, November 17, 2017 and December 4, 2017 (as amended, the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”). The Registration Statement relates to the proposed issuance and sale by the Company (“Offering”) of (i) shares (“Shares”) of the Company’s common stock, $0.001 par value per share (“Common Stock”), (ii) warrants (“Underwriters’ Warrants”), issued to the underwriters for the Offering to purchase shares of Common Stock and (iii) shares of Common Stock underlying the Underwriters’ Warrants (“Underwriters’ Warrant Shares”). The Shares, the Underwriters’ Warrants and the Underwriters’ Warrant Shares are referred to herein, collectively, as the “Securities”. The proposed maximum aggregate offering price of the Securities is $67,501,000. The Securities are to be sold by the Company pursuant to an Underwriting Agreement by and between the Company and MDB Capital Group, LLC, as representative of the several underwriters.

 

You have requested our opinion as to the matters set forth below in connection with the issuance of the Securities. For purposes of rendering that opinion, we have examined: (i) the Registration Statement, (ii) the Underwriting Agreement, (iii) a form of the Amended and Restated Certificate of Incorporation of the Company, which has been filed with the SEC as an exhibit to the Registration Statement (the “Charter”), (iv) a form of the Company’s Amended and Restated Bylaws, which has been filed with the SEC as an exhibit to the Registration Statement (the “Bylaws”), (v) the Company’s stock, warrant and option ledgers, and (vi) the corporate actions of the Company’s Board of Directors which authorize the issuance of the Securities. We have also reviewed such matters of law as we have deemed necessary to render the opinions expressed herein. For the purposes of this opinion letter, we have assumed that each document submitted to us is accurate and complete, that each such document that is an original is authentic, that each such document that is a copy conforms to an authentic original, the conformity to the original or final versions of the documents submitted to us as copies or drafts, including without limitation, the Charter and that all signatures on each such document are genuine.

 

 

Cue Biopharma, Inc.

December 4, 2017

Page 2

 

In rendering our opinion below, we also have assumed that: (a) the Company will have sufficient authorized and unissued shares of Common Stock at the time of each issuance of an Underwriters’ Warrant Share; (b) each Share and Underwriters’ Warrant Share will be evidenced by an appropriate certificate, duly executed and delivered or the Company’s Board of Directors will adopt a resolution, providing that all shares of Common Stock shall be uncertificated in accordance with Section 158 of the Delaware General Corporation Law (the “DGCL”), prior to their issuance; (c) the issuance of each Share and Underwriters’ Warrant Share will be duly noted in the Company’s stock ledger upon issuance; and (d) each of the Underwriters’ Warrants and the Underwriting Agreement constitutes a valid and binding agreement of each of the parties thereto (other than the Company), enforceable against the parties thereto in accordance with its terms. We have further assumed the legal capacity of natural persons. We have not verified any of those assumptions.

 

Our opinion set forth below in numbered paragraphs 1 and 3 and the first sentence of numbered paragraph 2 are limited to the DGCL. Our opinion set forth below in the second sentence of numbered paragraph 2 is limited to the laws of the State of New York.

 

Based upon and subject to the foregoing, provided that the Registration Statement and any required post-effective amendment thereto have all become effective under the Securities Act and any related prospectus required by applicable law (“Prospectus”) have been delivered and filed as required by such laws, it is our opinion that:

 

1.

The Shares have been duly authorized for issuance by the Company and, when issued and paid for as described in the Prospectus and the Underwriting Agreement, will be validly issued, fully paid, and non-assessable.

 

2.

The Underwriters’ Warrants have been duly authorized for issuance by the Company. Provided that the Underwriters’ Warrants have been duly executed and delivered by the Company and duly delivered to the purchaser thereof against payment therefor, the Underwriters’ Warrants, when issued and paid for as described in the Registration Statement and the Prospectus, will be valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to the effect of bankruptcy, insolvency, fraudulent transfer, reorganization, receivership, moratorium and other laws affecting the rights and remedies of creditors generally, and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity).

 

 

Cue Biopharma, Inc.

December 4, 2017

Page 3

 

3.

The Underwriters’ Warrant Shares have been duly authorized and, when issued and delivered by the Company against payment therefor, upon the exercise of the Underwriters’ Warrants in accordance with the terms therein, will be validly issued, fully paid, and non-assessable.

 

The opinions set forth above are subject to the following additional assumptions:

 

(a)

The Registration Statement and any amendment thereto (including any post-effective amendment) will have become effective under the Securities Act, and such effectiveness shall not have been terminated, suspended or rescinded;

 

(b)

All Securities offered pursuant to the Registration Statement will be issued and sold (i) in compliance with all applicable federal and state securities laws, rules and regulations and solely in the manner provided in the Registration Statement and the Prospectus and (ii) only upon payment of the consideration fixed therefor in accordance with the Underwriting Agreement and, if applicable, the Securities themselves, and there will not have occurred any change in law or fact affecting the validity of any of the opinions rendered herein with respect thereto; and

 

(c)

To the extent that the obligations of the Company under any agreement pursuant to which any Securities offered pursuant to the Registration Statement are to be issued or governed, including any amendment or supplement thereto, may be dependent upon such matters, we assume for purposes of this opinion letter that (i) each party to any such agreement other than the Company (including any applicable warrant agent or other party acting in a similar capacity with respect to any Securities) will be duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that each such other party will be duly qualified to engage in the activities contemplated thereby; (ii) each such agreement and the applicable Securities will have been duly authorized, executed and delivered by each such other party and will constitute the valid and binding obligations of each such other party, enforceable against each such other party in accordance with their terms; (iii) each such other party will be in compliance, with respect to acting in any capacity contemplated by any such agreement, with all applicable laws and regulations; and (iv) each such other party will have the requisite organizational and legal power and authority to perform its obligations under each such agreement.

 

We assume no obligation to update or supplement any of our opinions to reflect any changes of law or fact that may occur.

 

 

Cue Biopharma, Inc.

December 4, 2017

Page 4

 

We hereby consent to the filing of this opinion letter with the SEC as Exhibit 5.1 to the Registration Statement. We also consent to the reference to our Firm under the caption “Legal Matters” in the Registration Statement and in the Prospectus. In giving our consent, we do not thereby admit that we are experts with respect to any part of the Registration Statement, the Prospectus or any Prospectus Supplement within the meaning of the term “expert”, as used in Section 11 of the Securities Act or the rules and regulations promulgated thereunder, nor do we admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations thereunder.

 

	Very truly yours,
	/s/ K&L Gates LLP
	K&L Gates LLP

 

 

Exhibit 10.2

 

Dated as of                     , 2017

 

MDB Capital Group, LLC

2425 Cedar Springs Road

Dallas, Texas 75201

 

Ladies and Gentlemen:

 

This agreement is being delivered to you in connection with the proposed Underwriting Agreement (the “Underwriting Agreement”) between Cue Biopharma, Inc., a Delaware corporation (the “Company”), and MDB Capital Group, LLC (“MDB”) relating to a proposed public offering, on a best efforts basis (the “Offering”), of shares (the “Shares”) of the Company’s Common Stock (the “Common Stock”).

 

In order to induce MDB to enter into the Underwriting Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees that, during the period beginning on and including the date of the Underwriting Agreement through and including the one year anniversary of the date of the Underwriting Agreement (the “Lock-Up Period”), the undersigned, or any affiliated party of the undersigned, will not, without the prior written consent of MDB, directly or indirectly:

 

(i)

offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, owned or with respect to which the undersigned has acquired the power of disposition as of the date of the Underwriting Agreement, or

 

(ii)

enter into any swap or other agreement, arrangement or transaction that transfers to another, in whole or in part, directly or indirectly, any of the economic consequence of ownership of any Common Stock or any securities convertible into or exercisable or exchangeable for any Common Stock, owned or with respect to which the undersigned has acquired the power of disposition as of the date of the Underwriting Agreement,

 

whether any transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock, other securities, in cash or otherwise. Moreover, if:

 

(1)

during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs, or

 

(2)

prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Lock-Up Period,

 

 

the Lock-Up Period shall be extended and the restrictions imposed by this agreement shall continue to apply until the expiration of the 18-day period beginning on the date of issuance of the earnings release or the occurrence of the material news or material event, as the case may be, unless MDB waives, in writing, such extension.

 

Notwithstanding the provisions set forth in the immediately preceding paragraph, the undersigned may, without the prior written consent of MDB, (1) transfer any Common Stock or any securities convertible into or exchangeable or exercisable for Common Stock as a bona fide gift or gifts, or by will or intestacy, to any member of the immediate family (as defined below) of the undersigned or to a trust the beneficiaries of which are exclusively the undersigned or members of the undersigned’s immediate family or to a charity or educational institution; provided, however, that it shall be a condition to the transfer that, if the undersigned is required to file a report under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), reporting a reduction in beneficial ownership of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock by the undersigned during the Lock-Up Period (as the same may be extended as described above), the undersigned shall include a statement in such report to the effect that such transfer or distribution is not a transfer for value and that such transfer is being made as a gift or by will or intestacy, as the case may be; (2) exercise or convert currently outstanding warrants, options and convertible debentures, as applicable, and exercise options under an acceptable stock option plan, so long as the undersigned agrees that the shares of Common Stock received from any such exercise or conversion will be subject to this agreement; (3) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity, (A) transfer any Common Stock or any securities convertible into or exchangeable or exercisable for Common Stock to another corporation, partnership, limited liability company, trust or other business entity that is a direct or indirect affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended (the “1933 Act”)) of the undersigned or (B) distribute shares of Common Stock or any securities convertible into or exercisable for Common Stock to limited partners, limited liability company members or stockholders of the undersigned; (4) if the undersigned is a trust, transfer to the beneficiary of such trust; or (5) transfer any Common Stock or any securities convertible into or exchangeable or exercisable for Common Stock pursuant to the Underwriting Agreement; provided, in the case of clauses (1) through (4), that (x) such transfer shall not involve a disposition for value and (y) if applicable, the transferee executes and delivers to MDB not later than one business day prior to such transfer, a written agreement, in substantially the form of this agreement and otherwise satisfactory in form and substance to MDB. For purposes of this paragraph, “immediate family” shall mean a spouse, child, grandchild or other lineal descendant (including by adoption), father, mother, brother or sister of the undersigned.

 

The undersigned further agrees that (i) it will not, during the Lock-Up Period (as the same may be extended as described above), make any demand for or exercise any right with respect to the registration under the 1933 Act, of any Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, including under any current or future registration rights agreement or similar agreement to which the undersigned is a party or under which the undersigned is entitled to any right or benefit to have any securities included in a registration statement filed by the Company for resale or other transaction, and (ii) the Company may, with respect to any Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock owned or held (of record or beneficially) by the undersigned, cause the transfer agent or other registrar to enter stop transfer instructions and implement stop transfer procedures with respect to such securities during the Lock-Up Period (as the same may be extended as described above).

 

 

The foregoing restrictions shall not apply to (i) any shares of Common Stock the undersigned may purchase in the Offering or in open market transactions after the completion of the Offering; provided, that no filing under Section 16(a) of the Exchange Act shall be required by reason of the undersigned’s being an officer or director of the Company or shall be voluntarily made during the Lock-Up Period in connection with subsequent sales of Common Stock acquired in such transactions or (ii) the establishment of any contract, instruction or plan that satisfies all the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act (a “Plan”); provided, that no sales of the undersigned’s securities shall be made pursuant to such a Plan prior to the expiration of the Lock-Up Period and such a Plan may only be established if no public announcement of the establishment or existence thereof and no filing with the SEC or other regulatory authority in respect thereof or transactions thereunder or contemplated thereby, by the undersigned, the Company or any other person, shall be required, and no such announcement or filing is made voluntarily by the undersigned, the Company or any other person, prior to the expiration of the Lock-Up Period.

 

In addition, the undersigned hereby waives any and all notice requirements and rights with respect to the registration of any securities pursuant to any current or future agreement, instrument, understanding or otherwise, including any registration rights agreement or similar agreement, to which the undersigned is a party or under which the undersigned is entitled to any right or benefit and any tag-along rights or other similar rights to have any securities (debt or equity) included in the offering contemplated by the Underwriting Agreement or sold in connection with the sale of Common Stock pursuant to the Underwriting Agreement, provided that such waiver shall apply only to the public offering of Common Stock pursuant to the Underwriting Agreement and each registration statement filed under the 1933 Act in connection therewith.

 

The undersigned understands that, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the securities to be sold thereunder, the undersigned shall be released from all obligations under this Agreement.

 

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this agreement and that this agreement has been duly executed and delivered by the undersigned and is a valid and binding agreement of the undersigned. This agreement and all authority herein conferred are irrevocable and shall survive the death or incapacity of the undersigned and shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.

 

[Signature Page Immediately Follows]

 

 

	Yours very truly,
	Print Name:

 

Signature Page — Cue Biopharma Lock-up Letter to MDB Capital Group, LLC

 

 

 

Exhibit 10.19

 

ESCROW AGREEMENT (PUBLIC OFFERING)

 

THIS AGREEMENT (this “Agreement”) is made this November 24, 2017 by and among Cue Biopharma, Inc. (the “Issuer”) and the Underwriter whose name and address appears on the Information Sheet (as defined herein) attached to this Agreement and Continental Stock Transfer & Trust Company, 1 State Street, 30th Floor, New York, New York 10004 (the “Escrow Agent”).

 

WITNESSETH:

 

WHEREAS, the Issuer has filed with the Securities and Exchange Commission (the “Commission”) a Registration Statement (the “Registration Statement”) covering a proposed public offering of its securities as described on the Information Sheet;

 

WHEREAS, the Underwriter proposes to offer the Securities, as agent for the Issuer, for sale to the public on a “best efforts” only basis for at least the Minimum Securities Amount and Minimum Dollar Amount and at most the Maximum Securities Amount and Maximum Dollar Amount and at the price per share all as set forth, on the Information Sheet;

 

WHEREAS the Issuer and the Underwriter propose to establish an Escrow Account (the “Escrow Account”), to which subscription monies which are received by the Escrow Agent from the Underwriter in connection with such public offering are to be credited, and the Escrow Agent is willing to establish the Escrow Account and the terms are subject to the conditions hereinafter set forth; and

 

WHEREAS, the Escrow Agent has an agreement with JP Morgan Chase (the “Bank”) to establish a special Bank Account (the “Bank Account”) into which the subscription monies, which are received by the Escrow Agent from the Underwriter and credited to the Escrow Account, are to be deposited;

 

NOW, THEREFORE in consideration of the premises and mutual covenants herein contained, the parties hereto hereby agree as follows:

 

1

Information Sheet. Each capitalized term not otherwise defined in this Agreement shall have the meaning set forth for such term on the information sheet which is attached to this Agreement and is incorporated by reference herein and made a pact hereof (the “Information Sheet”).

 

2

Establishment of the Bank Account.

 

2.1

The Escrow Agent shall establish a non-interest bank account at the branch of JP Morgan Chase selected by the Escrow Agent, and bearing the designation set forth on the Information Sheet (heretofore defined as the “Bank Account”). The purpose of the Bank Account is for (a) the deposit of all subscription monies (checks, or wire transfers) which are received by the Underwriter from prospective purchasers of the Securities and are delivered by the Underwriter to the Escrow Agent, (b) the holding of amounts of subscription monies which are collected through the banking system, and (c) the disbursement of collected funds, all as described herein.

 

 

2.2

On or before the date of the initial deposit in the Bank Account pursuant to this Agreement, the Underwriter shall notify the Escrow Agent in writing of the Effective Date of the Registration Statement (the “Effective Date”), and the Escrow Agent shall not be required to accept any amounts for credit to the Escrow Account or for deposit in the Bank Account prior to its receipt of such notification.

 

2.3

The Offering Period, which shall be deemed to commence on the Effective Date, shall consist of the number of calendar days or business days set forth on the Information Sheet. The Offering Period shall be extended by an Extension Period only if the Escrow Agent shall have received written notice thereof at least two (2) business days prior to the expiration of the Offering Period. The Extension Period, which shall be deemed to commence on the next calendar day following the expiration of the Offering Period, shall consist of the number of calendar days or business days set forth on the Information Sheet. The last day of the Offering Period, or the last day of the Extension Period (if the Escrow Agent has received written notice thereof as hereinabove provided), is referred to herein as the “Termination Date”. Except as provided in Section 4.3 hereof, after the Termination Date the Underwriter shall not deposit, and the Escrow Agent shall not accept, any additional amounts representing payments by prospective purchasers.

 

3

Deposits to the Bank Account.

 

3.1

The Underwriter shall promptly, but in no event later than noon on the business day immediately following the day such monies are received by such underwriter, deliver to the Escrow Agent all monies in the form of checks or wire transfers which it receives from prospective purchasers of the Securities by the end of the next business day following receipt where internal supervisory review is conducted at the same location at which subscription documents and monies are received. Upon the Escrow Agent’s receipt of such monies, such monies shall be credited to the Escrow Account. All checks delivered to the Escrow Agent shall be made payable to “CST&T Cue Biopharma Escrow Account.” Any check payable other than to the Escrow Agent as required hereby shall be returned to the prospective purchaser, or if the Escrow Agent has insufficient information to do so, then to the Underwriter (together with any Subscription Information, as defined below or other documents delivered therewith) by noon of the next business day following receipt of such check by the Escrow Agent, and such check shall be deemed not to have been delivered to the Escrow Agent pursuant to the terms of this Agreement.

 

3.2

Promptly after receiving subscription monies as described in Section 3.1, the Escrow Agent shall deposit the same into the Bank Account. Amounts of monies so deposited are hereinafter referred to as “Escrow Amounts”. The Escrow Agent shall cause the Bank to process all Escrow Amounts for collection through the banking system. Simultaneously with each deposit to the Escrow Account, the Underwriter (or the Issuer, if such deposit is made by the Issuer) shall inform the Escrow Agent in writing of the name, address, and the tax identification number of the purchaser, the amount of Securities subscribed for by such purchase, and the aggregate dollar amount of such subscription (collectively, the “Subscription Information”).

 

 

3.3

The Escrow Agent shall not be required to accept for credit to the Escrow Account or for deposit into the Bank Account checks which are not accompanied by the appropriate Subscription Information, which at minimum shall include the name address, tax identification number and the number of shares. Wire transfers representing payments by prospective purchasers shall not be deemed deposited in the Escrow Account until the Escrow Agent has received in writing the Subscription Information required with respect to such payments.

 

3.4

The Escrow Agent shall not be required to accept in the Escrow Account any amounts representing payments by prospective purchasers, whether by check or wire, except during the Escrow Agent’s regular business hours.

 

3.5

Only those Escrow Amounts, which have been deposited in the Bank Account and which have cleared the banking system and have been collected by the Escrow Agent, are herein referred to as the “Fund”.

 

3.6

If the proposed offering is terminated before the Termination Date, the Escrow Agent shall refund any portion of the Fund prior to disbursement of the Fund in accordance with Article 4 hereof upon instructions in writing signed by both the Issuer and the Underwriter.

 

4

Disbursement from the Bank Account.

 

4.1

Subject to Section 4.3 below, if by the close of regular banking hours on the Termination Date the Escrow Agent determines that the amount in the Fund is less than the Minimum Dollar Amount or the Minimum Securities Amount, as indicated by the Subscription Information submitted to the Escrow Agent, then in either such case, the Escrow Agent shall promptly refund to each prospective purchaser the amount of payment received from such purchaser which is then held in the Fund or which thereafter clears the banking system, without interest thereon or deduction therefrom, by drawing checks on the Bank Account for the amounts of such payments and transmitting them to the purchasers. In such event, the Escrow Agent shall promptly notify the Issuer and the Underwriter of its distribution of the Fund.

 

4.2

Subject to Section 4.3 below, if at any time up to the close of regular banking hours on the Termination Date, the Escrow Agent determines that the amount in the Fund is at least equal to the Minimum Dollar Amount and represents the sale of not less than the Minimum Securities Amount, the Escrow Agent shall promptly notify the Issuer and the Underwriter of such fact in writing. The Escrow Agent shall promptly disburse the Fund to the Company, by drawing checks on the Bank Account in accordance with instructions in writing signed by both the Issuer and the Underwriter as to the disbursement of the Fund, promptly after it receives such instructions.

 

 

4.3

(This provision applies only if a Collection Period has been provided for by the appropriate indication on the Information Sheet.) If the Escrow Agent or the Underwriter has on hand at the close of business on the Termination Date any uncollected amounts which when added to the Fund would raise the amount in the Fund to the Minimum Dollar Amount, and result in the Fund representing the sale of the Minimum Securities Amount, the Collection Period (consisting of the number of business days set forth on the Information Sheet) shall be utilized to allow such uncollected amounts to clear the banking system. During the Collection Period, the Underwriter (and the Issuer) shall not deposit and the Escrow Agent shall not accept, any additional amounts; provided, however, that such amounts as were received by the Underwriter (or the Issuer) by the close of business on the Termination Date may be deposited with the Escrow Agent by noon of the next business day following the Termination Date. If, at the close of business on the last day of the Collection Period, an amount sufficient to raise the amount in the Fund to the Minimum Dollar Amount and which would result in the Fund representing the sale of the Minimum Securities Amount shall not have cleared the banking system, the Escrow Agent shall promptly notify the Issuer and the Underwriter in writing of such fact and shall promptly return all amounts then in the Fund, and any amounts which thereafter clear the banking system, to the prospective purchasers as provided in Section 4.1 hereof.

 

4.4

Upon disbursement of the entire Fund pursuant to the terms of this Article 4, the Escrow Agent shall be relieved of all further obligations and released from all liability under this Agreement. It is expressly agreed and understood that in no event shall the aggregate amount of payments made by the Escrow Agent exceed the amount of the Fund.

 

5

Rights, Duties and Responsibilities of Escrow Agent. It is understood and agreed that the duties of the Escrow Agent are purely ministerial in nature, and that:

 

5.1

The Escrow Agent shall on a daily basis determine, and notify the Underwriter and Issuer of, the Escrow Amounts which have been deposited in the Bank Account and the amounts, constituting the Fund, which have cleared the banking system and have been collected by the Escrow Agent.

 

5.2

The Escrow Agent shall not be responsible for or be required to enforce any of the terms or conditions of the underwriting agreement or any other agreement between the Underwriter and the Issuer nor shall the Escrow Agent be responsible for the performance by the Underwriter or the Issuer of their respective obligations under this Agreement.

 

5.3

The Escrow Agent shall not be required to accept from the Underwriter (or the Issuer) any Subscription Information pertaining to prospective purchasers unless such Subscription Information is accompanied by checks, or wire transfers meeting the requirements of Section 3.1, nor shall the Escrow Agent be required to keep records of any information with respect to payments deposited by the Underwriter (or the Issuer) except as to the amount of such payments; however, the Escrow Agent shall notify the Underwriter within a reasonable time of any discrepancy between the amount set forth in any Subscription Information and the amount delivered to the Escrow Agent therewith. Such amount need not be accepted for deposit in the Escrow Account until such discrepancy has been resolved.

 

 

5.4

The Escrow Agent shall be under no duty or responsibility to enforce collection of any check delivered to it hereunder. The Escrow Agent, within a reasonable time, shall return to the Underwriter any check received which is dishonored, together with the Subscription Information, if any, which accompanied such check.

 

5.5

The Escrow Agent shall be entitled to rely upon the accuracy, act in reliance upon the contents, and assume the genuineness of any notice, instruction, certificate, signature, instrument or other document which is given to the Escrow Agent pursuant to this Agreement without the necessity of the Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent shall not be obligated to make any inquiry as to the authority, capacity, existence or identity of any person purporting to give any such notice or instructions or to execute any such certificate, instrument or other document.

 

5.6

If the Escrow Agent is uncertain as to its duties or rights hereunder or shall receive instructions with respect to the Bank Account, the Escrow Amounts or the Fund which, in its sole determination, are in conflict either with other, instructions received by it or with any provision of this Agreement, it shall be entitled to hold the Escrow Amounts, the Fund, or a portion thereof, in the Bank Account pending the resolution of such uncertainty to the Escrow Agent’s sole satisfaction, by final judgment of a court or courts of competent jurisdiction or otherwise; or the Escrow Agent, at its sole option, may deposit the Fund (and any other Escrow Amounts that thereafter become part of the Fund) with the Clerk of a court of competent jurisdiction in a proceeding to which all parties in interest are joined. Upon the deposit by the Escrow Agent of the Fund with the Clerk of any court, the Escrow Agent shall be relieved of all further obligations and released from all liability hereunder.

 

5.7

The Escrow Agent shall not be liable for any action taken or omitted hereunder, or for the misconduct of any employee, agent or attorney appointed by it, except in the case of willful misconduct or gross negligence. The Escrow Agent shall be entitled to consult with counsel of its own choosing and shall not be liable for any action taken, suffered or omitted by it in accordance with the advice of such counsel.

 

5.8

The Escrow Agent shall have no responsibility at any time to ascertain whether or not any security interest exists in the Escrow Amounts, the Fund or any part thereof or to file any statement under the Uniform Commercial Code with respect to the Fund or any part thereof.

 

6

Amendment; Resignation. This Agreement may be altered or amended only with the written consent of the Issuer, the Underwriter and the Escrow Agent.

 

 

6.1

The Escrow Agent may resign for any reason upon thirty (30) business days’ written notice to the Issuer and the Underwriter. Should the Escrow Agent resign as herein provided, it shall not be required to accept any deposit, make any disbursement or otherwise dispose of the Escrow Amounts or the Fund, but its only duty shall be to hold the Escrow Amounts until they clear the banking system and the Fund for a period of not more than five (5) business days following the effective date of such resignation, at which time (a) if a successor escrow agent shall have been appointed and written notice thereof (including the name and address of such successor escrow agent) shall have been given to the resigning Escrow Agent by the Issuer, the Underwriter and such successor escrow agent, then the resigning Escrow Agent shall pay over to the successor escrow agent the Fund, less any portion thereof previously paid out in accordance with this Agreement; or (b) if the resigning Escrow Agent shall not have received written notice signed by the Issuer, the Underwriter and a successor escrow agent, then the resigning Escrow Agent shall promptly refund the amount in the Fund to each prospective purchaser without interest thereon or deduction therefrom, and the resigning Escrow Agent shall promptly notify the Issuer and the Underwriter in writing of its liquidation and distribution of the Fund; whereupon, in either case, the Escrow Agent shall be relieved of all further obligations and released from all liability under this Agreement. Without limiting the provisions of Section 8 hereof, the resigning Escrow Agent shall be entitled to be reimbursed by the Issuer and the Underwriter for any actual expenses incurred in connection with its resignation, transfer of the Fund to a successor escrow agent or distribution of the Fund pursuant to this Section 6.

 

7

Representations and Warranties. The Issuer and the Underwriter hereby jointly and severally represent and warrant to the Escrow Agent that:

 

7.1

No party other than the parties hereto and the prospective purchasers have, or shall have, any lien, claim or security interest in the Escrow Amounts or the Fund or any part thereof.

 

7.2

No financing statement under the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the Escrow Amounts or the Fund or any part thereof.

 

7.3

The Subscription Information submitted with each deposit shall, at the time of submission and at the time of disbursement of the Fund, be deemed a representation and warranty that such deposit represents a bona fide payment by the purchaser described therein for the amount of securities in such described as Subscription Information.

 

7.4

All of the information contained in the Information Sheet is, as of the date hereof, and will be, at the time of any disbursement of the Fund, true and correct.

 

7.5

Reasonable controls have been established and required due diligence performed to comply with “Know Your Customer” regulations, USA Patriot Act, Office of the Foreign Asset Control (OFAC) regulations and the Bank Secrecy Act.

 

8

Fees and Expenses. The Escrow Agent shall be entitled to the Escrow Agent Fees set forth on the Information Sheet, payable as and when stated therein. In addition, the Issuer and the Underwriter jointly and severally agree to reimburse the Escrow Agent for any reasonable expenses incurred in connection with this Agreement, including, but not limited to, reasonable counsel fees. Upon receipt of the Minimum Dollar Amount, the Escrow Agent shall have a lien upon the Fund to the extent of its fees for services as Escrow Agent.

 

 

9

Indemnification and Contribution.

 

9.1

The Issuer and the Underwriter (collectively referred to as the “Indemnitors”) jointly and severally agree to indemnify the Escrow Agent and its officers, directors, employees, agents and shareholders (collectively referred to as the “ Indemnitees”) against, and hold them harmless of and from, any and all loss, liability, cost, damage and expense, including without limitation, reasonable counsel fees, which the Indemnitees may suffer or incur by reason of any action, claim or proceeding brought against the Indemnitees arising out of or relating in any way to this Agreement or any transaction to which this Agreement relates, unless such action, claim or proceeding is the result of the willful misconduct or gross negligence of the Indemnitees.

 

9.2

If the indemnification provided for in Section 9.1 is applicable, but for any reason is held to be unavailable, the Indemnitors shall contribute such amounts as are just and equitable to pay, or to reimburse the Indemnitees for, the aggregate of any and all losses, liabilities, costs, damages and expenses, including counsel fees, actually incurred by the Indemnitees as a result of or in connection with, and any amount paid in settlement of, any action, claim or proceeding arising out of or relating in any way to any actions or omissions of the Indemnitors.

 

9.3

The provisions of this Article 9 shall survive any termination of this Agreement, whether by disbursement of the Fund, resignation of the Escrow Agent or otherwise.

 

10

Governing Law and Assignment. This Agreement shall be construed in accordance with and governed by the laws of the State of New York and shall be binding upon the parties hereto and their respective successors and assigns; provided, however, that any assignment or transfer by any party of its rights under this Agreement or with respect to the Escrow Amounts or the Fund shall be void as against the Escrow Agent unless (a) written notice thereof shall be given to the Escrow Agent; and (b) the Escrow Agent shall have consented in writing to such assignment or transfer.

 

11

Notices. All notices required to be given in connection with this Agreement shall be sent by registered or certified mail, return receipt requested, or by hand delivery with receipt acknowledged, or by the Express Mail service offered by the United States Post Office, and addressed, if to the Issuer or the Underwriter, at their respective addresses set forth on the Information Sheet, and if to the Escrow Agent, at its address set forth above, to the attention of the Trust Department.

 

12

Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be determined to be invalid or unenforceable, the remaining provisions of this Agreement or the application of such provision to persons or circumstances other than those to which it is held invalid or unenforceable shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law.

 

13

Execution in Several Counterparts. This Agreement may be executed in several counterparts or by separate instruments, and all of such counterparts and instruments shall constitute one agreement, binding on all of the parties hereto.

 

 

14

Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings (written or oral) of the parties in connection therewith.

 

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written.

 

“Issuer”				“Escrow Agent”
CUE BIOPHARMA, INC.				CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By:	/s/ Daniel Passeri			By:	/s/ Sharmin Carter
	Name:	Daniel Passeri			Name:	Sharmin Carter
	Title:	CEO			Title:	Vice President
“Underwriter”
MDB CAPITAL GROUP, LLC
By:	/s/ Christopher Marlett
	Name:	Christopher Marlett
	Title:	CEO

 

 

Exhibit 10.20

 

Subscription Agreement

 

This subscription (this “Subscription”) is dated [l], 2017, by and between the investor identified on the signature page hereto (the “Investor”) and Cue Biopharma, Inc., a Delaware corporation (the “Company”). The parties agree as follows:

 

1.            Subscription.

 

Investor agrees to buy and the Company agrees to sell to Investor such number of shares (the “Shares”) of the Company’s common stock, $0.001 par value per share (the “Common Stock”), as set forth on the signature page hereto, for an aggregate purchase price (the “Purchase Price”) equal to the product of (x) the aggregate number of Shares the Investor has agreed to purchase and (y) the purchase price per share as set forth on the signature page hereto.

 

The Shares are being registered for sale pursuant to a Registration Statement on Form S-1, Registration No. 333-220550 (the “Registration Statement”). The Registration Statement will have been declared effective by the Securities and Exchange Commission (the “Commission”) prior to issuance of any Shares and acceptance of any Investor’s subscription. The prospectus contained in the Registration Statement (the “Prospectus”), however, is subject to change. A final Prospectus and/or Prospectus supplement will be delivered to the Investor as required by law.

 

The Shares are being offered by MDB Capital Group, LLC (“MDB”) and Feltl and Company, Inc. (the “Underwriters”) as underwriters on a “best efforts” basis and are not required to sell any specific number or dollar amount of the shares of Common Stock offered by the Prospectus, but will use their best efforts to sell such shares. The Company does not intend to close this offering unless it sells at least a minimum number of 5,333,334 shares of Common Stock, at the price per share set forth on the cover page of the Prospectus. This offering will terminate on             , 2018 (30 days after the date of the final Prospectus), unless the Company sells the maximum number of shares of Common Stock set forth on the cover page of the Prospectus before that date, or decides to terminate this offering prior to that date, or agrees with MDB to extend for up to 60 days beyond such date. 

 

The completion of the purchase and sale of the Shares (the “Closing”) shall take place at a place and time (the “Closing Date”) to be specified by the Company and Underwriters in accordance with Rule 15c6-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Upon satisfaction or waiver of all the conditions to closing set forth in the preliminary prospectus contained in the Registration Statement when it is declared effective by the Commission, at the Closing: (i) the Purchase Price deposited by the Investor subsequent to the declaration of effectiveness of the Registration Statement by wire transfer of immediately available funds to the Company’s escrow account per wire instructions as provided on the signature line below shall be released to the Company, and (ii) the Company shall cause the Shares to be delivered to the Investor (A) through the facilities of The Depository Trust Company’s DWAC system in accordance with the instructions set forth on the signature page attached hereto under the heading “DWAC Instructions,” or (B) if requested by the Investor on the signature page hereto or if the Company is unable to make the delivery through the facilities of The Depository Trust Company’s DWAC system, through the book-entry delivery of Shares on the books and records of the transfer agent. If delivery is made by book entry on the books and records of the transfer agent, the Company shall send written confirmation of such delivery to the Investor at the address indicated on the Signature Page hereof.

 

 

Each of the Underwriters and any participating broker dealers (the “Members”) shall confirm, via the underwriting agreement with the Company, selected dealer agreement or master selected dealer agreement, as applicable, that it will comply with Rule 15c2-4 under the Exchange Act. As per Rule 15c2-4 and Notice to Members 84-7 issued by the Financial Industry Regulatory Authority (collectively, the “Rule”), all checks that are accompanied by a subscription agreement will be promptly sent along with the subscription agreements to the escrow account by noon the next business day. In regard to monies being wired from an investor’s bank account, the Members shall request the investors to send their wires by the business day immediately following the receipt of a completed subscription document. In regards to monies being sent from an investors account held at the participating broker, the funds will be “promptly transmitted” to the escrow agent following the receipt of a completed subscription document and completed wire instructions by the investor to send funds to the escrow account. Absent unusual circumstances, funds in customer accounts will be transmitted by noon of the next business day. In the event that the offering does not close for any reason prior to the termination date set forth in the Registration Statement, all funds deposited in the escrow account will be returned to investors promptly in accordance with the terms of the escrow agreement and applicable law.

 

2.            Subscription Process.

 

To purchase shares of Common Stock in this offering, investors must complete and sign a subscription agreement. Investors will be required to pay for their shares of Common Stock by wire for the full purchase price of the shares, payable to “Continental Stock Transfer & Trust Company as Agent for Cue Biopharma & MDB Capital Group Escrow Account”.

 

Subscriptions will be effective only upon the Company’s acceptance of the subscriptions, and the Company reserves the right to reject any subscriptions in whole or in part. In compliance with Rule 15c2-4 under the Exchange Act, the Company and the Underwriters will instruct investors to deliver all monies in the form of  ACH or wire transfers to the escrow agent. Upon the escrow agent’s receipt of such monies, they shall be credited to the escrow account. Pursuant to an escrow agreement among the Company, MDB, Continental Stock Transfer & Trust Company, as escrow agent, the funds received in payment for the shares of Common Stock purchased in this offering will be wired to a non-interest bearing escrow account at JP Morgan Chase and held until the escrow agent determines that the amount in the escrow account is equal to at least the minimum amount required to close this offering. Upon confirmation of receipt of the requested minimum subscription amount, the escrow agent will release the funds in accordance with the written instructions provided by the Company and MDB, indicating the date on which the shares of common stock purchased in this offering are to be delivered to the investors and the date the net proceeds are to be delivered to the Company. Unless investors instruct us otherwise, the Company will deliver the shares of Common Stock being issued to the investors electronically.

 

3.            Miscellaneous.

 

This Subscription may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. Execution may be made by delivery by facsimile or via electronic format.

 

All communications hereunder, except as otherwise specifically provided herein, shall be in writing and shall be mailed, hand delivered, sent by a recognized overnight courier service such as Federal Express, or sent via facsimile and confirmed by letter, to the party to whom it is addressed at the following addresses or such other address as such party may advise the other in writing:

 

To the Company: as set forth on the signature page hereto.

 

To the Investor: as set forth on the signature page hereto.

 

All notices hereunder shall be effective upon receipt by the party to which it is addressed.

 

 

If the foregoing correctly sets forth our agreement, please confirm this by signing and returning to us the duplicate copy of this Subscription.

 

[Signature Page Follows]

 

 

[Company Signature Page to Investor Subscription Agreement for Cue Biopharma, Inc.]

 

IN WITNESS WHEREOF, the Investor and the Company have caused this Subscription Agreement to be duly executed as of the date first written above.

 

	Cue Biopharma, Inc.
	By:
	Name:
	Title:
	Address for Notice:
	Cue Biopharma, Inc.
	675 W. Kendall Street
	Cambridge, MA 02142
	Attn: Chief Executive Officer

 

 

[Investor Signature Page to Investor Subscription Agreement for Cue Biopharma, Inc. - Individual]

 

IN WITNESS WHEREOF, the Investor and the Company have caused this Subscription Agreement to be duly executed as of the date first written above.

 

Number of Shares: ____________________
	Name (Print)
Purchase Price per Share: $7.50
	Signature (Individual)
Aggregate Purchase Price: $________________
Broker of Records: ____________________	Tax Identification or Social Security Number
	If Joint Tenants or Tenants-in-Common:
	Name (Print)
	Signature (Individual)
	Tax Identification or Social Security Number
	Address for Notice:
	c/o Name
	Street Address
	City, State, Zip Code & Country
	(______)____________________________
	Telephone Number
	(______)____________________________
	Facsimile Number

 

 

Select method of delivery of Shares: DRS or DWAC (Pick one)

 

DWAC DELIVERY INSTRUCTIONS:

 

1.	Name of DTC Participant (broker-dealer at which the account or accounts to be credited with the Shares are maintained):
2.	DTC Participant Number:
3.	Name of Account at DTC Participant being credited with the Shares:
4.	Account Number of DTC Participant being credited with the Shares:

 

Or

 

DRS ELECTRONIC BOOK ENTRY CONFIRMATION (hold shares at transfer agent) Delivery Instructions:

 

Name(s) in which Shares should be issued:

 

Address:
City/State/Zip:
Attention:
Telephone No.:

 

 

[Investor Signature Page to Investor Subscription Agreement for Cue Biopharma, Inc. - Entity]

 

IN WITNESS WHEREOF, the Investor and the Company have caused this Subscription Agreement to be duly executed as of the date first written above.

 

Number of Shares: ________________________
	Name of Entity
Purchase Price per Share: $7.50
Aggregate Purchase Price: $________________	Type of Entity (i.e., corporation, limited liability company, partnership, etc.)
Broker of Records: ____________________
	Tax Identification or Social Security Number
	State of Formation of Entity
	Name of Authorized Signatory (Print)
	Signature
	Title
	Address for Notice:
	Street Address
	City, State, Zip Code & Country
	(______)____________________________
	Telephone Number
	(______)____________________________
	Facsimile Number

 

 

Select method of delivery of Shares: DRS or DWAC (Pick one)

 

DWAC DELIVERY INSTRUCTIONS:

 

1.	Name of DTC Participant (broker-dealer at which the account or accounts to be credited with the Shares are maintained):
2.	DTC Participant Number:
3.	Name of Account at DTC Participant being credited with the Shares:
4.	Account Number of DTC Participant being credited with the Shares:

 

Or

 

DRS ELECTRONIC BOOK ENTRY CONFIRMATION (hold shares at transfer agent) Delivery

Instructions:

 

Name(s) in which Shares should be issued:

 

Address:
City/State/Zip:
Attention:
Telephone No.:

 

 

SUBSCRIPTION PAYMENT INSTRUCTIONS:

 

NO WIRE TRANSFERS OR ACH PAYMENTS MAY BE MADE TO THE ESCROW ACCOUNT, DIRECTLY OR THROUGH ANY UNDERWRITER UNLESS AND UNTIL: (A) THE REGISTRATION STATEMENT HAS BEEN DECLARED EFFECTIVE BY THE COMMISSION, AND (B) A COPY OF THIS SUBSCRIPTION AGREEMENT, DULY EXECUTED BY BOTH PARTIES HERETO, HAS BEEN DELIVERED TO YOU.

 

WIRE PAYMENT INSTRUCTIONS:

 

	JP Morgan Chase
	[Bank Address]
	ABA/Routing #:
	Swift #:
	Account #:
	Account Title: Continental Stock Transfer & Trust Company as Agent for Cue Biopharma & MDB Capital Group Escrow Account
	Telephone No.:
	Fax No.:

 

 

 

 

 

Exhibit 10.21

 

CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR SUCH PORTIONS. ASTERISKS DENOTE OMISSIONS.

 

EXCLUSIVE PATENT LICENSE AND RESEARCH

COLLABORATION AGREEMENT

 

by and between

 

Cue Biopharma, Inc.

 

and

 

MERCK SHARP & DOHME CORP.

 

 

EXCLUSIVE PATENT LICENSE AND RESEARCH COLLABORATION AGREEMENT

 

This Agreement ( “Agreement”) is effective as of November 14, 2017, (the “Effective Date”) and is entered into by and between CUE BIOPHARMA, INC., a corporation organized and existing under the laws of Delaware (“Company”) and MERCK SHARP & DOHME CORP., a corporation organized and existing under the laws of New Jersey (“Merck”).

 

RECITALS:

 

WHEREAS, Company has developed Company Know-How (as hereinafter defined) and has rights to Company Patent Rights (as hereinafter defined) related to antigen-specific T cell-targeted biologics, including an exclusive license to certain intellectual property rights pursuant to an Amended and Restated License Agreement dated July 31, 2017 between Company and Albert Einstein College of Medicine, Inc. (“Albert Einstein”), a corporation organized and existing under the laws of the State of New York, having an office and place of business at 1300 Morris Park Avenue, Bronx, New York 10461 as successor-in-interest to Albert Einstein College of Medicine of Yeshiva University, a Division of Yeshiva University (the “Amended and Restated Einstein License Agreement”);

 

WHEREAS, such antigen-specific T cell-targeted biologics have multiple potential uses, including but not limited to the treatment of Autoimmune Disease (as hereinafter defined), cancer, and infectious diseases;

 

WHEREAS, Merck and Company desire to enter into a research collaboration to research and develop certain antigen-specific T cell-targeted biologics and in particular Cue Biologics, Compounds and Products of potential utility for treating Initial Indications in Autoimmune Disease (as those terms are hereinafter defined) upon the terms and conditions set forth herein, with the goal of identifying and/or optimizing novel biologics to be developed and commercialized by Merck;

 

WHEREAS, Merck desires to obtain a license under the Company Patent Rights and Company Know-How upon the terms and conditions set forth herein, and Company desires to grant such a license;

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, Company and Merck hereby agree as follows:

 

Article 1 DEFINITIONS.

 

Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below.

 

1.1

“AAALAC” shall mean the Association for Assessment and Accreditation of Laboratory Animal Care International.

 

1.2

“Act” shall mean, as applicable, the United States Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§ 301 et seq., and/or the Public Health Service Act, 42 U.S.C. §§ 262 et seq., as amended from time to time.

 

 

1.3

“Affiliate” shall mean: (i) any corporation or business entity of which, now or hereafter, fifty percent (50%) or more of the securities or other ownership interests representing the equity, the voting stock or general partnership interest are owned, controlled or held, directly or indirectly, by Merck or Company; or (ii) any corporation or business entity which, now or hereafter, directly or indirectly, owns, controls or holds fifty percent (50%) (or the maximum ownership interest permitted by law) or more of the securities or other ownership interests representing the equity, the voting stock or, if applicable, the general partnership interest, of Merck or Company; or (iii) any corporation or business entity of which, now or hereafter, fifty percent (50%) or more of the securities or other ownership interests representing the equity, the voting stock or general partnership interest are owned, controlled or held, directly or indirectly, by a corporation or business entity described in (i) or (ii).

 

1.4

“Agreement” shall have the meaning given such term in the preamble to this document.

 

1.5

“Antigen” as used herein shall mean any protein or Peptide that, when bound or presented by a Disease-Associated Allele, binds to T cells or evokes an immune response.

 

1.6

“Applicable Laws” means any and all applicable laws of any jurisdiction which are applicable to any of the Parties or their respective Affiliates in carrying out activities hereunder or to which any of the Parties or their respective Affiliates in carrying out the activities hereunder is subject, and shall include all statutes, enactments, acts of legislature, laws, ordinances, rules, regulations, notifications, guidelines, policies, directions, directives and orders of any statutory authority, tribunal, board, or court or any central or state government or local authority or other governmental entity in such jurisdictions, including the Act, GLPs, GCPs and GMPs.

 

1.7

“Autoimmune Disease” means a disease or inflammatory disorder in which the body’s immune system produces antibodies and/or pro-inflammatory chemical agents that attack its own tissues, leading to the deterioration and in some cases to the destruction of such tissue.

 

1.8

“Calendar Quarter” shall mean the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31.

 

1.9

“Calendar Year” shall mean each successive period of twelve (12) months commencing on January 1 and ending on December 31.

 

1.10

“Change of Control” shall mean with respect to a Party: (1) the sale of all or substantially all of such Party’s assets or business relating to this Agreement; (2) a merger, reorganization or consolidation involving such Party in which the voting securities of such Party outstanding immediately prior thereto cease to represent at least fifty percent (50%) of the combined voting power of the surviving entity immediately after such merger, reorganization or consolidation; or (3) a person or entity, or group of persons or entities, acting in concert acquire at least fifty percent (50%) of the voting equity securities or management control of such Party.

 

1.11

“Clinical Trial” shall mean a Phase I Clinical Trial, Phase II Clinical Trial, Phase III Clinical Trial, and/or Post-Approval Clinical Trial.

 

1.12

“Combination Product” shall mean a Product that includes one or more active pharmaceutical ingredients other than Compound in combination with Compound. All references to Product in this Agreement shall be deemed to include Combination Product.

 

 

1.13

“Commercially Reasonable Efforts” shall mean, with respect to the efforts to be expended by a Party with respect to any objective, such reasonable and diligent, good faith efforts to accomplish such objective as such Party would normally use to accomplish a similar objective under similar circumstances. It is understood and agreed that with respect to the Research, Development and Commercialization of Product by either Party, such efforts shall be substantially equivalent to those efforts and resources commonly used by such Party for biological products owned by it or to which it has rights, which product is at a similar stage in its Development or product life and is of similar market potential taking into account efficacy, safety, approved labeling, the competitiveness of alternative products in the marketplace, the patent and other proprietary position of the product, the likelihood of regulatory approval given the Regulatory Authority involved, the profitability of the product including the amounts payable to licensors of patent or other intellectual property rights, alternative products, other risks associated with the Development or Commercialization of the product and other relevant factors. Commercially Reasonable Efforts shall be determined on a market-by-market and Indication-by-Indication basis for a particular Product, and it is anticipated that the level of effort will be different for different markets, and will change over time, reflecting among other things changes in the status of the Product and the market(s) involved.

 

1.14

“Commercialization” shall mean any and all activities related to the import, export, transportation, storage, marketing, detailing, promotion, distribution, sale or other disposition and/or other approved use of a Product in a country or region in the Territory, including: (a) strategic marketing, sales force detailing, advertising, medical affairs, reimbursement and market access activities and market and product support; and (b) all customer support, distribution matters, invoicing and sales activities. When used as a verb, “to Commercialize” and “Commercializing” means to engage in Commercialization, and “Commercialized” has a corresponding meaning. For clarity, Commercialization excludes any Research, Development or Manufacturing activities.

 

1.15

“Company” shall have the meaning given such term in the preamble to this Agreement.

 

1.16

“Company Information and Inventions” shall mean all protocols, formulas, data, Inventions, know-how and trade secrets, patentable or otherwise, resulting from the Research Program developed or invented solely by employee(s) of Company and/or its Affiliates, and/or a Third Party acting on behalf of Company and/or its Affiliates, and not employed by Merck and/or its Affiliates.

 

1.17

“Company Know-How” shall mean all information and materials, including but not limited to discoveries, improvements, processes, methods, protocols, formulas, data, inventions (including without limitation Company Information and Inventions and Company’s rights in Joint Information and Inventions), know-how and trade secrets, patentable or otherwise, which during the term of this Agreement: (i) are Controlled by Company or its Affiliates; (ii) are not generally known; and (iii) are necessary or useful to Merck in the Field, or necessary or useful to Merck in connection with the Research Program and the Research, Development, Manufacture, Commercialization or use of Compound or Product in the Territory; excluding, however, any Merck Know-How. Company Know-How includes Einstein Know-How and Cue Know-How.

 

1.18

“Company Patent Rights” shall mean Patent Rights that during the term of this Agreement are Controlled by Company or any of its Affiliates, including, but not limited to, those listed on Schedule 1.1, which: (i) claim or cover a Cue Biologic, Compound and/or Product, or a method of use or process of Manufacture thereof, including without limitation any improvements; or (ii) claim or cover Company Information and Inventions. Company Patent Rights include Einstein Patent Rights and Cue Patent Rights.

 

 

1.19

“Competing Pharma” shall mean a company or group of companies acting in concert (a) for which the collective worldwide sales of ethical pharmaceutical products in the preceding Calendar Year were one billion United States dollars (US$1,000,000,000) or more, or (b) which has a research, development or commercialization program for any preparation or product that may be used for the treatment of an Initial Indication, or any other preparation or product that is reasonably considered to be competitive with any Cue Biologic, Compound or Product.

 

1.20

“Competing Pharma Change of Control” shall mean a Change of Control in which a company or group of companies acting in concert (a) for which the collective worldwide sales of ethical pharmaceutical products in the Calendar Year that preceded the Change of Control were one billion United States dollars (US$1,000,000,000) or more, or (b) which has a research, development or commercialization program for any preparation or product that may be used for the treatment of an Initial Indication, or any other preparation or product that is reasonably considered to be competitive with any Cue Biologic, Compound or Product, is the acquirer (by asset purchase, merger, consolidation, reorganization or otherwise) as part of such Change of Control.

 

1.21

“Compound” shall mean a Product Candidate; or a derivative thereof [***].

 

1.22

“Control”, “Controls” or “Controlled by” shall mean with respect to any item of or right under Company Patent Rights, Company Know-How, Merck Patent Rights, Merck Know-How, or Joint Patent Rights, or other intellectual property assets or rights, as applicable, the possession of (whether by ownership or license, other than pursuant to this Agreement) or the ability of a Party to grant access to, or a license or sublicense of, such items or right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party existing at the time or in effect during the time such Party would be required hereunder to grant the other Party such access or license or sublicense.

 

1.23

“Cue Biologic” shall mean [***].

 

1.24

“Cue Biologics Patent Rights” shall be as defined in Section 7.1.1.

 

1.25

“Cue Biologics-Specific Information and Inventions” shall be as defined in Section 7.1.1.

 

1.26

“Cue Know-How” shall man all Company Know-How other than Einstein Know-How.

 

1.27

“Cue Patent Rights” shall mean all Company Patent Rights other than Einstein Patent Rights.

 

1.28

“Cue Platform” shall mean Company’s proprietary Antigen-specific T cell-targeted biologic platform that produces biologics designed and engineered to selectively modulate function of T cell subsets.

 

1.29

“Cue Platform Biologic” shall mean [***].

 

1.30

“Development” means any and all clinical drug development activities, Clinical Trials, statistical analysis and report writing, the preparation and submission of regulatory filings, regulatory affairs with respect to the foregoing and all other activities necessary or reasonably useful or otherwise requested or required by a Regulatory Authority as a condition or in support of obtaining or maintaining a regulatory approval for a Cue Biologic, Compound or Product, and “Develop”, “Developed” and “Developing” will have corresponding meanings. For clarity, Development excludes any Research, Commercialization or Manufacturing activities.

 

 

1.31

“Disease-Associated Allele” shall mean any allele from any species which is associated with [***].

 

1.32

“Einstein Know-How” shall mean all know-how licensed to Company under the Amended and Restated Einstein License Agreement.

 

1.33

“Einstein Patent Rights” shall mean all patent rights licensed to Company under the Amended and Restated Einstein License Agreement.

 

1.34

“Exclusions Lists” shall be as defined in Section 1.90 Violation.

 

1.35

“Field” shall mean [***].

 

1.36

[***].

 

1.37

“First Commercial Sale” shall mean, with respect to any Product, the first sale for end use or consumption of such Product in a country, excluding, however, any sale or other distribution for use in a Clinical Trial.

 

1.38

“Good Clinical Practices” or “GCPs” shall mean the applicable then-current Good Clinical Practices as such term or its equivalent is defined from time to time by the United States Food and Drug Administration or other relevant Regulatory Authority having jurisdiction over the Development, Manufacture or Commercialization of Product in the Territory pursuant to its regulations, guidelines or otherwise, as applicable.

 

1.39

“Good Laboratory Practices” or “GLPs” shall mean the applicable then-current standards for laboratory activities for pharmaceuticals or biologicals, as set forth in the Act and any regulations or guidance documents promulgated thereunder, as amended from time to time, together with any similar standards of good laboratory practice as are required by any Regulatory Authority in the Territory.

 

1.40

“Good Manufacturing Practices” or “GMPs” shall mean the applicable then-current Good Manufacturing Practices as such term or its equivalent is defined from time to time by the United States Food and Drug Administration or other relevant Regulatory Authority having jurisdiction over the Development, Manufacture or Commercialization of Product in the Territory pursuant to its regulations, guidelines or otherwise, as applicable.

 

1.41

“Human Leukocyte Antigen” or “HLA” shall mean a protein or protein complex involved in the presentation of Peptide antigens to T cells.

 

1.42

[****]

 

1.43

“IND” shall mean an investigational new drug application, clinical study application, clinical trial exemption, or similar application or submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirements of such Regulatory Authority.

 

 

1.44

“IND Enabling Studies” shall mean the genotoxicity, acute toxicology, safety, pharmacology, and/or sub-chronic toxicology studies in species using applicable GLPs that in Merck’s sole discretion satisfy applicable regulatory requirements and meet the standard necessary for submission as part of an IND filing with a Regulatory Authority.

 

1.45

“Indication” shall mean a separate and distinct disease or medical condition in humans which a Product that is in Clinical Trials is intended to treat, prevent and/or diagnose and/or for which a Product has received Marketing Authorization.

 

1.46

“Indication Specific Peptide” shall mean a Peptide Researched or Developed pursuant to the Research Program which is [***].

 

1.47

“Initial Indication” shall mean [***] and “Initial Indications” shall mean [***], collectively.

 

1.48

“Information” shall mean any and all information and data, including without limitation all Merck Know-How, all Company Know-How, and all other scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, financial and commercial information or data, whether communicated in writing or orally or by any other method, which is provided by one Party to the other Party in connection with this Agreement.

 

1.49

“Invention” shall mean any process, method, composition of matter, article of manufacture, discovery or finding that is conceived and/or reduced to practice as a result of the Research Program.

 

1.50

“Joint Information and Inventions” shall mean all protocols, formulas, data, Inventions, know-how and trade secrets, patentable or otherwise, resulting from the Research Program and developed or invented jointly by employee(s) of Merck and/or its Affiliates, and/or a Third Party acting on behalf of Merck and/or its Affiliates, on the one hand, and by employee(s) of Company and/or its Affiliates, and/or a Third Party acting on behalf of Company and/or its Affiliates, on the other hand.

 

1.51

“Joint Patent Rights” shall mean Patent Rights that claim or cover Joint Information and Inventions.

 

1.52

“Joint Steering Committee” shall mean the joint steering committee established to facilitate the Research Program as more fully described in Section 2.4.

 

1.53

“Maintained Initial Indication” shall mean an Initial Indication in which Merck has not discontinued Research, Development and Commercialization efforts with respect to any Compound or Product pursuant to Section 2.11.5.

 

1.54

“Major Market” shall mean [***].

 

1.55

“Manufacturing” means the production, manufacture, synthesis, processing, filling, formulating, finishing, packaging, labeling, shipping and holding of Cue Biologic, Compound or Product or any intermediate thereof, including sequencing, process development, process qualification and validation, scale-up, commercial manufacture and analytic development, product characterization, stability testing, quality assurance and quality control. “Manufacturing” refers to both pre-clinical and clinical Manufacturing for Research and Development, and Manufacturing for Commercialization. “Manufacture” and “Manufactured” will have corresponding meanings. For clarity, “Manufacturing” excludes Research, Development or Commercialization activities.

 

 

1.56

“Marketing Authorization” shall mean all approvals from the relevant Regulatory Authority necessary to market and sell a Product in the applicable country (including without limitation, in countries outside of the United States, all applicable pricing and governmental reimbursement approvals only if required to market and sell Product in a country).

 

1.57

“Merck” shall have the meaning given such term in the preamble to this Agreement.

 

1.58

“Merck Information and Inventions” shall mean all protocols, formulas, data, Inventions, know-how and trade secrets, patentable or otherwise, resulting from the Research Program developed or invented solely by employee(s) of Merck and/or its Affiliates, and/or a Third Party acting on behalf of Merck and/or its Affiliates, and not employed by Company and/or its Affiliates.

 

1.59

“Merck Know-How” shall mean all information and materials, including but not limited to discoveries, improvements, processes, methods, protocols, formulas, data, inventions (including without limitation Merck Information and Inventions and Merck’s rights in Joint Information and Inventions), know-how and trade secrets, patentable or otherwise, which during the term of this Agreement: (i) are Controlled by Merck; (ii) are not generally known; and (iii) are in Merck’s opinion necessary to Company in the performance of its obligations under the Research Program.

 

1.60

“Merck Patent Rights” shall mean Patent Rights that during the term of this Agreement are Controlled by Merck or any of its Affiliates, or to which Merck or any of its Affiliates, through license or otherwise, acquires rights, which: (i) claim or cover Compound and/or Product; or (ii) claim or cover Merck Information and Inventions.

 

1.61

“NDA” shall mean a new drug application, biologics license application, Marketing Authorization application, filing pursuant to Section 510(k) of the Act, or similar application or submission for Marketing Authorization of a Product filed with a Regulatory Authority to obtain marketing approval for a biological, pharmaceutical or diagnostic product in that country or in that group of countries.

 

1.62

“Net Sales” shall mean the gross invoice price (not including value added taxes, sales taxes, or similar taxes) of Product sold by Merck or its Related Parties to the first Third Party after deducting, if not previously deducted, from the amount invoiced or received:

 

1.62.1

trade and quantity discounts, other than early payment cash discounts;

 

1.62.2

returns, rebates, chargebacks and other allowances;

 

1.62.3

retroactive price reductions that are actually allowed or granted;

 

1.62.4

deductions for Health Care Reform fees and similar deductions to gross invoice price of Product imposed by Regulatory Authorities or other governmental entities;

 

 

1.62.5

a fixed amount equal to [***] of the amount invoiced to cover bad debt, early payment cash discounts, transportation and insurance and custom duties; and

 

1.62.6

the standard inventory cost of devices or delivery systems used for dispensing or administering Product.

 

[***]

 

With respect to sales of Combination Products, Net Sales shall be calculated on the basis of the gross invoice price of Product(s) containing the same strength of Compound sold without other active ingredients. In the event that Product is sold only as a Combination Product, Net Sales shall be calculated on the basis of the gross invoice price of the Combination Product multiplied by a fraction, the numerator of which shall be the inventory cost of Compound in the Product and the denominator of which shall be the inventory cost of all of the active ingredients in the Combination Product. Inventory cost shall be determined in accordance with Merck's regular accounting methods, consistently applied. The deductions set forth in Section 1.62.1 through Section 1.62.6 will be applied in calculating Net Sales for a Combination Product. In the event that Product is sold only as a Combination Product and either Party reasonably believes that the calculation set forth in this Paragraph does not fairly reflect the value of Compound relative to the other active ingredients in the Combination Product, the Parties shall reasonably negotiate, in good faith, other means of calculating Net Sales with respect to Combination Products.

 

1.63

“Party” shall mean Merck or Company, individually, and “Parties” shall mean Merck and Company, collectively.

 

1.64

“Patent Rights” shall mean any and all patents and patent applications in the Territory (which for the purpose of this Agreement shall be deemed to include certificates of invention and applications for certificates of invention), including divisionals, continuations, continuations-in-part, reissues, renewals, substitutions, registrations, re-examinations, revalidations, extensions, supplementary protection certificates, pediatric exclusivity periods and the like of any such patents and patent applications, and foreign equivalents of the foregoing.

 

1.65

“Peptide” shall mean a series of two or more amino acids connected by peptide bonds.

 

1.66

“Person” means any individual, partnership, joint venture, limited liability company, corporation, firm, trust, association, unincorporated organization, governmental authority or agency, or any other entity not specifically listed herein.

 

1.67

“Phase I Clinical Trial” shall mean a human clinical trial in any country that would satisfy the requirements of 21 CFR 312.21(a).

 

1.68

“Phase II Clinical Trial” shall mean a human clinical trial in any country that would satisfy the requirements of 21 CFR 312.21(b).

 

1.69

“Phase III Clinical Trial” shall mean a human clinical trial in any country that would satisfy the requirements of 21 CFR 312.21(c).

 

1.70

“Platform Information and Inventions” shall be as defined in Section 7.1.2.

 

1.71

“Platform Patent Rights” shall be as defined in Section 7.1.2.

 

 

1.72

“Post-Approval Clinical Trial” shall mean any clinical trial conducted in an Indication after the Regulatory Approval of such Indication.

 

1.73

“Product(s)” shall mean any pharmaceutical or biological preparation in final form containing a Compound: (i) for sale by prescription, over-the-counter or any other method; or (ii) for administration to human patients in a Clinical Trial, for any and all uses in the Field, including without limitation any Combination Product.

 

1.74

“Product Candidate” shall mean a Cue Biologic which: (i) meets or exceed Proof of Concept, as determined by Merck in accordance with its usual procedures for the development of new biological entities; and (ii) is designated in writing pursuant to Section 2.2.4 as a Product Candidate by Merck to Company.

 

1.75

“Proof of Concept” shall mean the demonstration of all or substantially all of the properties outlined in the Product Candidate Profile as defined in Schedule 2.1 Research Program, as determined by Merck in its sole discretion.

 

1.76

“Proof of Mechanism” shall mean the demonstration of biologically significant effect of a Cue Biologic [***], as determined by the Joint Steering Committee pursuant to Section 2.2.2.

 

1.77

“Proposed Product Candidate” shall be a Cue Biologic which has achieved Proof of Mechanism as determined by the Joint Steering Committee, as reflected in meeting minutes of the Joint Steering Committee.

 

1.78

“Qualifying Phase II Clinical Trial” shall mean a human clinical trial, in any country, the principal purpose of which is a confirmation of efficacy and safety, consistent with that observed in previous Clinical Trial(s) of the relevant Product, in the target population, at the intended clinical dose or doses or range of doses, on a sufficient number of subjects and for a sufficient period of time to determine the optimal manner of use of the Product (dose and dose regimen) prior to the Initiation of a Phase III Clinical Trial of such Product. For clarity, the Parties’ expectation is that a Qualifying Phase II Clinical Trial will be a phase IIb Clinical Trial which is intended to confirm the efficacy demonstrated in a prior phase IIa Clinical Trial or phase Ib Clinical Trial.

 

1.79

“Regulatory Authority” shall mean any applicable government regulatory authority involved in granting approvals for the manufacturing, marketing, reimbursement and/or pricing of a Product in the Territory, including, in the United States, the United States Food and Drug Administration and any successor governmental authority having substantially the same function.

 

1.80

“Regulatory T cells” or “T-regs” also known as suppressor T cells, are a subpopulation of T cells which modulate the immune system, maintain tolerance to self-antigens, and prevent autoimmune disease.

 

1.81

“Related Party” shall mean each of Merck, its Affiliates, and their respective sublicensees (which term does not include distributors), as applicable.

 

1.82

“Research” means activities related to the design, discovery, identification, synthesis, research, pre-clinical development, preclinical toxicology studies, profiling, characterization, improvement or optimization of a Cue Biologic, Compound or Product. For clarity, “Research” excludes Development, Commercialization or Manufacturing activities.

 

 

1.83

“Research Program” shall mean the Research activities undertaken by the Parties as set forth in Article 2 and Schedule 2.1, as may be revised from time to time pursuant to Section 2.1, Section 2.2, or Section 2.10.

 

1.84

“Research Program Term” shall mean the duration of the Research Program as it may be extended or terminated as described more fully in Section 2.10 and Article 8.

 

1.85

“Royalty Period” shall be as defined in Section 5.4.1(c).

 

1.86

“Term” is defined in Section 8.1.

 

1.87

“Territory” shall mean all of the countries in the world, and their territories and possessions.

 

1.88

“Third Party” shall mean an entity other than Merck and its Related Parties, and Company and its Affiliates.

 

1.89

“Valid Patent Claim” shall mean a claim of an issued, unexpired and in-force patent included within the Company Patent Rights or Joint Patent Rights that claims a Compound as a composition of matter, which claim has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction (which decision is not appealable or has not been appealed within the time allowed for appeal), and which claim has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination, supplemental examination or disclaimer or otherwise.

 

1.90

“Violation” shall mean that either Company, or any of its officers or directors has been: (a) convicted of any of the felonies identified among the exclusion authorities listed on the U.S. Department of Health and Human Services, Office of Inspector General (OIG) website, including 42 U.S.C. 1320a-7(a) (https://oig.hhs.gov/exclusions/index.asp); and/or (b) identified in the OIG List of Excluded Individuals/Entities (LEIE) database (https://oig.hhs.gov/exclusions/exclusions_list.asp) or the U.S. General Services Administration's list of Parties Excluded from Federal Programs (https://www.sam.gov/portal/public/SAM/) (each of (a) and (b), singly and collectively, the “Exclusions Lists”).

 

 

Article 2 RESEARCH PROGRAM, GOVERNANCE, exclusive efforts

 

2.1

General. Company and Merck shall engage in the Research Program upon the terms and conditions set forth in this Agreement. The activities to be undertaken in the course of the Research Program are set forth in Schedule 2.1 as may be revised from time to time upon mutual written agreement by authorized representative(s) of the Parties.

 

2.2

Conduct of Research. The Research Program is directed to: (i) the Research by Company of Cue Biologics up to Proof of Mechanism for each of the Initial Indications; and, subject to Section 2.2.2; (ii) the further Research and/or Development by Merck of Proposed Product Candidates. Subject to Section 2.2.4, Merck may, in its sole discretion, elect [****] Product Candidates for use by Merck and its Related Parties in efforts to Research, Develop, Manufacture and Commercialize Compounds and Products.

 

2.2.1

Until the expiration of the Research Program Term, Company and Merck each shall proceed diligently with the work set out in the Research Program by using their respective reasonable good faith efforts to allocate sufficient time, effort, equipment and facilities to the Research Program and to use personnel with sufficient skills and experience as are required to accomplish the Research Program in accordance with the terms of this Agreement and Schedule 2.1 as may be revised from time to time pursuant to Section 2.1.

 

2.2.2

Upon the generation of data supporting achievement of Proof of Mechanism for each Cue Biologic, Company shall present such information along with the identity of the Cue Biologic to the Joint Steering Committee. Following a determination by the Joint Steering Committee that such Cue Biologic has achieved Proof of Mechanism as reflected in the meeting minutes of the Joint Steering Committee, such Cue Biologic shall constitute a Proposed Product Candidate. Merck shall thereafter perform the Research and/or Development activities assigned under the Research Program for the Proposed Product Candidate. Company shall have responsibility for supply of such Proposed Product Candidate.

 

2.2.3

Upon achievement of Proof of Concept for one or more Proposed Product Candidates, Merck shall provide written notice to Company that such one or more Proposed Product Candidates have achieved Proof of Concept.

 

2.2.4

Following written notice to Company of the achievement of Proof of Concept for a Proposed Product Candidate, Merck shall conduct an internal review to determine in its sole discretion whether it wishes to elect the Proposed Product Candidate as a Product Candidate. Merck shall then request through the Joint Steering Committee a meeting with Company to discuss and mutually agree upon a technology transfer strategy to provide for the continued supply and Manufacturing of Product Candidates for IND Enabling Studies. Following Merck’s request for a meeting pursuant to this Section 2.2.4 and mutual agreement on the technology transfer strategy, Merck may elect in its sole discretion to designate a Proposed Product Candidate as a Product Candidate and provide written notice to Company informing them of such election. Parties shall thereafter work to execute on the mutually-agreed upon technology transfer strategy.

 

Merck shall be entitled to utilize the services of its Affiliates and Third Parties to perform its Research Program activities, provided that all such Affiliates and Third Parties are bound or agree to be bound by confidentiality and non-use obligations no less stringent than that contained in this Agreement. Company shall be entitled to utilize the service of Third Parties to perform its Research Program activities only upon Merck’s prior written consent or as specifically set forth in Schedule 2.1. Notwithstanding the foregoing, each Party shall remain at all times fully liable for its respective responsibilities under the Research Program.

 

 

2.3

Use of Research Funding. Company shall apply any Research funding it receives from Merck under this Agreement solely to carry out its Research Program activities in accordance with Schedule 2.1, as may be revised from time to time pursuant to Section 2.1, and the terms and conditions of this Agreement. Apart from the foregoing, each Party shall be responsible for its own cost and expense in carrying out its activities under the Research Program.

 

2.4

Joint Steering Committee. The Parties hereby establish a committee to facilitate the Research Program as follows:

 

2.4.1

Composition of the Joint Steering Committee. The Research Program shall be conducted under the direction of a joint steering committee (the “Joint Steering Committee”) comprised of two (2) Merck representatives (who shall be employees of Merck or its Affiliate, as applicable) and two (2) Company representatives (who shall be employees of Company or its Affiliate, as applicable). Each Party may change its representatives on the Joint Steering Committee from time to time in its sole discretion, effective upon notice to the other Party of such change. These representatives shall have appropriate technical credentials, experience and knowledge, and ongoing familiarity with the Research Program. Additional representative(s) or consultant(s) may from time to time, by mutual consent of the Parties, be invited to attend Joint Steering Committee meetings, subject to such representative’s or consultant’s written agreement to comply with the requirements of Section 4.1. The Joint Steering Committee shall be chaired by a representative of Merck. The role of the chairperson shall be to preside in person or telephonically at meetings of the Joint Steering Committee, to prepare and circulate agendas and to ensure the preparation of minutes. The chairperson of the Joint Steering Committee will be responsible for preparing reasonably detailed written minutes of all Joint Steering Committee meetings that reflect, without limitation, material decisions made at such meetings. The chairperson shall send draft meeting minutes to each member of the Joint Steering Committee for review and approval reasonably promptly after each meeting. Such minutes will be deemed approved unless one or more of the members of the Joint Steering Committee objects to the accuracy of such minutes within ten (10) business days of receipt. Decisions of the Joint Steering Committee shall be made unanimously by the representatives. In the event that the Joint Steering Committee cannot or does not, after reasonable good faith efforts, reach agreement on an issue, the resolution and/or course of conduct shall be determined by Merck, in its sole discretion.

 

 

2.4.2

Scope of Joint Steering Committee Oversight. The Joint Steering Committee shall be responsible for overseeing the Research Program, including to: (i) review and amend the Research Program activities set forth in Schedule 2.1 as may be revised from time to time pursuant to Section 2.1; (ii) review and coordinate the Parties’ activities under the Research Program; (iii) confer regarding the status of the Research Program and the progress under the Research Program and to make determinations and decisions in connection with the activities under the Research Program (including issues of priority); (iv) review relevant data under the Research Program; (v) consider and advise on any technical issues that arise under the Research Program; (vi) review and advise on any budgetary and economic matters relating to the Research Program which may be referred to the Joint Steering Committee; and (vii) to determine such other matters as allocated to the Joint Steering Committee hereunder. The Joint Steering Committee shall not have the authority to: (w) modify or amend the terms and conditions of this Agreement; (x) waive either Party’s compliance with the terms and conditions of this Agreement; (y) determine any issue in a manner that would conflict with the express terms and conditions of this Agreement; or (z) amend the Research Program activities in a manner that would increase the financial or other resource obligations imposed on the Company beyond the scope of those required under the then current planned activities, and if such amendment would increase such financial or other resource obligations, then such amendment must be mutually agreed to by the Parties in writing; provided that, for the avoidance of doubt if the work proposed in the amendment to the Research Program activities could be performed with the financial or other resource obligations then currently being funded by Merck and such work would not impose additional financial obligations on Company beyond the then current Research Program activities, Company shall perform such work at no additional charge and the Research Program activities shall automatically be deemed to be amended to include such work as proposed by the Joint Steering Committee.

 

2.4.3

Meetings. During the Research Program Term, the Joint Steering Committee shall meet in accordance with a schedule established by mutual written agreement of the Parties, but no less frequently than once per Calendar Quarter, with the location for such meetings alternating between Company and Merck facilities (or such other location may be determined by the Joint Steering Committee). Alternatively, the Joint Steering Committee may meet by means of teleconference, videoconference or other similar communications equipment. Each Party shall bear its own expenses related to the attendance of such meetings by its representatives.

 

2.4.4

Disbandment of Joint Steering Committee. Upon completion (or earlier termination) of the Research Program, the Joint Steering Committee shall be disbanded and shall have no further authority with respect to the activities hereunder.

 

2.5

Alliance Managers.

 

2.5.1

Appointment. Each Party shall have the right to appoint an employee who shall oversee interactions between the Parties for all matters related to this Agreement (each an “Alliance Manager”). Such persons shall endeavor to ensure clear and responsive communication between the Parties and the effective exchange of information, and may serve as a single point of contact for any matters arising under this Agreement. The Alliance Managers shall have the right to attend all Joint Steering Committee meetings as non-voting participants and may bring to the attention of the Joint Steering Committee any matters or issues either of them reasonably believes should be discussed, and shall have such other responsibilities as the Parties may mutually agree in writing. Each Party may designate different Alliance Managers by notice in writing to the other Party.

 

2.5.2

Responsibilities of the Alliance Managers. The Alliance Managers, if appointed, shall have the responsibility of creating and maintaining a constructive work environment between the Parties. Without limiting the generality of the foregoing, each Alliance Manager shall:

 

(a)

identify and bring disputes and issues that may result in disputes (including without limitation any asserted occurrence of a material breach by a Party) to the attention of the Joint Steering Committee in a timely manner, and function as the point of first referral in all matters of conflict resolution;

 

 

(b)

provide a single point of communication for seeking consensus both internally within the Parties’ respective organizations and between the Parties;

 

(c)

plan and coordinate cooperative efforts, internal communications and external communications between the Parties with respect to this Agreement; and

 

(d)

take responsibility for ensuring that meetings and the production of meeting agendas and minutes occur as set forth in this Agreement, and that relevant action items resulting from such meetings are appropriately carried out or otherwise addressed.

 

2.6

Patent Committee. The Parties hereby establish a committee to facilitate the filing, prosecution and maintenance of Patent Rights as follows:

 

2.6.1

Establishment. Within sixty (60) days after the Effective Date, the Parties shall establish a patent committee (the “Patent Committee”) to discuss, oversee and coordinate the filing, prosecution, maintenance and enforcement of Merck Patent Rights, Company Patent Rights and Joint Patent Rights; and the filing of Patent Rights on Information and Inventions (with the exception of Other Information and Inventions which are not Joint Information and Inventions); and defense against claims of infringement of Third Party patents related to the intellectual property licensed or practiced under this Agreement. The Patent Committee will provide recommendations to the Parties regarding the filing, prosecution, maintenance and enforcement of such Patent Rights and related intellectual property matters.

 

2.6.2

Membership; Meetings. The Patent Committee shall be composed of one (1) employee from each of Merck and Company knowledgeable in U.S. patent law and the technology areas that are the subject of this Agreement. The Patent Committee shall meet, in person, by teleconference, or by video-teleconference, at least one (1) time per Calendar Quarter, or more or less often as the Parties shall determine. In-person meetings shall alternate between Company and Merck locations within the United States whenever possible unless otherwise agreed by the Parties. The first such meeting shall be within ninety (90) days after the Effective Date. Any member of the Patent Committee may designate a substitute, who shall be an employee of the applicable Party, to attend with prior written notice to the other Party. Ad hoc guests who are subject to written confidentiality obligations at least as stringent as the provisions in Article 4 may be invited to Patent Committee meetings. Each Party may replace its Patent Committee members with other of its employees with the qualifications set forth in this Section 2.6.2, at any time, upon written notice to the other Party.

 

2.6.3

Recommendations; Limitations on Patent Committee. Recommendations of the Patent Committee shall be made by consensus, with each Party having collectively one (1) vote in all decisions. The Patent Committee shall have only such powers as are specifically delegated to it in this Agreement and such powers shall be subject to the terms and conditions set forth herein. Without limiting the generality of the foregoing, the Patent Committee shall have no power to amend this Agreement, the Research Program or any written Research plan. Recommendations where the Patent Committee is unable to reach a consensus are determined as follows:

 

 

(a)

Merck shall have final decision-making authority with respect to any dispute relating specifically to Cue Biologics-Specific Information and Inventions, Cue Biologics Patent Rights, and Merck Other Information and Inventions;

 

(b)

Company shall have final decision-making authority with respect to any dispute relating specifically to Platform Information and Inventions, Platform Patent Rights, and Company Other Information and Inventions; and

 

(c)

The Patent Committee shall seek to resolve disputes concerning recommendations on Joint Other Information and Inventions. If the Patent Committee is unable to reach a consensus recommendation on a matter that relates to the Joint Other Information and Inventions within thirty (30) days after it has met and attempted to reach such recommendation, then either Party may refer such matter for resolution by nominated executives of each Party.

 

The Patent Committee shall provide status updates to the Joint Steering Committee once per Calendar Quarter as long as the Joint Steering Committee is in existence and, thereafter, to the Parties.

 

Company shall update Schedule 1.1 and provide such updated schedule to the Patent Committee on a monthly basis.

 

2.6.4

Duration of Patent Committee. The Patent Committee shall endure for the Term and, by mutual agreement, beyond the Term.

 

2.7

Exchange of Information. Following execution of this Agreement, and during the term of the Research Program, Company shall on a quarterly basis and at least ten (10) days before each Joint Steering Committee meeting disclose to Merck in English and in writing or in an electronic format, any: [***]. Notwithstanding the foregoing, the Information exchanged pursuant to this Section 2.7 or the subject of a Company representation pursuant to Article 6 does not in any way limit the definition of Company Know-How as employed throughout the Agreement.

 

2.8

Records and Reports.

 

2.8.1

Records. Company shall maintain records, in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which shall fully and properly reflect all work done and results achieved in the performance of the Research Program by Company.

 

2.8.2

Copies and Inspection of Records. Merck shall have the right, during normal business hours and upon reasonable notice, to inspect and copy all such records of Company referred to in Section 2.8.1. Merck shall maintain such records and the information disclosed therein in confidence in accordance with Section 4.1. Merck shall have the right to arrange for its employee(s) and/or consultant(s) involved in the activities contemplated hereunder to visit the offices and laboratories of Company and any of its Third Party contractors as permitted under Section 2.2 during normal business hours and upon reasonable notice, and to discuss the Research Program work and its results in detail with the technical personnel and consultant(s) of Company. Upon request, Company shall provide copies of the records described in Section 2.8.1.

 

 

2.8.3

Quarterly Reports. Within thirty (30) calendar days following the end of each Calendar Quarter during the term of this Agreement, Company shall provide to Merck a written progress report in English which shall describe the work performed to date on the Research Program, evaluate the work performed in relation to the goals of the Research Program and provide such other information as may be required by the Research Program or reasonably requested by Merck relating to the progress of the goals or performance of the Research Program. For clarity, all such reports shall be considered the confidential Information of Merck.

 

2.9

Research Information and Inventions. The entire right, title and interest in:

 

2.9.1

Company Information and Inventions shall be owned solely by Company;

 

2.9.2

Merck Information and Inventions shall be owned solely by Merck; and

 

2.9.3

Joint Information and Inventions shall be owned jointly by Company and Merck.

 

Company shall promptly disclose to Merck in writing the development, making, conception or reduction to practice of Company Information and Inventions and Joint Information and Inventions. For the purposes of determining ownership under this Section 2.9, inventorship shall be determined in accordance with United States patent laws (regardless of where the applicable activities occurred). Subject to the licenses granted to the other party under this Agreement and the other terms and conditions of this Agreement, each Party shall have the non-exclusive right to exploit its interest in Joint Information and Inventions and Joint Patent Rights, and to grant licenses under its interest in Joint Information and Inventions and Joint Patent Rights, as it deems appropriate, without the consent of, and without accounting to, the other Party; provided, however, that for clarity, the foregoing joint ownership rights shall not be construed as granting, conveying or creating any license or other rights to the other Party’s intellectual property, unless otherwise expressly set forth in this Agreement; and further provided that, in the event that any Joint Patent Rights claim or cover a Compound or the Manufacturing process therefor, Company shall not grant any license under its interest in such Joint Patent Rights to any Third Party without Merck’s prior written consent.

 

2.10

Research Program Term. The term of the Research Program shall commence on the Effective Date and continue until the later of: (i) election of [****] Product Candidates; or (ii) [****] from the Effective Date, except as provided below in Section 2.10.1 or as otherwise stated herein.

 

2.10.1

Extensions. The term of the Research Program may be extended by Merck at its sole discretion for a total of [****] additional years on a year-by-year basis. To exercise each of these extensions, Merck shall provide written notice of such request at least ninety (90) days prior to the expiration of the then current Research Program term. For each extension exercised pursuant to this Section 2.10.1, the Parties shall work together to mutually agree on a revised Research Program and Schedule 2.1. Such revised Research Program shall be encompassed within the definition of Research Program for purposes of this Agreement.

 

2.11

Exclusive Efforts.

 

2.11.1

Cue Biologics, Compounds, Indication Specific Peptides. During the Research Program Term, Company shall keep Merck informed of any Indication Specific Peptide or of any Cue Biologic or Compound that is Researched or Developed for use in an Initial Indication. [***]

 

 

2.11.2

Cue Platform Biologics. [***]

 

2.11.3

Company Forbearance.

 

2.11.3.1

From the Effective Date until the earlier of [***], Company hereby covenants and agrees that it will not alone or with Third Parties [***]. Company shall, and shall cause its Affiliates to, furthermore [****].

 

2.11.3.2

From [***] to [***]. Company hereby covenants and agrees that it will not alone or with Third Parties [***]. Company shall, and shall cause its Affiliates to, furthermore [***].

 

2.11.4

[****]. From the Effective Date until [***], and subject to the provisions of Section 2.11.6 below relating to Company Candidates, Company may.

 

 

2.11.5

[****].

 

 

 

 

2.11.6

[****]

 

 

 

 

2.12

Compliance with Law and Ethical Business Practices.

 

2.12.1

Company shall conduct the activities of the Research Program in accordance with all relevant applicable laws, rules and regulations including, without limitation, all current governmental regulatory requirements concerning Good Laboratory Practices. Company shall notify Merck in writing of any deviations from applicable regulatory or legal requirements if Company becomes aware of any such deviation. Company hereby certifies that it has not and will not employ or otherwise use in any capacity the services of any person or entity debarred under Section 21 USC 335a in performing any services hereunder. Company shall notify Merck in writing immediately if any such debarment occurs or comes to its attention, and shall promptly remove any person or entity so disbarred from performing any activity or function or capacity related to the Research Program. Merck shall have the right, in its sole discretion, to terminate this Agreement immediately in the event that Company fails to promptly remove any such persons.

 

2.12.2

Company acknowledges that Merck’s corporate policy requires that Merck’s business must be conducted within the letter and spirit of the law. By signing this Agreement, Company agrees to conduct the services contemplated herein in an ethical, reasonable and lawful manner.

 

2.12.3

Specifically, Company warrants that none of its employees, agents, officers or other members of its management are officials, officers, agents, representatives of any government or international public organization. –NOTE: FOR A LIST OF "American institutions of research, public international organizations and designations under the International Immunities Act" SEE Section 316.20 at http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=d2739abeb6ca1764c5defa8607248f64&n=8y1.0.1.3.68&r=PART&ty=HTML#8:1.0.1.3.68.0.1.14 Company shall not make any payment, either directly or indirectly, of money or other assets, including but not limited to the compensation Company derives from this Agreement (hereinafter collectively referred as a “Payment”), to government or political party officials, officials of international public organizations, candidates for public office, or representatives of other businesses or persons acting on behalf of any of the foregoing (hereinafter collectively referred as “Officials”) where such Payment would constitute violation of any law. In addition regardless of legality, Company shall make no Payment either directly or indirectly to Officials if such Payment is for the purpose of influencing decisions or actions with respect to the subject matter of this Agreement or any other aspect of Merck’s business.

 

 

2.12.4

Company acknowledges that no employee of Merck or its Affiliates shall have authority to give any direction, either written or oral, relating to the making of any commitment by Company or its agents to any Third Party in violation of terms of this or any other provisions of this Agreement.

 

2.12.5

Company certifies to Merck that as of the date of this Agreement that Company has screened itself, and its officers, directors and employees against the Exclusions Lists and that it has informed Merck whether Company, or any of its officers or directors has been in Violation. After the execution of this Agreement, Company shall notify Merck in writing immediately if any such Violation occurs or comes to its attention.

 

2.12.6

Company’s failure to abide by the provisions of Section 2.12 shall be deemed a material breach of this Agreement. In the event that Company fails to cure such failure within the time specified in Section 8.3.1(a) after being notified by Merck of such failure, Merck may in such case and with immediate effect terminate this Agreement at its sole discretion upon written notice to Company and without prejudice to any other remedies that may be available to Merck.

 

2.12.7

Company shall indemnify and hold Merck and any of its Affiliates harmless from and against any and all liabilities (including all costs and reasonable attorneys’ fees associated with defending against such claims) that may arise by reason of the negligent or willful acts or omissions of Company or its agents which would constitute a violation of Section 2.12.

 

2.12.8

Company shall indemnify and hold Merck and any of its Affiliates harmless from and against any and all liabilities (including all costs and reasonable attorneys’ fees associated with defending against such claims) that may arise by reason of the careless, negligent or willful acts or omissions of Third Parties acting on Company’s behalf which would constitute a violation of Section 2.12. [***]

 

2.13

Use of Human Materials. If any human cell lines, tissue, human clinical isolates or similar human-derived materials (“Human Materials”) have been or are to be collected and/or used in the Research Program, Company represents and warrants: (i) that it has complied, or shall comply, with all applicable laws, guidelines and regulations relating to the collection and/or use of the Human Materials; and (ii) that it has obtained, or shall obtain, all necessary approvals and appropriate informed consents, in writing, for the collection and/or use of such Human Materials. Company shall provide documentation of such approvals and consents upon Merck’s request. Company further represents and warrants that such Human Materials may be used as contemplated in this Agreement without any obligations to the individuals or entities (“Providers”) who contributed the Human Materials, including, without limitation, any obligations of compensation to such Providers or any other Third Party for the intellectual property associated with, or commercial use of, the Human Materials for any purpose.

 

 

2.14

Animal Research. If animals are used in research hereunder, Company will comply with the Animal Welfare Act or any other applicable local, state, national and international laws and regulations relating to the care and use of laboratory animals. Merck encourages Company to use the highest standards, such as those set forth in the Guide for the Care and Use of Laboratory Animals (NRC, 1996), for the humane handling, care and treatment of such research animals. Company hereby certifies that it has and shall maintain current and valid accreditation from AAALAC during the Term. Any animals which are used in the course of the Research Program, or products derived from those animals, such as eggs or milk, will not be used for food purposes, nor will these animals be used for commercial breeding purposes.

 

Article 3 LICENSE; EXCHANGE OF INFORMATION; DEVELOPMENT AND COMMERCIALIZATION.

 

3.1

License Grants.

 

3.1.1

Company hereby grants to Merck an exclusive sublicense (even as to Company) in the Field and in the Territory under Company’s rights in the Einstein Patent Rights and Einstein Know-How, with the right to grant and authorize sublicenses, for any and all uses, including without limitation: (i) to make, have made or use Cue Biologics; (ii) to make, have made, use, import, offer to sell and sell Compound(s) and/or Product(s); and (iii) to otherwise carry out activities contemplated under this Agreement; all within the Field.

 

3.1.2

Company hereby grants to Merck an exclusive license (even as to Company) in the Field and in the Territory under Cue Patent Rights, Cue Know-How, and Company’s interest in Joint Patent Rights, with the right to grant and authorize sublicenses, for any and all uses, including without limitation: (i) to make, have made or use Cue Biologics; (ii) to make, have made, use, import, offer to sell and sell Compound(s) and/or Product(s); and (iii) to otherwise carry out activities contemplated under this Agreement; all within the Field.

 

3.1.3

[***]

 

3.1.4

Notwithstanding the scope of the exclusive sublicenses and licenses granted to Merck under Section 3.1.1 and Section 3.1.2, Company shall retain the rights under the Company Know-How, Company Patent Rights and Joint Patent Rights during the Research Program Term solely in connection with performing Company’s obligations under the Research Program in accordance with this Agreement to: (i) research, develop, make, have made, sell, offer to sell, import and use in the Territory, Cue Biologics, Compounds, Products and any invention claimed in or covered by Company Patent Rights or Joint Patent Rights; and (ii) use Company Know-How.

 

3.1.5

[***]

 

3.2

Non-Exclusive License Grant. In the event that either: (i) the making, have made or use by Merck or its Related Parties of any Cue Biologics during the term of this Agreement; or (ii) the making, having made, use, import, offer for sale and/or sale by Merck or its Related Parties of Compound or Product in the Territory would infringe a claim of an issued letters patent that Company (or its Affiliate) Controls and which patents are not covered by the grant in Section 3.1, Company hereby grants to Merck, to the extent Company is legally able to do so, a non-exclusive, sublicensable, royalty-free license in the Territory under such issued letters patent for Merck and its Related Parties to conduct such activities with respect to the Cue Biologics, Compounds and Products for all activities in the Field.

 

 

3.3

No Implied Licenses. Except as specifically set forth in this Agreement, neither Party shall acquire any license or other intellectual property interest, by implication or otherwise, in any Information disclosed to it under this Agreement or under any patents or patent applications owned or Controlled by the other Party or its Affiliates.

 

3.4

No Grant of Inconsistent Rights by Company. Company (and its Affiliates) shall not assign, transfer, convey or otherwise grant to any Person or otherwise encumber (including through lien, charge, security interest, mortgage, encumbrance or otherwise): (i) any rights to any Company Know-How, Company Patent Rights or Company’s interest in Joint Patent Rights (or any rights to any intellectual property that would otherwise be included in the Company Know-How, Company Patent Rights or Joint Patent Rights), in any manner that is inconsistent with or would interfere with the grant of the rights or licenses to Merck hereunder; (ii) any rights to any Cue Biologic prior to the expiration of the Research Program Term (provided that Company shall grant to Merck the rights to the Cue Biologics as set forth herein); or (iii) any rights to any Compounds or Products (provided that Company shall grant to Merck the rights to the Compounds and Products as set forth herein). Without limiting the foregoing, during the Term, (x) Company (and its Affiliates) shall not use (and shall not grant to any Third Party the right to use) any Cue Biologics (prior to the expiration of the Research Program Term) or Compounds or Products for any purposes (including the Research, Development, Manufacturing or Commercialization thereof), except for Company’s performance of the activities to be performed by Company under the Research Program in accordance with this Agreement and (y) Company (and its Affiliates) shall not provide or otherwise transfer to any Third Parties any Company Know-How which constitutes Cue Biologics-Specific Information and Inventions, for use in the Field.

 

3.5

Development and Commercialization. Merck shall use Commercially Reasonable Efforts, at its own expense, to Research, Develop and Commercialize a Compound or Product. Company shall timely supply adequate and sufficient amounts of Product Candidates through IND Enabling Studies for each Product Candidate. Merck shall reimburse Company for its reasonable expenses in supplying such adequate and sufficient amounts. Following the Research Program Term, upon Company’s written request which shall be no more frequently than once per year, Merck shall provide a written summary of Merck’s activities in Researching, Developing and/or Commercializing a Compound or Product (“Progress Report”).

 

3.6

Excused Performance. In addition to the provisions of Article 6, the obligations of Merck with respect to any Product under Section 3.5 are expressly conditioned upon the continuing absence of any adverse condition or event relating to the safety or efficacy of the Compound or Product, and the obligation of Merck to Research, Develop or Commercialize any such Compound or Product shall be delayed or suspended so long as in Merck’s good faith determination any such condition or event exists. Where such adverse condition or event exists, Merck will provide written notice as soon as practicable of a delay or suspension exercised under this Section 3.6.

 

 

3.7

Regulatory Matters. In the event that Merck determines that any regulatory filings for any Compounds and/or Products are required for any activities hereunder (including any activities under the Research Program), including INDs, NDAs and other Marketing Authorizations (as applicable), then as between the Parties, Merck (or its Affiliate or Related Party) shall have the sole right, in its discretion, to obtain such regulatory filings (in its (or its Affiliate’s or its Related Party’s) name) and as between the Parties, Merck (or its Affiliate or its Related Party) shall be the owner of all such regulatory filings. As between the Parties, Merck (or its Affiliate or Related Party) shall have the sole right to communicate and otherwise interact with Regulatory Authorities with respect to the Compounds and/or Products (including during the Research Program Term). For clarity, Company shall have no right to, and shall not, make any regulatory filings related to any Compounds or Products or otherwise interact with any Regulatory Authorities with respect to the Compounds or Products.

 

3.8

Sublicenses. Merck shall ensure that all sublicenses of the Cue Patent Rights and Cue Know-How granted by Merck under this Agreement comport with the terms of this Agreement, and that all sublicenses of the Einstein Patent Rights and Einstein Know-How granted by Merck under this Agreement comport with the terms of this Agreement and the Amended and Restated Einstein License Agreement.

 

Article 4 CONFIDENTIALITY AND PUBLICATION.

 

4.1

Nondisclosure Obligation. All Information disclosed by one Party to the other Party hereunder shall be maintained in confidence by the receiving Party and shall not be disclosed to any Third Party or used for any purpose except as set forth herein without the prior written consent of the disclosing Party, except to the extent that such Information:

 

4.1.1

is known by the receiving Party at the time of its receipt, and not through a prior disclosure by the disclosing Party, as documented by the receiving Party’s business records;

 

4.1.2

is in the public domain by use and/or publication before its receipt from the disclosing Party, or thereafter enters the public domain through no fault of the receiving Party;

 

4.1.3

is subsequently disclosed to the receiving Party by a Third Party who may lawfully do so and is not under an obligation of confidentiality to the disclosing Party;

 

4.1.4

is developed by the receiving Party independently of Information received from the disclosing Party, as documented by the receiving Party’s business records;

 

4.1.5

is disclosed to governmental or other regulatory agencies in order to obtain patents on Inventions in accordance with Article 7 herein or to gain or maintain approval to conduct clinical trials on Compound or Product or to market Product, but such disclosure may be only to the extent reasonably necessary to obtain such patents or approvals;

 

4.1.6

is deemed necessary by Merck to be disclosed to Related Parties, agent(s), consultant(s), and/or other Third Parties for any and all purposes Merck and its Affiliates deem necessary or advisable in the ordinary course of business to achieve the objectives of this Agreement on the condition that such Third Parties agree to be bound by confidentiality and non-use obligations that substantially are no less stringent than those confidentiality and non-use provisions contained in this Agreement; provided, however, that the term of confidentiality for such Third Parties shall be no less than ten (10) years; or

 

 

4.1.7

is deemed necessary by counsel to the receiving Party to be disclosed to such Party’s attorneys, independent accountants or financial advisors for the sole purpose of enabling such attorneys, independent accountants or financial advisors to provide advice to the receiving Party, on the condition that such attorneys, independent accountants and financial advisors agree to be bound by the confidentiality and non-use obligations contained in this Agreement; provided, however, that the term of confidentiality for such attorneys, independent accountants and financial advisors shall be no less than ten (10) years.

 

4.1.8

is deemed necessary by the receiving Party to be disclosed to such Party’s executives, management and other advisors, including but not limited to members of the Board of Directors and/or Scientific Advisory Board, consultants, bankers, lenders, existing and prospective bona fide investors, and prospective merger and/or acquisition partners (“Representatives”) on the following conditions: [***].

 

Any combination of features or disclosures shall not be deemed to fall within the foregoing exclusions merely because individual features are published or available to the general public or in the rightful possession of the receiving Party unless the combination itself and principle of operation are published or available to the general public or in the rightful possession of the receiving Party.

 

If a Party is required by judicial or administrative process (including a request for discovery received in an arbitration or litigation proceeding), or by a statute, regulation or rule of law (e.g., securities laws, rules and regulations), to disclose information that is subject to the non-disclosure provisions of this Section 4.1 or Section 4.2, such Party shall promptly inform the other Party of the disclosure that is being sought in order to provide the other Party an opportunity to challenge or limit the disclosure obligations. Information that is disclosed by judicial or administrative process shall remain otherwise subject to the confidentiality and non-use provisions of this Section 4.1 and Section 4.2, and the Party disclosing information pursuant to law or court order shall take all steps reasonably necessary, including without limitation obtaining an order of confidentiality, to ensure the continued confidential treatment of such information. The Parties will consult and cooperate fully with each other on the provisions of this Agreement to be redacted in any filings made by the Parties with the Securities and Exchange Commission or similar governmental agency in the U.S. or abroad, or as otherwise required by law.

 

4.2

Company Know-How. During the period from the Effective Date until achievement of Proof of Mechanism for the first Cue Biologic, Company agrees to keep all Company Know-How specifically related to any Cue Biologic, Compound, Product, Indication Specific Peptide, or any Peptide or biologic which is of utility for [****] confidential subject to Section 4.1. Upon achievement of Proof of Mechanism for the first Cue Biologic, Company agrees to keep all Company Know-How specifically related to any Cue Biologic, Compound, Product, Indication Specific Peptide or any Peptide or biologic which is of utility for [****] confidential subject to Section 4.1. In the event that a Company Candidate is not designated as a Proposed Product Candidate pursuant to Section 2.11.6.3, then with respect to such Company Know-How which is specifically related to to such Proposed Product Candidate (and not related to any other molecule which is a subject of the Agreement) Company’s obligations of confidentiality shall cease.

 

 

4.3

Publication. Each Party to this Agreement recognizes that the publication or disclosure of papers, presentations, abstracts or any other written or oral presentations regarding results of and other information regarding the subject matter of this Agreement, including the Research Program, may be beneficial to both Parties. Each Party also recognizes the mutual interest in obtaining valid patent protection and in protecting business interests and trade secret information. Accordingly, except for disclosures permitted pursuant to Section 4.1 each Party shall have the right to review and approve any paper or presentation proposed for disclosure by the other Party which utilizes data related to the Research Program, Cue Biologic, Compound or Product and/or includes confidential Information of the other Party. Before any such paper or presentation is disclosed, the Party proposing disclosure shall deliver a complete copy to the other Party at least sixty (60) days prior to submitting the paper to a publisher or making the presentation to a Third Party. The reviewing Party shall have the right (a) to propose modifications to the publication or presentation for patent reasons, trade secret reasons or business reasons or (b) to request a reasonable delay in publication or presentation in order to protect patentable information. If the reviewing Party requests a delay, the publishing Party shall delay submission or presentation for a period of up to ninety (90) days as necessary to enable patent applications protecting each Party's rights in such information to be filed in accordance with Article 7. Upon expiration of such ninety (90) days, the publishing Party shall be free to proceed with the publication or presentation. Notwithstanding the foregoing, if the reviewing Party requests modifications to the publication or presentation including the deletion of certain proprietary information, the publishing Party shall edit such publication to prevent disclosure of trade secret or proprietary business information (including but not limited to information related to Cue Biologics-Specific Information and Inventions) prior to submission of the publication or presentation. The disclosing Party shall comply with any such requests of the reviewing Party.

 

4.4

Publicity/Use of Names/Press Releases. No disclosure of the existence, or the terms, of this Agreement may be made by either Party, and no Party shall use the name, trademark, trade name or logo of the other Party, its Affiliates or their respective employee(s) in any publicity, promotion, news release or disclosure relating to this Agreement or its subject matter, without the prior express written permission of the other Party, except as may be required by law. If a Party is required by a statute, regulation or rule of law (e.g., securities laws, rules and regulations), to disclose the existence, or the terms, of this Agreement or the name, trademark, trade name or logo of the other Party, such Party shall promptly inform the other Party of the disclosure that is being sought and provide for a period of at least ten (10) days, or if the period provided by statute, regulation or rule of law is less than ten (10) days, the maximum period allowable thereunder in order to provide the other Party an opportunity to review the disclosure, provide comments, and challenge or limit the disclosure obligations. Information that is disclosed shall remain otherwise subject to the confidentiality and non-use provisions of Section 4.1 and Section 4.2, and the Party disclosing information shall take all steps reasonably necessary, to ensure the continued confidential treatment of such information. The Parties will furthermore consult and cooperate fully with each other on the provisions of this Agreement to be redacted in any filings made by the Parties with the Securities and Exchange Commission or similar governmental agency in the U.S. or abroad, or as otherwise required by law.

 

Article 5 PAYMENTS; ROYALTIES AND REPORTS

 

5.1

License Fee. In consideration for the licenses and other rights granted to Merck herein under the Company Patent Rights, Company Know-How and Company’s interest in Joint Patent Rights, upon the terms and conditions contained herein, Merck shall pay to Company US$ 2,500,000 (two million five hundred thousand) payable within thirty (30) days after the Effective Date. Company shall use these funds to pay for Contract Research as that term is defined in the Amended and Restated Einstein License Agreement.

 

 

5.2

Milestone Payments. Subject to the terms and conditions of this Agreement, Merck shall pay to Company the following milestone payments, for which Merck or any Related Party achieves, or Company achieves and Merck confirms, the following milestone events hereunder during the Term:

 

5.2.1

Research Collaboration Milestones.

 

		Milestone Event		Payment to Company
1.		[***]		[***]
2.		[***]		[***]

 

5.2.2

Development and Regulatory Milestones.

 

		Milestone Event		Payment to Company
3.		[***]		[***]
4.		[***]		[***]
5.		[***]		[***]
6.		[***]		[***]
7.		[***]		[***]
8.		[***]		[***]
9.		[***]		[***]

 

5.3

Merck shall notify Company in writing within sixty (60) days following the achievement of each milestone set forth in Section 5.2.1 and Section 5.2.2. With respect to the achievement of a milestone under Section 5.2.1 and milestones 1-9 under Section 5.2.2, Merck shall make the appropriate milestone payment within sixty (60) days after the achievement of such milestone. [***]. The milestone payments pursuant to Section 5.2.1 and Section 5.2.2 shall be payable only upon the initial achievement of such milestone [****]; but in no event shall such milestone payment be paid [****]. Such milestones are independent of the royalty payments due under Section 5.4 and shall not offset or affect the payment of any royalty payments due under Section 5.4.

 

 

5.4

Royalties.

 

5.4.1

Royalties Payable By Merck. Subject to the terms and conditions of this Agreement, Merck shall pay Company royalties, calculated on a Product-by-Product basis, as set forth in Section 5.4.

 

(a)

Patent Royalties. Subject to the provisions of Section 5.4.1(b), Merck shall pay Company royalties in an amount equal to the following percentage of Net Sales of Products by Merck or its Related Parties where the sale of Product would infringe a Valid Patent Claim in the country of sale:

 

(1)

[***] of Net Sales in the Territory in each Calendar Year up to and including [***];

 

(2)

[***] of Net Sales in the Territory in each Calendar Year for the portion of Net Sales exceeding [***] up to and including [***]; and

 

(3)

[***] of Net Sales in the Territory in each Calendar Year for the portion of Net Sales exceeding [***].

 

(b)

Know-How Royalty. Notwithstanding the provisions of Section 5.4.1(a), in countries where the sale of Product by Merck or its Related Parties would not infringe a Valid Patent Claim, Merck shall pay royalty rates that shall be set at [***] of the applicable royalty rate determined according to Section 5.4.1(a). Such royalties shall be calculated after first calculating royalties under Section 5.4.1(a).

 

(c)

Royalty tiers pursuant to Section 5.4.1(a) and Section 5.4.1(b) shall be calculated based on Net Sales of each Product in the Territory, provided that the determination of whether the royalty shall be calculated under Section 5.4.1(a) or Section 5.4.1(b) shall be determined on a country-by-country basis. Royalties on each Product at the rates set forth above shall continue on a country-by-country basis until the expiration of the later of: (i) the last-to-expire Valid Patent Claim claiming the Compound; or (ii) for a period of ten (10) years after First Commercial Sale of such Product in such country (the “Royalty Period”).

 

(d)

All royalties are subject to the following conditions:

 

(i)

that only one royalty shall be due with respect to the same unit of Product;

 

(ii)

that no royalties shall be due upon the sale or other transfer among Merck or its Related Parties, but in such cases the royalty shall be due and calculated upon Merck’s or its Related Party’s Net Sales to the first independent Third Party;

 

(iii)

no royalties shall accrue on the sale or other disposition of Product by Merck or its Related Parties for use in a Clinical Trial; and

 

(iv)

no royalties shall accrue on the disposition of Product in reasonable quantities by Merck or its Related Parties as samples (promotion or otherwise) or as donations (for example, to non-profit institutions or government agencies for a non-commercial purpose).

 

 

5.4.2

Change in Sales Practices. The Parties acknowledge that during the term of this Agreement, Merck’s sales practices for the marketing and distribution of Product may change to the extent to which the calculation of the payment for royalties on Net Sales may become impractical or even impossible. In such event the Parties agree to meet and reasonably discuss in good faith new ways of compensating Company to the extent currently contemplated under Section 5.4.1.

 

5.4.3

Royalties for [****]. In those cases in which [****], the royalty obligations of this Section 5.4 shall be applicable to the compensation and/or other amount of consideration received by Merck [****].

 

5.4.4

Compulsory Licenses. If a compulsory license is granted to a Third Party with respect to Compound or Product in any country in the Territory with a royalty rate lower than the royalty rate provided by Section 5.4.1, then the royalty rate to be paid by Merck on Net Sales in that country under Section 5.4.1 shall be reduced to the rate paid by the compulsory licensee.

 

5.4.5

[***]

 

5.4.6

Royalty Rates. Notwithstanding any provision in this Agreement, where a royalty payment is due in a particular country, in no event shall Merck pay royalty rates on Net Sales of any Product in such country that are less than [***]. Accordingly, [***] the royalty rate can under no circumstance go lower than [***].

 

5.5

Reports; Payment of Royalty. During the term of this Agreement following the First Commercial Sale of a Product, Merck shall furnish to Company a quarterly written report for the Calendar Quarter showing the Net Sales of all Products subject to royalty payments sold by Merck and its Related Parties in the Territory during the reporting period and the royalties payable under this Agreement. Subject to the provisions of Section 9.2.2, if applicable, such reports shall be sufficiently detailed so as to permit company to independently determine the accuracy of the amount of royalties paid. Reports shall be due on the sixtieth (60th) day following the close of each Calendar Quarter. Royalties shown to have accrued by each royalty report shall be due and payable on the date such royalty report is due. Merck shall keep complete and accurate records in sufficient detail to enable the royalties payable hereunder to be determined.

 

5.6

Audits.

 

5.6.1

Upon the written request of Company and not more than once in each Calendar Year, Merck shall permit an independent certified public accounting firm of nationally recognized standing selected by Company and reasonably acceptable to Merck, at Company’s expense, to have access during normal business hours to such of the records of Merck as may be reasonably necessary to verify the accuracy of the royalty reports hereunder for any Calendar Year ending not more than twenty-four (24) months prior to the date of such request. The accounting firm shall disclose to Company only whether the royalty reports are correct or incorrect and the amount of any discrepancy. No other information shall be provided to Company. The accounting firm shall be given copies of all documents needed to accurately perform the accounting, with all provisions and terms necessary to accurately perform the accounting being unredacted.

 

 

5.6.2

If such accounting firm correctly identifies an underpayment by Merck during such period, then Merck shall pay to Company the amount of the discrepancy within thirty (30) days of the date Company delivers to Merck such accounting firm’s written report so correctly concluding, or as otherwise agreed upon by the Parties. The fees charged by such accounting firm shall be paid by Company, except in the situation that the accounting firm determines that Merck has underpaid by the greater of [***] or [***] the royalties it owed for any Calendar Year reviewed by the accounting firm. If such accounting firm correctly identified an overpayment by Merck during such period, then such overpayment shall be withheld from a next payment due from Merck to Company.

 

5.6.3

Merck shall include in each sublicense granted by it pursuant to this Agreement a provision requiring the sublicensee to make reports to Merck, to keep and maintain records of sales made pursuant to such sublicense and to grant access to such records by Company’s independent accountant to the same extent required of Merck under this Agreement.

 

5.6.4

Upon the expiration of twenty-four (24) months following the end of any Calendar Year, the calculation of royalties payable with respect to such Calendar Year shall be binding and conclusive upon Company, and Merck and its Related Parties shall be released from any liability or accountability with respect to royalties for such Calendar Year.

 

5.6.5

Company shall treat all financial information subject to review under this Section 5.6 or under any sublicense agreement in accordance with the confidentiality and non-use provisions of this Agreement, and shall cause its accounting firm to enter into an acceptable confidentiality agreement with Merck and/or its Related Parties obligating it to retain all such information in confidence pursuant to such confidentiality agreement.

 

5.7

Payment Exchange Rate. All payments to be made by Merck to Company under this Agreement shall be made in United States dollars and may be paid by check made to the order of Company or bank wire transfer in immediately available funds to such bank account in the United States as may be designated in writing by Company from time to time. In the case of sales outside the United States, the rate of exchange to be used in computing the monthly amount of currency equivalent in United States dollars due Company shall be made at the monthly rate of exchange utilized by Merck in its worldwide accounting system.

 

5.8

Income Tax Withholding. Company shall be liable for all income and other taxes (including interest) (“Taxes”) imposed upon any payments made by Merck to Company under this Article 5 (“Agreement Payments”). If applicable laws, rules or regulations require the withholding of Taxes because of Company’s tax obligations, Merck shall make such withholding payments and shall subtract the amount thereof from the Agreement Payments. For clarity, Merck shall not deduct from Agreement Payments any Taxes withheld by Merck to satisfy Merck’s tax obligations. Merck shall submit to Company appropriate proof of payment of the withheld Taxes as well as the official receipts within a reasonable period of time. Merck shall provide Company reasonable assistance in order to allow Company to obtain the benefit of any present or future treaty against double taxation which may apply to the Agreement Payments.

 

 

Article 6 REPRESENTATIONS AND WARRANTIES

 

6.1

Representations and Warranties of Each Party. Each Party represents and warrants to the other Party that as of the Effective Date:

 

6.1.1

such Party is duly organized and validly existing under the laws of the state or jurisdiction of its organization and has full corporate right, power and authority to enter into this Agreement and to perform its obligations hereunder;

 

6.1.2

the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the necessary corporate actions of such Party. This Agreement has been duly executed by such Party. This Agreement and any other documents contemplated hereby constitute valid and legally binding obligations of such Party enforceable against it in accordance with their respective terms, except to the extent that enforcement of the rights and remedies created thereby is subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application affecting the rights and remedies of creditors; and

 

6.1.3

the execution, delivery and performance by such Party of this Agreement and any other agreements and instruments contemplated hereunder will not: (i) in any respect violate any statute, regulation, judgment, order, decree or other restriction of any governmental authority to which such Party is subject; (ii) violate any provision of the corporate charter, by-laws or other organizational documents of such Party; or (iii) constitute a material violation or breach by such Party of any provision of any material contract, agreement or instrument to which such Party is a party or to which such Party may be subject although not a party.

 

6.2

Company Representations and Warranties. Company represents and warrants to Merck that as of the date of this Agreement:

 

6.2.1

all Patent Rights within the Company Patent Rights are in full force and effect, and, to the best of Company’s knowledge, the Company Patent Rights and Company Know-How exist and are not invalid or unenforceable, in whole or in part;

 

6.2.2

it has the full right, power and authority to enter into this Agreement, to perform the activities hereunder, including the Research Program, and to grant the license and sublicense granted hereunder (including under Article 3);

 

6.2.3

it (and its Affiliates) has not prior to the Effective Date: (i) assigned, transferred, conveyed or otherwise encumbered its right, title and interest in Company Patent Rights or Company Know-How; or (ii) otherwise granted any rights to any Third Parties that would conflict with the rights granted to Merck hereunder;

 

6.2.4

it is the sole and exclusive owner or licensee of the Cue Patent Rights and Cue Know-How, all of which are (and shall be, in the case of Company Information and Inventions) free and clear of any liens, charges and encumbrances, and no other person, corporate or other private entity, or governmental entity or subdivision thereof, has or shall have any claim of ownership whatsoever with respect to the Cue Patent Rights and Cue Know-How;

 

 

6.2.5

to the best of Company’s knowledge, it is the sole and exclusive licensee of the Einstein Patent Rights and Einstein Know-How, all of which are free and clear of any liens, charges and encumbrances, and no other person, corporate or other private entity, or governmental entity or subdivision thereof, has or shall have any claim of ownership whatsoever with respect to the Einstein Patent Rights and Einstein Know-How, with the exception that Company is aware that the United States Government has sponsored certain related research of Albert Einstein and may have certain rights in any subject inventions resulting therefrom;

 

6.2.6

to the best of Company’s knowledge, the exercise of the license granted to Merck under the Company Patent Rights and Company Know-How, including without limitation the Research, Development, Manufacture, use, sale and import of Cue Biologics, Compounds and Products do not interfere with or infringe any intellectual property rights owned or possessed by any Third Party other than Albert Einstein;

 

6.2.7

there are no claims, judgments or settlements against or owed by Company (or any of its Affiliates) and no pending or threatened claims or litigation relating to the Company Patent Rights and Company Know-How;

 

6.2.8

to the best of Company’s knowledge, Company has disclosed to Merck all reasonably relevant information which Company reasonably believes to be necessary for Merck to accomplish the goals of the Research Program and any additional information requested by Merck regarding: (i) the Cue Biologics, Compounds or Products; and/or (ii) the Company Patent Rights and Company Know-How licensed under this Agreement, including: (a) any licenses and material agreements related to the Company Patent Rights, Company Know-How, Cue Biologics, Compounds and/or Products; and (b) and safety or efficacy information related to the Cue Biologics, Compounds and/or Products;

 

6.2.9

Company has disclosed to Merck the existence of any patent opinions related to the Company Patent Rights and Company Know-How licensed under this Agreement;

 

6.2.10

neither it nor any of its Affiliates has received any written notification from a Third Party that the Research, Development, Manufacture, use, sale or import of Cue Biologics, Compounds or Products infringes or misappropriates the Patent Rights or know-how owned or controlled by such Third Party, and Company has no knowledge that a Third Party has any basis for any such claim;

 

6.2.11

Company has complied with all existing country-specific laws and regulations involving inventor remuneration associated with the Company Patent Rights, including Article 6 of the Third Amendment of Chinese Patent Law;

 

6.2.12

Schedule 1.1 sets forth a true, correct and complete list of Company Patent Rights existing as of the Effective Date and such schedule contains all application numbers and filing dates, registration numbers and dates, jurisdictions and owners. The Company Patent Rights and Company Know-How constitute all intellectual property owned or otherwise controlled (through license or otherwise) by Company (or any of its Affiliates) as of the Effective Date that are necessary or useful for (or otherwise used by Company or any of its Affiliates in connection with), the Cue Biologics, Compounds and/or Products or the Research, Development, Manufacture, Commercialization and/or use thereof;

 

 

6.2.13

to the best of Company’s knowledge, Company has disclosed to Merck all material information and data which Company reasonably believes to be necessary for Merck to accomplish the goals of the Research Program and any additional information requested by Merck, in each case related to the Research Program and/or any Cue Biologics, Compounds or Products, regardless of whether such data and information would have a positive, negative or neutral impact on the potential commercial, scientific or strategic value or attractiveness of the Research Program, any Cue Biologics, Compounds or Products;

 

6.2.14

Company has obtained all necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by it as of the Effective Date, as applicable, in connection with the execution, delivery and performance of this Agreement;

 

6.2.15

neither Company nor any of its Affiliates has obtained, or filed for, any INDs, NDAs or Marketing Authorizations for any Cue Biologics, Compounds or Products, and, to the best of Company’s knowledge, no other Person has obtained, or filed for, any INDs, NDAs or Marketing Authorizations for any Cue Biologics, Compounds or Products;

 

6.2.16

to the best of Company’s knowledge, Company (and its Affiliates) has not employed or otherwise used in any capacity, and will not employ or otherwise use in any capacity, the services of any Person debarred under United States law, including under Section 21 USC 335a or any foreign equivalent thereof, with respect to the Cue Biologics, Compounds or Products or otherwise in performing any portion of the Research Program.

 

6.2.17

to the best of Company’s knowledge, all research and development (including non-clinical studies) related to the Cue Biologics, Compounds and/or Products prior to the Effective Date has been conducted in accordance with all Applicable Laws;

 

6.2.18

except for the Third Party licenses and agreements resulting from the receipt of certain grants by Albert Einstein from the United States Government, there are no agreements (including any licenses), written or oral, granting any licenses or other rights to (or from) Company (or any of its Affiliates) relating to the Cue Biologics, Compounds or Products or the Company Know-How or Company Patent Rights;

 

6.2.19

with respect to each Third Party license: (i) it is in full force and effect; (ii) neither Company nor any of its Affiliates is in breach thereof; (iii) neither Company nor any of its Affiliates has received any notice of breach or notice of threatened breach thereof; and (iv) neither Company nor any of its Affiliates has received any notice from the counterparty to such Third Party license of intent to reduce the scope of the field thereof or render any of the licenses thereunder non-exclusive, and no event, act or omission has occurred which could give rise to the right of the counterparty to such Third Party license to reduce the scope of the field thereof or render any of the licenses thereunder non-exclusive;

 

6.2.20

to the best of Company’s knowledge, all information and data provided by or on behalf of Company to Merck on or before the Effective Date in contemplation of this Agreement was and is true and accurate and complete in all material respects, and Company has not intentionally disclosed, failed to disclose, or cause to be disclosed, any information or data that would reasonably be expected to cause the information and data that has been disclosed to be misleading in any material respect; and

 

 

6.2.21

it has or ensures that it will have the resources and capabilities to do the work contemplated by the Research Program.

 

For purposes of the above representations, the phrase “to the best of Company’s knowledge” means that the employee(s) of the Company with responsibility for the matter have conducted a reasonable inquiry regarding such matter.

 

6.3

Company Third Party License Agreements Representations, Warranties and Covenants. Company represents and warrants to Merck that it has provided to Merck as of the Effective date a true, correct and complete copy of each relevant Company Third Party license agreements, and each such copy includes any and all amendments, restatements, side letters, and other modifications thereto, as each such Company Third Party license agreement is in effect as of the Effective Date. Company further covenants and agrees that during the Term, (a) it shall satisfy all of its obligations under (including making all payments), and take all steps to maintain in full force and effect, each such relevant Company Third Party license agreements; (b) it will not assign (except an assignment to a party to which this Agreement has been assigned as permitted under Section 9.2), amend, restate, amend and restate, terminate in whole or in part, or otherwise modify any of the Company Third Party license agreements necessary or useful to Merck’s exercise of the rights granted in this Agreement without the prior written consent of Merck; (c) it will provide Merck with prompt notice of any claim of a breach under any of the Company Third Party license agreements or notice of termination of any of the Company Third Party license agreements, made by either Company or the counterparty to such Company Third Party license agreement (or any party acting on behalf of such counterparty); and, (d) it will promptly send to Merck copies of all other material correspondence to or from the counterparty to such Company Third Party license agreement related to such Company Third Party license agreement. For the purposes of clarity, Company (and not Merck) shall be responsible for all of the financial and other obligations of Company (and/or any of its Affiliates) under any of the Company Third Party license agreements, including any and all financial obligations thereunder with respect to Net Sales of Merck and its Related Parties. Merck shall have the right, in its sole discretion, to terminate this Agreement immediately upon written notice to Company pursuant to Section 8.3, in the event that Company is in breach of this Section 6.3.

 

Article 7 PATENT PROVISIONS.

 

7.1

[****]

 

 

 

 

(a)

Merck shall have the sole right to file, prosecute, maintain and defend patent applications on Merck Information and Inventions (“Merck Other Information and Inventions”);

 

(b)

Company shall have the sole right to file, prosecute, maintain and defend patent applications on Company Information and Inventions (“Company Other Information and Inventions”); and

 

(c)

The Patent Committee will review proposed patent filings pertaining to Joint Other Information and Inventions. A Party that believes that a patent application should be filed regarding any Joint Information and Inventions which constitute Other Information and Inventions (“Joint Other Information and Inventions”) shall bring the matter to the attention of the Patent Committee and the Patent Committee shall discuss how to proceed. If Merck takes the lead in filing and prosecuting the application, then the Parties shall follow the general procedure described in Section 7.1.1. If Company takes the lead in filing and prosecuting the application, then the Parties shall follow the general procedure described in Section 7.1.2. If both Parties agree that a patent application regarding any Joint Information and Inventions should be filed, then the Parties will split the costs evenly or as otherwise agreed. If only one Party believes that a patent application regarding any Joint Information and Inventions should be filed, then that Party shall bear all costs unless the Parties agree otherwise.

 

7.1.4

Patent Term Extension. The Parties shall cooperate fully with each other to provide necessary information and assistance, as the other Party may reasonably request, in obtaining patent term extension or supplemental protection certificates or their equivalents in any country in the Territory where applicable to Company Patent Rights and Joint Patent Rights. In the event that elections with respect to obtaining such patent term extension are to be made, Merck shall have the right to make the election and Company agrees to abide by such election.

 

7.1.5

Other Cooperation. The Parties agree to cooperate fully and provide any information and assistance that either may reasonably request for the filing, prosecution and maintenance of Company Patent Rights and Joint Patent Rights, including but not limited to the preparation and filing of any terminal disclaimers and other documents required to procure and preserve the protections under Applicable Law for all Company Patent Rights and Joint Patent Rights relevant to a Compound or Product. The Parties further agree to take reasonable actions to maximize the protections available under the safe harbor provisions of 35 U.S.C. 102(c) for U.S. patents and patent applications.

 

7.1.6

Filing, Prosecution and Maintenance Expenses. Unless stated otherwise herein, with respect to all filing, prosecution and maintenance activities under this Section 7.1, the filing and/or prosecuting Party shall be responsible for payment of all costs and expenses related to such activities.

 

7.1.7

Inventor Remuneration. Company shall comply with all applicable country-specific inventor remuneration laws and regulations, including Article 6 of the Third Amendment of Chinese Patent Law associated with Company Patent Rights and Joint Patent Rights when inventor remuneration obligations are triggered by an employee of Company and/or its Affiliates, or a Third Party acting on behalf of Company and/or its Affiliates.

 

 

7.2

Interference, Derivation, Opposition, Reexamination, Reissue, Supplemental Examination, Inter Partes Review and Post-Grant Review Proceedings.

 

[****]

 

 

 

7.2.3

Cooperation. In connection with any administrative proceeding under Section 7.2.1 or Section 7.2.2, Merck and Company shall cooperate fully and provide each other with any information or assistance that either may reasonably request. The Parties shall keep each other informed of developments in any such action or proceeding, including the status of any settlement negotiations and the terms of any offer related thereto. For any proceeding not controlled by Merck, Company shall obtain prior approval from Merck of any settlement offer or settlement agreement. For any proceeding specifically related to Platform Information and Inventions which is not controlled by Company, Merck shall obtain prior approval from Company of any settlement offer or settlement agreement.

 

7.2.4

Expenses. The Party controlling any administrative proceeding pursuant to Section 7.2.1 and Section 7.2.2 shall bear all expenses related thereto, unless the Parties agree otherwise.

 

7.3

Enforcement and Defense.

 

7.3.1

[****]

 

7.3.2

The Party having the first right to initiate and prosecute legal action pursuant to Section 7.3.1 shall promptly inform the other Party if it elects not to exercise its first right under Section 7.3.1 to initiate and prosecute legal action, and the other Party shall thereafter have the right to either initiate and prosecute such action or to control the defense of such declaratory judgment action in its name and, if necessary, the name of the other Party. The costs of any agreed-upon course of action to terminate infringement of Company Patent Rights or Joint Patent Rights or misappropriation or misuse of Company Know-How, including without limitation the costs of any legal action commenced or the defense of any declaratory judgment, shall be paid by the Party initiating and/or prosecuting the action. Each Party shall have the right to be represented by counsel of its own choice.

 

 

7.3.3

For any action to terminate any infringement of Company Patent Rights or Joint Patent Rights or any misappropriation or misuse of Company Know-How pursuant to Section 7.3.1, in the event that a Party is unable to initiate or prosecute such action solely in its own name, the other Party will join such action voluntarily and will execute and cause its Affiliates to execute all documents necessary for the Party to initiate litigation to prosecute and maintain such action under this Section 7.3. In connection with any action or potential action, Merck and Company will cooperate fully and will provide each other with any information or assistance that either may reasonably request, including cooperating with regard to any pre-litigation review of the Company Patent Rights and Joint Patent Rights. Each Party shall keep the other informed of developments in any action or proceeding. For any proceeding not controlled by Merck, Company shall obtain prior approval from Merck of any settlement offer or settlement agreement. For any proceeding specifically related to Platform Information and Inventions not controlled by Company, Merck shall obtain prior approval from Company of any settlement offer or settlement agreement.

 

7.3.4

Any recovery obtained by either or both Merck and Company in connection with or as a result of any action contemplated by this Section 7.3, whether by settlement or otherwise, shall be shared in order as follows:

 

(a)

the Party which initiated and prosecuted the action shall recoup all of its costs and expenses incurred in connection with the action;

 

(b)

the other Party shall then, to the extent possible, recover its costs and expenses incurred in connection with the action; and

 

(c)

the amount of any recovery remaining shall then be allocated between the Parties on a pro rata basis taking into consideration the relative economic losses suffered by each Party.

 

7.3.5

Company shall inform Merck of any matter of which it becomes aware concerning the submission of an application to the U.S. Food & Drug Administration under Section 351(k) of the U.S. Public Health Services Act (42 USC 262(k)), or to a similar agency under any similar provisions in a country in the Territory, seeking approval of a biosimilar or interchangeable biological product with regard to which Merck is a reference product sponsor involving Company Patent Rights or Joint Patent Rights (“Biosimilar Application”). Company shall provide Merck with the unopened Biosimilar Application within three (3) days of receipt. Notwithstanding the foregoing provisions of Article 7, Merck shall have the sole right, in its discretion, to control any legal action and any activity taken to resolve a dispute with respect to any infringement of Company Patent Rights or Joint Patent Rights with respect to any Biosimilar Application, including selection of any patents for listing under 42 U.S.C. §262(l), and Company shall have no rights in connection therewith. For any action with respect to any infringement of Company Patent Rights or Joint Patent Rights with respect to any Biosimilar Application, in the event that Merck is unable to initiate or prosecute such action solely in its own name, Company will join such action voluntarily and will execute and cause its Affiliates to execute all documents necessary for Merck to initiate, prosecute and maintain such action. In connection with any action, Company shall cooperate with Merck and provide Merck with information and assistance that Merck may reasonably request, including as defined in Section 7.3.3.

 

 

Article 8 TERM AND TERMINATION

 

8.1

Term and Expiration. This Agreement shall be effective as of the Effective Date and unless terminated earlier pursuant to Section 8.2 or Section 8.3, this Agreement shall continue in full force and effect until one or more Products has received Marketing Authorization and, thereafter, until expiration of all royalty obligations hereunder. In the event that [***].

 

8.2

Termination by Merck. Notwithstanding anything contained herein to the contrary, Merck shall have the right to terminate this Agreement at any time in its sole discretion by giving thirty (30) days’ advance written notice to Company. For the avoidance of doubt, termination by Merck under this Section 8.2 can be effected only through a written notice specifically referring to this Section 8.2. No later than thirty (30) days after the effective date of such termination, each Party shall return or cause to be returned to the other Party all Information in tangible form received from the other Party and all copies thereof; provided, however, that each Party may retain one copy of Information received from the other Party in its confidential files for record purposes. In the event of termination under this Section 8.2: (i) each Party shall pay all amounts then due and owing as of the termination date; and (ii) except for the surviving provisions set forth in Section 8.4, the rights and obligations of the Parties hereunder shall terminate as of the date of such termination; provided, however, that upon payment of the License Fee pursuant to Section 5.1 Merck shall have a fully paid-up non-exclusive license under Company Information and Inventions and Company’s interest in Joint Information and Inventions to [***]. Upon termination, the Parties shall confer to determine how the Joint Patent Rights will be addressed.

 

8.3

Termination for Cause.

 

8.3.1

Cause for Termination. This Agreement may be terminated at any time during the term of this Agreement:

 

(a)

upon written notice by either Party if the other Party is in breach of its material obligations hereunder by causes and reasons within its control and has not cured such breach within ninety (90) days after notice requesting cure of the breach; provided, however, in the event of a good faith dispute with respect to the existence of a material breach, the ninety (90) day cure period shall be tolled until such time as the dispute is resolved pursuant to Section 9.7; or

 

(b)

by either Party upon the filing or institution of bankruptcy, reorganization, liquidation or receivership proceedings, or upon an assignment of a substantial portion of the assets for the benefit of creditors by the other Party; provided, however, that in the case of any involuntary bankruptcy proceeding such right to terminate shall only become effective if the Party consents to the involuntary bankruptcy or such proceeding is not dismissed within ninety (90) days after the filing thereof.

 

8.3.2

Effect of Termination for Cause on License.

 

(a)

If either Merck or Company terminates this Agreement under Section 8.3.1(a) or Section 8.3.1(b), then [***] shall terminate as of such termination date and each Party shall, within thirty (30) days after the effective date of such termination, return or cause to be returned to the other Party all Information of the other Party in tangible form and substances or compositions delivered or provided by the other Party, as well as any other material provided by the other Party in any medium; provided, however, that each Party may retain one copy of Information received from the other Party in its confidential files for record purposes.

 

 

(b)

[***].

 

(c)

Upon termination of this Agreement by Merck pursuant to Section 8.2, or by Company pursuant to Section 8.3.1(a), Merck and its Affiliates, sublicensees and distributors shall be entitled, during the twelve (12) month period immediately following the effective date of termination, to finish any work-in-progress and to sell any Product or Compound remaining in inventory, in accordance with the terms of this Agreement.

 

(d)

If this Agreement is terminated by Merck pursuant to Section 8.3.1(b) due to the rejection of this Agreement by or on behalf of Company under Section 365 of the United States Bankruptcy Code (the “Code”), all licenses and rights to licenses granted under or pursuant to this Agreement by Company to Merck are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the Code, licenses of rights to “intellectual property” as defined under Section 101(35A) of the Code. The Parties agree that Merck, as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Code, and that upon commencement of a bankruptcy proceeding by or against Company under the Code, Merck shall be entitled to a complete duplicate of or complete access to (as Merck deems appropriate), any such intellectual property and all embodiments of such intellectual property. Such intellectual property and all embodiments thereof shall be promptly delivered to Merck: (i) upon any such commencement of a bankruptcy proceeding upon written request therefore by Merck, unless Company elects to continue to perform all of its obligations under this Agreement; or (ii) if not delivered under (i) above, upon the rejection of this Agreement by or on behalf of Company upon written request therefore by Merck.

 

The foregoing provisions of Section 8.3.2(d) are without prejudice to any rights Merck may have arising under the Code or other applicable law.

 

8.4

[***]

 

8.5

Effect of Expiration or Termination; Survival. Expiration or termination of this Agreement shall not relieve the Parties of any obligation accruing prior to such expiration or termination. Any expiration or termination of this Agreement shall be without prejudice to the rights of either Party against the other accrued or accruing under this Agreement prior to expiration or termination, including without limitation the obligation to pay royalties for Product(s) or Compound sold prior to such expiration or termination. The provisions of Article 4 shall survive the expiration or termination of this Agreement and shall continue in effect for ten (10) years. In addition, the provisions of Article 1, Article 3, Article 6, Article 7, Article 8, Article 9 and Sections 2.6, 2.8, 2.9, 2.11 and 5.2 - 5.8 shall survive any expiration or termination of this Agreement.

 

 

Article 9 MISCELLANEOUS

 

9.1

Force Majeure. Neither Party shall be held liable to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in performing any obligation under this Agreement to the extent such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party, potentially including, but not limited to, embargoes, war, acts of war (whether war be declared or not), acts of terrorism, insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, fire, floods, or other acts of God, or acts, omissions or delays in acting by any governmental authority or the other Party. The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably practical, and shall promptly undertake all reasonable efforts necessary to cure such force majeure circumstances.

 

9.2

Assignment/Change of Control. Except as provided in this Section 9.2, this Agreement may not be assigned or otherwise transferred, nor may any right or obligation hereunder be assigned or transferred, by either Party without the consent of the other Party.

 

9.2.1

Merck may, without consent of Company, assign this Agreement and its rights and obligations hereunder in whole or in part to an Affiliate of Merck or in connection with a Change of Control.

 

9.2.2

Company may assign this Agreement in its entirety to the successor party in connection with a Change of Control. In the event that there is a Company Change of Control that is a Competing Pharma Change of Control, then Company shall provide written notice to Merck at least thirty (30) days prior to the completion of such Change of Control, i.e., the closing of the transaction that results in Change of Control, and Merck shall have the right, at Merck election at any time after such Change of Control to implement some or all of the following revisions to this Agreement:

 

(a)

Merck may limit its obligations to provide Company royalty related reports pursuant to Section 5.5 to reporting only Merck’s total royalty obligations; provided that, Merck will, if requested by Company, provide royalty reports specified in such Section 5.5 to an independent certified public accounting firm for auditing in accordance with Section 5.6.

 

(b)

Merck shall have the right to require Company, including the Change of Control party, to adopt reasonable procedures to be agreed upon in writing with Merck to prevent the disclosure of all Information of Merck and other information with respect to the Research, Development, Manufacture and Commercialization of Compounds and Products (collectively “Sensitive Information”) beyond Company personnel having access to and knowledge of Sensitive Information prior to the Change of Control and to control the dissemination of Sensitive Information disclosed after the Change of Control. The purposes of such procedures shall be to strictly limit such disclosures to only those personnel having a need to know Sensitive Information in order for Company to perform its obligations under this Agreement and to prohibit the use of Sensitive Information for competitive reasons against Merck and its Related Parties, and for Compounds or Products, including without limitation, the use of Sensitive Information for the research, development or commercialization of competing products.

 

 

9.2.3

In the event that there is a Company Change of Control: [***].

 

9.2.4

Any attempted assignment not in accordance with this Section 9.2 shall be void. Any permitted assignee shall assume all assigned obligations of its assignor under this Agreement.

 

9.3

Use of Affiliates. Merck shall have the right to exercise its rights and perform its obligations under this Agreement either itself or through any of its Affiliates.

 

9.4

Severability. If any one or more of the provisions contained in this Agreement is held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affects the substantive rights of the Parties. The Parties shall in such an instance use reasonable efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, implement the purposes of this Agreement.

 

 

9.5

Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

 

	if to Company, to:	Cue Biopharma, Inc. 675 West Street Cambridge, MA 02142 Attention: Daniel Passeri, President and CEO Email: dpasseri@cuebio.com
	and:	Mark R. Busch K&L Gates LLP 214 North Tryon Street, 47th Floor Charlotte, NC 28202 Phone: 704.331.7440 Fax: 704.353.3694 mark.busch@klgates.com
	if to Merck, to:	Merck Sharp & Dohme Corp. One Merck Drive Whitehouse Station, NJ 08889-0100 Attention: Office of Secretary Facsimile No.: (908) 735-1246
	And	Merck Sharp & Dohme Corp. 2000 Galloping Hill Road PO Box 539 Mailstop K-1-4161 Kenilworth, NJ 07033-1310 Attention: Senior Vice President, Business Development

 

or to such other address(es) as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by facsimile on a business day (or if delivered or sent on a non-business day, then on the next business day); (b) on the business day after dispatch if sent by nationally-recognized overnight courier; or (c) on the fifth (5th) business day following the date of mailing, if sent by mail. The Parties hereby agree that, to the extent permitted by law, any notice provided in accordance with this Section 9.5 shall constitute due service of process with respect to any legal proceeding between the Parties arising hereunder and that compliance with the Hague Convention for the Service of Process, if otherwise applicable, shall not be required.

 

9.6

Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without reference to any rules of conflict of laws or renvoi.

 

 

9.7

Dispute Resolution.

 

9.7.1

The Parties shall negotiate in good faith and use reasonable efforts to settle any dispute, controversy or claim arising from or related to this Agreement or the breach thereof (a “Dispute”). Any Party shall give the other Party written notice of any Dispute not resolved in the normal course of business. Within twenty (20) days from the date of delivery of such notice, the receiving Party shall submit to the other Party a written response. The notice and response shall include (a) a statement of that Party's position and a summary of arguments supporting that position, and (b) the name and title of the executive who will represent that Party and of any other person who will accompany the executive. Within forty-five (45) days from the date of delivery of the initial notice, the executives of both Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the Dispute. These executives shall have the authority to settle the Dispute and shall be at a higher level of management than the persons with direct responsibility for administration of this Agreement. All negotiations pursuant to this paragraph are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

 

9.7.2

If the Parties do not fully settle following the procedure in Section 9.7.1, and a Party wishes to pursue the matter, each dispute, controversy or claim arising from or related to this Agreement or the breach thereof that is not an “Excluded Claim” shall be brought in the federal court for the Southern District of New York, if federal jurisdiction is available, or, alternatively, in the state court in the borough of Manhattan, New York City, New York. Each of the Parties hereby submits to the exclusive jurisdiction of such courts for the purpose of any such litigation; provided, that a final judgment in any such litigation shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party irrevocably and unconditionally agrees not to assert (a) any objection which it may ever have to the laying of venue of any such litigation in such courts, (b) any claim that any such litigation brought in any such court has been brought in an inconvenient forum, and (c) any claim that such court does not have jurisdiction with respect to such litigation. Each party irrevocably and unconditionally waives any right to a trial by jury and agrees that any of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained-for agreement among the Parties irrevocably to waive its right to trial by jury in any LITIGATION.

 

9.7.3

As used in this Section 9.7, the term “Excluded Claim” shall mean a dispute, controversy or claim that concerns (a) a decision by the Joint Steering Committee, the Patent Committee, or Merck within the proper scope of the Committee’s authority pursuant to Section 2.4 or Section 2.5, or an issue concerning the integrity of data submitted to a regulatory agency, neither of which shall be arbitrable or justiciable in any forum; (b) the validity or infringement of a patent, trademark or copyright; or (c) any antitrust, anti-monopoly or competition law or regulation, whether or not statutory. Any action concerning Excluded Claims identified in clauses (b) and (c) of this Paragraph may be brought in any court having jurisdiction.

 

9.8

Limitation of Liability. Notwithstanding anything to the contrary contained herein, no party shall be liable to another party under any theory for any special, incidental, indirect, consequential or other similar damages, or any punitive damages, whether arising directly or indirectly out of the transactions contemplated by this Agreement. To be clear, neither party shall be entitled to recover for any lost profit or lost sale damages of any kind, whether those claimed damages are direct or indirect.

 

 

9.9

Entire Agreement; Amendments. This Agreement, together with the Schedules and Exhibits hereto, contains the entire understanding of the Parties with respect to the subject matter hereof. Any other express or implied agreements and understandings, negotiations, writings and commitments, either oral or written, with respect to the subject matter hereof are superseded by the terms of this Agreement. The Schedules and Exhibits to this Agreement are incorporated herein by reference and shall be deemed a part of this Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by authorized representative(s) of both Parties hereto.

 

Notwithstanding anything to the contrary in the foregoing, that certain confidentiality agreement between the Parties dated as of May 15, 2017, shall remain in full force and effect with respect to the subject matter thereof and information disclosed thereunder.

 

9.10

Headings. The captions to the several Articles, Sections and subsections hereof are not a part of this Agreement, but are merely for convenience to assist in locating and reading the several Articles and Sections hereof.

 

9.11

Independent Contractors. It is expressly agreed that Company and Merck shall be independent contractors and that the relationship between the two Parties shall not constitute a partnership, joint venture or agency. Neither Company nor Merck shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of the other Party.

 

9.12

Waiver. The waiver by either Party hereto of any right hereunder, or of any failure of the other Party to perform, or of any breach by the other Party, shall not be deemed a waiver of any other right hereunder or of any other breach by or failure of such other Party whether of a similar nature or otherwise.

 

9.13

Waiver of Rule of Construction. Each Party has had the opportunity to consult with counsel in connection with the review, drafting and negotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this Agreement shall be construed against the drafting Party shall not apply.

 

9.14

Certain Conventions. Any reference in this Agreement to an Article, Section, subsection, paragraph, clause, Schedule or Exhibit shall be deemed to be a reference to an Article, Section, subsection, paragraph, clause, Schedule or Exhibit, of or to, as the case may be, this Agreement, unless otherwise indicated. Whenever this Agreement refers to a number of days, unless otherwise specified, such number refers to calendar days. Unless the context of this Agreement otherwise requires, (a) words of any gender include each other gender, (b) words such as “herein”, “hereof”, and “hereunder” refer to this Agreement as a whole and not merely to the particular provision in which such words appear, (c) words using the singular shall include the plural, and vice versa.

 

9.15

Business Day Requirements. In the event that any notice or other action or omission is required to be taken by a Party under this Agreement on a day that is not a business day (excluding notices required under Section 3.6), then such notice or other action or omission shall be deemed to be required to be taken on the next occurring business day.

 

 

Counterparts. This Agreement may be signed in any number of counterparts (including by facsimile or electronic transmission), each of which shall be deemed an original, but all of which shall constitute one and the same instrument. After facsimile or electronic transmission, the Parties agree to execute and exchange documents with original signatures.

 

[Remainder of page intentionally left blank. Signature page follows.]

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

 

MERCK SHARP & DOHME CORP.			CUE BIOPHARMA, INC.
BY:	/s/ [***]		BY:	/s/ Daniel Passeri
	[***]			Daniel Passeri
TITLE: Senior Vice President and Global			TITLE: President and CEO
Head of Business Development & Licensing

 

 

Exhibit 10.22

 

CUE BIOPHARMA, INC.

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Executive Employment Agreement (“Agreement”), dated as of November 15, 2017 (the “Effective Date”), is made by and between Cue Biopharma, Inc., a Delaware corporation (“Cue”) and Colin Sandercock (“Executive,” and together with Cue, the “Parties”).

 

WHEREAS, Cue desires to employ Executive, and Executive desires to be so employed, pursuant to the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing, of the mutual promises contained herein and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

1.

POSITION AND DUTIES.

 

(a)          Cue shall employ Executive as its Senior Vice President and General Counsel (“General Counsel”), beginning December 4, 2017. In his role as General Counsel, Executive shall have such duties and authority commensurate with the position of General Counsel, and such other duties commensurate with the positions that may be assigned by the Board of Directors of Cue (the “Board”), or the Chief Executive Officer of Cue (the “CEO”).

 

(b)          Executive shall report directly to the CEO.

 

(c)          During the Term (as defined below), Executive shall devote all of Executive’s business time, energy, judgment, knowledge and skill and Executive’s best efforts to the performance of Executive’s duties with Cue, provided that the foregoing shall not prevent Executive from (i) providing legal services to unrelated third-party clients as needed, (ii) participating in charitable, civic, educational, professional, community or industry affairs or (iii) managing Executive’s passive personal investments, so long as such activities of (i)-(iii) above are generally conducted outside of normal business hours or require de minimis amounts of Executive’s time, unless otherwise approved by the Company, and in the aggregate do not interfere or conflict with Executive’s duties hereunder or create a potential business or fiduciary conflict.

 

2.            TERM. Subject to the remaining terms of this Section 2, this Agreement shall be for an initial term that begins on the Effective Date and continues in effect through December 31, 2018 (the “Initial Term”) and, unless terminated sooner as herein provided, shall continue on a year-to-year basis after the Initial Term (each year, a “Renewal Term,” and each Renewal Term together with the Initial Term, the “Term”). If either Party elects not to renew this Agreement, that Party must give a written notice of non-renewal to the other Party at least 60 days before the expiration of the then-current Initial Term or Renewal Term. In the event that one Party provides the other with a notice of non-renewal pursuant to this Section 2, no further automatic extensions shall occur and this Agreement shall terminate at the end of the then-existing Initial Term or Renewal Term, as applicable. If Cue provides Executive with notice of non-renewal, then the compensation provisions of Section 8(c) for Termination Without Cause shall be paid to Executive.

 

3.            BASE SALARY. Cue shall pay Executive a base salary (“Base Salary”) at an annual rate of $275,000 during the Term, in accordance with the regular payroll practices of Cue. The Base Salary shall be subject to annual review and upward adjustment in accordance with the Company’s normal compensation practices.

 

 

4.           ANNUAL BONUS. Each year during the Term, Executive shall be eligible to receive an annual incentive bonus (the “Annual Bonus”) of up to 20% of the Base Salary, subject to achievement of key performance indicators for Cue, with the level of achievement determined by the Compensation Committee of the Board or its delegate (the “Committee”) in its sole discretion. The Committee shall establish such key performance indicators in its sole discretion and in consultation with Executive. The terms of the Annual Bonus developed by the Committee shall govern any Annual Bonus that may be paid. Any Annual Bonus shall be paid in all events within two and one-half months after the end of the year in which such Annual Bonus becomes earned, provided that no Annual Bonus shall be considered earned until the Board makes all necessary determinations with respect to the Annual Bonus.

 

5.

STOCK OPTIONS.

 

(a)          NUMBER OF SHARES. Upon completion of a Financing (defined below), Executive shall be granted Options (as defined in the Cue Biopharma, Inc. 2016 Omnibus Incentive Plan (the “Plan”)) to purchase 250,000 shares of Cue’s common stock (the “Common Stock”) (the “Options”) pursuant to award agreements substantially in the forms previously provided to Executive.

 

(b)          EXERCISE PRICE; TERM. The exercise price per share of the Options shall be equal to the price at which shares of Common Stock are sold in the Company’s initial public offering or other equity financing transaction, whichever occurs first (a “Financing Transaction”). The Options shall have a term that expires seven years from the Grant Date.

 

(c)          PLAN TERMS CONTROL. The Options shall be subject to the terms and conditions applicable to Options granted under the Plan, as described in the Plan and the applicable Award Agreement (as defined in the Plan).

 

6.

EMPLOYEE BENEFITS.

 

(a)          BENEFIT PLANS. During the Term, Executive shall be entitled to participate in any employee benefit plans that Cue has adopted or may adopt, maintains or contributes to for the benefit of its employees generally, subject to satisfying the applicable eligibility requirements, except to the extent such plans are duplicative of the benefits otherwise provided to Executive hereunder. Executive’s participation shall be subject to the terms of the applicable plan documents and generally applicable Cue policies. Notwithstanding the foregoing, Cue may modify or terminate any employee benefit plan at any time.

 

(b)          VACATIONS. During the Term, Executive shall be entitled to paid vacation time in accordance with Cue’s policy applicable to senior management employees as in effect from time to time (the “Vacation Policy”); provided, however, that Executive shall be entitled to no less than 20 days of paid vacation per calendar year, prorated for any partial years of employment. Unused vacation time may not be carried forward from one calendar year to any subsequent calendar year, except to the extent specifically permitted under the Vacation Policy.

 

(c)          BUSINESS EXPENSES. Upon presentation of reasonable substantiation and documentation as Cue may require from time to time, Executive shall be reimbursed in accordance with Cue’s expense reimbursement policy, for all reasonable out-of-pocket business expenses incurred and paid by Executive during the Term and in connection with the performance of Executive’s duties hereunder. Executive currently resides in McLean, Virginia and, as needed for Cue business and pursuant to the direction of the CEO, Executive shall travel to Boston or elsewhere as directed by the CEO, and all reasonable expenses for travel, lodging and meals to and from Boston or elsewhere as directed by the CEO, shall constitute reasonable out-of-pocket business expenses.

 

7.           TERMINATION. Executive’s employment under this Agreement shall terminate on the first to occur of the following:

 

 

 

(a)          DISABILITY. Upon 90 days’ prior written notice by Cue to Executive of termination due to Disability. “Disability” shall mean Executive is unable to perform each of the essential duties of Executive’s position by reason of a medically determinable physical or mental impairment that is potentially permanent in character or that can be expected to last for a continuous period of not less than 12 months.

 

(b)          DEATH. Automatically upon the death of Executive.

 

(c)          CAUSE. Immediately upon written notice by Cue to Executive of a termination for Cause. “Cause” shall mean:

 

(i)          the commission of any act by Executive constituting financial dishonesty against Cue or its Affiliates (which act would be chargeable as a crime under applicable law);

 

(ii)         Executive’s engaging in any other act of dishonesty, fraud, intentional misrepresentation, moral turpitude, illegality or harassment that would (a) materially adversely affect the business or the reputation of Cue or any of its Affiliates with their respective current or prospective customers, suppliers, lenders or other third parties with whom such entity does or might do business or (b) expose Cue or any of its Affiliates to a risk of civil or criminal legal damages, liabilities or penalties;

 

(iii)        the repeated failure by Executive to follow the lawful directives of the Board or CEO;

 

(iv)        any willful, material misconduct, willful violation of Cue’s or its Affiliates’ policies, or willful and deliberate non-performance of duty by Executive in connection with the business affairs of Cue or its Affiliates; or

 

(v)         Executive’s material breach of a material term of this Agreement.

 

Executive shall be given written notice detailing the specific Cause event and a period of 30 days following Executive’s receipt of such notice to cure such event in all material respects (if susceptible to cure) to the reasonable satisfaction of the Board. All rights Executive has or may have under this Agreement shall be suspended automatically during the pendency of any investigation by the Board or its designee, or during any negotiations between the Board or its designee and Executive, regarding any actual or alleged act or omission by Executive of the type described in this definition of Cause. For purposes of this Section 7(c), no action or failure to act on Executive’s shall be considered “willful” unless done or omitted by Executive in bad faith and without reasonable belief that his action was in the best interests of the Company.

 

(d)          GOOD REASON. Upon written notice by Executive to Cue of a termination for Good Reason. “Good Reason” shall mean the occurrence of any of the following events, without the consent of Executive, unless such events are fully corrected in all material respects (if susceptible to cure) by Cue within 30 days following written notification by Executive to Cue of the occurrence of one of the events:

 

(i)          a diminution in Executive’s Base Salary or Annual Bonus opportunity;

 

(ii)         a material diminution in Executive’s authority, responsibilities or duties set forth in Section 1 above, other than temporarily while physically or mentally incapacitated, as required by applicable law; or

 

(iii)        a material breach by Cue of a material term of this Agreement.

 

 

Executive shall provide Cue with a written notice detailing the specific circumstances alleged to constitute Good Reason within 30 days after the occurrence of such circumstances, and actually terminate employment within 30 days following the expiration of Cue’s 30-day cure period described above. Otherwise, any claim of the occurrence of such circumstances as Good Reason shall be deemed irrevocably waived by Executive. For clarity, a waiver of the occurrence of circumstances that constitute Good Reason shall not act as a waiver for any other occurrence of circumstances that constitute Good Reason.

 

(e)          WITHOUT CAUSE. Upon 120 days written notice by Cue to Executive of an involuntary termination without Cause (other than for death or Disability).

 

(f)          VOLUNTARY TERMINATION. Upon 60 days’ prior written notice by Executive to Cue of Executive’s voluntary termination of employment without Good Reason (which Cue may, in its sole discretion, make effective earlier than any notice date).

 

8.

CONSEQUENCES OF TERMINATION.

 

(a)          DEATH/DISABILITY. In the event that Executive’s employment ends on account of Executive’s death or Disability, Executive or Executive’s estate, as the case may be, shall be entitled to the following (with the amounts due under Sections 8(a)(i) through 8(a)(iv) below to be paid within 60 days following termination of employment, or such earlier date as may be required by applicable law):

 

(i)          any unpaid Base Salary through the date of termination;

 

(ii)         any Annual Bonus for the year prior to the year in which such termination occurs that is earned but unpaid prior to the date of termination;

 

(iii)        reimbursement for any unreimbursed business expenses incurred through the date of termination;

 

(iv)        any accrued but unused vacation time in accordance with Cue policy, which shall be prorated for any year in which Executive’s employment with Cue is terminated;

 

(v)         all other payments, benefits or fringe benefits to which Executive shall be entitled under the terms of any applicable compensation arrangement or benefit, equity or fringe benefit plan or program or grant (collectively, Sections 8(a)(i) through 8(a)(v) hereof shall be hereafter referred to as the “Accrued Benefits”);

 

(vi)        an Annual Bonus for the year in which such termination occurs, determined and payable pursuant to the terms and conditions of Section 4 above as though no such termination had occurred; and

 

(vii)        three months of Base Salary, with such lump sum payable on the first payroll date of Cue that occurs more than 60 days after Executive’s termination.

 

(b)          TERMINATION FOR CAUSE OR WITHOUT GOOD REASON. If Executive’s employment is terminated (i) by Cue for Cause or (ii) by Executive without Good Reason, Cue shall pay to Executive the Accrued Benefits (other than the Annual Bonus described in Section 8(a)(ii) above).

 

(c)          TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If Executive’s employment by Cue is terminated by Cue other than for Cause or Executive’s death or Disability or by Executive for Good Reason, Cue shall pay or provide Executive the following:

 

(i)          the Accrued Benefits; and

 

 

(ii)         subject to Executive’s compliance with Section 9 below and Executive’s continued compliance with Section 10 below, a lump sum cash severance payment in an amount equal to (A) the highest Annual Bonus payable for the year of termination, prorated based on the number of days that Executive is employed in such year through the date of termination plus (B) six months of Base Salary, with such lump sum payable on the first payroll date of Cue that occurs more than 60 days after Executive’s termination plus (C) if Executive elects to continue medical, dental or other insurance under COBRA following such termination, the Company shall pay the Executive for Executive’s COBRA premiums for such coverage for the six-month period after termination (collectively, the “Severance Amount”).

 

Payments and benefits provided under this Section 8(c) shall be in lieu of any termination or severance payments or benefits to which Executive may be eligible under any of the plans, policies or programs of Cue or under the Worker Adjustment Retraining Notification Act of 1988, as amended, or any similar state statute or regulation. Should Executive die prior to the payment of the Severance Amount, the Severance Amount shall be paid to the heirs or estate of Executive in accordance with the schedule set forth herein.

 

(d)          OTHER OBLIGATIONS. Upon any termination of Executive’s employment with Cue, Executive shall automatically be deemed to have resigned from any and all other positions he then holds as an officer, director or fiduciary of Cue and any other entity that is part of the same consolidated group as Cue or in which capacity Executive serves at the direction of or as a result of his position with Cue; and Executive shall, within 10 days of such termination, take all actions as may be necessary under applicable law or requested by Cue to effect any such resignations.

 

(e)          EXCLUSIVE REMEDY. The amounts payable to Executive following termination of employment hereunder pursuant to Sections 8(a), (b) and (c) above shall be in full and complete satisfaction of Executive’s rights under this Agreement and any other claims that Executive may have in respect of Executive’s employment with Cue or any of its Affiliates, and Executive acknowledges that such amounts are fair and reasonable, and are Executive’s sole and exclusive remedy, in lieu of all other remedies at law or in equity, with respect to the termination of Executive’s employment hereunder or any breach of this Agreement.

 

(f)          NO MITIGATION OR OFFSET. Executive shall not be required to seek or accept other employment or otherwise to mitigate damages as a condition to the receipt of benefits pursuant to this Section 8, and amounts payable pursuant to this Section 8 shall not be offset or reduced by any amounts received by Executive from other sources.

 

(g)          NO WAIVER OF ERISA-RELATED RIGHTS. Nothing in this Agreement shall be construed to be a waiver by Executive of any benefits accrued for or due to Executive under any employee benefit plan (as such term is defined in the Employee Retirement Income Security Act of 1974, as amended) maintained by Cue, if any, except that Executive shall not be entitled to any severance benefits pursuant to any severance plan or program of Cue other than as provided herein.

 

(h)          CLAWBACK. All awards, amounts or benefits received or outstanding under this Agreement shall not be subject to clawback, cancellation, recoupment, rescission, payback, reduction or other similar action unless required by law.

 

9.            RELEASE. Any and all amounts payable and benefits or additional rights provided pursuant to this Agreement upon termination beyond the Accrued Benefits shall only be payable if Executive delivers to Cue and does not revoke a general release of claims in favor of Cue in a form satisfactory to Cue. Such release shall be furnished to Executive within two business days after Executive’s date of termination, and must be executed and delivered (and no longer subject to revocation, if applicable) within 30 days following termination (or such longer period to the extent required by law).

 

 

10.

RESTRICTIVE COVENANTS.

 

(a)

Confidentiality.

 

(i)          Company Information. At all times during the Term and thereafter, Executive shall hold in strictest confidence, and shall not use, except in connection with the performance of Executive’s duties, and shall not disclose to any person or entity, any Confidential Information of Cue. “Confidential Information” means any Cue proprietary or confidential information, technical data, trade secrets or know-how, including research, product plans, products, services, customer lists and customers, markets, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, marketing, distribution and sales methods and systems, sales and profit figures, finances and other business information disclosed to Executive by Cue, either directly or indirectly in writing, orally or by drawings or inspection of documents or other tangible property. However, Confidential Information does not include any of the foregoing items which has become publicly known and made generally available through no wrongful act of Executive.

 

(ii)         Executive-Restricted Information. During the Term, Executive shall not improperly use or disclose any proprietary or confidential information or trade secrets of any person or entity with whom Executive has an agreement or duty to keep such information or secrets confidential.

 

(iii)        Third Party Information. Executive recognizes that Cue has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on Cue’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. At all times during the Term and thereafter, Executive shall hold in strictest confidence, and shall not use, except in connection with the performance of Executive’s duties, and shall not disclose to any person or entity, such third party confidential or proprietary information, and shall not use it except as necessary in performing Executive’s duties, consistent with Cue’s agreement with such third party.

 

(b)

NONSOLICITATION; NONINTERFERENCE.

 

(i)          During Executive’s employment with Cue and for a period of 24 months thereafter, Executive shall not, except in the furtherance of Executive’s duties with Cue, directly or indirectly, individually or on behalf of any other person or entity, (i) solicit, aid or induce any customer of Cue or its Affiliates with whom Executive had meaningful business contact to purchase goods or services then sold by Cue or its Affiliates from another person or entity or assist or aid any other person or entity with whom Executive had meaningful business contact in identifying or soliciting any such customer, or (ii) interfere, or aid or induce any other person or entity with whom Executive had meaningful business contact in interfering, with the relationship between Cue or its Affiliates and any of their respective vendors, customers, joint venturers, licensees or licensors. If a customer of Cue or its Affiliates contacts Executive about legal representation, Executive shall be free to provide legal representation consistent with the Rules of Professional Conduct of the applicable jurisdiction.

 

(ii)         During Executive’s employment with Cue and for a period of 24 months thereafter, Executive shall not, except in the furtherance of Executive’s duties with Cue, directly or indirectly, individually or on behalf of any other person or entity, solicit, aid or induce any employee, consultant, representative or agent of Cue or its Affiliates (or any employee, consultant, representative or agent who has left the employment or retention of Cue or its Affiliates less than one year prior to the date that Executive solicits, aids or induces such person or entity (a “Covered Person”)) to any other person or entity unaffiliated with Cue or hire or retain any such employee, consultant, representative or agent or any Covered Person, or take any action to materially assist or aid any other person or entity in identifying, hiring or soliciting any such employee, consultant, representative or agent or any Covered Person.

 

 

(c)          NONDISPARAGEMENT. Executive shall not make negative comments or otherwise disparage Cue or any company or other trade or business that “controls,” is “controlled by” or is “under common control with,” Cue within the meaning of Rule 405 of Regulation C under the Securities Act, including any “subsidiary corporation” of Cue within the meaning of Section 424(f) of the Internal Revenue Code of 1986 (“Affiliates”) or any of their officers, directors, managers, employees, consultants, equityholders, agents or products. The foregoing shall not be violated by truthful statements (i) in response to legal process, required governmental testimony or filings or administrative or arbitral proceedings (including depositions in connection with such proceedings) or (ii) made in the course of Executive discharging his duties for Cue.

 

(d)          COOPERATION. Upon the receipt of reasonable notice from Cue, while employed by Cue and thereafter, Executive shall respond and provide information with regard to matters in which Executive has knowledge as a result of Executive’s employment with Cue, and shall provide reasonable assistance to Cue, its Affiliates and their respective representatives in defense of any claims that may be made against Cue or its Affiliates, and shall assist Cue and its Affiliates in the prosecution of any claims that may be made by Cue or its Affiliates, to the extent that such claims may relate to the period of Executive’s employment with Cue (collectively, the “Claims”). Executive shall promptly inform Cue if Executive becomes aware of any lawsuits involving Claims that may be filed or threatened against Cue or its Affiliates. Executive also shall promptly inform Cue (to the extent that Executive is legally permitted to do so) if Executive is asked to assist in any investigation of Cue or its Affiliates (or their actions) or another party attempts to obtain information or documents from Executive (other than in connection with any litigation or other proceeding in which Executive is a party-in-opposition) with respect to matters Executive believes in good faith to relate to any investigation of Cue or its Affiliates, in each case, regardless of whether a lawsuit or other proceeding has then been filed against Cue or its Affiliates with respect to such investigation, and shall not do so unless legally required. During the pendency of any litigation or other proceeding involving Claims, Executive shall not communicate with anyone (other than Executive’s attorneys and tax and/or financial advisors and except to the extent that Executive determines in good faith is necessary in connection with the performance of Executive’s duties hereunder) with respect to the facts or subject matter of any pending or potential litigation or regulatory or administrative proceeding involving Cue or any of its Affiliates without getting the prior written consent of Cue. Upon presentation of appropriate documentation, Cue shall pay or reimburse Executive for all reasonable out-of-pocket travel, duplicating or telephonic expenses incurred by Executive in accordance with Cue’s applicable policies in complying with this Section 10(e), and Executive shall be compensated by Cue at a reasonable hourly rate for assistance given after the end of the Term.

 

(e)          Ownership of Information, Ideas, Concepts, Improvements, Discoveries and Inventions, and all Original Works of Authorship.

 

(i)          As between the Parties, all information, ideas, concepts, improvements, discoveries and inventions, whether patentable or not, which are conceived, made, developed or acquired by Executive or which are disclosed or made known to Executive, individually or in conjunction with others, during the Term and which relate to Cue’s business, products or services (including all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of clients or customers or their requirements, the identity of key contacts within the client or customers’ organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names and marks) are and shall be the sole and exclusive property of Cue. Moreover, all drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, maps and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries and inventions are and shall be the sole and exclusive property of Cue.

 

 

(ii)         In particular, Executive hereby specifically assigns and transfers to Cue all of Executive’s worldwide right, title and interest in and to all such information, ideas, concepts, improvements, discoveries or inventions, and any United States or foreign applications for patents, inventor’s certificates or other industrial rights that may be filed thereon, and applications for registration of such names and marks. During the Term and thereafter, Executive shall assist Cue and its nominee at all times in the protection of such information, ideas, concepts, improvements, discoveries or inventions, both in the United States and all foreign countries, including the execution of all lawful oaths and all assignment documents requested by Cue or its nominee in connection with the preparation, prosecution, issuance or enforcement of any applications for United States or foreign letters patent, and any application for the registration of such names and marks.

 

(iii)        Moreover, if during the Term, Executive creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as reports, videotapes, written presentations, computer programs, drawings, maps, architectural renditions, models, manuals, brochures or the like) relating to Cue’s business, products or services, whether such work is created solely by Executive or jointly with others, Cue shall be deemed the author of such work if the work is prepared by Executive in the scope of Executive’s employment; or, if the work is not prepared by Executive within the scope of Executive’s employment but is specially ordered by Cue as a contribution to a collective work, as a part of any written or audiovisual work, as a translation, as a supplementary work, as a compilation or as an instructional text, then the work shall be considered to be work made for hire and Cue shall be the author of the work. In the event such work is neither prepared by Executive within the scope of Executive’s employment or is not a work specially ordered and deemed to be a work made for hire, then Executive shall assign, and by these presents, does assign, to Cue all of Executive’s worldwide right, title and interest in and to such work and all rights of copyright therein. Both during the Term and thereafter, Executive shall assist Cue and its nominee, at any time, in the protection of Cue’s worldwide right, title and interest in and to the work and all rights of copyright therein, including the execution of all formal assignment documents requested by Cue or its nominee and the execution of all lawful oaths and applications for registration of copyright in the United States and foreign countries; provided, however, that Executive shall be compensated by Cue at a reasonable hourly rate for assistance given after the end of the Term.

 

(iv)        Notwithstanding the foregoing provisions of this Section 10(f), Cue hereby notifies Executive that the provisions of this Section 10(f) shall not apply to any inventions for which no equipment, supplies, facility or trade secret information of Cue was used and which were developed entirely on Executive’s own time, unless (A) the invention relates (1) to the business of Cue, or (2) to actual or demonstrably anticipated research or development of Cue, or (B) the invention results from any work performed by Executive for Cue.

 

(f)          RETURN OF COMPANY PROPERTY. On the date of Executive’s termination of employment with Cue for any reason (or at any time prior thereto at Cue’s request), Executive shall return all property belonging to Cue or its Affiliates (including any Cue or Affiliate-provided laptops, computers, cell phones, wireless electronic mail devices or other equipment, or documents or property belonging to Cue or an Affiliate).

 

(g)          EFFECT OF EXECUTIVE BECOMING A BAD LEAVER. Notwithstanding any provision of this Agreement to the contrary, if (i) Executive breaches any of the covenants set forth in this Agreement at any time during the period commencing on the Effective Date and ending 24 months after Executive’s termination of employment with Cue for any reason and (ii) Executive fails to cure such breach within 30 days of the effective date of written notice of such breach given by Cue, then Executive shall be deemed a “Bad Leaver.” If Executive is or becomes a Bad Leaver, then (i) any severance being paid to Executive pursuant to this Agreement or otherwise shall immediately cease upon commencement of such action.

 

(h)          TOLLING. If Executive violates any of the terms of the restrictive covenant obligations articulated herein, the balance of any such obligation at issue will run from the first date on which Executive ceases to be in violation of such obligation.

 

 

11.         EQUITABLE RELIEF AND OTHER REMEDIES. Executive acknowledges that Cue’s remedies at law for a breach or threatened breach of any of the provisions of Section 10 above would be inadequate and in the event of such a breach or threatened breach, in addition to any remedies at law, Cue, without posting any bond, shall be entitled to seek to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy that may then be available, without the necessity of showing actual monetary damages or the posting of a bond or other security.

 

12.         NO ASSIGNMENTS. This Agreement is personal to each of the Parties. Except as provided in this Section 12, neither Party may assign or delegate any rights or obligations hereunder without first obtaining the written consent of the other Party. Cue may assign this Agreement to any of its Affiliates or to any successor to all or substantially all of the business and/or assets of Cue, provided that Cue shall require such Affiliate or successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Cue would be required to perform it if no such succession had taken place. As used in this Agreement, “Cue” shall mean Cue and any Affiliate or successor to its business and/or assets that assumes and agrees to perform the duties and obligations of Cue under this Agreement by operation of law or otherwise.

 

13.         NOTICE. Any notice that either Party may be required or permitted to give to the other shall be in writing and may be delivered personally, by electronic mail or via a postal service, postage prepaid, to such electronic mail or postal address and directed to such person as Cue may notify Executive from time to time; and to Executive at his electronic mail or postal address as shown on the records of Cue from time to time, or at such other electronic mail or postal address as Executive, by notice to Cue, may designate in writing from time to time.

 

14.         SECTION HEADINGS; INCONSISTENCY. The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. In the event of any inconsistency between the terms of this Agreement and any form, award, plan or policy of Cue, the terms of this Agreement shall govern and control.

 

15.         SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any action in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction.

 

16.         COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

 

17.         Applicable Law; Choice of Venue and Consent to Jurisdiction; Service of Process; waiver of jury trial.

 

(a)          All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Delaware applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction.

 

(b)          For purposes of resolving any dispute that arises directly or indirectly from the relationship of the Parties evidenced by this Agreement, the Parties hereby submit to and consent to the exclusive jurisdiction of the Commonwealth of Massachusetts and further agree that any related litigation shall be conducted solely in the courts of Middlesex County, Massachusetts or the federal courts for the United States for the District of Massachusetts, where this Agreement is made and/or to be performed, and no other courts.

 

(c)          Each Party may be served with process in any manner permitted under State of Delaware law, or by United States registered or certified mail, return receipt requested.

 

 

(d)          BY EXECUTION OF THIS AGREEMENT, THE PARTIES ARE WAIVING ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED ON THIS AGREEMENT.

 

18.          MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and such officer or director as may be designated by Cue. No waiver by either Party at any time of any breach by the other Party of, or compliance with, any condition or provision of this Agreement to be performed by such other Party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement together with all exhibits hereto sets forth the entire agreement of the Parties in respect of the subject matter contained herein and supersedes any and all prior agreements or understandings between Executive and Cue or its Affiliates with respect to the subject matter hereof. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof, have been made by either Party that are not expressly set forth in this Agreement.

 

19.          REPRESENTATIONS. Executive represents and warrants to Cue that (a) Executive has the legal right to enter into this Agreement and to perform all of the obligations on Executive’s part to be performed hereunder in accordance with its terms, and (b) Executive is not a party to any agreement or understanding, written or oral, and is not subject to any restriction, which, in either case, could prevent Executive from entering into this Agreement or performing all of Executive’s duties and obligations hereunder.

 

20.          TAX MATTERS.

 

(a)          WITHHOLDING. Any and all amounts payable under this Agreement or otherwise shall be subject to, and Cue may withhold from such amounts, any federal, state, local or other taxes as may be required to be withheld pursuant to any applicable law or regulation.

 

(b)          SECTION 409A COMPLIANCE.

 

(i)          The intent of the Parties is that payments and benefits under this Agreement be exempt from (to the extent possible) Section 409A (“Section 409A”) of the Internal Revenue Code of 1986 and the regulations and guidance promulgated thereunder, as amended (collectively, the “Code”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. To the extent that any provision hereof is modified in order to comply with Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Parties of the applicable provision without violating the provisions of Section 409A. In no event shall Cue be liable for any additional tax, interest or penalty that may be imposed on Executive by Section 409A or damages for failing to comply with Section 409A.

 

(ii)         A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that constitute “nonqualified deferred compensation” under Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” Notwithstanding anything to the contrary in this Agreement, if Executive is deemed on the date of termination to be a “specified employee” under Section 409A, then with regard to any payment or the provision of any benefit that is considered “nonqualified deferred compensation” under Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the earlier of (A) the expiration of the six-month period measured from the date of such “separation from service” of Executive, and (B) the date of Executive’s death, to the extent required under Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 20(b)(ii) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Executive in a lump sum on the first business day following the six-month period, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

 

(iii)        To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Section 409A, (A) all expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive, (B) any right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit and (C) no such reimbursement, expenses eligible for reimbursement or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.

 

(iv)        For purposes of Section 409A, Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be at the sole discretion of the Board.

 

(v)         Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Section 409A be subject to offset by any other amount unless otherwise permitted by Section 409A.

 

(c)          Modification of Payments. In the event it shall be determined that any payment, right or distribution by Cue or any other person or entity to or for the benefit of Executive pursuant to the terms of this Agreement or otherwise, in connection with, or arising out of, Executive’s employment with Cue or a change in ownership or effective control of Cue or a substantial portion of its assets (a “Payment”) is a “parachute payment” within the meaning of Code Section 280G on account of the aggregate value of the Payments due to Executive being equal to or greater than three times the “base amount,” as defined in Code Section 280G (the “Parachute Threshold”), so that Executive would be subject to the excise tax imposed by Code Section 4999 (the “Excise Tax”) and the net after-tax benefit that Executive would receive by reducing the Payments to the Parachute Threshold is greater than the net after-tax benefit Executive would receive if the full amount of the Payments were paid to Executive, then the Payments payable to Executive shall be reduced (but not below zero) so that the Payments due to Executive do not exceed the amount of the Parachute Threshold, reducing first any non-cash Payments.

 

By signing this Agreement Below, Executive acknowledges that Executive:

 

(1)

has read and understood the entire Agreement;

 

(2)

has had the opportunity to ask questions and consult counsel or other advisors about the agreement’s terms; and

 

(3)

agrees to be bound by the agreement.

 

 

In witness whereof, Cue has caused this Agreement to be executed in its name and on its behalf, and Executive acknowledges understanding and acceptance of, and agrees to, the terms of this Agreement, all as of the Effective Date.

 

CUE BIOPHARMA, INC.			COLIN SANDERCOCK
/s/ Daniel R. Passeri			/s/ Colin Sandercock
Print Name:	Daniel R. Passeri
Title:	Chief Executive Officer

 

 

Exhibit 10.23

 

IRREVOCABLE WAIVER AND AMENDMENT TO SECURITIES PURCHASE AGREEMENTS

 

THIS IRREVOCABLE WAIVER AND AMENDMENT TO SECURITIES PURCHASE AGREEMENTS (this “Amendment”) is made and entered into this as of November __, 2017, by and among Cue Biopharma, Inc., a Delaware corporation (the “Company”), and the Purchasers (as defined in the Recitals below). Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement (defined in the Recitals below).

 

RECITALS:

 

WHEREAS, reference is made to (1) that certain Securities Purchase Agreement by and among the Company and the purchasers listed on Schedule A thereto (“2015 Purchasers”), and dated on or about June 15, 2015 (the “2015 Agreement”); and (2) that certain Securities Purchase Agreement by and among the Company and the purchasers listed on Schedule A thereto (“2016 Purchasers” and together with the 2015 Agreement, the “Purchasers), and dated on or about December 22, 2016 (the “2016 Agreement” and together with the 2015 Agreement, each an “Agreement” and together the “Agreements”);

 

WHEREAS, the Company and the undersigned Purchasers desire to amend the Agreements on the terms set forth below to facilitate the Company’s proposed initial public offering of its securities, in consideration of which the Purchasers would benefit as stockholders of the Company; and

 

WHEREAS, the undersigned Purchasers collectively constitute the Required Holders (as defined in the each Agreement) mandated by each Agreement to amend its terms and bind all the Purchasers thereto.

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual agreements herein contained and for other good and valuable consideration, the parties hereto agree as follows:

 

(A)

IRREVOCABLE WAIVER. Subsection 4(i) of the 2016 Agreement provides that no Shares shall be issued to Purchasers as the result of an issuance or deemed issuance of Additional Shares of Common Stock if the Company receives written notice from Purchasers who purchased at least a majority of the Shares issued pursuant to the Agreement agreeing that no such issuance shall be made as the result of such issuance or deemed issuance of such Additional Shares of Common Stock. The undersigned 2016 Purchasers, constituting 2016 Purchasers who purchased at least a majority of the Shares issued pursuant to the 2016 Agreement, hereby provide notice to the Company and irrevocably agree that no Shares shall be issued to 2016 Purchasers pursuant to Subsection 4(i) of the 2016 Agreement in connection with any issuance of Additional Shares of Common Stock occurring after the Company’s initial public offering.

 

(B)

AMENDMENTS.

 

(1)           Amendments to the 2015 Agreement.

 

(a)

Subsection 4(i) of the 2015 Agreement is hereby amended by deleting the first sentence thereof and replacing it with the following sentence: “In connection with an initial public offering of the Company’s securities, if any, each Purchaser hereby agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of the Securities acquired by Purchaser under this Agreement (other than those included in the effective registration statement of the initial public offering, if any) without the prior written consent of the managing or lead underwriter of such offering, for a period of one hundred and eighty (180) days from the effective date of such registration statement (collectively, the “Lock Up Period”).”

 

 

(2)          Amendments to the 2016 Agreement.

 

(a)

Subsection 2(g) of the 2016 Agreement is hereby amended by deleting “180” and replacing it with “90”.

 

(b)

Subsection 4(h) of the 2016 Agreement is hereby amended by deleting the first sentence thereof and replacing it with the following sentence: “In connection with an initial public offering of the Company’s securities, if any, each Purchaser hereby agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of the Securities acquired by Purchaser under this Agreement (other than those included in the effective registration statement of the initial public offering, if any) without the prior written consent of the managing or lead underwriter of such offering, for a period of ninety (90) days from the effective date of such registration statement (collectively, the “Lock Up Period”).”

 

(3)          No Other Amendments. Except as expressly set forth herein, this Amendment shall not be deemed to be a waiver, amendment or modification of any provisions of the Agreement, or of any right, power or remedy of the Purchasers, or constitute a waiver, amendment or modification of any provision of the Agreement (except to the extent herein set forth), or any other document, instrument and/or agreement executed or delivered in connection therewith, in each case whether arising before or after the date hereof or as a result of performance hereunder or thereunder, all of which (except as specified herein) remain in full force and effect. Except as set forth herein, the Purchasers reserve all rights, remedies, powers, or privileges.

 

(C)       CONFLICTS. Except as expressly set forth in this Amendment, the terms and provisions of the Agreements shall continue unmodified and in full force and effect. In the event of any conflict between this Amendment and the Agreement, this Amendment shall control.

 

(D)       GOVERNING LAW. This Amendment shall be governed and construed under the laws of the State of Delaware, and shall be binding on and shall inure to the benefit of the parties and their respective successors and permitted assigns.

 

(E)       COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. A facsimile or other electronic transmission of this signed Amendment shall be legal and binding on all parties hereto.

 

[Remainder of page left blank intentionally; Signature pages follow.]

 

 

[Company’s Signature Page to Amendment]

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above.

 

COMPANY:
CUE BIOPHARMA, INC.
By:
Name:
Title:

 

[Required Holders’ Signature Pages to Amendment follow]

 

 

[Required Holders’ Signature Pages to Amendment]

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above.

 

PURCHASERS CONSTITUTING
THE REQUIRED HOLDERS:
[Name of Purchaser]
By:
Name:
Title:
Shares of Common Stock Held:

 

 

 

Exhibit 14.1

 

 

Cue Biopharma, Inc.

 

Code of Business Conduct and Ethics

 

INTRODUCTION

 

This Code of Business Conduct and Ethics (the “Code”) applies to all directors, officers, and employees of Cue Biopharma, Inc. (the “Company”). The Company has issued this Code to deter wrongdoing and to promote:

 

•

honest and ethical conduct by everyone associated with the Company, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

•

full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the United States Securities and Exchange Commission (the “SEC”) and in the Company’s other public communications;

 

•

compliance with all governmental laws, rules, and regulations (collectively, “Applicable Laws”), including all federal and state securities laws, rules and regulations (collectively, “Securities Laws”);

 

•

the prompt internal reporting of any violations of this Code to the appropriate person at the Company; and

 

•

accountability for adherence to the Code.

 

The effectiveness of this Code depends in part on the cooperation of all directors, officers, and employees in promptly disclosing to the designated persons within the Company any conduct believed to violate the standards described in this Code. The Company has established procedures to ensure that you may report any suspected violations anonymously. The Company expressly prohibits retaliation of any kind against anyone who in good faith reports suspected misconduct.

 

The Company seeks to foster a culture of compliance with Applicable Laws and the highest standards of business conduct. Everyone at the Company shall promote this culture of compliance. Suspected violations of this Code or Applicable Laws must be reported, and the Company will take appropriate steps to investigate them internally. Violators shall be subject to discipline, as deemed appropriate by the Company in its sole discretion, including immediate termination. This Code is neither a contract nor a comprehensive manual that covers every situation you might encounter. This Code creates no contractual rights. If you have any questions about the provisions of this Code, or about how you should conduct yourself in a particular situation, you should consult your supervisor or department head, the Company’s Chief Executive Officer or General Counsel, or Mark Busch of K&L Gates LLP, the Company’s outside legal counsel, whose contact information is set forth below under “Reporting and Enforcement Mechanisms.”

 

 

STANDARDS OF CONDUCT

 

Conflicts of Interest and Corporate Opportunities

 

You must ensure that any financial, business, or other activities in which you are involved outside the workplace are free of conflicts with your responsibilities to the Company. A “conflict of interest” may occur when your private interest in any way interferes – or even appears to interfere – with the interests of the Company. A conflict situation can arise when a person has interests that may impair the objective performance of his or her duties to the Company. Conflicts of interest may also arise when a person (or his or her family member) receives improper personal benefits as a result of his or her position in the Company.

 

You must disclose any matter that you believe might raise doubt regarding your ability to act objectively and in the Company’s best interest. The following is a non-exhaustive list of examples of situations involving potential conflicts of interest that should be disclosed:

 

•

any Company loan to any employee, officer, or director, or Company guarantee of any personal obligation;

 

•

employment by or acting independently as a consultant to a Company competitor, customer, or supplier;

 

•

directing Company business to any entity in which an employee or close family member has a substantial interest;

 

•

owning, or owning a substantial interest in, any competitor, customer, or supplier of the Company;

 

•

using Company assets, intellectual property, or other resources for personal gain; and

 

•

accepting anything of more than nominal value – such as gifts, discounts, or compensation – from an individual or entity that does or seeks to do business with the Company, other than routine entertainment and meals that are business related.

 

Directors and officers shall disclose any actual or apparent conflict situation to the Chief Executive Officer and to the Audit Committee. Employees who are not officers shall disclose all such situations of which they are aware to an appropriate supervisor or department head, or to the Chief Executive Officer. All supervisors and department heads who receive such reports must forward them promptly to the Chief Executive Officer.

 

You owe a duty to the Company to advance its legitimate interests. Thus you may not (i) take for yourself corporate opportunities that are discovered through the use of Company property, information or position, without first offering such opportunities to the Company; (ii) use corporate property, information, or position for personal gain; or (iii) compete with the Company. Directors and officers of the Company must adhere to their fundamental duties of good faith, due care, and loyalty owed to all shareholders, and to act at all times with the Company’s and its shareholders’ best interests in mind. Any business arrangements or transactions with the Company in which any directors or officers of the Company have a direct or indirect material financial interest must be approved in accordance with the Company’s Policy and Procedures with Respect to Related Person Transactions.

 

 

Confidentiality

 

You must maintain the confidentiality of business, technical, or other information entrusted to you by the Company, its customers or business partners, except when disclosure is authorized or legally mandated. Confidential information includes all non-public information that might be of use to competitors or harmful to the Company, its customers or business partners if disclosed. This obligation is in addition to the requirements of any confidentiality agreement that you may have entered into with the Company.

 

Fair Dealing

 

You must act fairly, honestly, and in good faith in any dealings on behalf of the Company with any of its customers, suppliers, competitors, employees, and all others. You may not take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice.

 

Protection and Proper Use of Company Assets

 

You must protect and seek to ensure the efficient use of Company assets. You should protect against the improper disclosure, theft, or misuse of the Company’s intellectual and physical property. Unauthorized or improper disclosure, theft, or misuse of any such Company property can result in disciplinary measures, including termination. The Company’s assets, including e-mail and all computer systems, should be used only for the Company’s legitimate business purposes. The content of the Company’s electronic communication infrastructure (e-mail, voicemail, Internet access) is not protected by any right of personal privacy, and the Company can access and monitor it at any time without notice.

 

Compliance with Laws, Rules, and Regulations

 

The Company is committed to compliance with Applicable Laws. The Company also maintains policies regarding such matters as insider trading that can be obtained from the Company’s Chief Financial Officer.

 

Each and every director, officer, and employee must comply with Applicable Laws. Questions or concerns about compliance issues should be raised by any of the means indicated under “Reporting and Enforcement Mechanisms” below.

 

Dealing with Government Employees

 

Directors, officers and employees of the Company must respect the laws and regulations that affect government employees in any dealings with them. In dealing with U.S. government employees or U.S. state government employees, this means not providing or offering to provide anything of value—even normal business courtesies such as paying for lunch. Directors, officers and employees must always be honest when dealing with government employees. This means not guessing or speculating if asked a question. No director, officer or employee will make any false certification to a government employee. The Company’s Chief Executive Officer will be consulted prior to offering employment to anyone who is a government employee.

 

 

Payments to Government Officials

 

No payment shall be made by the Company to any government official for the purpose of influencing any of the official’s acts or decisions, or inducing the official to use personal influence to affect any governmental act or decision. “Payment” means a transfer of money, a gift, or an offer or promise to give anything of value, whether made directly or indirectly, through trade associations, agents, consultants, or others. “Government Official” includes an officer or employee or any person acting for or on behalf of a government or a government unit.

 

U.S. Foreign Corrupt Practices Act

 

Many countries have laws that prohibit the payment of bribes to government officials. The U.S. Foreign Corrupt Practices Act (“FCPA”) also prohibits the Company from making payments to officials of governments outside the U.S. for the purpose of obtaining favorable government action or keeping government business. Specifically, this law prohibits the Company from directly or indirectly offering, promising to pay, or paying money or anything of value to government officials for the purpose of:

 

•

Influencing the acts or decisions of the official.

 

•

Inducing the official to act or failing to act in violation of his or her duties.

 

•

Inducing the official to use his or her influence to assist in obtaining or retaining business for or directing business to any person.

 

The law also prohibits using intermediaries (for example, foreign affiliates, agents, and consultants) to channel payments to government officials for the same purposes. This law applies to the Company and all employees and agents of the Company, regardless of their residence or nationality. The Company expects our employees to refuse to make questionable payments. Furthermore, employees are not to engage in any lobbying activity that may be construed as being on behalf of or in connection with the Company. Any proposed payment or gift to a government official or lobbying activity that may be construed as being on behalf of or in connection with the Company must be reviewed and approved in advance by calling the Company’s legal counsel. Employees should be aware that they do not actually have to make the payment to violate the Company’s policy or the law, as merely offering, promising or authorizing it is sufficient.

 

Compliance with Securities Laws

 

The primary objective of the Securities Laws is to ensure that the public has accurate and complete information on which to base investment decisions. If you obtain information causing you to believe that the Company’s books or records are not being maintained, or that its financial condition or results of operations are not being disclosed, in accordance with these controls and procedures, you must report the matter directly as required by the Company’s Whistleblower Policy.

 

 

In order to comply with its public disclosure obligations, the Company limits to a select group of executives the responsibility of dealing with investors and securities analysts. Any inquiries from investors, potential investors or analysts should be promptly referred to the Company’s Chief Executive Officer.

 

To promote compliance with applicable Securities Laws, the Company has adopted an Insider Trading Policy, which applies to all of the Company’s directors, officers, employees, consultants and contractors and governs transactions involving the Company’s securities.

 

Health and Safety

 

The Company is committed to providing safe and healthful working conditions for its employees, contractors, and visitors. The Company will conduct all operations and activities in a manner that protects human health and the quality of life. The Company recognizes that the responsibilities for safe and healthful working conditions are shared in the following ways:

 

•

The Company will establish and implement health and safety programs and policies and provide the safeguards required to ensure safe and healthful conditions;

 

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Supervisors and managers will create an environment where employees have genuine concern for safety and all operations are performed with the utmost regard for the safety and health of all personnel involved; and

 

•

All employees are expected to conduct their work in a safe manner and comply with all health and safety programs, policies, procedures, and laws.

 

No employee may bring a firearm, weapon or explosive substance into the workplace. The prohibition on firearms and weapons does not apply to security guards who are licensed and expressly authorized to carry a firearm or weapon.

 

The Environment

 

The Company is committed to operating its businesses and facilities and to producing its products in a manner that respects and protects human health and the environment. The Company requires that its operations are in compliance with all national, regional, and local regulations relating to the environment, such as those affecting air emissions, water purity and waste disposal. Compliance with legal requirements is only a minimum standard. All employees are expected to be alert to environmental issues. Employees with responsibilities in any of these areas are expected to inform themselves of all standards applicable to their activities and to inquire of management if they are unsure of the requirements affecting their responsibilities.

 

Discrimination and Harassment

 

The Company is firmly committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination or harassment of any kind. Examples of prohibited conduct include derogatory comments based on race, gender, ethnicity or sexual preference and unwelcome sexual advances.

 

 

Media Relations and Speaking Publicly

 

Since the Company’s reputation is one of its most important assets and because of the need to provide honest and consistent responses to the media, all inquiries and contacts from the media should be directed to the Chief Executive Officer. Employees should refer members of the media to the Chief Executive Officer and should make no comments on behalf of the Company, whether officially or “off the record.” All press releases concerning the Company are to be issued only with the approval of the Chief Executive Officer or, in his absence, the Chief Financial Officer.

 

You may not publish or post any material in written or electronic format (including articles, social media postings, blogs, videos or other media), give interviews or make public appearances that disclose confidential Company business-related information, such as information concerning the Company’s customers, technologies, products or services without prior approval from your supervisor. Employees communicating in any public venue or forum without approval must not give the appearance of speaking or acting on the Company’s behalf.

 

REPORTING AND ENFORCEMENT MECHANISMS

 

Among your most important responsibilities in this Company are the obligations to (1) comply with this Code and all Applicable Laws, including Securities Laws, and (2) report any situation or conduct you believe may constitute a possible violation of this Code or Applicable Laws.

 

If you should learn of a potential or suspected violation of this Code, you have an obligation to report the relevant information through the Company’s Whistleblower Hotline or to one of the persons listed below. You may address questions about ethics issues and raise any concerns about a possible violation of this Code or Applicable Laws to:

 

•

a supervisor or department head;

 

•

the Company’s Chief Executive Officer; and/or

 

•

Company General Counsel.

 

Frequently, a supervisor or department head will be in the best position to resolve the issue quickly. However, you may also raise any question or concern with any of the other persons listed above. You may do so orally or in writing and, if preferred, anonymously.

 

If the issue or concern relates to the Company’s financial statement disclosures, accounting practices, internal controls or auditing matters or possible violations of the federal securities laws or the rules or regulations promulgated thereunder, you are required to promptly report it pursuant to the procedures set forth in the Company’s Whistleblower Policy. In accordance with the Company’s Whistleblower Policy, such report may be anonymous.

 

 

POLICY AGAINST RETALIATION

 

The Company will not tolerate retaliation in any form against any person who in good faith reports suspected violations of the Code, voices other ethical concerns, or who is involved on the Company’s behalf in investigating or helping to resolve any such issue. The Company will not discharge, demote, suspend, threaten, harass, or in any other manner discriminate against any employee for providing information, causing information to be provided, or otherwise assisting in an investigation of any conduct that such person reasonably and in good faith believes constitutes a violation of this Code. Any acts of retaliation against an employee for any such conduct will be treated as a serious violation of this Code and may result in discipline, including immediate termination by the Company and/or criminal or civil sanctions. If you believe you have been subjected to such retaliation, you should report the situation as soon as possible to the Company’s Chief Executive Officer or to the Company’s General Counsel.

 

PENALTIES FOR VIOLATIONS

 

The Company is committed to taking prompt and consistent action in response to violations of this Code. Any covered person who violates the Code is subject to disciplinary action, including immediate termination. The Company will promptly investigate internally reports of suspected violations. It will evaluate suspected violations on a case-by-case basis and apply an appropriate sanction, including, in its sole discretion, reporting the violation to authorities.

 

WAIVER/AMENDMENTS

 

Any of the Chief Executive Officer, General Counsel or the Company’s Board of Directors may waive application of any provision of this Code for any persons other than a member of the Company’s Board of Directors or an executive officer. Only the Company’s Board of Directors may amend any provision of this Code or waive application of this Code for a director or an executive officer. Any waiver for a director or an executive officer shall be disclosed as required by SEC and Nasdaq Stock Market rules.

 

Adopted Effective December 1, 2017

 

Exhibit 23.1

 

  

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors

Cue Biopharma, Inc.

 

 

We hereby consent to the use in the Prospectus constituting a part of this pre-effective amendment number 3 to Form S-1 Registration Statement (registration number 333-220550) of our report dated September 21, 2017, relating to the balance sheets of Cue Biopharma, Inc. (the “Company”) as of December 31, 2016 and 2015, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2016, which is contained in the Prospectus. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.

 

We also consent to the reference to us under the caption “Experts” in the Prospectus.

 

 

/s/ Gumbiner Savett Inc.

December 4, 2017

Santa Monica, California