Akari Therapeutics Plc F-1, filed Oct 12, 2022
Akari Therapeutics Plc (AKTX)
As filed with the Securities and Exchange Commission on October 12, 2022
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM F-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AKARI THERAPEUTICS, PLC
(Exact name of registrant as specified in its charter)
| England and Wales | 2834 | 98-1034922 | ||
| (State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
75/76 Wimpole Street
London W1G 9RT
United Kingdom
Telephone +44 20 8004 0270
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Puglisi & Associates
850 Library Avenue
Newark, Delaware 19711
(302) 738-6680
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Todd Finger, Esq.
Gary Emmanuel, Esq.
Richard Bass, Esq.
McDermott Will & Emery LLP
One Vanderbilt Avenue
New York, NY 10173
Tel: (212) 547-5400
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective as determined by market conditions
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ¨
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The selling shareholders may not sell these securities until the Securities and Exchange Commission has declared this registration statement effective. This preliminary prospectus is not an offer to sell these securities and neither we nor the selling shareholders are soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED October 12, 2022
AKARI THERAPEUTICS, PLC
2,784,705,800
Ordinary Shares
American Depositary Shares representing Ordinary Shares
This prospectus relates to the resale, by the selling shareholders identified in this prospectus, of up to an aggregate of 2,784,705,800 ordinary shares, par value $0.0001 per share of Akari Therapeutics, Plc, represented by 27,847,058 American Depository Shares, or ADSs, consisting of (1) 1,392,352,900 ordinary shares represented by 13,923,529 ADSs, issuable upon the exercise of series A warrants issued as part of a private placement in September 2022, or the Private Placement, and (2) 1,392,352,900 ordinary shares represented by 13,923,529 ADSs issuable upon the exercise of series B warrants issued in the Private Placement.
The selling shareholders are identified in the table commencing on page 15. Each ADS represents 100 ordinary shares. No ADSs are being registered hereunder for sale by us. We will not receive any proceeds from the sale of the ADSs by the selling shareholders. All net proceeds from the sale of the ordinary shares represented by ADSs covered by this prospectus will go to the selling shareholders. However, we may receive the proceeds from any exercise of warrants in certain circumstances. See “Use of Proceeds.”
The selling shareholders may sell all or a portion of the ordinary shares represented by ADSs from time to time in market transactions through any market on which our ADSs are then traded, in negotiated transactions or otherwise, and at prices and on terms that will be determined by the then prevailing market price or at negotiated prices directly or through a broker or brokers, who may act as agent or as principal or by a combination of such methods of sale. See “Plan of Distribution”.
Our ADSs are listed on the Nasdaq Capital Market under the symbol “AKTX”. On October 11, 2022, the closing price of our ADSs on the Nasdaq Capital Market was $0.549 per ADS.
Investing in these securities involves a high degree of risk. Please carefully consider the risks discussed in this prospectus under “Risk Factors” beginning on page 6 and in our reports filed with the Securities and Exchange Commission which are incorporated by reference herein for a discussion of information that should be considered in connection with an investment in our securities.
Neither the U.S. Securities and Exchange Commission, nor any state or other foreign securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2022
TABLE OF CONTENTS
This prospectus is part of a registration statement that we filed with the SEC. As permitted by the rules and regulations of the SEC, the registration statement filed by us includes additional information not contained in this prospectus. You may read the registration statement and the other reports we file with the SEC at the SEC’s website or its offices described under the heading “Where You Can Find More Information”.
You should rely only on the information contained in or incorporated by reference in this prospectus. We have not authorized any person to provide you with information different from that contained in or incorporated by reference in this prospectus. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted. The information in or incorporated by reference in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies, regardless of the time of delivery of this prospectus or of any sale of the securities offered hereby. Our business, financial condition, results of operations, and prospects may have changed since that date. We do not take any responsibility for, nor do we provide any assurance as to the reliability of, any information other than the information in or incorporated by reference in this prospectus. Neither the delivery of this prospectus nor the sale of the ADSs means that information contained in or incorporated by reference in this prospectus is correct after the date of this prospectus.
Throughout this prospectus, unless otherwise designated, the terms “we”, “us”, “our”, “Akari”, “the Company” and “our Company” refer to Akari Therapeutics, Plc and its wholly-owned subsidiaries. References to “ordinary shares”, “ADSs”, and “share capital” refer to the ordinary shares, ADSs, and share capital, respectively, of Akari.
Market data and certain industry data and forecasts used in, or incorporated by reference in, this prospectus were obtained from sources we believe to be reliable, including market research databases, publicly available information, reports of governmental agencies and industry publications and surveys. We have relied on certain data from third-party sources, including internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry. Forecasts are particularly likely to be inaccurate, especially over long periods of time. In addition, we do not necessarily know what assumptions regarding general economic growth were used in preparing the third-party forecasts we cite. Statements as to our market position are based on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus. Our historical results do not necessarily indicate our expected results for any future periods.
Certain figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
We have obtained the statistical data, market data and other industry data and forecasts used in this prospectus and in our SEC filings incorporated herein by reference from publicly available information. We have not sought the consent of the sources to refer to the publicly available reports in this prospectus.
We have not taken any action to permit a public offering of the ADSs outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the ADSs and the distribution of this prospectus outside of the United States.
1
This summary highlights selected information contained elsewhere in or incorporated by reference into this prospectus that we consider important. This summary does not contain all of the information you should consider before investing in our securities. You should read this summary together with the entire prospectus, including the risks related to our business, our industry, investing in our ordinary shares and our location in the United Kingdom, that we describe under “Risk Factors” and our consolidated financial statements and the related notes incorporated by reference into this prospectus and the other documents incorporated by reference into this prospectus, which are described under “Incorporation of Certain Information by Reference” before making an investment in our securities.
Akari Therapeutics, Plc
Overview
We are a clinical-stage biopharmaceutical company focused on developing advanced therapies for autoimmune and inflammatory diseases, specifically through the inhibition of the complement and leukotriene pathways. Each of these systems has scientifically well-supported causative roles in the diseases we are targeting. We believe that blocking early mediators of inflammation will prevent initiation and continual amplification of the processes that cause certain diseases.
Our lead product candidate, nomacopan, inhibits both terminal complement activation and leukotriene B4, or LTB4. It inhibits terminal complement activation by tightly binding to C5 and preventing its cleavage. It inhibits LTB4 by capturing the fatty acid within the body of the nomacopan protein.
Nomacopan is a recombinant small protein (16,769 Da) derived from a protein originally discovered in the saliva of the Ornithodoros moubata tick, where it modulates the host immune system to allow the parasite to feed without alerting the host to its presence or provoking an immune response.
Nomacopan has received orphan drug designation from the U.S. Food and Drug Administration, or the FDA, and the European Medicines Agency, or the EMA, for PNH, GBS, and BP and orphan drug designation from the FDA for HSCT-TMA. Orphan drug designation provides us with certain benefits and incentives, including a period of marketing exclusivity if marketing authorization of the drug is ultimately received for the designated indication. The receipt of orphan drug designation status does not change the regulatory requirements or process for obtaining marketing approval and the designation does not mean that marketing approval will be received.
We have received Fast Track designation from the FDA for the investigation of nomacopan for the treatment of pediatric HSCT-TMA and for the treatment of PNH in patients who have polymorphisms conferring Soliris® (eculizumab) resistance and the treatment of BP. The Fast Track program was created by the FDA to facilitate the development and expedite the review of new drugs which show promise in treating a serious or life-threatening disease and address an unmet medical need. Drugs with Fast Track designation may also qualify for priority review to expedite the FDA review process, if relevant criteria are met.
Our clinical targets for nomacopan are autoimmune and inflammatory diseases where the inhibition of both C5 and LTB4 are implicated, including pediatric HSCT-TMA. We additionally have a pre-clinical program of PAS-nomacopan in geographic atrophy (GA).
September 2022 Financing
On September 12, 2022, we entered into a definitive agreement with healthcare-focused institutional investors and accredited investors alongside participation from certain existing investors, including the Akari Executive Chairman of the Board of Directors, Dr. Ray Prudo, providing for the issuance of an aggregate of 15,100,000 ADSs in a registered direct offering at $0.85 per ADS for aggregate gross proceeds of approximately $12.84 million, or the September 2022 Financing. The offering initially closed on September 14, 2022, and a second closing was held on September 16, 2022. In addition, we issued to the investors in the Private Placement that closed simultaneously with the September 2022 Financing (i) series A warrants exercisable to purchase up to 15,100,000 ADSs at an exercise price of $0.85 per ADS and (ii) series B warrants exercisable to purchase up to 15,100,000 ADSs at an exercise price of $0.85 per ADS. The series A warrants and series B warrants became exercisable immediately following the date of issuance and will expire two years following issuance, in the case of the series A warrants, and seven years following issuance, in the case of the series B warrants. We agreed to pay A.G.P./Alliance Global Partners a cash placement fee equal to 7% of the aggregate purchase price for the ADSs sold in the offering, expense reimbursement of up to $75,000 and a non-accountable expense allowance of $50,000. We paid an aggregate of $1,000,700 in placement agent fees and expenses.
2
Corporate Information
Our legal and commercial name is Akari Therapeutics, Plc. We were originally established as a private limited company under the laws of England and Wales on October 7, 2004 under the name Freshname No. 333 Limited. On January 19, 2005, we changed our name to Morria Biopharmaceuticals Limited and on February 3, 2005, we completed a reverse merger with Morria Biopharmaceuticals Inc., or Morria, a Delaware corporation, in which Morria became our wholly-owned subsidiary and we re-registered as a non-traded public limited company under the laws of England and Wales. Morria was dedicated to the discovery and development of novel, first-in-class, non-steroidal, synthetic anti-inflammatory drugs. On March 22, 2011, we incorporated an Israeli subsidiary, Morria Biopharma Ltd. On June 25, 2013, we changed our name to Celsus Therapeutics Plc and on October 13, 2013 Morria was renamed Celsus Therapeutics Inc. As of the date of this prospectus, Celsus Therapeutics Inc. and Morria Biopharma Ltd. do not conduct any operations.
On September 18, 2015, we completed an acquisition of all of the capital stock of Volution Immuno Pharmaceuticals SA, or Volution, a private Swiss company, from RPC Pharma Limited, or RPC, Volution’s sole shareholder, in exchange for our ordinary shares, in accordance with the terms of a Share Exchange Agreement, dated as of July 10, 2015. In connection with the acquisition, our name was changed to Akari Therapeutics, Plc and the combined company focused on the development and commercialization of life-transforming treatments for a range of rare and orphan autoimmune and inflammatory diseases caused by dysregulation of complement C5.
Our ADSs have been listed on the Nasdaq Capital Market under the symbol “AKTX” since September 21, 2015 and under the symbol “CLTX” from January 31, 2014 until September 18, 2015. Prior to that, our ADSs were quoted on the OTCQB under the symbol “CLSXD” from January 3, 2014 to January 30, 2014 and were quoted on the OTCQB under the symbol “CLSXY” from September 16, 2013 until January 2, 2014 and under the symbol “MRRBY” from February 19, 2013 to September 15, 2013. Effective January 3, 2014, our ratio of ADSs to ordinary shares changed from one ADS per each two ordinary shares to one ADS per each ten ordinary shares and, effective as of September 17, 2015, our ratio of ADSs to ordinary shares changed from one ADS per each ten ordinary shares to one ADS per each one hundred ordinary shares. Currently, each ADS represents by one hundred ordinary shares. Effective December 8, 2020, the currency of the Company’s ordinary shares was changed from pounds sterling to US dollars and the nominal (par) value of an ordinary share was reduced to $0.0001.
Our principal office is located at 75/76 Wimpole Street, London W1G 9RT, United Kingdom, and our telephone number is +44 20 8004 0270. Our website address is www.akaritx.com. The information contained on, or that can be accessed through, our website is neither a part of nor incorporated into this prospectus. We have included our website address in this prospectus solely as an inactive textual reference. Puglisi & Associates, or Puglisi, serves as our agent for service of process in the United States for this offering. Puglisi’s address is 850 Library Avenue, Suite 204, Newark, Delaware 19711.
We use our website (www.akaritx.com) as a channel of distribution of Company information. The information we post through this channel may be deemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website are not, however, a part of this prospectus.
Implications of being a Foreign Private Issuer
As a foreign private issuer, we are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue proxy statements that comply with the requirements applicable to U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore, our officers, directors, and principal shareholders will be exempt from the requirements to report transactions in our equity securities and from the short-swing profit liability provisions contained in Section 16 of the Exchange Act. These exemptions and leniencies, along with other corporate governance exemptions resulting from our ability to rely on home country rules, will reduce the frequency and scope of information and protections to which you may otherwise have been eligible in relation to U.S. domestic reporting companies. If we were to lose our foreign private issuer status, the regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer will be significantly more than costs we incur as a foreign private issuer.
3
| ADSs Offered | Up to an aggregate of 2,784,705,800 ordinary shares, par value $0.0001 per share of Akari Therapeutics, Plc., represented by 27,847,058 American Depositary Shares, or ADSs, consisting of (1) 1,392,352,900 ordinary shares represented by 13,923,529 ADSs issuable upon the exercise of series A warrants originally issued in the Private Placement, and (2) 1,392,352,900 ordinary shares represented by 13,923,529 ADSs issuable upon the exercise of series B warrants originally issued in the Private Placement. The selling shareholders are identified in the table commencing on page 15. Each ADS represents 100 ordinary shares. | |
| Ordinary Shares Outstanding at September 16, 2022 | 7,444,917,123 ordinary shares. | |
| Use of proceeds |
We will not receive any proceeds from the sale of the ordinary shares represented by ADSs by the selling shareholders. All net proceeds from the sale of the ordinary shares represented by ADSs covered by this prospectus will go to the selling shareholders. However, we may receive the proceeds from any exercise of warrants if the holders do not exercise the warrants on a cashless basis. See the section of this prospectus titled “Use of Proceeds.” | |
| Offering Price | The selling shareholders may sell all or a portion of their ordinary shares, represented by ADSs, through a public or private transactions at prevailing market prices or at privately negotiated prices. | |
| Nasdaq Capital Market Symbol | AKTX | |
| Risk factors | Before investing in our securities, you should carefully read and consider the “Risk Factors” beginning on page 6 of this prospectus. | |
| Depositary | Deutsche Bank Trust Company Americas |
Unless otherwise indicated, the number of ordinary shares outstanding prior to and after this offering is based on 7,444,917,123 ordinary shares outstanding as of September 16 2022, and excludes:
| · | 429,573,885 ordinary shares (equivalent to 4,295,738 ADSs) issuable upon the exercise of options outstanding as of August 22, 2022 at a weighted-average exercise price of approximately $0.02 per ordinary share (equivalent to approximately $2.12 per ADS); | |
| · | 460,426,115 additional ordinary shares (equivalent to 4,604,261 ADSs) available for future issuance as of August 22, 2022 under our 2014 Equity Incentive Compensation Plan; | |
| · | 118,421,300 ordinary shares (equivalent to 1,184,213 ADSs) issuable upon exercise of unregistered warrants issued to investors in the July 2019 registered direct offering, having an exercise price of $3.00 per ADS; | |
| · | 17,762,900 ordinary shares (equivalent to 177,629 ADSs) issuable upon exercise of unregistered warrants issued to the placement agent in connection with the July 2019 registered direct offering, at an exercise price of $2.85 per ADS; | |
| · | 279,763,600 ordinary shares (equivalent to 2,797,636 ADSs) issuable upon exercise of unregistered warrants issued to investors in the February 2020 private placement offering, having an exercise price of $2.20 per ADS; |
4
| · | 44,962,300 ordinary shares (equivalent to 449,623 ADSs) issuable upon exercise of unregistered warrants issued to the placement agent in connection with the February 2020 private placement offering, at an exercise price of $2.55 per ADS; | |
| · | 39,838,400 ordinary shares (equivalent to 398,384 ADSs) issuable upon exercise of unregistered placement agent warrants issued in the July 2021 private placement, having an exercise price of $2.32 per ADS; | |
| · | 215,550,700 ordinary shares (equivalent to 2,155,507 ADSs) issuable upon exercise of warrants issued to investors in connection with the December 2021 registered direct offering, having an exercise price of $1.65 per ADS; | |
| · | 17,244,000 ordinary shares (equivalent to 172,440 ADSs) issuable upon exercise of unregistered placement agent warrants issued in connection with the December 2021 registered direct offering, having an exercise price of $1.75 per ADS; | |
| · | 372,040,900 ordinary shares (equivalent to 3,720,409 ADSs) issuable upon exercise of warrants issued to investors in connection with the March 2022 registered direct offering, having an exercise price of $1.40 per ADS; | |
| · | 29,763,300 ordinary shares (equivalent to 297,633 ADSs) issuable upon exercise of unregistered placement agent warrants issued in connection with the March 2022 registered direct offering, having an exercise price of $1.50 per ADS; and | |
| · | 3,020,000,000 ordinary shares (equivalent to 30,200,000 ADSs) issuable upon exercise of unregistered series A warrants and series B warrants issued in the Private Placement that closed simultaneously with the September 2022 registered direct offering, having an exercise price of $0.85 per ADS. |
Throughout this prospectus, when we refer to our ordinary shares, represented by ADSs, being registered on behalf of the selling shareholders for offer and sale, we are referring to the ordinary shares, represented by ADSs, issuable upon exercise of the warrants, each as described under “The Private Placement” and “Selling Shareholders.” When we refer to the selling shareholders in this prospectus, we are referring to the selling shareholders identified in this prospectus and, as applicable, their donees, pledgees, transferees or other successors-in-interest selling shares of ordinary shares, represented by ADSs, or interests in ordinary shares, represented by ADSs, received after the date of this prospectus from a selling shareholder as a gift, pledge, partnership distribution or other transfer.
5
An investment in our securities involves a high degree of risk. you should carefully consider the risk factors set forth in our most recent Annual Report on Form 20-F on file with the SEC, which is incorporated by reference into this prospectus, as well as the following risk factors, which supplement or augment the risk factors set forth in our Annual Report on Form 20-F. Before making an investment decision, you should carefully consider these risks as well as other information we include or incorporate by reference in this prospectus. The risks and uncertainties not presently known to us or that we currently deem immaterial may also materially harm our business, operating results and financial condition and could result in a complete loss of your investment.
A substantial number of ADSs may be sold in this offering, which could cause the price of our ADSs to decline.
We are registering for resale 2,784,705,800 ordinary shares represented by 27,847,058 ADSs issuable upon the exercise of warrants held by the selling shareholders. This sale and any future sales of a substantial number of ADSs in the public market, or the perception that such sales may occur, could adversely affect the price of the ADSs on the Nasdaq Capital Market. We cannot predict the effect, if any, that market sales of those ADSs or the availability of those ADSs for sale will have on the market price of the ADSs.
Sales of a substantial number of shares of the ADSs by our existing shareholders in the public market could cause our share price to fall.
If our existing shareholders sell, or indicate an intention to sell, substantial amounts of the ADSs in the public market, the trading price of the ADSs could decline. In addition a substantial number of ordinary shares are subject to options that are or will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules. If these additional ordinary shares (as represented by ADSs), or if it is perceived that they will be sold, in the public market, the trading price of our ADSs could decline.
Our ADSs may be involuntarily delisted from trading on the Nasdaq Capital Market if we fail to comply with the continued listing requirements. A delisting of our ADSs is likely to reduce the liquidity of our ADSs and may inhibit or preclude our ability to raise additional financing.
Nasdaq requires us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our ADSs. Generally, we must maintain a minimum amount of shareholders equity (generally $2.5 million) and a minimum closing bid price (generally $1.00). If we fail to meet any of the continuing listing requirements, our ADSs may be subject to delisting and we may become subject to delisting proceedings. If our ADSs are delisted and we are not able to list our ADSs on another national securities exchange, we expect our securities would be quoted on an over-the-counter market. If this were to occur, our shareholders could face significant material adverse consequences, including limited availability of market quotations for our ADSs and reduced liquidity for the trading of our securities. In addition, we could experience a decreased ability to issue additional securities and obtain additional financing in the future. There can be no assurance that an active trading market for our ADSs will develop or be sustained. We may choose to raise additional capital in order to increase our shareholders’ equity in order to meet the Nasdaq continued listing standards. Any additional equity financings may be financially dilutive to, and will be dilutive from an ownership perspective to our shareholders, and such dilution may be significant based upon the size of such financing. Additionally, we cannot assure that such` funding will be available on a timely basis, in needed quantities, or on terms favorable to us, if at all.
In 2021, we identified a material weakness in our internal control over financial reporting, and in the future, we may identify additional material weaknesses or fail to maintain an effective system of controls. If we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.
6
The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we are required, under Section 404 of the Sarbanes-Oxley Act of 2002, to perform system and process evaluations and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by our management. A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement of annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
In 2021, we identified a material weakness in our internal control over financial reporting, and concluded that our internal control over financial reporting was not effective as of December 31, 2020, which resulted in an error in the accounting treatment of the RPC options, or the RPC Options. We remediated the material weakness regarding the RPC Options in 2021, which were originally recorded as a $26 million liability (as related to options and warrants), by re-classifying and re-valuing the RPC Options in the year ended December 31, 2015 (and for each subsequent year) as $22.6 million of equity (additional paid-in capital) as discussed in “Item 15. Controls and Procedures” of this Annual Report on Form 20-F. In addition, we updated our policies and procedures regarding the accounting for significant non-routine transactions, specifically to periodically re-evaluate the accounting analysis and conclusions of these transactions to ensure that the accounting conclusions reached at the inception of the transaction remain appropriate.
We cannot assure you that the measures we have taken to date and may take in the future will be sufficient to prevent or avoid potential future material weaknesses. The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error, and the risk of fraud. If we are unable to prevent or avoid future material weaknesses, our ability to record, process, and report financial information accurately, and to prepare financial statements within the time periods specified by the forms of the SEC, could be adversely affected which, in turn, may adversely affect our reputation and business and the market price of our ordinary shares. In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities,loss of investor confidence, delisting of our securities, and harm to our reputation and financial condition, or diversion of financial and management resources from the operation of our business.
In addition, it is possible that control deficiencies could be identified by our management or by our independent registered public accounting firm in the future or may occur without being identified. Such a failure could result in regulatory scrutiny and cause investors to lose confidence in our reported financial results, lead to a default under our current or future indebtedness and otherwise have a material adverse effect on our business, financial condition, cash flows, or results of operations.
7
If we are deemed or become a passive foreign investment company, or PFIC, for U.S. federal income tax purposes in 2022 or in any prior or subsequent years, there may be negative tax consequences for U.S. taxpayers that are holders of our ADSs.
We will be treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes in any taxable year in which either (i) at least 75% of our gross income is “passive income” or (ii) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.
We believe we were not a PFIC for 2021. Because the PFIC determination is highly fact sensitive, there can be no assurance that we will not be a PFIC for 2022 or for any other taxable year. If we were to be characterized as a PFIC for U.S. federal income tax purposes in any taxable year during which a U.S. shareholder owns our ADSs, and such U.S. shareholder does not make an election to treat us as a “qualified electing fund,” or QEF, or make a “mark-to-market” election, then “excess distributions” to such U.S. shareholder, and any gain realized on the sale or other disposition of our ADSs will be subject to special rules. Under these rules: (i) the excess distribution or gain would be allocated ratably over the U.S. shareholder’s holding period for ADSs; (ii) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (iii) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the U.S. Internal Revenue Service, or IRS determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. shareholder to make a timely QEF or mark-to-market election. U.S. shareholders who hold our ADSs during a period when we are a PFIC will be generally subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject to certain exceptions, including for U.S. shareholders who made a timely QEF or mark-to-market election. A U.S. shareholder can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. A QEF election generally may not be revoked without the consent of the IRS. If an investor provides reasonable notice to us that it has determined to make a QEF election, we intend to provide annual financial information to such investor as may be reasonably required for purposes of filing United States federal income tax returns in connection with such QEF election.
U.S. investors are urged to consult their own tax advisors regarding the possible application of the PFIC rules.
Our auditor’s report on our financial statements states that our recurring operating losses, negative cash flows and dependence on additional financial support raises substantial doubt about our ability to continue as a going concern, which may have a detrimental effect on our ability to obtain additional funding.
The report of our U.S. independent registered public accounting firm on our financial statements for the period ended December 31, 2021, includes an explanatory paragraph raising substantial doubt about our ability to continue as a going concern as a result of our recurring losses from operations and net capital deficiency. Our future is dependent upon our ability to obtain financing in the future. This opinion could materially limit our ability to raise funds. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. As a result, we may have to liquidate our business and investors may lose their investment in our securities.
8
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking statements and readers are cautioned that our actual results may differ materially from those discussed in the forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Words such as “may,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. Forward-looking statements represent management’s present judgment regarding future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
Such risks and uncertainties include, but are not limited to:
| · | our needs for additional capital to fund our operations; |
| · | our ability to continue as a going concern; |
| · | uncertainties of cash flows and inability to meet working capital needs; |
| · | an inability or delay in obtaining required regulatory approvals for nomacopan and any other product candidates, which may result in unexpected cost expenditures; |
| · | our ability to obtain orphan drug designation in additional indications; |
| · | risks inherent in drug development in general; |
| · | uncertainties in obtaining successful clinical results for nomacopan and any other product candidates and unexpected costs that may result therefrom; |
| · | difficulties enrolling patients in our clinical trials; |
| · | our ability to enter into collaborative, licensing, and other commercial relationships and on terms commercially reasonable to us; |
| · | failure to realize any value of nomacopan and any other product candidates developed and being developed in light of inherent risks and difficulties involved in successfully bringing product candidates to market; |
9
| · | inability to develop new product candidates and support existing product candidates; |
| · | the approval by the FDA, MHRA and EMA and any other similar foreign regulatory authorities of other competing or superior products brought to market; |
| · | risks resulting from unforeseen side effects; |
| · | risk that the market for nomacopan may not be as large as expected; |
| · | risks associated with the impact of the COVID-19 pandemic and the Russian invasion of Ukraine; |
| · | inability to obtain, maintain and enforce patents and other intellectual property rights or the unexpected costs associated with such enforcement or litigation; |
| · | inability to obtain and maintain commercial manufacturing arrangements with third party manufacturers or establish commercial scale manufacturing capabilities; |
| · | the inability to timely source adequate supply of our active pharmaceutical ingredients from third party manufacturers on whom the Company depends; and |
| · | unexpected cost increases and pricing pressures. |
In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this prospectus might not occur. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to us or to any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
We have obtained the statistical data, market data and other industry data and forecasts used throughout this prospectus from publicly available information. We have not sought the consent of the sources to refer to the publicly available reports in this prospectus.
You should read this prospectus and the documents that we have filed as exhibits to the prospectus with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.
10
We will not receive any proceeds from the sale of the ordinary shares represented by ADSs by the selling shareholders. All net proceeds from the sale of the ordinary shares represented by ADSs and the warrants covered by this prospectus will go to the selling shareholders. We expect that the selling shareholders will sell their ordinary shares represented by ADSs as described under “Plan of Distribution.”
We may receive proceeds from the exercise of the warrants and issuance of the warrant ADSs. If all of the warrants mentioned above were exercised for cash in full, the proceeds would be approximately $25.7 million. We intend to use the net proceeds of such warrant exercise, if any, for research and development, general and administrative expenses, and for working capital purposes. Pending such uses, we intend to invest the net proceeds in short-term, interest-bearing, investment grade securities or as otherwise pursuant our customary investment policies. We can make no assurances that any of the warrants will be exercised, or if exercised, that they will be exercised for cash, the quantity which will be exercised or in the period in which they will be exercised.
11
The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2022:
| · | on an actual basis; |
| · | On an as adjusted basis giving effect to the sale by us of 15,100,000 ADSs, representing ordinary shares, subsequent to June 30, 2022 at an offering price of $0.85 per ADS for gross proceeds of $12,835,000, after deducting the placement agent fees and estimated offering expenses payable by us. |
The following information should be read in conjunction with the consolidated financial statements and related notes incorporated by reference in this prospectus. For more details on how you can obtain the documents incorporated by reference in this prospectus, see “Where You Can Find More Information” and “Incorporation of Certain Information by Reference.” The information presented in the capitalization table below is unaudited.
| June 30, 2022 | ||||||||
| Actual | As Adjusted | |||||||
| (in thousands, except share and per share data) | ||||||||
| Cash | $ | 8,151 | $ | 19,735 | ||||
| Shareholders’ equity: | ||||||||
| Share capital | 593 | 744 | ||||||
| Additional paid-in capital | 166,721 | 178,154 | ||||||
| Capital Redemption Reserve | 52,194 | 52,194 | ||||||
| Accumulated other comprehensive loss | (622 | ) | (622 | ) | ||||
| Accumulated deficit | (210,561 | ) | (210,561 | ) | ||||
| Total shareholders’ equity | 8,326 | 19,909 | ||||||
| Total capitalization (long-term liabilities and equity) | $ | 8,326 | $ | 19,909 | ||||
12
Unless otherwise indicated, the number of ordinary shares outstanding prior to and after the September 2022 offering is based on 5,934,917,123 ordinary shares outstanding as of June 30, 2022, and excludes:
| · | 429,573,885 ordinary shares (equivalent to 4,295,738 ADSs) issuable upon the exercise of options outstanding as of August 22, 2022 at a weighted-average exercise price of approximately $0.02 per ordinary share (equivalent to approximately $2.12 per ADS); | |
| · | 460,426,115 additional ordinary shares (equivalent to 4,604,261 ADSs) available for future issuance as of August 22, 2022 under our 2014 Equity Incentive Compensation Plan; | |
| · | 118,421,300 ordinary shares (equivalent to 1,184,213 ADSs) issuable upon exercise of unregistered warrants issued to investors in the July 2019 registered direct offering, having an exercise price of $3.00 per ADS; | |
| · | 17,762,900 ordinary shares (equivalent to 177,629 ADSs) issuable upon exercise of unregistered warrants issued to the placement agent in connection with the July 2019 registered direct offering, at an exercise price of $2.85 per ADS; | |
| · | 279,763,600 ordinary shares (equivalent to 2,797,636 ADSs) issuable upon exercise of unregistered warrants issued to investors in the February 2020 private placement offering, having an exercise price of $2.20 per ADS; | |
| · | 44,962,300 ordinary shares (equivalent to 449,623 ADSs) issuable upon exercise of unregistered warrants issued to the placement agent in connection with the February 2020 private placement offering, at an exercise price of $2.55 per ADS; | |
| · | 39,838,400 ordinary shares (equivalent to 398,384 ADSs) issuable upon exercise of unregistered placement agent warrants issued in the July 2021 private placement, having an exercise price of $2.32 per ADS; | |
| · | 215,550,700 ordinary shares (equivalent to 2,155,507 ADSs) issuable upon exercise of warrants to be issued to investors in connection with the December 2021 registered direct offering, having an exercise price of $1.65 per ADS; | |
| · | 17,244,000 ordinary shares (equivalent to 172,440 ADSs) issuable upon exercise of unregistered placement agent warrants issued in connection with the December 2021 registered direct offering, having an exercise price of $1.75 per ADS; | |
| · | 372,040,900 ordinary shares (equivalent to 3,720,409 ADSs) issuable upon exercise of warrants issued to investors in connection with the March 2022 registered direct offering, having an exercise price of $1.40 per ADS; | |
| · | 29,763,300 ordinary shares (equivalent to 297,633 ADSs) issuable upon exercise of unregistered placement agent warrants issued in connection with the March 2022 registered direct offering, having an exercise price of $1.50 per ADS; and | |
| · | 3,020,000,000 ordinary shares (equivalent to 30,200,000 ADSs) issuable upon exercise of unregistered series A warrants and series B warrants issued in the Private Placement closed simultaneously with the September 2022 registered direct offering, having an exercise price of $0.85 per ADS. |
Except as otherwise indicated, all information in this prospectus supplement assumes no exercise of the outstanding options or warrants described above.
13
The ordinary shares represented by ADSs being offered by the selling shareholders are those ordinary shares represented by ADSs issuable upon exercise of warrants previously issued in connection with the Private Placement. For additional information regarding the issuance of those ADSs and warrants to purchase ADSs, see “Summary – September 2022 Financing” above. We are registering the ordinary shares represented by ADSs in order to permit the selling shareholders to offer the ordinary shares represented by ADSs for resale from time to time. The selling shareholders have not had any material relationship with us within the past three years.
The table below lists the selling shareholders and other information regarding the beneficial ownership of the ordinary shares represented by ADSs by each of the selling shareholders. The second column lists the number of ordinary shares represented by ADSs beneficially owned by each selling stockholder, based on its ownership of ADSs and warrants to purchase ADSs, as of September 16, 2022, assuming exercise of the warrants held by the selling shareholders on that date, without regard to any limitations on conversions or exercises. The third column lists the maximum number of ordinary shares represented by ADSs being offered in this prospectus by the selling shareholders. The fourth and fifth columns list the amount of ordinary shares represented by ADSs owned after the offering, by number of ordinary shares represented by ADSs and percentage of outstanding ordinary shares, without regard to any limitations on conversions or exercises, and assuming in both cases that (i) all of the ordinary shares represented by ADSs to be registered by the registration statement of which this prospectus is a part are sold in this offering and (ii) the selling shareholder does not acquire additional ordinary shares represented by ADSs after the date of this prospectus and prior to completion of this offering.
Under the terms of the warrants issued in the September 2022 Financing, a selling stockholder may not exercise the warrants to the extent such exercise would cause such selling stockholder, together with its affiliates, to beneficially own a number of ordinary shares which would exceed 4.99% or 9.99% of our then outstanding ordinary shares following such exercise, excluding for purposes of such determination ordinary shares not yet issuable upon exercise of the warrants which have not been exercised. The number of shares does not reflect this limitation. The selling shareholders may sell all, some or none of their ordinary shares represented by ADSs in this offering. See “Plan of Distribution.”
Information about the selling shareholders may change over time. Any changed information will be set forth in an amendment to the registration statement or supplement to this prospectus, to the extent required by law. Unless otherwise noted below, the address of each selling shareholder listed on the table is c/o Akari Therapeutics, Plc., 75/76 Wimpole Street, London W1G 9RT.
14
| Name | Number of Ordinary Shares Owned Prior to Offering | Maximum Number of Ordinary Shares to be Sold Pursuant to this Prospectus | Number of Ordinary Shares Owned After the Offering(1) | Percentage of Ordinary Shares Owned After the Offering(1) | ||||||||||||
| Armistice Capital Master Fund Ltd(2) | 1,411,764,900 | (3) | 941,176,600 | (4) | 470,588,300 | (5) | 4.50 | % | ||||||||
| Bigger Capital Fund, LP | 105,882,000 | (6) | 70,588,000 | (7) | 35,294,000 | (8) | * | |||||||||
| SHN Financial Investments LTD | 47,735,700 | (9) | 31,823,800 | (10) | 15,911,900 | (11) | * | |||||||||
| Sabby Volatility Warrant Master Fund LTD | 1,345,775,900 | (12) | 941,176,400 | (13) | 404,599,500 | (14) | 4.50 | % | ||||||||
| Diana L. Blanton | 43,973,600 | (15) | 16,000,000 | (16) | 27,973,600 | (17) | * | |||||||||
| Fernyhough Investments Ltd. | 75,483,800 | (18) | 30,000,000 | (19) | 45,483,800 | (20) | * | |||||||||
| HCB LLC | 120,000,000 | (21) | 80,000,000 | (22) | 40,000,000 | (23) | * | |||||||||
| Joseph P. Errico | 122,065,600 | (24) | 40,000,000 | (25) | 82,065,600 | (26) | * | |||||||||
| Martin Krytus | 256,250,700 | (27) | 80,000,000 | (28) | 176,250,700 | (29) | 1.68 | % | ||||||||
| Thomas C. Mollick | 238,215,000 | (30) | 20,000,000 | (31) | 218,215,000 | (32) | 2.09 | % | ||||||||
| Newco DE 22 Inc( | 17,646,900 | (33) | 11,764,600 | (34) | 5,882,300 | (35) | * | |||||||||
| PranaBio Investments LLC | 917,808,700 | (36) | 300,000,000 | (37) | 617,808,700 | (38) | 5.90 | % | ||||||||
| Shalom Auerbach | 11,948,200 | (39) | 5,882,200 | (40) | 6,066,000 | (41) | * | |||||||||
| Thomas Frederick | 115,500,000 | (42) | 20,000,000 | (43) | 95,500,000 | (44) | * | |||||||||
| Douglas Topkis | 158,510,000 | (45) | 60,000,000 | (46) | 98,510,000 | (47) | * | |||||||||
| Wesley R. Barnett & Ashley R. Bell Barnett | 30,147,300 | (48) | 11,764,800 | (49) | 18,382,500 | (50) | * | |||||||||
| Donald A Wojnowski(51) | 30,000,000 | (52) | 20,000,000 | (53) | 10,000,000 | (54) | * | |||||||||
| Richard Jeanneret | 35,294,100 | (55) | 23,529,400 | (56) | 11,764,700 | (57) | * | |||||||||
| Kim Mare Timothy | 54,999,900 | (58) | 20,000,000 | (59) | 34,999,900 | (60) | * | |||||||||
| Julie A. Goldstein | 177,000,000 | (61) | 61,000,000 | (62) | 116,000,000 | (63) | * | |||||||||
* Represents less than 1% of outstanding ordinary shares.
| (1) | The percentage of beneficial ownership after the offering is based on 10,464,917,123 ordinary shares, consisting of (a) 7,444,917,123 ordinary shares outstanding on September 16, 2022, and (b) the 3,020,000,000 ordinary shares, represented by ADSs, issuable upon exercise of the series A warrants and series B warrants issued in the Private Placement. |
| (2) | The securities are directly held by Armistice Capital Master Fund Ltd., a Cayman Islands exempted company (the “Master Fund”), and may be deemed to be indirectly beneficially owned by: (i) Armistice Capital, LLC (“Armistice Capital”), as the investment manager of the Master Fund; and (ii) Steven Boyd, as the Managing Member of Armistice Capital. Armistice Capital and Steven Boyd disclaim beneficial ownership of the securities except to the extent of their respective pecuniary interests therein. The address of Armistice Capital Master Fund Ltd. is c/o Armistice Capital, LLC, 510 Madison Avenue, 7th Floor, New York, NY 10022. |
| (3) | Represents (i) 470,588,300 ordinary shares represented by 4,705,883 ADSs acquired in our September 2022 Financing and (ii) 941,176,600 ordinary shares represented by 9,411,766 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
15
| (4) | Represents 941,176,600 ordinary shares represented by 9,411,766 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (5) | Represents 470,588,300 ordinary shares represented by 4,705,883 ADSs acquired in our September 2022 Financing. |
| (6) | Represents (i) 35,294,000 ordinary shares represented by 352,940 ADSs acquired in our September 2022 Financing and (ii) 70,588,000 ordinary shares represented by 705,880 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (7) | Represents 70,588,000 ordinary shares represented by 705,880 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (8) | Represents 35,294,000 ordinary shares represented by 352,940 ADSs acquired in our September 2022 Financing. |
| (9) | Represents (i) 15,911,900 ordinary shares represented by 159,119 ADSs acquired in our September 2022 Financing and (ii) 31,823,800 ordinary shares represented by 318,238 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (10) | Represents 31,823,800 ordinary shares represented by 318,238 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (11) | Represents 15,911,900 ordinary shares represented by 159,119 ADSs acquired in our September 2022 Financing. |
| (12) | Represents (i) 404,599,500 ordinary shares represented by 4,045,995 ADSs acquired in our September 2022 Financing and (ii) 941,176,400 ordinary shares represented by 9,411,764 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (13) | Represents 941,176,400 ordinary shares represented by 9,411,764 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (14) | Represents 404,599,500 ordinary shares represented by 4,045,995 ADSs acquired in our September 2022 Financing. |
| (15) | Represents (i) 1,315,700 ordinary shares represented by 13,157 ADSs acquired in our July 2019 Financing, (ii) 657,900 ordinary shares represented by 6,579 ADSs issuable upon exercise of warrants issued in our July 2019 Financing, (iii) 3,000,000 ordinary shares represented by 30,000 ADSs acquired in our February 2020 Private Placements, (iv) 1,500,000 ordinary shares represented by 15,000 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements, (v) 4,000,000 ordinary shares represented by 40,000 ADSs acquired in our December 2021 Financing, (vi) 2,000,000 ordinary shares represented by 20,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (vii) 5,000,000 ordinary shares represented by 50,000 ADSs acquired in our March 2022 Financing, (viii) 2,500,000 ordinary shares represented by 25,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing (ix) 8,000,000 ordinary shares represented by 80,000 ADSs acquired in our September 2022 Financing and (x) 16,000,000 ordinary shares represented by 160,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (16) | Represents 16,000,000 ordinary shares represented by 160,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (17) | Represents (i) 1,315,700 ordinary shares represented by 13,157 ADSs acquired in our July 2019 Financing, (ii) 657,900 ordinary shares represented by 6,579 ADSs issuable upon exercise of warrants issued in our July 2019 Financing, (iii) 3,000,000 ordinary shares represented by 30,000 ADSs acquired in our February 2020 Private Placements, (iv) 1,500,000 ordinary shares represented by 15,000 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements, (v) 4,000,000 ordinary shares represented by 40,000 ADSs acquired in our December 2021 Financing, (vi) 2,000,000 ordinary shares represented by 20,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (vii) 5,000,000 ordinary shares represented by 50,000 ADSs acquired in our March 2022 Financing, (viii) 2,500,000 ordinary shares represented by 25,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing and (ix) 8,000,000 ordinary shares represented by 80,000 ADSs acquired in our September 2022 Financing. |
16
| (18) | Represents (i) 15,000,000 ordinary shares represented by 150,000 ADSs acquired in our July 2021 Private Placement (ii) 15,483,800 ordinary shares represented by 154,838 ADSs acquired in our July 2021 Private Placement, (iii) 15,000,000 ordinary shares represented by 150,000 ADSs acquired in our September 2022 Financing and (iv) 30,000,000 ordinary shares represented by 300,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (19) | Represents 30,000,000 ordinary shares represented by 300,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (20) | Represents (i) 15,000,000 ordinary shares represented by 150,000 ADSs acquired in our July 2021 Private Placement (ii) 15,483,800 ordinary shares represented by 154,838 ADSs acquired in our July 2021 Private Placement and (iii) 15,000,000 ordinary shares represented by 150,000 ADSs acquired in our September 2022 Financing. |
| (21) | Represents (i) 40,000,000 ordinary shares represented by 400,000 ADSs acquired in our September 2022 Financing and (ii) 80,000,000 ordinary shares represented by 800,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (22) | Represents 80,000,000 ordinary shares represented by 800,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (23) | Represents 40,000,000 ordinary shares represented by 400,000 ADSs acquired in our September 2022 Financing. |
| (24) | Represents (i) 3,784,000 ordinary shares represented by 37,840 ADSs issued in our July 2019 Financing, (ii) 681,600 ordinary shares represented by 6,816 ADSs issuable upon exercise of warrants issued in our July 2019 Financing, (iii) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our February 2020 Private Placements, (iv) 5,000,000 ordinary shares represented by 50,000 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements, (v) 2,000,000 ordinary shares represented by 20,000 ADSs acquired in our December 2021 Financing, (vi) 1,000,000 ordinary shares represented by 10,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (vii) 8,400,000 ordinary shares represented by 84,000 ADSs acquired in our March 2022 Financing, (viii) 4,200,000 ordinary shares represented by 42,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing (ix) 20,000,000 ordinary shares represented by 200,000 ADSs acquired in our September 2022 Financing and (x) 40,000,000 ordinary shares represented by 400,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (25) | Represents 40,000,000 ordinary shares represented by 400,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (26) | Represents (i) 3,784,000 ordinary shares represented by 37,840 ADSs issued in our July 2019 Financing, (ii) 681,600 ordinary shares represented by 6,816 ADSs issuable upon exercise of warrants issued in our July 2019 Financing, (iii) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our February 2020 Private Placements, (iv) 5,000,000 ordinary shares represented by 50,000 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements (v) 2,000,000 ordinary shares represented by 20,000 ADSs acquired in our December 2021 Financing, (vi) 1,000,000 ordinary shares represented by 10,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (vii) 8,400,000 ordinary shares represented by 84,000 ADSs acquired in our March 2022 Financing, (viii) 4,200,000 ordinary shares represented by 42,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing and (ix) 20,000,000 ordinary shares represented by 200,000 ADSs acquired in our September 2022 Financing. |
17
| (27) | Represents (i) 28,250,700 ordinary shares represented by 282,507 ADSs acquired in our July 2021 Private Placement, (ii) 50,000,000 ordinary shares represented by 500,000 ADSs acquired in our December 2021 Financing, (iii) 25,000,000 ordinary shares represented by 250,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (iv) 22,000,000 ordinary shares represented by 220,000 ADSs acquired in our March 2022 Financing, (v) 11,000,000 ordinary shares represented by 110,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing (vi) 40,000,000 ordinary shares represented by 400,000 ADSs acquired in our September 2022 Financing and (vii) 80,000,000 ordinary shares represented by 800,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (28) | Represents 80,000,000 ordinary shares represented by 800,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (29) | Represents (i) 28,250,700 ordinary shares represented by 282,507 ADSs acquired in our July 2021 Private Placement, (ii) 50,000,000 ordinary shares represented by 500,000 ADSs acquired in our December 2021 Financing, (iii) 25,000,000 ordinary shares represented by 250,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (iv) 22,000,000 ordinary shares represented by 220,000 ADSs acquired in our March 2022 Financing, (v) 11,000,000 ordinary shares represented by 110,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing and (vi) 40,000,000 ordinary shares represented by 400,000 ADSs acquired in our September 2022 Financing. |
| (30) | Represents (i) 44,117,600 ordinary shares represented by 441,176 ADSs acquired in our February 2020 Private Placements, (ii) 22,058,800 ordinary shares represented by 220,588 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements, (iii) 40,500,000 ordinary shares represented by 405,000 ADSs acquired in our December 2021 Financing, (iv) 20,250,000 ordinary shares represented by 202,500 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (v) 54,192,400 ordinary shares represented by 541,924 ADSs acquired in our March 2022 Financing, (vi) 27,096,200 ordinary shares represented by 270,962 ADSs issuable upon exercise of warrants issued in our March 2022 Financing (vii) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our September 2022 Financing and (ix) 20,000,000 ordinary shares represented by 200,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (31) | Represents 20,000,000 ordinary shares represented by 200,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (32) | Represents (i) 44,117,600 ordinary shares represented by 441,176 ADSs acquired in our February 2020 Private Placements, (ii) 22,058,800 ordinary shares represented by 220,588 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements (iii) 40,500,000 ordinary shares represented by 405,000 ADSs acquired in our December 2021 Financing, (iv) 20,250,000 ordinary shares represented by 202,500 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (v) 54,192,400 ordinary shares represented by 541,924 ADSs acquired in our March 2022 Financing, (vi) 27,096,200 ordinary shares represented by 270,962 ADSs issuable upon exercise of warrants issued in our March 2022 Financing and (vii) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our September 2022 Financing. |
| (33) | Represents (i) 5,882,300 ordinary shares represented by 58,823 ADSs acquired in our September 2022 Financing and (ii) 11,764,600 ordinary shares represented by 117,646 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (34) | Represents 11,764,600 ordinary shares represented by 117,646 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (35) | Represents 5,882,300 ordinary shares represented by 58,823 ADSs acquired in our September 2022 Financing. |
| (36) | Represents the entire holdings of PranaBio Investments, LLC and includes warrants to purchase 32,500,000 ordinary shares (equivalent to 325,000 ADSs) at an exercise price of $0.03 per share (or $3.00 per ADS), warrants to purchase 30,000,000 ordinary shares (equivalent to 300,000 ADSs) at an exercise price of $0.02 per share (or $2.20 per ADS), warrants to purchase 12,500,000 ordinary shares (equivalent to 125,000 ADSs) at an exercise price of $0.0165 per share (or $1.65 per ADS), warrants to purchase 50,000,000 ordinary shares (equivalent to 500,000 ADSs) at an exercise price of $0.014 per share (or $1.40 per ADS), and warrants to purchase 300,000,000 ordinary shares (equivalent to 3,000,000 ADSs) at an exercise price of $0.0085 per share (or $0.85 per ADS). |
18
| (37) | Represents 300,000,000 ordinary shares represented by 3,000,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (38) | Represents the entire holdings of Pranabio Investments, LLC, excluding 300,000,000 ordinary shares represented by 3,000,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (39) | Represents (i) 2,941,100 ordinary shares represented by 29,411 ADSs acquired in our September 2022 Financing and (ii) 5,882,200 ordinary shares represented by 58,822 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (40) | Represents 5,882,200 ordinary shares represented by 58,822 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (41) | Represents 2,941,100 ordinary shares represented by 29,411 ADSs acquired in our September 2022 Financing. |
| (42) | Represents (i) 15,000,000 ordinary shares represented by 150,000 ADSs acquired in our February 2020 Private Placements, (ii) 7,500,000 ordinary shares represented by 75,000 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements, (iii) 27,000,000 ordinary shares represented by 270,000 ADSs acquired in our December 2021 Financing, (iv) 13,500,000 ordinary shares represented by 135,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (v) 15,000,000 ordinary shares represented by 150,000 ADSs acquired in our March 2022 Financing, (vi) 7,500,000 ordinary shares represented by 750,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing (vii) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our September 2022 Financing and (viii) 20,000,000 ordinary shares represented by 200,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (43) | Represents 20,000,000 ordinary shares represented by 200,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (44) | Represents (i) 15,000,000 ordinary shares represented by 150,000 ADSs acquired in our February 2020 Private Placements, and (ii) 7,500,000 ordinary shares represented by 75,000 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements, (iii) 27,000,000 ordinary shares represented by 270,000 ADSs acquired in our December 2021 Financing, (iv) 13,500,000 ordinary shares represented by 135,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (v) 15,000,000 ordinary shares represented by 150,000 ADSs acquired in our March 2022 Financing, (vi) 7,500,000 ordinary shares represented by 750,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing and (vii) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our September 2022 Financing. |
| (45) | Represents (i) 1,010,000 ordinary shares represented by 10,100 ADSs, (ii) 15,000,000 ordinary shares represented by 150,000 ADSs acquired in our February 2020 Private Placements, (iii) 7,500,000 ordinary shares represented by 75,000 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements, (iv) 20,000,000 ordinary shares represented by 200,000 ADSs acquired in our December 2021 Financing, (v) 10,000,000 ordinary shares represented by 100,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (vi) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our March 2022 Financing, (vii) 5,000,000 ordinary shares represented by 500,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing, (viii) 30,000,000 ordinary shares represented by 300,000 ADSs acquired in our September 2022 Financing and (ix) 60,000,000 ordinary shares represented by 600,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (46) | Represents 60,000,000 ordinary shares represented by 600,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
19
| (47) | Represents (i) 1,010,000 ordinary shares represented by 10,100 ADSs, (ii) 15,000,000 ordinary shares represented by 150,000 ADSs acquired in our February 2020 Private Placements, (iii) 7,500,000 ordinary shares represented by 75,000 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements, (iv) 20,000,000 ordinary shares represented by 200,000 ADSs acquired in our December 2021 Financing, (v) 10,000,000 ordinary shares represented by 100,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (vi) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our March 2022 Financing, (vii) 5,000,000 ordinary shares represented by 500,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing and (viii) 30,000,000 ordinary shares represented by 300,000 ADSs acquired in our September 2022 Financing. |
| (48) | Represents (i) 83,333,400 ordinary shares represented by 833,334 ADSs acquired in our March 2022 Financing, (ii) 41,666,700 ordinary shares represented by 416,667 ADSs issuable upon exercise of warrants issued in our March 2022 Financing, (iii) 5,882,400 ordinary shares represented by 58,824 ADSs acquired in our September 2022 Financing and (iv) 11,764,800 ordinary shares represented by 117,648 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (49) | Represents 11,764,800 ordinary shares represented by 117,648 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (50) | Represents (i) 83,333,400 ordinary shares represented by 833,334 ADSs acquired in our March 2022 Financing, (ii) 41,666,700 ordinary shares represented by 416,667 ADSs issuable upon exercise of warrants issued in our March 2022 Financing and (iii) 5,882,400 ordinary shares represented by 58,824 ADSs acquired in our September 2022 Financing. |
| (51) | Referenced person is affiliated with Paulson Investment Company, LLC, a registered broker dealer. |
| (52) | Represents (i) 11,398,900 ordinary shares represented by 113,989 ADSs issued in our July 2019 Financing, (ii) 7,214,000 ordinary shares represented by 72,140 ADSs issuable upon exercise of warrants issued in our July 2019 Financing, (iii) 18,853,700 ordinary shares represented by 188,537 ADSs issuance upon exercise of warrants issued in our February 2020 Private Placements, (iv) 7,629,600 ordinary shares represented by 76,296 ADSs issuable upon exercise of placement agent warrants issued in our December 2021 Financing, (v) 11,993,100 ordinary shares represented by 119,931 ADSs issuable upon exercise of placement agent warrants issued in our March 2022 Financing, (vi) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our September 2022 Financing and (ii) 20,000,000 ordinary shares represented by 200,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (53) | Represents 20,000,000 ordinary shares represented by 200,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (54) | Represents (i) 11,398,900 ordinary shares represented by 113,989 ADSs issued in our July 2019 Financing, (ii) 7,214,000 ordinary shares represented by 72,140 ADSs issuable upon exercise of warrants issued in our July 2019 Financing, (iii) 18,853,700 ordinary shares represented by 188,537 ADSs issuance upon exercise of warrants issued in our February 2020 Private Placements, (iv) 7,629,600 ordinary shares represented by 76,296 ADSs issuable upon exercise of placement agent warrants issued in our December 2021 Financing, (v) 11,993,100 ordinary shares represented by 119,931 ADSs issuable upon exercise of placement agent warrants issued in our March 2022 Financing and (vi) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our September 2022 Financing. |
| (55) | Represents (i) 11,764,700 ordinary shares represented by 117,647 ADSs acquired in our September 2022 Financing and (ii) 23,529,400ordinary shares represented by 235,294 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (56) | Represents 23,529,400ordinary shares represented by 235,294 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
20
| (57) | Represents 11,764,700 ordinary shares represented by 117,647 ADSs acquired in our September 2022 Financing. |
| (58) | Represents (i) 16,666,600 ordinary shares represented by 166,666 ADSs acquired in our March 2022 Financing, (ii) 8,333,300 ordinary shares represented by 83,333 ADSs issuable upon exercise of warrants issued in our March 2022 Financing, (iii) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our September 2022 Financing and (iv) 20,000,000 ordinary shares represented by 200,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (59) | Represents 20,000,000 ordinary shares represented by 200,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (60) | Represents (i) 16,666,600 ordinary shares represented by 166,666 ADSs acquired in our March 2022 Financing, (ii) 8,333,300 ordinary shares represented by 83,333 ADSs issuable upon exercise of warrants issued in our March 2022 Financing and (iii) 10,000,000 ordinary shares represented by 100,000 ADSs acquired in our September 2022 Financing. |
| (61) | Represents (i) 5,263,100 ordinary shares represented by 52,631 ADSs acquired in our July 2019 Financing, (ii) 2,631,600 ordinary shares represented by 26,316 ADSs issuable upon exercise of warrants issued in our July 2019 Financing, (iii) 4,736,900 ordinary shares represented by 47,369 ADSs acquired in our February 2020 Private Placements, (iv) 2,368,400 ordinary shares represented by 23,684 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements, (v) 24,000,000 ordinary shares represented by 240,000 ADSs acquired in our December 2021 Financing, (vi) 12,500,000 ordinary shares represented by 125,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (vii) 22,000,000 ordinary shares represented by 220,000 ADSs acquired in our March 2022 Financing, (viii) 11,000,000 ordinary shares represented by 110,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing, (ix) 30,500,000ordinary shares represented by 305,000 ADSs acquired in our September 2022 Financing and (x) 61,000,000 ordinary shares represented by 610,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (62) | Represents 61,000,000 ordinary shares represented by 610,000 ADSs issuable upon the exercise of warrants issued in our September 2022 Financing. |
| (63) | Represents (i) 5,263,100 ordinary shares represented by 52,631 ADSs acquired in our July 2019 Financing, (ii) 2,631,600 ordinary shares represented by 26,316 ADSs issuable upon exercise of warrants issued in our July 2019 Financing, (iii) 4,736,900 ordinary shares represented by 47,369 ADSs acquired in our February 2020 Private Placements, (iv) 2,368,400 ordinary shares represented by 23,684 ADSs issuable upon exercise of warrants issued in our February 2020 Private Placements, (v) 24,000,000 ordinary shares represented by 240,000 ADSs acquired in our December 2021 Financing, (vi) 12,500,000 ordinary shares represented by 125,000 ADSs issuable upon exercise of warrants issued in our December 2021 Financing, (vii) 22,000,000 ordinary shares represented by 220,000 ADSs acquired in our March 2022 Financing, (viii) 11,000,000 ordinary shares represented by 110,000 ADSs issuable upon exercise of warrants issued in our March 2022 Financing and (ix) 30,500,000 ordinary shares represented by 305,000 ADSs acquired in our September 2022 Financing. |
21
DESCRIPTION OF SHARE CAPITAL AND ARTICLES OF ASSOCIATION
The following summarizes the material rights of holders of ordinary shares, as set out in our Articles of Association. The following summary is qualified in its entirety by reference to the United Kingdom Companies Act 2006, or the Companies Act, and to our Articles of Association, which are filed as an exhibit to our Form F-3/A filed with the SEC on August 30, 2021, which is incorporated by reference in this prospectus.
We were originally established as a private limited company under the laws of England and Wales on October 7, 2004 under the name Freshname No. 333 Limited. On January 19, 2005, we changed our name to Morria Biopharmaceuticals Limited and on February 3, 2005, we completed a reverse merger with Morria Biopharmaceuticals Inc., or Morria, a Delaware corporation, in which Morria became our wholly-owned subsidiary and we re-registered as a non-traded public limited company under the laws of England and Wales. Morria was dedicated to the discovery and development of novel, first-in-class, non-steroidal, synthetic anti-inflammatory drugs. On March 22, 2011, we incorporated an Israeli subsidiary, Morria Biopharma Ltd. On June 25, 2013, we changed our name to Celsus Therapeutics Plc and on October 13, 2013 Morria was renamed Celsus Therapeutics Inc. On September 25, 2015, we further changed our name to “Akari Therapeutics, Plc”. As such our affairs are governed by our Articles of Association and English law.
In the following summary, a “shareholder” is the person registered in our register of members as the holder of the relevant securities. For those ordinary shares that have been deposited in our ADS facility pursuant to our deposit agreement with Deutsche Bank Trust Company Americas, as depositary, Deutsche Bank Trust Company Americas, as depositary, or its nominee is deemed the shareholder.
Share Capital
Our board of directors is generally authorized to issue up to 15,000,000,000 ordinary shares of $0.0001 each until June 30, 2026, without seeking shareholder approval, subject to certain limitations. As of August 22, 2022, there were 5,934,917,123 ordinary shares outstanding, outstanding options to purchase 429,573,885 ordinary shares and 460,426,115 ordinary shares available for future issuance under our 2014 Equity Incentive Compensation Plan. In connection with our annual general meeting held on June 30, 2022, the amount of shares available for the grant of awards under our 2014 Equity Incentive Plan was increased to 890,000,000 ordinary shares. All of our existing issued ordinary shares are fully paid. Accordingly, no further capital may be required by us from the holders of such shares.
The rights and restrictions to which the ordinary shares will be subject are prescribed in our Articles of Association. Our Articles of Association permit our board of directors, with shareholder approval, to determine the terms of any preferred shares that we may issue. Our board of directors is authorized, having obtained the consent of the shareholders, to provide from time to time for the issuance of other classes or series of shares and to establish the characteristics of each class or series, including the number of shares, designations, relative voting rights, dividend rights, liquidation and other rights, redemption, repurchase or exchange rights and any other preferences and relative, participating, optional or other rights and limitations not inconsistent with applicable law.
English law does not recognize fractional shares held of record. Accordingly, our Articles of Association do not provide for the issuance of fractional ordinary shares, and our official English share register will not reflect any fractional shares.
We are not permitted under English law to hold our own ordinary shares unless they are repurchased by us and held in treasury.
During the three years ended December 31, 2021, excluding this offering, we have issued an aggregate of 3,179,038,510 ordinary shares and options to purchase an aggregate of 58,900,000 ordinary shares.
Issuance of Options and Warrants
Our Articles of Association provide that, subject to any shareholder approval requirement under any laws, regulations or the rules of any stock exchange to which we are subject, our board of directors is unconditionally authorized, from time to time, in its discretion, to grant such persons, at such times and upon such terms as it determines, options to purchase, or issue them warrants to subscribe, our shares of any class or classes or of any series of any class. The Companies Act provides that directors may issue options or warrants without shareholder approval once authorized to do so by the Articles of Association or an ordinary resolution of shareholders. Our board of directors may issue shares upon exercise of options or warrants without shareholder approval or authorization, up to the relevant authorized share capital limit.
22
Dividends
Our Articles of Association provide that our board of directors may, subject to the applicable provisions of the Companies Act, from time to time, declare such dividend as may appear to the board of directors to be justified by the distributable profits of the Company. Subject to the rights of the holders of shares with preferential or other special rights that may be authorized in the future, holders of ordinary shares are entitled to receive dividends according to their rights and interest in our distributable profits. Dividends, to the extent declared, are distributed according to the proportion of the nominal value paid up on account of the shares held at the date so appointed by the Company, without regard to the premium paid in excess of the nominal value, if any. A company may only distribute a dividend out of the company’s distributable profits, as defined under the Companies Act.
Any dividend unclaimed after a period of twelve years from the due date for payment of such dividend shall be forfeited and shall revert to us. In addition, the investment or use by the board of directors of any unclaimed dividend, interest or other sum payable on or in respect of an ordinary share shall not constitute us as a trustee in respect thereof.
Rights in a Liquidation
In the event of our liquidation, subject to applicable law, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of ordinary shares in proportion to their respective holdings. This liquidation right may be affected by the grant of preferential dividends or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.
Voting Rights
Holders of ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders. These voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential rights that may be authorized in the future.
The ordinary shares do not have cumulative voting rights in the election of directors. As a result, holders of ordinary shares that represent more than 50% of the voting power at the general meeting of shareholders, in person or by proxy, have the power to elect all the directors whose positions are being filled at that meeting to the exclusion of the remaining shareholders. Each director must retire at the next annual general meeting after the end of his appointment term of one, two or three years. In any two year period, a majority of the directors must stand for re-election or replacement. In the event that this majority has not been met and the number of directors eligible for retirement by rotation under the provision of our Articles of Association is not met, any further directors to retire are those who have been in office the longest since their last appointment or re-appointment, but as between persons who became or were last re-appointed directors on the same day, those to retire are determined by the Board of Directors at the recommendation of the Chairman. A retiring director is eligible for re-appointment, subject to the terms of our Articles of Association.
The actions necessary to change the rights of holders of the ordinary shares are as follows: the rights of the shareholders would need to be altered by way of a special resolution requiring 75% vote of the shareholders who are present and voting in person or by proxy. In order to change the rights of a separate class of shares, it will require such a vote by shareholders of that class of shares.
Preemptive Rights
There are no rights of pre-emption under our Articles of Association in respect of transfers of issued ordinary shares. In certain circumstances, our shareholders have preemptive rights with respect to new issuances of equity securities. However our board of directors is generally authorized to allot equity securities for cash without triggering shareholder preemptive rights, provided that this power shall (i) be limited to the allotment of equity securities up to an aggregate nominal amount of $1,500,000; and (ii) expire (unless previously revoked or varied by us), on June 30, 2026.
23
Transfer of Shares
Fully paid ordinary shares are issued in registered form and may be transferred pursuant to our Articles of Association, unless such transfer is restricted or prohibited by another instrument and subject to applicable securities laws. The Articles of Association state that the directors of the Company may refuse to authorize a transfer of shares if the shares in question have not been paid in full and are therefore only partly paid.
Fiduciary Duties of Office Holders
Directors owe fiduciary duties to their companies. Chapter 2 of Part 10 of the Companies Act codifies certain of those duties. The relevant statutory duties imposed on directors under the Companies Act are:
| ● | to act in accordance with the company’s constitution, and only exercise powers for the purposes for which they are conferred; |
| ● | to act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole |
| ● | to exercise independent judgment; |
| ● | to exercise reasonable care, skill and diligence, being such as would be exercised by a reasonably diligent person with the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director, and the general knowledge, skill and experience that the director has; |
| ● | to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company (including in particular through exploitation of any property, information or opportunity) unless authorized by the company or its board; |
| ● | not to accept benefits from third parties; and |
| ● | to declare an interest in a proposed transaction or arrangement. |
In addition, certain additional duties are imposed by the common law, such as a duty of confidentiality.
Disclosure of Personal Interests of an Officer Holder
The Companies Act requires a director to disclose to the board any direct or indirect personal interest that he or she may have in connection with any existing or proposed transaction by the company. The disclosure is required to be made promptly and, in the case of a proposed transaction, before it is entered into. All transactions in which a director has an interest must be declared, and not only those that are extraordinary transactions.
24
Except as provided in our Articles of Association, a director may not vote at a meeting of the board or of a committee of the board on any resolution concerning a matter:
| ● | in which he (directly or indirectly) has a material interest, other than an interest in shares or debentures or other securities of or in (or through) the Company; and |
| ● | subject to the Companies Act, which conflicts or may conflict with the interests of the Company. |
A director is not counted in the quorum at a meeting in relation to any resolution on which he is debarred from voting.
Notwithstanding the foregoing, a director is entitled to vote and be counted in the quorum in respect of any resolution concerning any of the following matters:
| ● | the giving of any security, guarantee or indemnity to a third party in respect of a debt or obligation of the Company or any of our subsidiaries for which he himself has assumed responsibility in whole or in part under a guarantee or indemnity or by the giving of security; |
| ● | any proposal concerning an offer of shares or debentures or other securities of or by the Company or any of our subsidiaries for subscription or purchase in which offer he is or is to be interested as a participant as the holder of such shares, debentures or other securities or in its underwriting or sub-underwriting; |
| ● | any contract, arrangement, transaction or other proposal concerning any other company in which he (together with any person connected with him) is interested (directly or indirectly) whether as an officer, shareholder, creditor or otherwise, unless he (together with any person connected with him) holds an interest representing one per cent. or more of any class of the equity share capital (exclusive of treasury shares) of such company or of the voting rights available to members of the relevant company; |
| ● | any contract, arrangement, transaction or other proposal concerning the adoption, modification or operation of a superannuation fund or retirement, death or disability benefits scheme under which he may benefit and which has been approved by or is subject to and conditional upon approval by His Majesty’s Revenue & Customs; |
| ● | any contract, arrangement, transaction or proposal concerning the adoption, modification or operation of any scheme for enabling employees including full time executive directors of the Company and/or any subsidiary to acquire shares of the Company or any arrangement for the benefit of employees of the Company or any of our subsidiaries, which does not award him any privilege or benefit not awarded to the employees to whom such scheme relates; and |
| ● | any contract, arrangement, transaction or proposal concerning insurance which the Company proposes to maintain or purchase for the benefit of directors or for the benefit of persons including directors. |
25
Article 27 of the Articles of Association states, that the board may authorize any matter which may otherwise involve a director breaching his duties under certain sections of the Companies Act to avoid conflicts of interest.
Any director (including the director which has the conflict) may propose that such conflicted director be authorized in relation to any matter which is the subject of such a conflict. The director with the conflict will not count towards the quorum at the meeting at which the conflict is considered and may not vote on any resolution authorizing the conflict. Where the board gives authority in relation to such a conflict, the board may impose such terms on the relevant director as it deems appropriate.
Directors’ and Officers’ Compensation
The Companies Act requires that a resolution approving provisions to appoint a director for a fixed period of more than two years must not be passed unless a memorandum setting out the proposed contract incorporating the provision is made available to members: in the case of a resolution at a meeting, by being made available for inspection by members of the company both (i) at the company’s registered office for not less than 15 days ending with the date of the meeting, and (ii) at the meeting itself.
Directors’ Borrowing Powers
Our board of directors may, from time to time, in its discretion, cause us to borrow or secure the payment of any sum or sums of money for the purposes of our company.
Retirement of Directors
We do not have any age limitations for our directors, nor do we have mandatory retirement as a result of reaching a certain age.
Share Qualification of Directors
No shareholding qualification is required by a director.
Redemption Provisions
We may, subject to applicable law and to our Articles of Association, issue redeemable shares and redeem them.
Capital Calls
Under our Articles of Association and the Companies Act, the liability of our shareholders is limited to the nominal value (i.e. par). The board of directors has the authority to make calls upon the shareholders in respect of any money unpaid on their shares and each shareholder shall pay to us as required by such notice the amount called on his shares. If a call remains unpaid after it has become due and payable, and the fourteen days’ notice provided by the board of directors has not been complied with, any share in respect of which such notice was given may be forfeited by a resolution of the board.
No Sinking Fund
Our ordinary shares do not have sinking fund provisions.
Modification of Rights
Subject to the provisions of the Companies Act, if at any time our capital is divided into different classes of shares, the rights attached to any class may be varied or abrogated with the consent in writing of the holders of at least three-fourths in nominal value of that class or with the sanction of a special resolution passed at a separate meeting of the holders of that class, but not otherwise. The quorum at any such meeting is two or more persons holding, or representing by proxy, at least one-third in nominal value of the issued shares in question.
26
Shareholders’ Meetings and Resolutions
Pursuant to our Articles of Association, the quorum required for an ordinary meeting of shareholders consists of at least two shareholders present in person or by proxy, who hold in aggregate more than 15% of the voting rights of shareholders eligible to vote at the meeting. If at any time the Company has only one shareholder, such shareholder, in person, by proxy or, if a corporation, by its representative, shall constitute a quorum. A meeting adjourned for lack of a quorum generally is adjourned to the same day in the following week at the same time and place or any time and place as the chairman of the board may designate. Furthermore, the board of the company may call a general meeting whenever they think fit. If the Board, in its absolute discretion, considers that it is impractical or unreasonable for any reason to hold a general meeting on the date or at the time or place specified in the notice calling the general meeting, it may postpone the general meeting to another date, time and/or place.
Under the Companies Act, each shareholder of record must be provided at least 14 calendar days’ prior notice of any general shareholders’ meeting and 21 days’ prior notice of an annual general meeting. Subject to the provisions of the Companies Act, our annual general meeting will be held at such time and place or places (any of which may be electronic facilities) as our board may determine. Our board may call a general meeting whenever it thinks fit, and must do so when required under the Companies Act. General meetings must be convened on such requisition, or in default may be convened by such requisitionists or by court order, as provided by the Companies Act.
Voting at any general meeting of shareholders is by a show of hands, unless a poll is demanded. A poll may be demanded by:
| ● | the chairman of the meeting; |
| ● | at least five shareholders entitled to vote at the meeting; |
| ● | any shareholder or shareholders representing in the aggregate not less than one-tenth of the total voting rights of all shareholders entitled to vote at the meeting; or |
| ● | any shareholder or shareholders holding shares conferring a right to vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. |
In a vote by a show of hands, every shareholder who is present in person or by proxy at a general meeting has one vote. In a vote on a poll, every shareholder who is present in person or by proxy shall have one vote for every share of which they are registered as the holder (provided that no shareholder shall have more than one vote on a show of hands notwithstanding that he may have appointed more than one proxy to vote on his behalf). To the extent the Articles of Association provide for a vote by a show of hands in which each shareholder has one vote, this differs from U.S. law, under which each shareholder typically is entitled to one vote per share at all meetings.
27
Holders of ADSs are entitled to vote by supplying their voting instructions to Deutsche Bank Trust Company Americas, as depositary, who, subject to the terms of the deposit agreement, will vote the ordinary shares represented by their ADSs in accordance with their instructions. The ability of Deutsche Bank Trust Company Americas, as depositary, to carry out voting instructions may be limited by practical and legal limitations, the terms of the deposit agreement, the terms of our Articles of Association, and the terms of the ordinary shares on deposit. We cannot assure the holders of our ADSs that they will receive voting materials in time to enable them to return voting instructions to Deutsche Bank Trust Company Americas, as depositary, in a timely manner.
Unless otherwise required by law or the Articles of Association, voting in a general meeting is by ordinary resolution. An ordinary resolution is approved by a majority vote of the shareholders present at a meeting at which there is a quorum. Examples of matters that can be approved by an ordinary resolution include:
| ● | the election of directors; |
| ● | the approval of financial statements; |
| ● | the declaration of final dividends; |
| ● | the appointment of auditors; and |
| ● | the grant of authority to allot shares. |
A special resolution requires the affirmative vote of not less than three-fourths of the eligible votes cast. Examples of matters that must be approved by a special resolution include changes to the Articles of Association, or our winding-up.
Limitation on Owning Securities
Our Articles of Association do not restrict in any way the ownership or voting of ordinary shares by non-residents. Furthermore, there is no general obligation for a shareholder of a U.K. company which is not listed in the U.K. to voluntarily disclose his shareholding unless required to do so by the Company. If the Company serves a demand on a person under section 793 of the Companies Act, that person will be required to disclose any interest he has in the shares of the Company.
Change in Control
We can issue additional shares with any rights or restrictions attached to them as long as the Company is not restricted by any rights attached to existing shares. These rights or restrictions can be decided by the directors so long as there is no conflict with any resolution passed by the shareholders. The ability of the directors to issue shares with rights or restrictions that are different than those attached to the currently outstanding ordinary shares could have the effect of delaying, deferring or preventing change of control of our Company.
In addition, our board of directors is divided into three classes for purposes of election. One class is elected at each annual general meeting to serve for a three-year term. Because this would restrict shareholders’ ability to replace the entire board at a single meeting, this provision could also have the effect of delaying, deferring or preventing a change in control of our Company.
We may be subject to the Takeover Code, if the Takeover Panel determines that we have our place of central management and control in the United Kingdom. Whilst the Takeover Panel has not informed us of any such determination, on account of the current constitution of our board, we believe that we are currently subject to the Takeover Code. If that is the case, now or in the future, then under Rule 9 of the Takeover Code, if a person: (a) acquires an interest in our shares which, when taken together with shares in which he or persons acting in concert with him are interested, carry 30% or more of the voting rights of our shares; or (b) who, together with persons acting in concert with him, is interested in shares that in the aggregate carry not less than 30% of our voting rights and does not hold shares carrying more than 50% of our voting rights, acquires additional interests in shares that increase the percentage of shares carrying voting rights in which that person is interested, the acquirer and, depending on the circumstances, its concert parties, will be required (except with the consent of the Takeover Panel) to make a cash offer for our outstanding shares at a price not less than the highest price paid for any interest in our shares by the acquirer or its concert parties during the previous 12 months.
28
Differences in Corporate Law between England and the State of Delaware
As a public limited company incorporated under the laws of England and Wales, the rights of our shareholders are governed by applicable English law, including the Companies Act, and not by the law of any U.S. state. As a result, our directors and shareholders are subject to different responsibilities, rights and privileges than are applicable to directors and shareholders of U.S. corporations. We have set below a summary of the differences between the provisions of the Companies Act applicable to us and the Delaware General Corporation Law relating to shareholders’ rights and protections. This summary is not intended to be a complete discussion of the respective rights and it is qualified in its entirety by reference to English law, Delaware law and our Articles of Association. Before investing, you should consult your legal advisor regarding the impact of English corporate law on your specific circumstances and reasons for investing. The summary below does not include a description of rights or obligations under the U.S. federal securities laws or Nasdaq listing requirements. You are also urged to carefully read the relevant provisions of the Delaware General Corporation Law and the Companies Act for a more complete understanding of the differences between Delaware and English law.
| Delaware | England | |||
| Number of Directors | Under Delaware law, a corporation must have at least one director and the number of directors shall be fixed by or in the manner provided in the bylaws, unless specified in the certificate of incorporation. | Under the Companies Act, a public limited company must have at least two directors and the number of directors may be fixed by or in the manner provided in a company’s articles of association. | ||
| Removal of Directors | Under Delaware law, directors may be removed from office, with or without cause, by a majority shareholder vote, except (a) in the case of a corporation whose board is classified, shareholders may effect such removal only for cause, unless otherwise provided in the certificate of incorporation, and (b) in the case of a corporation having cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire board of directors, or, if there are classes of directors, at an election of the class of directors of which he or she is a part. | Under the Companies Act, shareholders may remove a director without cause by an ordinary resolution (which is passed by a simple majority of those voting in person or by proxy at a general meeting) irrespective of any provisions of any service contract the director has with the company, provided that 28 clear days’ notice of the resolution is given to the company and certain other procedural requirements under the Companies Act are followed (such as allowing the director to make representations against his or her removal at the meeting and/or in writing). |
29
| Vacancies on the Board of Directors | Under Delaware law, vacancies and newly created directorships may be filled by a majority of the directors then in office (even though less than a quorum) or by a sole remaining director unless otherwise provided in the certificate of incorporation or bylaws of the corporation. | Under English law, the procedure by which directors (other than a company’s initial directors) are appointed is generally set out in a company’s articles of association, provided that where two or more persons are appointed as directors of a public limited company by resolution of the shareholders, resolutions appointing each director must be voted on individually unless a resolution of the shareholders that such resolutions do not have to be voted on individually is first agreed to by the meeting without any vote being given against it. |
| Delaware | England | |||
| Annual General Meeting | Under Delaware law, the annual meeting of shareholders shall be held at such place, on such date and at such time as may be designated from time to time by the board of directors or as provided in the certificate of incorporation or by the bylaws. | Under the Companies Act, a public limited company must hold an annual general meeting each year. This meeting must be held within six months beginning with the day following the company’s accounting reference date. | ||
| General Meeting | Under Delaware law, special meetings of the shareholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws. | Under the Companies Act, a general meeting of the shareholders of a public limited company may be called by the directors. Shareholders holding at least 5% of the paid-up capital (excluding any paid-up capital held as treasury shares) of the company carrying voting rights at general meetings can also require the directors to call a general meeting. | ||
| Notice of General Meetings | Under Delaware law, written notice of any meeting of the shareholders must be given to each shareholder entitled to vote at the meeting not less than ten nor more than 60 days before the date of the meeting and shall specify the place, date, hour and purpose or purposes of the meeting. |
The Companies Act provides that a general meeting (other than an adjourned meeting) must be called by notice of:
● in the case of an annual general meeting, at least 21 days; and
● in any other case, at least 14 days. |
30
| The company’s articles of association may provide for a longer period of notice and, in addition, certain matters (such as the removal of directors or auditors) require special notice, which is 28 clear days’ notice. The shareholders of a company may in all cases consent to a shorter notice period, the proportion of shareholders’ consent required being 100% of those entitled to attend and vote in the case of an annual general meeting and, in the case of any other general meeting, a majority in number of the members having a right to attend and vote at the meeting, being a majority who together hold not less than 95% in nominal value of the shares giving a right to attend and vote at the meeting. |
| Delaware | England | |||
| Quorum | The certificate of incorporation or bylaws may specify the number of shares, the holders of which shall be present or represented by proxy at any meeting in order to constitute a quorum, but in no event shall a quorum consist of less than 1/3 of the shares entitled to vote at the meeting. In the absence of such specification in the certificate of incorporation or bylaws, a majority of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at a meeting of shareholders. | Subject to the provisions of a company’s articles of association, the Companies Act provides that two shareholders present at a meeting (in person or by proxy) shall constitute a quorum. | ||
| Proxy | Under Delaware law, at any meeting of shareholders, a shareholder may designate another person to act for such shareholder 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. | Under the Companies Act, at any meeting of shareholders, a shareholder may designate another person to attend, speak and vote at the meeting on their behalf by proxy (or, in the case of a shareholder which is a corporate body, may appoint a corporate representative). |
31
| Issue of New Shares | Under Delaware law, if the company’s certificate of incorporation so provides, the directors have the power to authorize additional stock. The directors may authorize capital stock to be issued for consideration consisting of cash, any tangible or intangible property or any benefit to the company or any combination thereof. |
Under the Companies Act, the directors of a company must not exercise any power to allot shares or grant rights to subscribe for, or to convert any security into, shares unless they are authorized to do so by the company’s articles of association or by an ordinary resolution of the shareholders.
Any authorization given must state the maximum amount of shares that may be allotted under it and specify the date on which it will expire, which must be not more than five years from the date the authorization was given. The authority can be renewed by a further resolution of the shareholders. |
| Delaware | England | |||
| Pre-emptive Rights | Under Delaware law, unless otherwise provided in a corporation’s certificate of incorporation, a stockholder does not, by operation of law, possess pre-emptive rights to subscribe to additional issuances of the corporation’s stock. | Under the Companies Act, “equity securities” (being (i) shares in the company other than shares that, with respect to dividends and capital, carry a right to participate only up to a specified amount in a distribution (“ordinary shares”) or (ii) rights to subscribe for, or to convert securities into, ordinary shares) proposed to be allotted for cash must be offered first to the existing equity shareholders in the company in proportion to the respective nominal value of their holdings, unless an exception applies or a special resolution to the contrary has been passed by shareholders in a general meeting or the articles of association provide otherwise in each case in accordance with the provisions of the Companies Act. | ||
| Liability of Directors and Officers |
Under Delaware law, a corporation’s certificate of incorporation may include a provision eliminating or limiting the personal liability of a director to the corporation and its shareholders for monetary damages arising from a breach of fiduciary duty as a director. However, no provision can limit the liability of a director for:
● any breach of the director’s duty of loyalty to the corporation or its shareholders;
● acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
● willful or negligent payment of unlawful dividends or stock purchases or redemptions; or
● any transaction from which the director derives an improper personal benefit. |
Under the Companies Act, any provision (whether contained in a company’s articles of association or any contract or otherwise) that purports to exempt a director of a company (to any extent) from any liability that would otherwise attach to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company is void.
Any provision by which a company directly or indirectly provides an indemnity (to any extent) for a director of the company or of an associated company against any liability attaching to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company of which he or she is a director is also void except as permitted by the Companies Act, which provides exceptions for the company to: (i) purchase and maintain insurance against such liability; (ii) provide a “qualifying third party indemnity” (being an indemnity against liability incurred by the director to a person other than the company or an associated company, which must not cover fines imposed in criminal proceedings, penalties imposed by regulatory bodies arising out of non-compliance with regulatory requirements, the defense costs of criminal proceedings where the director is found guilty, the defense costs of civil proceedings successfully brought against the director by the company or an associated company, or the costs of unsuccessful applications by the director for certain reliefs); and (iii) provide a “qualifying pension scheme indemnity” (being an indemnity against liability incurred in connection with the company’s activities as trustee of an occupational pension plan). |
32
| Delaware | England | |||
| Voting Rights | Delaware law provides that, unless otherwise provided in the certificate of incorporation, each shareholder of record is entitled to one vote for each share of capital stock held by such shareholder. | Under English law, unless a poll is demanded by the shareholders of a company or is required by the Chairman of the meeting or the company’s articles of association, shareholders shall vote on all resolutions on a show of hands. | ||
| Under the Companies Act, a poll may be demanded by: (i) not fewer than five shareholders having the right to vote on the resolution; (ii) any shareholder(s) representing at least 10% of the total voting rights of all the shareholders having the right to vote on the resolution (excluding any voting rights attached to treasury shares); or (iii) any shareholder (s) holding shares in the company conferring a right to vote on the resolution being shares on which an aggregate sum has been paid up equal to not less than 10% of the total sum paid up on all the shares conferring that right. A company’s articles of association may provide more extensive rights for shareholders to call a poll. | ||||
| Under English law, an ordinary resolution is passed on a show of hands if it is approved by a simple majority (more than 50%) of the votes cast by shareholders present (in person or by proxy) and entitled to vote. If a poll is demanded, an ordinary resolution is passed if it is approved by holders representing a simple majority of the total voting rights of shareholders present (in person or by proxy) who (being entitled to vote) vote on the resolution. Special resolutions require the affirmative vote of not less than 75% of the votes cast by shareholders present (in person or by proxy) at the meeting. | ||||
| Variation of Class Rights | Under Delaware law, the holders of the outstanding shares of a class shall be entitled to vote as a class upon a proposed amendment, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would increase or decrease the aggregate number of authorized shares of such class, increase or decrease the par value of the shares of such class, or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely. |
The Companies Act provides that rights attached to a class of shares may only be varied or abrogated in accordance with provision in the company’s articles for the variation or abrogation of those rights or, where the company’s articles contain no such provision, if the holders of shares of that class consent to the variation or abrogation. Consent for these purposes means:
● consent in writing from the holders of at least 75% in nominal value of the issued shares of that class (excluding any shares held as treasury shares); or
● a special resolution passed at a separate meeting of the holders of that class sanctioning the variation. | ||
| The Companies Act provides that the quorum for a class meeting is not less than two persons holding or representing by proxy at least one-third of the nominal value of the issued shares of that class. Following a variation of class rights, shareholders who amount to not less than 15% of the shareholders of the class in question who did not approve the variation may apply to court to have the variation cancelled. Any application must be made within 21 days of the variation. The court may cancel the variation if it is satisfied having regard to all the circumstances of the case that the variation would unfairly prejudice the shareholders of the class represented by the applicant. |
33
| Shareholder Vote on Certain Transactions |
Generally, under Delaware law, unless the certificate of incorporation provides for the vote of a larger portion of the stock, completion of a merger, consolidation, sale, lease or exchange of all or substantially all of a corporation’s assets or dissolution requires:
● the approval of the board of directors; and
● approval by the vote of the holders of a majority of the outstanding stock or, if the certificate of incorporation provides for more or less than one vote per share, a majority of the votes of the outstanding stock of a corporation entitled to vote on the matter.
Under Delaware law, a contract or transaction between the company and one or more of its directors or officers, or between the company and any other organization in which one or more of its directors or officers, are directors or officers, or have a financial interest, shall not be void solely for this reason, or solely because the director or officer participates in the meeting of the board which authorizes the contract or transaction, or solely because any such director’s or officer’s votes are counted for such purpose, if:
● the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the board, and the board in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum;
● the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or
● the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee or the shareholders. |
The Companies Act provides for schemes of arrangement, which are arrangements or compromises between a company and any class of shareholders or creditors that may be used in certain types of reconstructions, amalgamations, capital reorganizations or takeovers. These arrangements require:
● the approval at a shareholders’ or creditors’ meeting convened by order of the court, of a majority in number of shareholders or creditors representing 75% in value of the capital held by, or debt owed to, the class of shareholders or creditors, or class thereof present and voting, either in person or by proxy; and
● the approval of the court.
Once approved, sanctioned and effective, all shareholders or creditors of the relevant class and the company are bound by the terms of the scheme.
In addition, the Companies Act provides for restructuring plans, which may be used by a company only for the purpose of reducing or mitigating the effects of financial difficulties it is encountering that may affect its ability to carry on business as a going concern. These plans are similar to schemes of arrangement, but: the only shareholder or creditor approval required is that of shareholders or creditors representing 75% in value of the capital held by, or debt owed to, the members present and voting of one class of shareholders or creditors that would have a genuine economic interest in the company if the plan were not approved; and if that approval is obtained, members of any other class of shareholders or creditors will be bound by the restructuring plan if they will not as a result be worse off than if the plan were not approved and the court grants its approval.
The Companies Act also contains certain provisions relating to transactions between a director and the company, including transactions involving the acquisition of substantial non-cash assets from a director or the sale of substantial noncash assets to a director, and loans between a company and a director or certain connected persons of directors. If such transactions meet certain thresholds set out within the Companies Act the approval of shareholders by ordinary resolution will be required. |
34
| Delaware | England | |||
| Standard of Conduct for Directors | Delaware law does not contain specific provisions setting forth the standard of conduct of a director. The scope of the fiduciary duties of directors is generally determined by the courts of the State of Delaware. In general, directors have a duty to act without self-interest, on a well-informed basis and in a manner they reasonably believe to be in the best interest of the shareholders. Directors of a Delaware corporation owe fiduciary duties of care and loyalty to the corporation and to its shareholders. The duty of care generally requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself or herself of all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he or she reasonably believes to be in the best interests of the corporation. The director must not use his or her corporate position for personal gain or advantage. In addition, under Delaware law, when the board of directors of a Delaware corporation approves the sale or break-up of a corporation, the board of directors may, in certain circumstances, have a duty to obtain the highest value reasonably available to the shareholders. |
Under English law, a director owes various statutory and fiduciary duties to the company, including:
● to act in the way he or she considers, in good faith, would be most likely to promote the success of the company for the benefit of its shareholders as a whole;
● to avoid a situation in which he or she has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company;
● to act in accordance with the company’s constitution and only exercise his or her powers for the purposes for which they are conferred;
● to exercise independent judgment;
● to exercise reasonable care, skill and diligence;
● not to accept benefits from a third party conferred by reason of his or her being a director or doing (or not doing) anything as a director; and
● to declare any interest that he or she has, whether directly or indirectly, in a proposed or existing transaction or arrangement with the company. |
35
| Shareholder Suits |
Under Delaware law, a shareholder may initiate a derivative action to enforce a right of a corporation if the corporation fails to enforce the right itself. The complaint must:
● state that the plaintiff was a shareholder at the time of the transaction of which the plaintiff complains or that the plaintiff’s shares thereafter devolved on the plaintiff by operation of law;
● allege with particularity the efforts made by the plaintiff to obtain the action the plaintiff desires from the directors and the reasons for the plaintiff’s failure to obtain the action; or
● state the reasons for not making the effort. Additionally, the plaintiff must remain a shareholder through the duration of the derivative suit. |
Under English law, generally, the company, rather than its shareholders, is the proper claimant in an action in respect of a wrong done to the company or where there is an irregularity in the company’s internal management. Notwithstanding this general position, the Companies Act provides that (i) a court may allow a shareholder to bring a derivative claim (that is, an action in respect of and on behalf of the company) in respect of a cause of action arising from a director’s negligence, default, breach of duty or breach of trust, subject to complying with the procedural requirements under the Companies Act and (ii) a shareholder may bring a claim for a court order where the company’s affairs have been or are being conducted in a manner that is unfairly prejudicial to some or all of its shareholders. |
Other U.K. Law Considerations
Squeeze-Out
Under the Companies Act, if a takeover offer (as defined in Section 974 of the Companies Act) is made for the shares of a company and the offeror were to acquire, or unconditionally contract to acquire: (i) not less than 90% in value of the shares to which the takeover offer relates (the “Takeover Offer Shares”); and (ii) where those shares are voting shares, not less than 90% of the voting rights attached to the Takeover Offer Shares, the offeror could acquire compulsorily the remaining 10% within three months of the day after the last day on which its offer can be accepted. It would do so by sending a notice to outstanding shareholders telling them that it will acquire compulsorily their Takeover Offer Shares and then, six weeks later, it would execute a transfer of the outstanding Takeover Offer Shares in its favor and pay the consideration to the company, which would hold the consideration on trust for outstanding shareholders. The consideration offered to the shareholders whose Takeover Offer Shares are acquired compulsorily under the Companies Act must, in general, be the same as the consideration that was available under the takeover offer.
Sell-Out
The Companies Act also gives minority shareholders a right to be bought out in certain circumstances by an offeror who has made a takeover offer (as defined in Section 974 of the Companies Act). If a takeover offer related to all the shares of a company and, at any time before the end of the period within which the offer could be accepted, the offeror held or had agreed to acquire not less than 90% of the shares to which the offer relates, any holder of the shares to which the offer related who had not accepted the offer could by a written communication to the offeror require it to acquire those shares. The offeror is required to give any shareholder notice of his or her right to be bought out within one month of that right arising. The offeror may impose a time limit on the rights of the minority shareholders to be bought out, but that period cannot end less than three months after the end of the acceptance period. If a shareholder exercises his or her rights, the offeror is bound to acquire those shares on the terms of the offer or on such other terms as may be agreed.
36
Disclosure of Interest in Shares
Pursuant to Part 22 of the Companies Act, a company is empowered by notice in writing to require any person whom the company knows to be, or has reasonable cause to believe to be, interested in the company’s shares or at any time during the three years immediately preceding the date on which the notice is issued to have been so interested, within a reasonable time to disclose to the company details of that person’s interest and (so far as is within such person’s knowledge) details of any other interest that subsists or subsisted in those shares. If a shareholder defaults in supplying the company with the required details in relation to the shares in question, or the Default Shares, the shareholder shall not be entitled to vote or exercise any other right conferred by membership in relation to general meetings. Where the Default Shares represent 0.25% or more of the issued shares of the class in question, in certain circumstances the directors may direct that:
| (i) | any dividend or other money payable in respect of the Default Shares shall be retained by the company without any liability to pay interest on it when such dividend or other money is finally paid to the shareholder; and/or |
| (ii) | no transfer by the relevant shareholder of shares (other than a transfer approved in accordance with the provisions of the company’s articles of association) may be registered (unless such shareholder is not in default and the transfer does not relate to Default Shares). |
Dividends
Under English law, before a company can lawfully make a distribution, it must ensure that it has sufficient distributable reserves. A company’s distributable reserves are its accumulated, realized profits, so far as not previously utilized by distribution or capitalization, less its accumulated, realized losses, so far as not previously written off in a reduction or reorganization of capital duly made. In addition to having sufficient distributable reserves, a public company will not be permitted to make a distribution if, at the time, the amount of its net assets (that is, the aggregate of the company’s assets less the aggregate of its liabilities) is less than the aggregate of its issued and paid-up share capital and undistributable reserves, or if the distribution would result in the amount of its net assets being less than that aggregate.
Purchase of Own Shares
Under English law, a public limited company may purchase its own shares only out of the distributable profits of the company or the proceeds of a new issue of shares made for the purpose of financing the purchase, provided that it is not restricted from doing so by its articles. A public limited company may not purchase its own shares if as a result of the purchase there would no longer be any issued shares of the company other than redeemable shares or shares held as treasury shares. Shares must be fully paid in order to be repurchased.
In addition to the foregoing, because Nasdaq is not a “recognized investment exchange” under the Companies Act, a company may purchase its own fully paid shares only pursuant to a purchase contract authorized by ordinary resolution of the holders of its ordinary shares before the purchase takes place. Any authority will not be effective if any shareholder from whom the company proposes to purchase shares votes on the resolution and the resolution would not have been passed if such shareholder had not done so. The resolution authorizing the purchase must specify a date, not being later than five years after the passing of the resolution, on which the authority to purchase is to expire.
A share buy-back by a company of its ordinary shares will give rise to U.K. stamp duty at the rate of 0.5% of the amount or value of the consideration payable by the company, and such stamp duty will be paid by the company. Our Articles of Association do not have conditions governing changes in our capital which are more stringent than those required by law.
Statutory Pre-Emption Rights
Under English law, a company must not allot equity securities to a person on any terms unless the following conditions are satisfied:
| (i) | it has made an offer to each person who holds ordinary shares in the company to allot to them on the same or more favorable terms a proportion of those securities that is as nearly as practicable equal to the proportion in nominal value held by them of the ordinary share capital of the company; and |
37
| (ii) | the period during which any such offer may be accepted has expired or the company has received notice of the acceptance or refusal of every offer so made. |
For these purposes “equity securities” means ordinary shares in the company or rights to subscribe for, or to convert securities into, ordinary shares in the company. “Ordinary shares” means shares other than shares that, with respect to dividends and capital, carry a right to participate only up to a specified amount in a distribution. The statutory pre-emption rights are subject to certain exceptions, including the issue of ordinary shares for non-cash consideration, an allotment of bonus shares and the allotment of equity securities pursuant to an employees’ share scheme. The statutory pre-emption rights may also be disapplied by a resolution approved by 75% of the shareholders who vote on it.
U.K. City Code on Takeovers and Mergers
The U.K. City Code on Takeovers and Mergers, or the Takeover Code, applies, among other things, to an offer for a public company whose registered office is in the United Kingdom and whose securities are not admitted to trading on a regulated market in the United Kingdom if the company is considered by the Panel on Takeovers and Mergers, or the Takeover Panel, to have its place of central management and control in the United Kingdom. This is known as the “residency test.” The test for central management and control under the Takeover Code is different from that used by the U.K. tax authorities. Under the Takeover Code, the Takeover Panel will determine whether we have our place of central management and control in the United Kingdom by looking at various factors, including the structure of our board of directors, the functions of the directors and where they are resident. Whilst the Takeover Panel has not informed us of any such determination, on account of the current constitution of our board, we believe that we are currently subject to the Takeover Code.
If at the time of a takeover offer the Takeover Panel determines that we have our place of central management and control in the United Kingdom, we will be subject to a number of rules and restrictions, including but not limited to the following: (1) our ability to enter into deal protection arrangements with a bidder will be extremely limited; (2) we may not, without the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (3) we will be obliged to provide equality of information to all bona fide competing bidders.
Further, the Takeover Code contains certain rules in respect of mandatory offers. Under Rule 9 of the Takeover Code, if a person: (a) acquires an interest in our shares which, when taken together with shares in which he or persons acting in concert with him are interested, carry 30% or more of our voting rights; or (b) who, together with persons acting in concert with him, is interested in shares that in the aggregate carry not less than 30% of our voting rights and does not hold shares carrying more than 50% of our voting rights, acquires additional interests in shares that increase the percentage of shares carrying voting rights in which that person is interested, the acquirer and, depending on the circumstances, its concert parties, will be required (except with the consent of the Takeover Panel) to make a cash offer for our outstanding shares at a price not less than the highest price paid for any interest in our shares by the acquirer or its concert parties during the previous 12 months.
38
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
American Depositary Shares
Deutsche Bank Trust Company Americas, as depositary, will register and deliver the ADSs. Each ADS will represent ownership of 100 ordinary shares deposited with Deutsche Bank AG, London Branch with principal office at Winchester House, 1 Great Winchester Street, London EC2N 2DB, U.K., as custodian for the depositary. Each ADS will also represent ownership of any other securities, cash or other property which may be held by the depositary. The depositary’s corporate trust office at which the ADSs will be administered is located at 1 Columbus Circle, New York, NY 10019, USA. The principal executive office of the depositary is located at 1 Columbus Circle, New York, NY 10019, USA.
The Direct Registration System, or DRS, is a system administered by The Depository Trust Company, or DTC, pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by the depositary to the ADS holders entitled thereto.
We will not treat ADS holders as our shareholders and accordingly, you, as an ADS holder, will not have shareholder rights. English law governs shareholder rights. The depositary or its custodian will be the holder of the ordinary shares underlying your ADSs. As a holder of ADSs, you will have ADS holder rights. A deposit agreement among us, the depositary and you, as an ADS holder, and the beneficial owners of ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. The laws of the State of New York govern the deposit agreement and the ADSs.
The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of American Depositary Receipt.
Holding the ADSs
How will you hold your ADSs?
You may hold ADSs either (1) directly (a) by having an American Depositary Receipt, or ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (b) by holding ADSs in the DRS, or (2) indirectly through your broker or other financial institution. If you hold ADSs directly, you are an ADS holder. This description assumes you hold your ADSs directly. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.
Dividends and Other Distributions
How will you receive dividends and other distributions on the shares?
The depositary has agreed to pay to ADS holders the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities, after deducting its fees and expenses. The holder of ADSs will receive these distributions in proportion to the number of ordinary shares their ADSs represent as of the record date (which will be as close as practicable to the record date for our ordinary shares) set by the depositary with respect to the ADSs.
| ● | Cash. The depositary will convert any cash dividend or other cash distribution we pay on the ordinary shares or any net proceeds from the sale of any ordinary shares, rights, securities or other entitlements into U.S. dollars if it can do so on a reasonable basis, and can transfer the U.S. dollars to the United States. If that is not possible or lawful or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest. |
39
| ● | Before making a distribution, any taxes or other governmental charges, together with fees and expenses of the depositary, that must be paid, will be deducted. See “Taxation.” It will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution. | |
| ● | Shares. The depositary may distribute additional ADSs representing any ordinary shares we distribute as a dividend or free distribution to the extent reasonably practicable and permissible under law. The depositary will only distribute whole ADSs. It will try to sell ordinary shares which would require it to deliver a fractional ADS and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new ordinary shares. The depositary may sell a portion of the distributed ordinary shares sufficient to pay its fees and expenses in connection with that distribution. | |
| ● | Elective Distributions in Cash or Shares. If we offer holders of our ordinary shares the option to receive dividends in either cash or shares, the depositary, after consultation with us and having received timely notice as described in the deposit agreement of such elective distribution by us, has discretion to determine to what extent such elective distribution will be made available to ADS holders. We must first instruct the depositary to make such elective distribution available to ADS holders and furnish it with satisfactory evidence that it is legal to do so. The depositary could decide it is not legal or reasonably practical to make such elective distribution available to ADS holders, or it could decide that it is only legal or reasonably practical to make such elective distribution available to some but not all holders of the ADSs. In such case, the depositary shall, on the basis of the same determination as is made in respect of the ordinary shares for which no election is made, distribute either cash in the same way as it does in a cash distribution, or additional ADSs representing ordinary shares in the same way as it does in a share distribution. The depositary is not obligated to make available to ADS holders a method to receive the elective dividend in shares rather than in ADSs. There can be no assurance that ADS holders will be given the opportunity to receive elective distributions on the same terms and conditions as the holders of ordinary shares. | |
| ● | Rights to Purchase Additional Shares. If we offer holders of our ordinary shares any rights to subscribe for additional shares or any other rights, the depositary may after consultation with us and having received timely notice as described in the deposit agreement of such distribution by us, make these rights available to ADS holders. We must first instruct the depositary to make such rights available to ADS holders and furnish the depositary with satisfactory evidence that it is legal to do so. If the depositary decides it is not legal and practical to make the rights available but that it is practical to sell the rights, the depositary will use reasonable efforts to sell the rights and distribute the net proceeds in the same way as it does with cash. The depositary will allow rights that are not distributed or sold to lapse. In that case, ADS holders will receive no value for them. If the depositary makes rights available to ADS holders, it will exercise the rights and purchase the shares on ADS holders’ behalf. The depositary will then deposit the shares and deliver ADSs to ADS holders. It will only exercise rights if ADS holders pay it the exercise price and any other charges the rights require that ADS holders to pay. U.S. securities laws may restrict transfers and cancellation of the ADSs represented by shares purchased upon exercise of rights. For example, ADS holders may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver restricted depositary shares that have the same terms as the ADSs described in this section except for changes needed to put the necessary restrictions in place. |
40
| ● | Other Distributions. Subject to receipt of timely notice from us with the request to make any such distribution available to ADS holders, and provided the depositary has determined such distribution is lawful and reasonably practicable and feasible and in accordance with the terms of the deposit agreement, the depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice: it may decide to sell what we distributed and distribute the net proceeds in the same way as it does with cash; or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution. | |
| ● | The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that ADS holders may not receive the distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to ADS holders. |
Deposit, Withdrawal and Cancellation
How are ADSs issued?
The depositary will deliver ADSs if an ADS holders or its broker deposit ordinary shares or evidence of rights to receive ordinary shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names the ADS holder requests and will deliver the ADSs to or upon the order of the person or persons entitled thereto.
How do ADS holders cancel an American Depositary Share?
You may turn in your ADSs at the depositary’s corporate trust office or by providing appropriate instructions to your broker. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the ordinary shares and any other deposited securities underlying the ADSs to you or a person you designate at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its corporate trust office, if feasible.
The depositary may refuse to accept for surrender ADSs only in the case of (i) temporary delays caused by closing our transfer books or those of the depositary or the deposit of our ordinary shares in connection with voting at a shareholders’ meeting or the payment of dividends, (ii) the payment of fees, taxes and similar charges and (iii) compliance with any laws or governmental regulations relating to depositary receipts or to the withdrawal of deposited securities. Subject thereto, in the case of surrender of a number of ADSs representing other than a whole number of our ordinary shares, the depositary will cause ownership of the appropriate whole number of our ordinary shares to be delivered in accordance with the terms of the deposit agreement and will, at the discretion of the depositary, either (i) issue and deliver to the person surrendering such ADSs a new ADS representing any remaining fractional Ordinary Share or (ii) sell or cause to be sold the fractional ordinary shares represented by the ADSs surrendered and remit the proceeds of such sale (net of applicable fees and charges of, and expenses incurred by, the depositary and taxes and/or governmental charges) to the person surrendering the ADS.
How do ADS holders interchange between Certificated ADSs and Uncertificated ADSs?
You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send you a statement confirming that you are the owner of uncertificated ADSs. Alternatively, upon receipt by the depositary of a proper instruction from a holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to you an ADR evidencing those ADSs.
41
Voting Rights
How do you vote?
As an ADS holder, you may instruct the depositary to vote the deposited securities. Otherwise, you could exercise your right to vote directly if you withdraw the ordinary shares your ADSs represent. However, you may not know about the meeting enough in advance to withdraw the ordinary shares.
If we ask for your instructions and upon timely notice from us as described in the deposit agreement, the depositary will notify you of the upcoming vote and arrange to deliver our voting materials to you. The materials will (1) describe the matters to be voted on and (2) explain how you may instruct the depositary to vote the ordinary shares or other deposited securities underlying your ADSs as you direct. Voting instructions may be given only by mail and in respect of a number of ADSs representing an integral number of our ordinary shares or other deposited securities. For instructions to be valid, the depositary must receive them on or before the date specified. The depositary will try, as far as practical, subject to the laws of the United Kingdom and the provisions of our constitutive documents, to vote or to have its agents vote the ordinary shares or other deposited securities as you instruct. The depositary will only vote or attempt to vote as you instruct.
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the ordinary shares underlying your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to vote and you may have no recourse if the ordinary shares underlying your ADSs are not voted as you requested.
In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited securities, if we request the depositary to act, we are required to give the depositary 30 days’ advance notice of any such meeting and details concerning the matters to be voted upon sufficiently in advance of the meeting date, and the depositary will mail you a notice.
Fees and Charges
As a holder of American Depositary Shares, or ADSs, you will be required to pay the following service fees to the depositary bank:
| Service: | Fee: | ||
| Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property | Up to $0.05 per ADS issued | ||
| Cancellation of ADSs, including in the case of termination of the deposit agreement | Up to $0.05 per ADS cancelled | ||
| Distribution of cash dividends or other cash distributions | Up to $0.02 per ADS held | ||
| Distribution of ADSs pursuant to share dividends, free share distributions or exercise of rights | Up to $0.05 per ADS held | ||
| Operation and maintenance costs in administering the ADSs | An annual fee of $0.02 per ADS held |
42
| Inspections of the relevant share register maintained by the local registrar and/or performing due diligence on the central securities depository for England and Wales | An annual fee of $0.01 per ADS held (such fee to be assessed against holders of record as at the date or dates set by the depositary as it sees fit and collected at the sole discretion of the depositary by billing such holders for such fee or by deducting such fee from one or more cash dividends or other cash distributions) |
As an ADS holder, you will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges such as:
| ● | Taxes (including applicable interest and penalties) and other governmental charges. | |
| ● | Such registration fees as may from time to time be in effect for the registration of ordinary shares or other deposited securities with the foreign registrar and applicable to transfers of ordinary shares or other deposited securities to or from the name of the custodian, the depositary or any nominees upon the making of deposits and withdrawals, respectively. | |
| ● | Expenses for cable, telex and fax transmissions and for delivery of securities. | |
| ● | Expenses and charges incurred by the Depositary in the conversion of foreign currency. |
| ● | Fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit, including any fees of a central depository for securities in the local market, where applicable. | |
| ● | Fees and expenses incurred in connection with complying with exchange control regulations and any other regulatory requirements that are not currently applicable but may arise or become applicable to ordinary shares, deposited securities, ADSs and ADRs. | |
| ● | Any applicable fees and penalties thereon. |
The depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary bank for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary bank to the holders of record of ADSs as of the applicable ADS record date.
The depositary fees payable for cash distributions are generally deducted from the cash being distributed or by selling a portion of distributable property to pay the fees. In the case of distributions other than cash (i.e., share dividends, rights, etc.), the depositary bank charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary bank sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary banks.
43
In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.
The depositary may make payments to us or reimburse us for certain costs and expenses, by making available a portion of the ADS fees collected in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary bank agree from time to time.
Payment of Taxes
As an ADS holder, you will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until such taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to you any net proceeds, or send to you any property, remaining after it has paid the taxes. You agree to indemnify us, the depositary, the custodian and each of our and their respective agents, directors, employees and affiliates for, and hold each of them harmless from, any claims with respect to taxes (including applicable interest and penalties thereon) arising from any tax benefit obtained for you.
Reclassifications, Recapitalizations and Mergers
| If we: | Then: | ||
| Change the nominal or par value of our ordinary shares | The cash, shares or other securities received by the depositary will become deposited securities. | ||
| Reclassify, split up or consolidate any of the deposited securities | Each ADS will automatically represent its equal share of the new deposited securities. | ||
| Distribute securities on the ordinary shares that are not distributed to you or recapitalize, reorganize, merge, liquidate, sell all or substantially all of our assets, or take any similar action | The depositary may distribute some or all of the cash, shares or other securities it received. It may also deliver new ADSs or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities. |
Amendment and Termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the form of ADR without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, including expenses incurred in connection with foreign exchange control regulations and other charges specifically payable by ADS holders under the deposit agreement, or materially prejudices a substantial existing right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended.
44
How may the deposit agreement be terminated?
The depositary will terminate the deposit agreement if we ask it to do so, in which case the depositary will give notice to you at least 90 days prior to termination. The depositary may also terminate the deposit agreement if the depositary has told us that it would like to resign and we have not appointed a new depositary within 90 days. In such case, the depositary must notify you at least 30 days before termination.
After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions on the deposited securities, sell rights and other property and deliver ordinary shares and other deposited securities upon cancellation of ADSs after payment of any fees, charges, taxes or other governmental charges. Six months or more after termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability for interest. The depositary’s only obligations will be to account for the money and other cash. After termination, our only obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.
Books of Depositary
The depositary will maintain ADS holder records at its depositary office. You may inspect such records at such office during regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADSs and the deposit agreement.
The depositary will maintain facilities in New York to record and process the issuance, cancellation, combination, split-up and transfer of ADRs.
These facilities may be closed from time to time, to the extent not prohibited by law or if any such action is deemed necessary or advisable by the depositary or us, in good faith, at any time or from time to time because of any requirement of law, any government or governmental body or commission or any securities exchange on which the ADRs or ADSs are listed, or under any provision of the deposit agreement or provisions of, or governing, the deposited securities, or any meeting of our shareholders or for any other reason.
Limitations on Obligations and Liability
Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:
| ● | are only obligated to take the actions specifically set forth in the deposit agreement without gross negligence or willful misconduct; | |
| ● | are not liable if either of us is prevented or delayed by law or circumstances beyond our control from performing our obligations under the deposit agreement, including, without limitation, requirements of any present or future law, regulation, governmental or regulatory authority or share exchange of any applicable jurisdiction, any present or future provisions of our memorandum and articles of association, on account of possible civil or criminal penalties or restraint, any provisions of or governing the deposited securities or any act of God, war or other circumstances beyond our control as set forth in the deposit agreement; |
45
| ● | are not liable if either of us exercises, or fails to exercise, discretion permitted under the deposit agreement; |
| ● | have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other party; | |
| ● | may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party; | |
| ● | disclaim any liability for any action/inaction in reliance on the advice or information of legal counsel, accountants, any person presenting ordinary shares for deposit, holders and beneficial owners (or authorized representatives) of ADSs, or any person believed in good faith to be competent to give such advice or information; | |
| ● | disclaim any liability for inability of any holder to benefit from any distribution, offering, right or other benefit made available to holders of deposited securities but not made available to holders of ADSs; and | |
| ● | disclaim any liability for any indirect, special, punitive or consequential damages. |
The depositary and any of its agents also disclaim any liability for any failure to carry out any instructions to vote, the manner in which any vote is cast or the effect of any vote or failure to determine that any distribution or action may be lawful or reasonably practicable or for allowing any rights to lapse in accordance with the provisions of the deposit agreement, the failure or timeliness of any notice from us, the content of any information submitted to it by us for distribution to you or for any inaccuracy of any translation thereof, any investment risk associated with the acquisition of an interest in the deposited securities, the validity or worth of the deposited securities, the credit-worthiness of any third party, or for any tax consequences that may result from ownership of ADSs, ordinary shares or deposited securities.
In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the depositary will issue, deliver or register a transfer of an ADS, make a distribution on an ADS, or permit withdrawal of ordinary shares, the depositary may require:
| ● | payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any ordinary shares or other deposited securities and payment of the applicable fees, expenses and charges of the depositary; | |
| ● | satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and |
46
| ● | compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents. |
The depositary may refuse to issue and deliver ADSs or register transfers of ADSs generally when the register of the depositary or our transfer books are closed or at any time if the depositary or we think it is necessary or advisable to do so.
Your Right to Receive the Shares Underlying Your ADSs
You have the right to cancel your ADSs and withdraw the underlying ordinary shares at any time except:
| ● | when temporary delays arise because: (1) the depositary has closed its transfer books or we have closed our transfer books; (2) the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting; or (3) we are paying a dividend on our ordinary shares; | |
| ● | when you owe money to pay fees, taxes and similar charges; or | |
| ● | when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other deposited securities. |
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Pre-release of ADSs
The deposit agreement permits the depositary to deliver ADSs before deposit of the underlying ordinary shares. This is called a pre-release of the ADSs. The depositary may also deliver ordinary shares upon cancellation of pre-released ADSs (even if the ADSs are cancelled before the pre-release transaction has been closed out). A pre-release is closed out as soon as the underlying ordinary shares are delivered to the depositary. The depositary may receive ADSs instead of ordinary shares to close out a pre-release. The depositary may pre-release ADSs only under the following conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made represents to the depositary in writing that it or its customer (a) owns the ordinary shares or ADSs to be deposited, (b) assigns all beneficial rights, title and interest in such ordinary shares or ADSs to the depositary for the benefit of the owners, (c) will not take any action with respect to such ordinary shares or ADSs that is inconsistent with the transfer of beneficial ownership, (d) indicates the depositary as owner of such ordinary shares or ADSs in its records, and (e) unconditionally guarantees to deliver such ordinary shares or ADSs to the depositary or the custodian, as the case may be; (2) the pre-release is fully collateralized with cash or other collateral that the depositary considers appropriate; and (3) the depositary must be able to close out the pre-release on not more than five business days’ notice. Each pre-release is subject to further indemnities and credit regulations as the depositary considers appropriate. In addition, the depositary will normally limit the number of ADSs that may be outstanding at any time as a result of pre-release to 30% of the aggregate number of ADSs then outstanding, although the depositary, in its sole discretion, may disregard the limit from time to time, if it thinks it is appropriate to do so, including (1) due to a decrease in the aggregate number of ADSs outstanding that causes existing pre-release transactions to temporarily exceed the limit stated above or (2) where otherwise required by market conditions. The depositary may also set limits with respect to the number of ADSs and Shares involved in pre-release transactions with any one person on a case-by-case basis as it deems appropriate.
47
Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the DRS and Profile Modification System, or Profile, will apply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by the depositary to the ADS holders entitled thereto. Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of an ADS holder, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register such transfer.
In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the depositary will not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary’s reliance on, and compliance with, instructions received by the depositary through the DRS/Profile System and in accordance with the deposit agreement, shall not constitute negligence or bad faith on the part of the depositary.
48
We are registering the ordinary shares represented by ADSs issuable upon exercise of the warrants issued in the Private Placement to permit the resale of these ordinary shares represented by ADSs by the holders of these warrants from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling shareholders of the ordinary shares represented by ADSs other than proceeds from the cash exercise of the warrants. We will bear all fees and expenses incident to our obligation to register the ordinary shares represented by ADSs.
The selling shareholders may sell all or a portion of the ordinary shares represented by ADSs beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the ordinary shares represented by ADSs are sold through underwriters or broker-dealers, the selling shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. The ordinary shares represented by ADSs may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,
| ● | on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale; |
| ● | in the over-the-counter market; |
| ● | in transactions otherwise than on these exchanges or systems or in the over-the-counter market; |
| ● | through the writing of options, whether such options are listed on an options exchange or otherwise; |
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| ● | privately negotiated transactions; |
| ● | short sales; |
| ● | sales pursuant to Rule 144; |
| ● | broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share; |
| ● | a combination of any such methods of sale; and |
| ● | any other method permitted pursuant to applicable law. |
If the selling shareholders effect such transactions by selling ordinary shares represented by ADSs to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling shareholders or commissions from purchasers of the ordinary shares represented by ADSs for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of ordinary shares represented by ADSs or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the ordinary shares represented by ADSs in the course of hedging in positions they assume. The selling shareholders may also sell ordinary shares represented by ADSs short and deliver ordinary shares represented by ADSs covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling shareholders may also loan or pledge ordinary shares represented by ADSs to broker-dealers that in turn may sell such shares.
49
The selling shareholders may pledge or grant a security interest in some or all of the warrants or ADSs owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the ordinary shares represented by ADSs from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus. The selling shareholders also may transfer and donate the ordinary shares represented by ADSs in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
The selling shareholders and any broker-dealer participating in the distribution of the ordinary shares represented by ADSs may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the ordinary shares represented by ADSs is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of ordinary shares represented by ADSs being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling shareholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.
Under the securities laws of some states ordinary shares represented by ADSs may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states ordinary shares represented by ADSs may not be sold unless such ordinary shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance that any selling shareholder will sell any or all of the ordinary shares represented by ADSs registered pursuant to the registration statement, of which this prospectus forms a part.
The selling shareholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the ordinary shares represented by ADSs by the selling shareholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the ordinary shares represented by ADSs to engage in market-making activities with respect to the ordinary shares represented by ADSs. All of the foregoing may affect the marketability of the ordinary shares represented by ADSs and the ability of any person or entity to engage in market-making activities with respect to the ordinary shares represented by ADSs.
We will pay all expenses of the registration of the ordinary shares represented by ADSs, estimated to be $45,000 in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling shareholder will pay all underwriting discounts and selling commissions, if any.
Once sold under the registration statement, of which this prospectus forms a part, the ordinary shares represented by ADSs will be freely tradable in the hands of persons other than our affiliates.
50
The following summary contains a description of certain United Kingdom and United States federal income tax consequences of the acquisition, ownership and disposition of our ordinary shares or ADSs to a U.S. Holder (as defined below) of our ordinary shares or ADSs and, to the limited extent discussed below, a Non-U.S. Holder (as defined below) of our ordinary shares or ADSs. The summary is based upon the tax laws of the United Kingdom and the United States and the respective regulations thereunder as of the date hereof, which are subject to change.
For purposes of this description, a “U.S. Holder” includes any beneficial owner of our ordinary shares or ADSs that is, for U.S. federal income tax purposes:
| ● | a citizen or individual resident of the United States; |
| ● | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or organized under the laws of any state thereof, or the District of Columbia; |
| ● | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
| ● | a trust if (1) a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of the substantial decisions of such trust; or (2) such trust has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes. |
A “Non-U.S. Holder” is any beneficial owner of our ordinary shares or ADSs that is not a U.S. Holder.
This section does not purport to be a comprehensive description of all of the tax considerations that may be relevant to any particular investor. This discussion assumes that you are familiar with the tax rules applicable to investments in securities generally, and with any special rules to which you may be subject. In particular, the discussion deals only with investors that will hold our ordinary shares or ADSs as capital assets (generally, property held for investment), and does not address the tax treatment of investors that are subject to special rules, including, but not limited to banks, financial institutions, insurance companies, dealers or traders in securities or currencies, persons that elect mark-to- market treatment, tax-exempt entities (including Section 401 pensions plans) or government organizations, real estate investment trusts, regulated investment companies, grantor trusts, individual retirement and other tax-deferred accounts, persons that received our ordinary shares or ADSs as compensation for the performance of services, persons who own, directly, indirectly through non-U.S. entities or by attribution by application of the constructive ownership rules of section 958(b) of the United States Internal Revenue Code of 1986, or the Code, 10% or more of our total voting power or value, persons that are residents of the U.K. for U.K. tax purposes or that conduct a business or have a permanent establishment in the U.K., persons that hold our ordinary shares or ADSs as a position in a straddle, hedging, conversion, integration, constructive sale or other risk reduction transaction, certain former citizens or long-term residents of the U.S., partnerships and their partners and persons whose functional currency is not the U.S. dollar. This discussion is based on laws, treaties, judicial decisions, and regulatory interpretations in effect on the date hereof, all of which are subject to change, as well as, in the United States, the Code, administrative pronouncements, judicial decisions, and final, temporary and proposed Treasury regulations, all as of the date hereof, any of which is subject to change, possibly with retroactive effect. Additionally, the summary below regarding U.S. federal income tax does not address any U.S. state or local tax considerations or any U.S. federal estate, gift or alternative minimum tax considerations or any U.S. federal tax considerations other than U.S. federal income tax considerations.
If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds our ordinary shares or ADSs, the tax treatment of a partner (including a person or entity treated as a partner) will generally depend upon the status of such partner and upon the activities of such partnership.
51
We will not seek a ruling from the IRS with regard to the U.S. federal income tax treatment of an investment in our ordinary shares or ADSs, and we cannot assure you that the IRS will agree with the conclusions set forth below.
You are urged to consult with your own advisers regarding the tax consequences of the acquisition, ownership, and disposition of our ordinary shares or ADSs in the light of your particular circumstances, including the effect of any state, local, or other national laws.
United Kingdom tax considerations
Taxation of dividends
Under current U.K. tax law, no tax is required to be withheld in the United Kingdom at source from cash dividends paid to U.S. resident holders.
Taxation of capital gains
Subject to the comments in the following paragraph, a holder of our ordinary shares or ADSs who, for U.K. tax purposes, is not resident in the U.K. will not be liable for U.K. taxation on capital gains realized on the disposal of our ordinary shares or ADS unless at the time of the disposal:
| ● | the holder carries on a trade, or in the case of an individual, a profession or vocation in the United Kingdom through, in the case of an individual, a branch or agency, or, in the case of a company, a permanent establishment, and |
| ● | our ordinary shares or ADSs are or have been used, held, or acquired for the purpose of such trade, profession, vocation, branch, agency or permanent establishment. |
A holder of our ordinary shares or ADSs who (1) is an individual who has ceased to be resident for U.K. tax purposes in the United Kingdom, (2) was solely resident for U.K. tax purposes in the United Kingdom for at least four out of the seven U.K. tax years immediately preceding the year in which he or she ceased to be resident in the United Kingdom, (3) only remains non-resident in the United Kingdom for a period of five years or less and (4) disposes of his or her ordinary shares or ADSs during that period may also be liable, upon returning to the United Kingdom, for U.K. tax on capital gains, subject to any available exemption or relief, even though he or she was not resident in the United Kingdom at the time of the disposal.
Inheritance tax
Our ordinary shares or ADSs are assets situated in the United Kingdom for the purposes of U.K. inheritance tax (the equivalent of U.S. estate and gift tax). Subject to the discussion of the U.K.-U.S. estate tax treaty in the next paragraph, U.K. inheritance tax may apply (subject to any available reliefs) if an individual who holds our ordinary shares or ADSs gifts them or dies even if he or she is neither domiciled in the United Kingdom nor deemed to be domiciled there under U.K. law. For inheritance tax purposes, a transfer of our ordinary shares or ADSs at less than full market value may be treated as a gift for these purposes. Special inheritance tax rules apply (1) to gifts if the donor retains some benefit, (2) to close companies and (3) to trustees of settlements.
However, as a result of the U.K.-U.S. estate tax treaty, our ordinary shares or ADSs held by an individual who is domiciled in the United States for the purposes of the U.K.-U.S. estate tax treaty and who is not a U.K. national will not be subject to U.K. inheritance tax on that individual’s death or on a gift of our ordinary shares or ADSs unless the ordinary shares or ADSs:
| ● | are part of the business property of a permanent establishment in the United Kingdom, or |
| ● | pertain to a fixed base in the United Kingdom used for the performance of independent personal services. |
The U.K.-U.S. estate tax treaty provides a credit mechanism if our ordinary shares or ADSs are subject to both U.K. inheritance tax and to U.S. estate and gift tax.
52
U.K. stamp duty and stamp duty reserve tax (SDRT)
U.K. legislation provides that SDRT is chargeable at 1.5% on the issuance of a depositary receipt for U.K. shares or securities, or the issuance of such shares or securities into a clearance system. His Majesty’s Revenue and Customs, or HMRC, previously accepted that these provisions contravened European Union law, and accordingly did not seek to enforce SDRT on issues of U.K. shares and securities to depositary receipt issuers and clearance services anywhere in the world. European Union law ceased to apply in the United Kingdom on 31 December 2020, but the U.K. government has indicated that it will not seek to reimpose such a charge, although no legislation has been introduced to repeal the domestic law charging provision. HMRC still contends that stamp duty/SDRT at 1.5% is payable on transfers (by sale or otherwise) of shares and securities to depository receipt systems or clearance services that are not an integral part of an issue of share capital.
Transfer of shares in registered form
A transfer of shares in registered form would attract ad valorem stamp duty generally at the rate of 0.5% of the purchase price of the shares. There is no charge to ad valorem stamp duty on gifts.
SDRT would generally be payable on an unconditional agreement to transfer shares in registered form at 0.5% of the amount or value of the consideration for the transfer, but is repayable if, within six years of the date of the agreement, an instrument transferring the shares is executed or, if the SDRT has not been paid, the liability to pay the tax (but not necessarily interest and penalties) would be cancelled.
In addition, any transfers of, and unconditional agreements to transfer, unlisted shares on or after July 22, 2020 to a company that is connected with the transferor will attract a charge to stamp duty and SDRT respectively on the higher of the market value of the shares and the value of the consideration where some or all of the consideration consists of the issue of shares.
Transfer of ADSs
No U.K stamp duty will be payable on a written instrument transferring an ADS or on a written agreement to transfer an ADS provided that the instrument of transfer or the agreement to transfer is executed and remains at all times outside the United Kingdom. Where these conditions are not met, the transfer of, or agreement to transfer, an ADS could, depending on the circumstances, attract a charge to U.K. stamp duty at the rate of 0.5% of the value of the consideration given in connection with the transfer.
No SDRT will be payable in respect of an agreement to transfer an ADS.
United States federal income taxation considerations
Ownership of ADSs
For U.S. federal income tax purposes, a holder of ADSs generally will be treated as the owner of the ordinary shares represented by such ADSs. Gain or loss will generally not be recognized on account of exchanges of ordinary shares for ADSs, or of ADSs for ordinary shares. References to ordinary shares in the discussion below are deemed to include ADSs, unless context otherwise requires.
U.S. Taxation of Distributions
Subject to the discussion below under “Passive Foreign Investment Company Rules,” the gross amount of any distributions made by us to a U.S. Holder will generally be subject to U.S. federal income tax as dividend income to the extent paid or deemed paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Such dividends will not be eligible for the dividends received deduction generally allowed to U.S. corporations with respect to dividends received from other U.S. corporations. To the extent that an amount received by a U.S. Holder exceeds its allocable share of our current and accumulated earnings and profits, such excess would, subject to the discussion below, be treated first as a tax-free return of capital which will reduce such U.S. Holder’s tax basis in his ordinary shares or ADSs and then, to the extent such distribution exceeds such U.S. Holder’s tax basis, it will be treated as capital gain. We have not maintained and do not plan to maintain calculations of earnings and profits under U.S. federal income tax principles. Accordingly, it is unlikely that U.S. Holders will be able to establish whether a distribution by us is in excess of our current and accumulated earnings and profits (as computed under U.S. federal income tax principles). Thus, it is expected that any distribution will be reported as a dividend, even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. The amount of any distribution of property other than cash will be the fair market value of that property on the date of distribution.
53
Subject to applicable holding period (which generally requires our ordinary shares to be held for at least 61 days without protection from the risk of loss during the 121-day period beginning 60 days before the ex-dividend date) and other limitations, the U.S. Dollar amount of dividends received on our ordinary shares or ADSs by certain non-corporate U.S. Holders are currently subject to taxation at a maximum rate of 20% if the dividends are “qualified dividends” and certain other requirements are met. Dividends paid on our ordinary shares or ADSs will be treated as qualified dividends if: (i) we are eligible for the benefits of the U.S.-U.K. Tax Treaty (as defined below) or the ordinary shares or ADSs are readily tradable on an established U.S. securities market and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a PFIC. Our ADSs are listed on The Nasdaq Capital Market, which is an established securities market in the United States, and we expect the ADSs to be readily tradable on The Nasdaq Capital Market. However, there can be no assurance that the ADSs will be considered readily tradable on an established securities market in the United States in later years. The Company, which is incorporated under the laws of England and Wales, believes that it qualifies as a resident of the United Kingdom for the purposes of, and is eligible for the benefits of, the Convention between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, signed on July 24, 2001, or the U.S.-U.K. Tax Treaty, although there can be no assurance in this regard. Further, the IRS has determined that the U.S.-U.K. Tax Treaty is satisfactory for purposes of the qualified dividend rules and that it includes an exchange-of-information program. Based on the foregoing, we expect to be considered a qualified foreign corporation under the Code. Accordingly, dividends paid by us to non-corporate U.S. Holders with respect to shares that meet the minimum holding period and other requirements are expected to be treated as “qualified dividend income.” However, dividends paid by us will not qualify for the 20% maximum U.S. federal income tax rate if we are treated, for the tax year in which the dividends are paid or the preceding tax year, as a “passive foreign investment company” for U.S. federal income tax purposes, as discussed below. Although we currently believe that distributions on our ordinary shares or ADSs that are treated as dividends for U.S. federal income tax purposes should constitute qualified dividends, no assurance can be given that this will be the case. U.S. Holders should consult their tax advisors regarding the tax rate applicable to dividends received by them with respect to our ordinary shares or ADSs, as well as the potential treatment of any loss on a disposition of our ordinary shares or ADSs as long-term capital loss regardless of the U.S. Holders’ actual holding period for our ordinary shares or ADSs.
For foreign tax credit computation purposes, dividends will generally constitute foreign source income, and with certain exceptions, will constitute “passive category income.”
The additional 3.8% “net investment income tax” (described below) may apply to dividends received by certain U.S. Holders who meet certain modified adjusted gross income thresholds.
U.S. Taxation upon Sale or Other Disposition
Subject to the discussion under “Passive Foreign Investment Company Rules” below, gain or loss realized by a U.S. Holder on the sale or other taxable disposition of our ordinary shares or ADSs will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the U.S. Holder’s adjusted tax basis in our ordinary shares or ADSs and the amount realized on the disposition. Such gain or loss generally will be treated as long-term capital gain or loss if our ordinary shares or ADSs have been held for more than one year at the time of the sale or disposition. Any such gain or loss realized will generally be treated as U.S. source gain or loss. In the case of a non-corporate U.S. Holder, long-term capital gains are currently eligible for federal income tax at preferential rates . The deductibility of capital losses is subject to significant limitations.
54
For a cash basis taxpayer, units of foreign currency paid or received are translated into U.S. dollars at the spot rate on the settlement date of the purchase or sale. In that case, no foreign currency exchange gain or loss will result from currency fluctuations between the trade date and the settlement date of such a purchase or sale. An accrual basis taxpayer, however, may elect the same treatment required of cash basis taxpayers with respect to purchases and sales of the ADSs that are traded on an established securities market, provided the election is applied consistently from year to year. Such election may not be changed without the consent of the IRS. For an accrual basis taxpayer who does not make such election, units of foreign currency paid or received are translated into U.S. dollars at the spot rate on the trade date of the purchase or sale. Such an accrual basis taxpayer may recognize exchange gain or loss based on currency fluctuations between the trade date and settlement date. Any foreign currency gain or loss a U.S. Holder realizes will be U.S. source ordinary income or loss. U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currency other than U.S. dollars upon the disposition of their ordinary shares or ADSs.
The maximum individual rate for long-term capital gain is currently 20%.
The additional 3.8% “net investment income tax” (described below) may apply to gains recognized upon the sale or other taxable disposition of our ordinary shares or ADSs by certain U.S. Holders who meet certain modified adjusted gross income thresholds.
Medicare Tax
Certain U.S. Holders including individuals, estates and trusts are subject to a Medicare tax of 3.8% on “net investment income,” which includes dividends, interest, and capital gain from the sale of investment securities, adjusted for certain deductions properly allocated to such investment income. The Medicare tax will apply to the lesser of such net investment income or the excess of the taxpayer’s adjusted gross income (with certain modifications) over a specified amount. The specified amount is $250,000 for married individuals filing jointly, $125,000 for married individuals filing separately, and $200,000 for single individuals. U.S. Holders should consult with their own tax advisers regarding the application of the net investment income tax to them as a result of their investment in our ADSs or ordinary shares.
Passive Foreign Investment Company Rules
Based on the nature of our present business operations, assets and income, we believe that for the year 2020, we were not a PFIC. However, because the PFIC determination is highly fact intensive, no assurance can be given that we will not be treated as a PFIC for 2021 or for any other taxable year. A separate determination must be made after the close of each taxable year as to whether we are a PFIC for that year. As a result, our PFIC status may change from year to year.
We would be a PFIC for U.S. federal income tax purposes in any taxable year if 75% or more of our gross income would be passive income, or on average at least 50% of the gross value of our assets is held for the production of, or produces, passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. Assets that produce or are held for the production of passive income may include cash, even if held as working capital or raised in a public offering, as well as marketable securities and other assets that may produce passive income. In making the above determination, we are treated as earning our proportionate share of any income and owning our proportionate share of any asset of any company in which we are considered to own, directly or indirectly, 25% or more of the shares by value. If we were considered a PFIC at any time when a U.S. Holder held our ordinary shares or ADSs, we generally should continue to be treated as a PFIC with respect to that U.S. Holder, and the U.S. Holder generally will be subject to special rules with respect to (a) any gain realized on the disposition of our ordinary shares or ADSs and (b) any “excess distribution” by us to the U.S. Holder in respect of our ordinary shares or ADSs. Generally, a distribution during a taxable year to a U.S. Holder with respect to ordinary shares would be treated as an “excess distribution” to the extent that the distribution plus all other distributions received (or deemed to be received) by the U.S. Holder during the taxable year with respect to such ordinary shares, is greater than 125% of the average annual distributions received by the U.S. Holder with respect to such ordinary shares during the three preceding years (or during such shorter period as the U.S. Holder may have held the ordinary shares or ADSs). Under the PFIC rules: (i) the gain or excess distribution would be allocated ratably over the U.S. Holder’s holding period for our ordinary shares or ADSs, (ii) the amount allocated to the taxable year in which the gain or excess distribution was realized or to any year before we became a PFIC would be taxable as ordinary income and (iii) the amount allocated to each other taxable year would be subject to tax at the highest tax rate in effect in that year and an interest charge generally applicable to underpayments of tax would be imposed in respect of the tax attributable to each such year. Because a U.S. Holder that is a direct (and in certain cases indirect) shareholder of a PFIC is deemed to own its proportionate share of interests in any lower-tier PFICs, U.S. Holders should be subject to the foregoing rules with respect to any of our subsidiaries characterized as PFICs, if we are deemed a PFIC.
55
In the event we are treated as a PFIC for any taxable year, the tax consequences under the default PFIC regime described above could be avoided by either a “mark-to-market” or “qualified electing fund” election. If our ordinary shares or ADSs are considered “marketable stock,” a U.S. Holder may elect to “mark-to-market” its ADSs, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. A U.S. Holder making a mark-to-market election (if the eligibility requirements for such an election were satisfied) generally would not be subject to the PFIC rules discussed above, except with respect to any portion of the holder’s holding period that preceded the effective date of the election. Instead, such U.S. Holder would generally include in income any excess of the fair market value of the ordinary shares or ADSs at the close of each tax year over its adjusted basis in the ordinary shares or ADSs. If the fair market value of the ordinary shares of ADSs had depreciated below the U.S. Holders adjusted basis at the close of the tax year, the U.S. Holder may generally deduct the excess of the adjusted basis of the ordinary shares or ADSs over its fair market value at that time. However, such deductions generally would be limited to the net mark-to-market gains, if any, that the U.S. Holder included in income with respect to such ordinary shares or ADSs in prior years. Income recognized and deductions allowed under the mark-to-market provisions, as well as any gain or loss on the disposition of ordinary shares or ADSs with respect to which the mark-to-market election is made, is treated as ordinary income or loss (except that loss is treated as capital loss to the extent the loss exceeds the net mark-to-market gains, if any, that a U.S. Holder included in income with respect to such ordinary share or ADSs in prior years). Gain or loss from the disposition of ordinary shares or ADSs (as to which a “mark-to-market” election was made) in a year in which we are no longer a PFIC, will be capital gain or loss. Our ordinary shares or ADSs should be considered “marketable stock” if they traded at least 15 days during each calendar quarter of the relevant calendar year in more than de minimis quantities. Any such mark to market election would not be available for a lower-tier PFIC.
Alternatively, a U.S. Holder making a valid and timely “qualified electing fund” or “QEF” election generally would not be subject to the default PFIC regime discussed above. Instead, for each PFIC year to which such an election applied, the electing U.S. Holder would be subject to U.S. federal income tax on the electing U.S. Holder’s pro rata share of our net capital gain and ordinary earnings, regardless of whether such amounts were actually distributed to the electing U.S. Holder. Any gain on sale or other disposition of a U.S. Holder’s ordinary shares or would be treated as capital, and the interest penalty will not be imposed. If an investor provides reasonable notice to us that it has determined to make a QEF election, we intend to provide annual financial information to such investor as may be reasonably required for purposes of filing United States federal income tax returns in connection with such QEF election.
U.S. Holders are urged to consult their tax advisors about the PFIC rules, including the advisability, procedure and timing of making a mark-to-market election or QEF election and the U.S. Holder’s eligibility to file such elections (including, with respect to making a mark-to-market election, whether our ordinary shares or ADSs are treated as “marketable stock” for such purpose). A U.S. Holder will be required to file Internal Revenue Service Form 8621 if such U.S. Holder owns our ordinary shares or ADSs in any year in which we are classified as a PFIC.
Information reporting and backup withholding
A U.S. Holder may be subject to information reporting to the IRS and possible backup withholding with respect to dividends paid on, or proceeds of the sale or other disposition of our ordinary shares or ADSs unless such U.S. Holder is a corporation or qualifies within certain other categories of exempt recipients or in the case of backup withholding provides a taxpayer identification number and certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. Amounts withheld under these rules may be credited against the U.S. Holder’s U.S. federal income tax liability and a U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate IRS forms and furnishing any required information. A U.S. Holder who does not provide a correct taxpayer identification number may be subject to penalties imposed by the IRS.
56
A Non-U.S. Holder generally will not be subject to information reporting or backup withholding with respect to dividends on our ordinary shares or ADSs, unless payment is made through a paying agent (or office) in the United States or through certain U.S.-related financial intermediaries. However, a Non-U.S. Holder generally may be subject to information reporting and backup withholding with respect to the payment within the United States of dividends on our ordinary shares or ADSs, unless such Non-U.S. Holder provides a taxpayer identification number, certifies under penalties of perjury as to its foreign status, or otherwise establishes an exemption.
Certain reporting requirements
Certain U.S. Holders are required to file IRS Form 926, Return by U.S. Transferor of Property to a Foreign Corporation, and certain U.S. Holders may be required to file IRS Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, reporting transfers of cash or other property to us and information relating to the U.S. Holder and us. Substantial penalties may be imposed upon a U.S. Holder that fails to comply. See also the discussion regarding Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, above.
In addition, certain U.S. Holders must report information on IRS Form 8938, Statement of Specified Foreign Financial Assets, with respect to their investments in certain “foreign financial assets,” which would include an investment in our ordinary shares or ADSs, if the aggregate value of all of those assets exceeds $50,000 on the last day of the taxable year (or in some circumstances, a higher threshold). This reporting requirement applies to individuals and certain U.S. entities.
U.S. Holders who fail to report required information could become subject to substantial penalties. U.S. Holders should consult their tax advisors regarding the possible implications of these reporting requirements arising from their investment in our ordinary shares or ADSs.
57
The consolidated financial statements of Akari Therapeutics, Plc as of December 31, 2021 and 2020 and for each of the three years in the period ended December 31, 2021 incorporated by reference in this Prospectus have been so incorporated in reliance on the report of BDO USA, LLP, an independent registered public accounting firm, incorporated herein by reference, given on the authority of said firm as experts in auditing and accounting. The report on the consolidated financial statements contains an explanatory paragraph regarding the Company's ability to continue as a going concern.
McDermott Will & Emery LLP has passed upon certain legal matters regarding the securities offered hereby.
58
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form F-1, including amendments and relevant exhibits and schedules, under the Securities Act covering the ordinary shares represented by ADSs to be sold in this offering. This prospectus, which constitutes a part of the registration statement, summarizes material provisions of contracts and other documents that we refer to in the prospectus. Since this prospectus does not contain all of the information contained in the registration statement, you should read the registration statement and its exhibits and schedules for further information with respect to us and our ordinary shares and the ADSs. Our SEC filings, including the registration statement, are also available to you on the SEC’s Web site at http://www.sec.gov.
We are subject to the information reporting requirements of the Exchange Act that are applicable to foreign private issuers, and under those requirements we file reports with the SEC. Those other reports or other information may be inspected without charge at the locations described above. As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. However, we file with the SEC, within four months after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm, and submit to the SEC, on Form 6-K, unaudited quarterly financial information for the first three quarters of each fiscal year within 60 days after the end of each such quarter, or such applicable time as required by the SEC.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
We file annual and special reports and other information with the SEC (File Number 001-36288). These filings contain important information that does not appear in this prospectus. The SEC allows us to “incorporate by reference” information into this prospectus, which means that we can disclose important information to you by referring you to other documents which we have filed or will file with the SEC. We are incorporating by reference in this prospectus the documents listed below:
| · | Our Annual Report on Form 20-F for the fiscal year ended December 31, 2021, filed with the SEC on May 16, 2022; |
| · | Our Form 6-Ks filed with the SEC on May 17, 2022, May 20, 2022, June 7, 2022, June 16, 2022, July 5, 2022, July 8, 2022, July 20, 2022, July 29, 2022, August 1, 2022, September 14, 2022 and September 27, 2022 (to the extent expressly incorporated by reference into our effective registration statements filed by us under the Securities Act); and |
| · | The description of our ordinary shares contained in Exhibit 2.2 to our Annual Report on Form 20-F for the year ended December 31, 2021, filed with the SEC on May 16, 2022, and any amendment or report filed with the SEC for the purposes of updating the description |
If you find inconsistencies between the documents and this prospectus, you should rely on the statements made in this prospectus. All information appearing in this prospectus is qualified in its entirety by the information and financial statements, including the notes thereto, contained in the documents incorporated by reference herein.
We will provide to each person, including any beneficial owner, to whom this prospectus is delivered, a copy of these filings, at no cost, upon written or oral request to us at the following address:
Akari Therapeutics, Plc
75/76 Wimpole Street
London W1G 9RT
+44 20 8004 0270
Attention: Rachelle Jacques
Email: info@akaritx.com
59
Our SEC filings are also available (free of charge) from our web site at www.akaritx.com. The information contained on, or that can be accessed from, our website does not form part of this prospectus.
You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, or such earlier date, that is indicated in this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
ENFORCEMENT OF FOREIGN JUDGMENTS
We are incorporated under the laws of England and Wales. Several of our directors and officers reside outside the United States, and a portion of our assets and all or a substantial portion of the assets of such persons are located outside the United States. As a result, it may be difficult for you to serve legal process on us or certain of our directors and executive officers or have any of them appear in a U.S. court.
It may be difficult for U.S. investors to bring and/or effectively enforce suits against our company in England. Although English courts do recognize U.S. judgments unless there is an overriding jurisdictional or public policy reason not to do so, if a judgment is obtained in the U.S. courts based on the civil liability provisions of U.S. federal securities laws against us, difficulties may arise in enforcing the judgment against us in the English courts. The enforceability of any U.S. judgment in the United Kingdom will depend on the particular facts of the case as well as the laws and treaties in effect at the time. The United States and the United Kingdom do not currently have a treaty providing for reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. It may similarly be difficult for U.S. investors to bring an original action in the English courts to enforce liabilities based on U.S. federal securities laws.
60
2,784,705,800
Ordinary Shares
American Depositary Shares representing Ordinary Shares
PROSPECTUS
61
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 6. Indemnification of Directors, Officers and Employees
The Registrant’s articles of association provide that, subject to the Companies Act 2006, every director or other officer (excluding an auditor) of the Registrant may be indemnified out of the assets of the Registrant against all costs, charges, expenses, losses or liabilities incurred by him in performing his duties or the exercise of his powers or otherwise in relation to or in connection with his duties, powers or office.
The Registrant also maintains directors and officers insurance to insure such persons against certain liabilities.
Item 7. Recent Sales of Unregistered Securities
Set forth below are the sales of all unregistered securities of the Registrant sold by the Registrant within the past three years which were not registered under the Securities Act of 1933:
On September 26, 2018, March 29, 2019 and July 6, 2020, respectively, the Registrant issued 55,000,000, 5,000,000 and 40,760,900 ordinary shares, respectively, of the Registrant to Aspire Capital LLC in transactions exempt pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
On July 3, 2019, the Registrant sold to certain institutional investors, accredited investors and an existing shareholder, RPC Pharma Ltd., an affiliated entity of Dr. Ray Prudo, the Registrant’s Chairman, an aggregate 2,368,392 ADSs in a registered direct offering at $1.90 per ADS, resulting in gross proceeds of approximately $4.5 million. In addition, the Registrant issued to the investors unregistered warrants to purchase an aggregate of 1,184,213 ADSs in a private placement. The warrants are immediately exercisable and will expire five years from issuance at an exercise price of $3.00 per ADS, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basis if six months after issuance there is no effective registration statement registering the ADSs underlying the warrants. The Registrant paid an aggregate of $337,496 in placement agent fees and expenses and issued unregistered placement agent warrants to purchase an aggregate of 177,629 ADS on the same terms as the warrants, except that the placement agent warrants are exercisable at $2.85 per ADS, and expire on June 28, 2024.
On February 13, 2020, February 19, 2020, February 20, 2020 and February 28, 2020, the Registrant entered into securities purchase agreements with certain accredited and institutional investors, led by existing investors, including Dr. Ray Prudo, the Company’s Chairman, providing for the issuance of an aggregate of 5,620,296 ADSs in a private placement at $1.70 per ADS for aggregate gross proceeds of approximately $9.5 million. In addition, the Registrant issued to the investors unregistered warrants to purchase 2,810,136 ADSs. The warrants are immediately exercisable and will expire five years from issuance at an exercise price of $2.20 per ADS, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basis if six months after issuance there is no effective registration statement registering the ADSs underlying the warrants. The Registrant paid an aggregate of $808,362 in placement agent fees and expenses and issued placement agent warrants to purchase 449,623 ADSs on the same terms as the warrants except the exercise price thereof is $2.55 and expire on March 3, 2025.
On July 7, 2021, the Registrant entered into securities purchase agreements with certain accredited and institutional investors, led by existing investors of the Company, including Dr. Ray Prudo, the Company’s Chairman, providing for the issuance of an aggregate of 7,947,529 ADSs in a private placement at $1.55 per ADS for aggregate gross proceeds of approximately $12.3 million. In addition, the Company also entered into a placement agent agreement, pursuant to which the placement agent agreed to serve as the placement agent for the Company in connection with the offering. Under the placement agent agreement, the Company paid the placement agent a total cash placement fee of approximately $933,000; an expense reimbursement not to exceed $50,000 and a non-accountable expense allowance of $10,000. The placement agent also received 398,384 of compensation warrants, which are immediately exercisable and will expire five years from issuance at an exercise price of $2.32 per ADS, subject to adjustment as set forth therein. The warrants may be exercised on a cashless basis if six months after issuance there is no effective registration registering the ADSs underlying the warrants. Subject to certain conditions, the Company has the option to “call” the exercise of the warrants from time to time after any 10 consecutive trading day period during which the daily volume weighted average price of the ADSs exceeds $3.00. The offering initially closed on July 14, 2021, a second closing was held on July 15, 2021 and a third closing was held on August 27, 2021.
62
On September 12, 2022, the Registrants entered into a securities purchase agreement, pursuant to which the Registrant issued to investors in a private placement series A warrants to purchase up to 15,100,000 ADSs and series B warrants to purchase up to 15,100,000 ADSs, each with an exercise price of $0.85 per ADS. The offering initially closed on September 14, 2022, and a second closing was held on September 16, 2022.
The privately placed securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve a public offering and the securities were acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof.
63
Item 8. Exhibits and Financial Statement Schedules
64
65
+ Indicates management contract or compensatory plan
* Filed herewith
The agreements included as exhibits to this registration statement contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.
66
The Registrant acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, the registrant is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this registration statement not misleading.
(b) Financial Statement Schedules
All Financial Statement Schedules have been omitted because either they are not required, are not applicable or the information required therein is otherwise set forth in the Registrant’s consolidated financial statements and related notes thereto.
67
Item 9. Undertakings
| (a) | The undersigned Registrant hereby undertakes: |
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
i. To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
iii. To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
| provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and a(l)(iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. |
| (2) | That for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and this offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (4) | To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. |
| (6) | That, for the purpose of determining liability of the Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: |
The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
| i. | Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424; |
68
| ii. | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned Registrant; | |
| iii. | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned Registrant; and |
| iv. | Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser. |
| (d) | The undersigned Registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. |
| (e) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 6 hereof, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
| (g) | The undersigned Registrant hereby undertakes that: |
| i. | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this Registration Statement as of the time it was declared effective. |
| ii. | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
69
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in London, England on this 12th day of October, 2022.
| AKARI THERAPEUTICS, PLC | |||
| By: | /s/ Rachelle Jacques | ||
| Name: | Rachelle Jacques | ||
| Title: | President and Chief Executive Officer | ||
Each person whose signature appears below constitutes and appoints Ray Prudo and Rachelle Jacques, and each of them, as attorney-in-fact with full power of substitution, for him or her in any and all capacities, to do any and all acts and all things and to execute any and all instruments which said attorney and agent may deem necessary or desirable to enable the registrant to comply with the Securities Act, and any rules, regulations and requirements of the SEC thereunder, in connection with the registration under the Securities Act of ordinary shares of the registrant, or the Shares, including, without limitation, the power and authority to sign the name of each of the undersigned in the capacities indicated below to the Registration Statement on Form F-1, or the Registration Statement, to be filed with the SEC with respect to such Shares, to any and all amendments or supplements to such Registration Statement, whether such amendments or supplements are filed before or after the effective date of such Registration Statement, to any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act, and to any and all instruments or documents filed as part of or in connection with such Registration Statement or any and all amendments thereto, whether such amendments are filed before or after the effective date of such Registration Statement, and each of the undersigned hereby ratifies and confirms all that such attorney and agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on October 12, 2022.
| Name | Title | |
| /s/ Rachelle Jacques | President, Chief Executive Officer and Director | |
| Rachelle Jacques | (principal executive officer) | |
| /s/ Dr. Torsten Hombeck | Chief Financial Officer | |
| Dr. Torsten Hombeck | (principal financial officer and accounting officer) | |
| /s/ Dr. Ray Prudo | Executive Chairman | |
| Dr. Ray Prudo | ||
| /s/ Dr. James Hill | Director | |
| Dr. James Hill | ||
| /s/ Dr. Stuart Ungar | Director | |
| Dr. Stuart Ungar | ||
| /s/ David Byrne | Director | |
| David Byrne | ||
| /s/ Donald Williams | Director | |
| Donald Williams | ||
| /s/ Michael Grissinger | Director | |
| Michael Grissinger |
70
AUTHORIZED REPRESENTATIVE
Pursuant to the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of Akari Therapeutics, Plc has signed this registration statement on October 12, 2022.
| Puglisi & Associates | ||
| By: | /s/ Donald J. Puglisi | |
| Name: Donald J. Puglisi | ||
| Title: Managing Director | ||
71
Exhibit 5.1
 |
mwe.com
|
Our Ref: NJA - 096717.0014
Akari Therapeutics, Plc
Highdown House
Yeoman Way
Worthing
West Sussex
BN99 3HH
12 October 2022
Dear Sirs
Akari Therapeutics, Plc – Registration Statement on Form F-1 - Exhibit 5.1
| 1. | Background |
| 1.1 | This opinion is being furnished in connection with the Registration Statement on Form F-1 (the Registration Statement) to be filed by the Company with the Securities and Exchange Commission (the SEC) under the Securities Act of 1933, as amended (the Securities Act) and the rules and regulations promulgated thereunder (the Rules) on or about the date of this opinion. |
| 1.2 | We have acted for Akari Therapeutics, Plc, a public limited company incorporated under the laws of England and Wales (the Company), as its legal advisers on English law in connection with its offering of securities pursuant to certain securities purchase agreements dated on or around 12 September 2022 (the SPAs) and a Placement Agency Agreement dated 12 September 2022 between A.G.P./Alliance Global Partners and the Company (the Placement Agency Agreement). Pursuant to the SPAs, the Company has issued to investors in a private placement, amongst others, the following warrants (collectively, the Warrants) registered under the Registration Statement: (i) Series A Warrants to purchase 1,392,352,900 ordinary shares represented by 13,923,529 American Depository Shares (ADSs) and (ii) Series B Warrants to purchase 1,392,352,900 ordinary shares represented by 13,923,529 ADSs. The Shares issuable by the Company upon exercise of Warrants are referred to as the New Shares. |
| 1.3 | In rendering this opinion, we have examined and relied upon originals or copies of such corporate records, agreements, documents and instruments as we have deemed necessary or advisable for the purposes of this opinion, including (i) certificates of incorporation and change of name of the Company and the articles of association of the Company (the Articles), (ii) an executed copy of the Placement Agency Agreement, (iii) executed copies of the SPAs and the agreed specimen forms of the Warrants, (iv) a certificate of an officer of the Company (Officer’s Certificate) and (v) the authorisations of the shareholders (Shareholder Resolutions) and the board of directors of the Company (and any committees thereof) (the Authorising Resolutions and, together with the Shareholder Resolutions, the Corporate Approvals). |
| 1.4 | On 12 October 2022 at 17:10 (London time) we carried out a search on an online service provided by Companies House (the Company Search) and on 12 October 2022 at 17:11 (London time) we made a search of the Central Registry of Winding-Up Petitions at the English High Court with respect to the Company (the Winding-Up Enquiry and, together with the Company Search, the Searches). |
 |
110 Bishopsgate London EC2N 4AY DX 131004 CDE Houndsditch Tel +44 20 7577 6900 Fax +44 20 7577 6950
McDermott Will & Emery UK LLP is a limited liability partnership regulated by the Solicitors Regulation Authority and registered in England and Wales, registered number OC311909. The members are solicitors or registered foreign lawyers. A list of members’ names and their professional qualifications is available for inspection at the principal place of business and registered office shown above. |
| 1.5 | Those documents and searches set out in paragraphs 1.3 and 1.4 are the only documents or records we have examined and the only searches and enquiries we have carried out for the purposes of this opinion. We have made no further enquiries concerning the Company or any other matter in connection with the giving of this opinion. |
| 2. | Assumptions |
| 2.1 | We have not been responsible for investigating or verifying the accuracy of any facts or the reasonableness of any statement of opinion or intention contained in or relevant to any document. |
| 2.2 | This opinion applies as at the date of this letter. We expressly disclaim any obligation to update this opinion for changes in law or events occurring after that date. |
| 2.3 | In giving this opinion we have assumed: |
| 2.3.1 | the genuineness of all signatures, seals and stamps; |
| 2.3.2 | that each of the individuals who signs as, or otherwise claims to be, an officer of the Company is the individual whom he or she claims to be and holds the office he or she claims to hold; |
| 2.3.3 | the authenticity and completeness of all documents submitted to us as originals; |
| 2.3.4 | the conformity with the original documents and due execution of all documents reviewed by us as drafts, specimens, pro formas or copies, the authenticity and completeness of all such original documents, and that each document examined by us in draft, specimen or pro forma form will be or has been duly executed in the form of that draft, specimen or pro forma; |
| 2.3.5 | that any documents examined by us which are governed by the laws of any jurisdiction other than England and Wales are legal, valid and binding under the laws by which they are (and are expressed to be) governed; |
| 2.3.6 | that each of the statements contained in the Officer’s Certificate is true and correct as at the date hereof; |
| 2.3.7 | that each Authorising Resolution proposed at a meeting was duly passed at a meeting of the directors of the Company (or a committee of them) duly convened and held and throughout which a valid quorum of directors (or members) entitled to vote on the resolution were present, that the minutes we inspected are a true record of the proceedings of each such meeting, that each Authorising Resolution proposed by written resolution of the directors of the Company (or a committee of them) was duly agreed to by all the directors of the Company (or all the members of the relevant committee) and that (except as amended by Authorising Resolutions reviewed by us) each Authorising Resolution recorded in such minutes or written resolutions has not been and will not be amended or rescinded and remains in full force and effect; |
| 2.3.8 | that the Shareholder Resolutions were duly passed at a meeting of the shareholders of the Company duly convened and held and throughout which a valid quorum of shareholders entitled to vote on the resolutions were present, that the minutes we inspected are a true record of the proceedings of the relevant meeting and that each resolution recorded therein has not been and will not be amended or rescinded and remains in full force and effect; |
| 2.3.9 | that the directors of the Company have exercised, or will exercise, their powers in accordance with their duties under all applicable laws and the Articles in respect of the performance of the Placement Agency Agreement, the SPAs, the Warrants and any actions contemplated by, or authority under, the Corporate Approvals; |
| 2.3.10 | that no agreement, document or obligation to or by which the Company (or its assets) is a party or bound and no injunction or other court order against or affecting the Company would be breached or infringed by the matters contemplated by the performance of the actions to be carried out pursuant to, or any other aspect of the transactions contemplated by, the Corporate Approvals; |
| 2 |
| 2.3.11 | that the information disclosed by the Searches is true, accurate, complete and up-to-date and that there is no information which, for any reason, should have been disclosed by those Searches but was not so disclosed; |
| 2.3.12 | that all consents, approvals, authorisations, notices, filings, recordations, publications and registrations, and the payment of any stamp duties or documentary taxes, that are necessary under any applicable laws or regulations in order to permit the performance of the actions to be carried out pursuant to the Corporate Approvals have been or will be duly made or obtained and are, or will be, in full force and effect; |
| 2.3.13 | that there are no provisions of the laws of any jurisdiction outside England and Wales that would have any implication for the opinions we express and that, insofar as the laws of any jurisdiction outside England and Wales may be relevant to this opinion letter, such laws have been and will be complied with; |
| 2.3.14 | that on each date on which any New Shares are allotted and issued (each an Allotment Date) the Company will have complied with its Articles and all applicable laws relevant to the allotment and issue of those New Shares; |
| 2.3.15 | that as at each Allotment Date the documents examined, and the results of the searches and enquiries made, as set out in paragraph 1, would not be rendered untrue, inaccurate, incomplete or out of date by reference to subsequent facts, matters, circumstances or events; and |
| 2.3.16 | that there will be no fact or matter (such as bad faith, coercion, duress, undue influence or a mistake or misrepresentation before or at the time after any agreement or instrument is entered into, a subsequent breach, release, waiver or variation of any right or provision, an entitlement to rectification or circumstances giving rise to an estoppel) which might affect the allotment and issue of any New Shares and no additional document between any relevant parties which would or might affect this opinion and which was not revealed to us by the documents examined or the searches and enquiries made by us in connection with the giving of this opinion. |
| 2.4 | In relation to paragraph 1.4, it should be noted that this information may not be true, accurate, complete or up to date. In particular, but without limitation: |
| 2.4.1 | there may be matters which should have been registered but which have not been registered or there may be a delay between the registration of those matters and the relevant entries appearing on the register of the relevant party; |
| 2.4.2 | there is no requirement to register with the Registrar of Companies notice of a petition for the winding up of, or application for an administration order in respect of, a company. Such a notice or notice of a winding-up or administration order having been made, a resolution having been passed for the winding up of a company or a receiver, manager, administrative receiver, administrator or liquidator having been appointed may not be filed with the Registrar of Companies immediately and there may be a delay in any notice appearing on the register of the relevant party; |
| 2.4.3 | the results of the Winding-Up Enquiry relate only to petitions for the compulsory winding up of, or applications for an administration order in respect of, the Company presented prior to the enquiry and entered on the records of the Central Registry of Winding-Up Petitions. The presentation of such a petition, or the making of such an application, may not have been notified to the Central Registry or entered on its records immediately or, if presented to a County Court, at all; and |
| 3 |
| 2.4.4 | in each case, further information might have become available on the relevant register after the Searches were made. |
| 3. | Opinion |
| 3.1 | On the basis of the examination and enquiries referred to in paragraph 1 (Background) and the assumptions made in paragraph 2 (Assumptions), we are of the opinion that the New Shares will, when the names of the holders of such New Shares are entered into the register of members of the Company and subject to their being issued upon due exercise of the relevant Warrants in accordance with their terms, the Corporate Approvals and the Registration Statement and the Company has received the aggregate issue price in respect of all the New Shares in accordance with the relevant Warrants, be validly issued and fully paid and no further amount may be called thereon. |
| 3.2 | This opinion is strictly limited to the matters expressly stated in this paragraph 3 and is not to be construed as extending by implication to any other matter. |
| 4. | Law |
| 4.1 | This opinion and any non-contractual obligations arising out of or in connection with this opinion shall be governed by, and construed in accordance with, English law. |
| 4.2 | This opinion relates only to English law as applied by the English courts as at today’s date. |
| 4.3 | We do not undertake or accept any obligation to update this opinion to reflect subsequent changes in English law or factual matters. |
| 4.4 | We express no opinion as to, and we have not investigated for the purposes of this opinion, the laws of any jurisdiction other than England. It is assumed that no foreign law which may apply to the matters contemplated by the Registration Statement, the issue of the Warrants or the New Shares, the Company, any document or any other matter contemplated by any document would or might affect this opinion. |
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not admit that we are in the category of persons whose consent is required under section 7 of the Securities Act or the Rules.
Yours faithfully
/s/ McDermott Will & Emery UK LLP
McDermott Will & Emery UK LLP
| 4 |
Exhibit 10.11
Akari Therapeutics, Plc
Executive Employment Agreement
This Employment Agreement (the “Agreement”) is made and entered into as of 28th February 2022, by and between Rachelle Jacques (the “Executive”) and Akari Therapeutics, Plc a public limited company formed under the laws of the United Kingdom (the “Company”).
WHEREAS, the Company desires to employ the Executive on the terms and conditions set forth herein; and
WHEREAS, the Executive desires to be employed by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations set forth herein, the parties agree as follows:
1. Commencement. Executive shall, subject to the terms and conditions herein, have commenced her position with the Company on or before March 28, 2022 (the “Target Start Period”). If Executive does not commence employment with the Company within the Target Start Period, the offer pursuant to this agreement shall be valid and binding, subject to the provisions of Section 4.3, thereafter until May 28, 2022 (the “Post-Target Period”), after which it shall become null and void. The term during which the Executive is thereafter employed shall be defined as the “Employment Term” and the date on which her employment commences as the “Start Date”.
2. Position and Duties.
2.1 Position. During the Employment Term, the Executive shall serve as the President and Chief Executive Officer of the Company, reporting to the Executive Chairman of the Board of Directors. The Executive shall additionally be appointed to serve as a member of the Board of Directors, and be nominated by the Company to serve in such role for so long as she remains in the position of Chief Executive Officer. In such position, the Executive shall have such duties, authority, and responsibilities as are consistent with the Executive’s position.
2.2 Duties. During the Employment Term, the Executive shall devote substantially all of the Executive’s business time and attention to the performance of the Executive’s duties hereunder and will not engage in any other business, profession, or occupation for compensation or otherwise which would conflict or interfere with the performance of such services either directly or indirectly without the prior written consent of the Board. Notwithstanding the foregoing, it is agreed and acknowledged that Executive serves in the following capacity at two present organizations, which positions shall not be deemed to conflict with her duties as Executive so long as such service does not interfere with meeting her duties and responsibilities under this Agreement: (a) Independent Director at Corbus Pharmaceuticals Holdings Inc. (NASDAQ: CRBP), and _Independent Director at uniQure N.V. (NASDAQ: QURE).
3. Place of Performance. The principal place of Executive’s employment shall be in Boston, Massachusetts; provided that, the Executive may be required to travel on Company business during the Employment Term. The Executive may work remotely from her primary residence, so long as doing so does not interfere with the Executive’s responsibilities under this Agreement; provided, that, subject to any health or safety concerns related to the COVID-19 pandemic or other similar extraordinary circumstances, the Executive shall be required to spend, on average, of Forty to Fifty (40-50) days per annum in the London office, and at such time as a Boston office may be established, Executive shall expect to work regularly therefrom.
4. Compensation.
4.1 Base Salary. The Company shall pay the Executive an annual rate of base salary of Six Hundred Thousand Dollars ($600,000) in periodic installments in accordance with the Company’s customary payroll practices and applicable wage payment laws. The Executive’s base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required to, increase the Executive’s base salary during the Employment Term. The Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as “Base Salary.”
4.2 Annual Bonus.
(a) For each complete fiscal year of the Employment Term, the Executive shall be eligible to receive an annual performance bonus (the “Annual Bonus”). As of the Start Date, the Executive’s annual target bonus opportunity shall be equal to Fifty Percent (50%) of Base Salary (the “Target Bonus”), based on the achievement of performance goals established by the Executive Chairman of the Board of Directors and the Board of Directors, in consultation with Executive. The Annual Bonus for the 2022 fiscal year shall be pro-rated based on the number of days employed during the year.
(b) The Annual Bonus, if any, is scheduled to be paid within two and a half (2 1/2) months after the end of the applicable fiscal year.
(c) Except as otherwise provided in Section 5, in order to be eligible to receive an Annual Bonus, the Executive must be employed by the Company on the date that Annual Bonuses are paid.
4.3 Signing Bonus. If Executive’s Start Date is within the Target Start Period, the following bonuses including Sections 4.3(a)-(c) shall be paid. If Executive’s Start Date is within the Post-Target Period, the provisions of Section 4.3(a) and Section 4.3(b)(i) shall not apply.
(a) Cash Bonus. The Company shall pay the Executive a lump sum cash signing bonus of Six Hundred Fifty Thousand Dollars ($650,000) (the “Signing Bonus”) payable on the first payroll date following the Start Date, subject to all applicable tax reporting and withholding requirements; provided that, (a) the Executive shall repay Fifty Percent (50%) of the Signing Bonus if, prior to the first anniversary of the Start Date, the Executive terminates the Executive’s employment without Good Reason (as defined below) or is terminated by the Company for Cause (as defined below); and (b) the Executive shall repay Thirty-Three and One-Third Percent (33.33%) of the Signing Bonus if, after the first anniversary but before the second anniversary of the Start Date, the Executive voluntarily terminates the Executive’s employment without Good Reason or is involuntarily terminated by the Company for Cause.
2
(b) RSU Bonus.
(i) Additionally, within 75 days of the Start Date, the Company will grant Executive Restricted Stock Units (“RSUs”) having a face value of $262,000 (the “Sign-On Grant”), such Sign-On Grant to vest as to 50% on the first anniversary of the Start Date, and the remaining 50% vesting monthly thereafter for the following year, such that the Sign-On Grant will be fully vested on the second anniversary of the Start Date, subject to full acceleration in the event of a Change in Control or involuntary termination without Cause, resignation for Good Reason or due to death or disability. RSUs will be settled in ordinary shares of the Company within 15 days following vesting (or, if applicable, on the date of a Change in Control), net of withholding taxes.
(ii) On the first anniversary of on the Start Date, the Company will grant Executive RSUs having a value, on the basis of the last closing price of the Company’s American Depositary Shares (each representing 100 ordinary shares) (“ADSs”) on Nasdaq before that anniversary, of $446,000 (the “Incremental RSU Grant 1”), such Incremental RSU Grant 1 to vest as to 50% on the second anniversary of the Start Date, and the remaining 50% vesting monthly thereafter for the following year, such that the Incremental RSU Grant 1 will be fully vested on the third anniversary of the Start Date, subject to full acceleration in the event of a Change in Control or involuntary termination without Cause, resignation for Good Reason or due to death or disability. RSUs will be settled in ordinary shares of the Company within 15 days following vesting (or, if applicable, on the date of a Change in Control), net of withholding taxes.
(iii) On the second anniversary of on the Start Date, the Company will grant Executive RSUs having a value, on the basis of the last closing price of an ADS on Nasdaq before that anniversary, of $446,000, (the “Incremental RSU Grant 2”), such Incremental RSU Grant 2 to vest as to 50% on the third anniversary of the Start Date, and the remaining 50% vesting monthly thereafter for the following year, such that the Incremental RSU Grant 2 will be fully vested on the fourth anniversary of the Start Date, subject to full acceleration in the event of a Change in Control or involuntary termination without Cause, resignation for Good Reason or due to death or disability. RSUs will be settled in ordinary shares of the Company within 15 days following vesting (or, if applicable, on the date of a Change in Control), net of withholding taxes.
(iv) Each of the above RSU grants will be made from a shareholder-approved Company equity grant plan or, if not, so as to qualify as inducement grants under NASDAQ rules together with filing of an applicable registration statement with the SEC (S-8 or otherwise). In order to comply with English company law, the Executive will pay the Company within 10 days of each vesting date an issue price for the ordinary shares to be issued pursuant to the vested RSUs equal to their nominal value (currently $0.0001 per ordinary share).
(v) In the event of any Change in Control or involuntary termination without Cause, resignation for Good Reason or due to death or disability, occurring prior to the granting of the Incremental RSU Grant 1 or Incremental RSU Grant 2, the Company will pay Executive a cash lump sum equal to the above-referenced ungranted RSU grant face value.
3
(c) Sign-On Option. The Company will grant the Executive an option (vesting ratably on a semiannual basis over four years from the Start Date, so that it will be fully vested on the fourth anniversary of the Start Date) to purchase 237,396,700 ordinary shares in the Company (which may be acquired through ADSs) (the “Option”) in the form and on the terms attached hereto as Exhibit A, which Option shall be made from a shareholder-approved Company equity grant plan or, if not, so as to qualify as an inducement grant under applicable stock exchange rules together with filing of an applicable registration statement with the SEC.
4.4 Equity Awards. Commencing with annual long-term incentive awards to senior executives in 2023, in addition to the sign-on RSUs and Option set forth above, the Executive will be eligible to receive awards under the Company’s equity incentive plan not less frequently than annually, such awards having a target grant value (Black Scholes value in the case of stock options) of not less than 100% of Executive’s Base Salary for the fiscal year 2023 only, and thereafter otherwise commensurate with awards to executives in similarly situated companies as recommended by a reputable compensation consultant engaged by the Board. Executive shall work with Company in structuring revisions to its long-term incentive program.
4.5 Fringe Benefits and Perquisites. During the Employment Term, the Executive shall be entitled to fringe benefits and perquisites consistent with those provided to similarly situated executives of the Company.
4.6 Employee Benefits. During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company shall use its reasonable best efforts to provide coverage at a comparable level to Executive’s coverage in effect immediately prior to the Start Date, provided, however, that for clarity, Executive shall participate in existing Company-sponsored Employee Benefit Plans on the terms provided to similarly situated executives (including, without limitation, the level of employee contribution for plan premiums and other payments required thereunder). The Company reserves the right to amend or terminate any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law.
4.7 Vacation; Paid Time Off. During the Employment Term, the Executive shall be entitled to Twenty (20) paid vacation days per calendar year (prorated for partial years) in accordance with the Company’s vacation policies, as in effect from time to time. The Executive shall receive other paid time off in accordance with the Company’s policies for executive officers as such policies may exist from time to time and as required by applicable law.
4
4.8 Business Expenses. The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment, and travel expenses incurred by the Executive in connection with the performance of the Executive’s duties hereunder in accordance with the Company’s expense reimbursement policies and procedures. Executive business air travel will be business class. Outstanding expenses shall be reimbursed within a maximum of Sixty (60) days.
4.9 Indemnification. The Company shall indemnify and hold the Executive harmless to the maximum extent permitted under applicable law and the Company’s articles of association for acts and omissions in the Executive’s capacity as an officer, director, or employee of the Company. Executive will be covered as an insured under any contract of directors’ and officers’ liability insurance that covers the Board. Executive’s rights of indemnification and coverage under applicable directors’ and officers’ liability insurance will survive a termination of Executive’s employment and service as a director.
4.10 Clawback Provisions. Any amounts payable under this Agreement are subject to any policy (whether in existence as of the Start Date or later adopted) established by the Company providing for clawback or recovery of amounts that were paid to the Executive. The Company will make any determination for clawback or recovery in its sole discretion and in accordance with any applicable law or regulation.
5. Termination of Employment. The Employment Term and the Executive’s employment hereunder may be terminated by either the Company or the Executive at any time and for any reason or for no particular reason; provided that, unless otherwise provided herein, either party shall be required to give the other party at least Thirty (30) days advance written notice of any termination of the Executive’s employment. Upon termination of the Executive’s employment during the Employment Term, the Executive shall be entitled to the compensation and benefits described in this Section 5 and shall have no further rights to any compensation or any other benefits from the Company or any of its affiliates.
5.1 For Cause, or Without Good Reason.
(a) The Executive’s employment hereunder may be terminated by the Company for Cause, or by the Executive without Good Reason and the Executive shall be entitled to receive:
(i) any accrued but unpaid Base Salary and accrued but unused paid time off which shall be paid on the pay date immediately following the date of the Executive’s termination in accordance with the Company’s customary payroll procedures;
(ii) any earned but unpaid Annual Bonus with respect to any completed fiscal year immediately preceding the date of the Executive’s termination, which shall be paid on the otherwise applicable payment date except to the extent payment is otherwise deferred pursuant to any applicable deferred compensation arrangement; provided that, if the Executive’s employment is terminated by the Company for Cause or the Executive resigns without Good Reason, then any such earned but unpaid Annual Bonus shall be forfeited;
5
(iii) reimbursement for unreimbursed business expenses properly incurred by the Executive, which shall be subject to and paid in accordance with the Company’s expense reimbursement policy; and
(iv) such employee benefits (including equity compensation), if any, to which the Executive may be entitled under the Company’s employee benefit plans as of the date of the Executive’s termination; provided that, in no event shall the Executive be entitled to any payments in the nature of severance or termination payments except as specifically provided herein.
Items 5.1(a)(i) through 5.1(a)(iv) are referred to herein collectively as the “Accrued Amounts.”
(b) For purposes of this Agreement, “Cause” shall mean:
(i) the Executive’s material failure to perform the Executive’s duties (other than any such failure resulting from incapacity due to physical or mental illness);
(ii) the Executive’s failure to comply with any valid and legal directive of the Executive Chairman of the Board of Directors;
(iii) the Executive’s engagement in dishonesty, illegal conduct, or misconduct, which is, in each case, injurious to the Company or its affiliates;
(iv) the Executive’s embezzlement, misappropriation, or fraud, whether or not related to the Executive’s employment with the Company;
(v) the Executive’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude;
(vi) the Executive’s violation of the Company’s written policies or codes of conduct, including written policies related to discrimination, harassment, performance of illegal or unethical activities, and ethical misconduct;
(vii) the Executive’s material breach of any obligation under this Agreement or any other written agreement between the Executive and the Company; or
(viii) the Executive’s engagement in conduct that brings or is reasonably likely to bring the Company negative publicity or into public disgrace, embarrassment, or disrepute.
Except for a failure, breach, or refusal which, by its nature, cannot reasonably be expected to be cured, the Executive shall have Thirty (30) business days from the delivery of written notice by the Company within which to cure any acts constituting Cause.
6
(c) For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following, in each case during the Employment Term without the Executive’s prior written consent:
(i) a material reduction in the Executive’s Base Salary other than a general reduction in Base Salary that affects all similarly situated executives in substantially the same proportions or to except to the extent the Executive consents in writing to any reduction, deferral or waiver of compensation;
(ii) a material diminution of Executive’s title, authority, duties, and responsibilities (including, without limitation, a change in the chain of reporting) (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law);
(iii) a relocation of the Executive’s principal place of employment by more than Fifty (50) miles;
(iv) any material breach by the Company of any material provision of this Agreement; or
(v) the Company’s failure to nominate the Executive for election to the Board and to use its best efforts to have her elected.
To terminate the Executive’s employment for Good Reason, the Executive must provide written notice to the Company of the existence of the circumstances providing grounds for termination for Good Reason within Thirty (30) days of the initial existence of such grounds and the Company must have at least Thirty (30) days from the date on which such notice is provided to cure such circumstances. If the Executive does not terminate the Executive’s employment for Good Reason within Ninety (90) days after the first occurrence of the applicable grounds, then the Executive will be deemed to have waived the Executive’s right to terminate for Good Reason with respect to such grounds.
5.2 Termination Without Cause or for Good Reason. The Employment Term and the Executive’s employment hereunder may be terminated by the Executive for Good Reason or by the Company without Cause. In the event of such termination, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive’s compliance with Section 7 of this Agreement and the agreements referenced therein and the Executive’s execution, within 21 days following receipt, of a release of claims in favor of the Company, its affiliates and their respective officers and directors in a form provided by the Company (the “Release”) (such 21-day period, the “Release Execution Period”), and the Release becoming effective according to its terms, the Executive shall be entitled to receive the following:
(a) a lump sum payment equal to one (1) times the sum of the Executive’s Base Salary plus eligible Target Bonus for the year in which the date of the Executive’s termination occurs, which shall be paid within Sixty (60) days following the date of the Executive’s termination; provided that, if the Release Execution Period begins in one taxable year and ends in another taxable year, payment shall not be made until the beginning of the second taxable year;
7
(b) payment of any earned but as yet unpaid annual bonus for a previously completed fiscal year, paid when bonuses for such year are paid to other senior executives of the Company;
(c) a payment equal to the product of (i) the Annual Bonus, if any, that the Executive otherwise would have earned for the fiscal year that includes the date of the Executive’s termination had no termination occurred, based on achievement of the applicable performance goals for such year and (ii) a fraction, the numerator of which is the number of days the Executive was employed by the Company during the year of termination and the denominator of which is the number of days in such year (the “Pro Rata Bonus”). This amount shall be paid on the date that annual bonuses are paid to similarly situated executives;
(d) If the Executive timely and properly elects health continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Executive for the monthly COBRA premium paid by the Executive for the Executive and the Executive’s dependents. Such reimbursement shall be paid to the Executive in the standard payroll cycle of the month immediately following the month in which the Executive timely remits the premium payment. The Executive shall be eligible to receive such reimbursement until the earliest of: (i) the twelve (12)-month anniversary of the date of the Executive’s termination; (ii) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (iii) the date on which the Executive becomes eligible to receive substantially similar coverage from another employer or other source. Notwithstanding the foregoing, if the Company’s making payments under this Section 5.2(d) would violate the nondiscrimination rules applicable to non-grandfathered, insured group health plans under the Affordable Care Act (the “ACA”), or result in the imposition of penalties under the ACA and the related regulations and guidance promulgated thereunder, the parties agree to reform this Section 5.2(d) in a manner as is necessary to comply with the ACA.
(e) Notwithstanding the terms of the Company’s 2014 Equity Incentive Plan or any applicable award agreements, if the Executive agrees in writing during the Release Execution Period that the non-competition restrictions in Section 8.2 shall continue to apply following an employment termination described in this Section 5.2:
(i) all outstanding equity-based compensation awards that do not vest based on the attainment of performance goals shall become fully vested and the restrictions thereon shall lapse; provided that, any delays in the settlement or payment of such awards that are set forth in the applicable award agreement and that are required under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”) shall remain in effect; and
(ii) all outstanding equity-based compensation awards that vest based on the attainment of performance goals, to the extent granted, shall remain outstanding and shall vest or be forfeited in accordance with the terms of the applicable award agreements, if the applicable performance goals are satisfied.
8
5.3 Death or Disability.
(a) The Executive’s employment hereunder shall terminate automatically upon the Executive’s death during the Employment Term, and the Company may terminate the Executive’s employment on account of the Executive’s Disability.
(b) If the Executive’s employment is terminated during the Employment Term on account of the Executive’s death or Disability, the Executive (or the Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the following:
(i) the Accrued Amounts; and
(ii) a lump sum payment equal to the Pro Rata Bonus, if any, that the Executive would have earned for the fiscal year that includes the date of the Executive’s termination based on the achievement of applicable performance goals for such year, which shall be payable on the date that annual bonuses are paid to the Company’s similarly situated executives, but in no event later than two-and-a-half (2 1/2) months following the end of the fiscal year that includes the date of the Executive’s termination.
Notwithstanding any other provision contained herein, all payments made in connection with the Executive’s Disability shall be provided in a manner which is consistent with federal and state law.
(c) For purposes of this Agreement, “Disability” shall mean the inability of the Executive to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. Any question as to the existence of the Executive’s Disability as to which the Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. The determination of Disability made in writing to the Company and the Executive shall be final and conclusive for all purposes of this Agreement.
5.4 Change in Control Termination.
(a) Notwithstanding any other provision contained herein, if the Executive’s employment hereunder (i) is terminated by the Executive for Good Reason or by the Company without Cause (other than on account of the Executive’s death or Disability), and (ii) is terminated, in each case, within eighteen (18) months following a Change in Control, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive’s compliance with Section 6, Section 7, Section 8 and Section 9 of this Agreement and the Executive’s execution of a Release which becomes effective within Fourteen (14) days following the Termination Date (as defined in Section 5.5), the Executive shall be entitled to receive the following:
(i) a lump sum payment equal to one (1) times the sum of the Executive’s Base Salary and Target Bonus for the year in which the Termination Date occurs (or if greater, the year immediately preceding the year in which the Change in Control occurs), which shall be paid within Thirty (30) days following the Termination Date; provided that, if the Release Execution Period begins in one taxable year and ends in another taxable year, payment shall not be made until the beginning of the second taxable year;
9
(ii) a lump sum payment equal to the Executive’s Target Bonus for the fiscal year in which the Termination Date (as determined in accordance with Section 5.5) occurs (or if greater, the year in which the Change in Control occurs), which shall be paid within Sixty (60) days following the Termination Date; provided that, if the Release Execution Period begins in one taxable year and ends in another taxable year, payment shall not be made until the beginning of the second taxable year; and
(iii) reimbursement of the Executive for the monthly COBRA premium paid, if COBRA coverage is elected, by the Executive for the Executive and the Executive’s dependents until the earliest of: (i) the twelve (12)-month anniversary of the date of the Executive’s termination pursuant to the Change in Control; (ii) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (iii) the date on which the Executive becomes eligible to receive substantially similar coverage from another employer or other source. Notwithstanding the foregoing, if the Company’s making payments under this Section 5.4(a) would violate the nondiscrimination rules applicable to non-grandfathered, insured group health plans under the ACA, or result in the imposition of penalties under the ACA and the related regulations and guidance promulgated thereunder, the parties agree to reform this Section 5.4(a) in a manner as is necessary to comply with the ACA.
(b) Notwithstanding the terms of any equity incentive plan or award agreements, as applicable, if the Executive agrees in writing during the Release Execution Period that the non-competition restrictions in Section 8.2 below shall continue to apply after an employment termination described in this Section 5.4:
(i) all outstanding unvested stock options granted to the Executive during the Employment Term shall become fully vested and exercisable for the remainder of their full term; and
(ii) all outstanding equity-based compensation awards other than stock options (including RSUs) that do not vest based on the attainment of performance goals shall become fully vested and the restrictions thereon shall lapse; provided that, any delays in the settlement or payment of such awards that are set forth in the applicable award agreement and that are required under Section 409A shall remain in effect.
10
For purposes of this Agreement, “Change in Control” shall mean any (i) Corporate Transaction as such term is defined in the Company’s 2014 Equity Incentive Plan or (ii) acquisition by one person (or more than one person acting as a group) of shares in the Company that, together with the shares held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting rights in the Company. Notwithstanding the foregoing, a Change in Control shall not occur unless such transaction constitutes a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the Company’s assets under Section 409A.
5.5 Notice of Termination. Any termination of the Executive’s employment hereunder by the Company or by the Executive during the Employment Term (other than termination pursuant to Section 5.3(a) on account of the Executive’s death) shall be communicated by written notice of termination (“Notice of Termination”) to the other party hereto in accordance with Section 20. The Notice of Termination shall specify:
(a) the termination provision of this Agreement relied upon;
(b) to the extent applicable, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and
(c) the applicable date of termination (in each case, the “Termination Date”), which shall be no less than Thirty (30) days following the date on which the Notice of Termination is delivered if the Company terminates the Executive’s employment without Cause, or no less than Thirty (30) days following the date on which the Notice of Termination is delivered if the Executive terminates the Executive’s employment with or without Good Reason; provided that, the Company shall have the option to provide the Executive with a lump sum payment in lieu of such notice. In the event of the Executive’s termination without Cause after the Company enters into a definitive sale agreement for a transaction that, upon consummation, would be a Change of Control and that transaction is in fact consummated after the termination, the Executive will be treated as if not terminated until the day after consummation of such Change in Control transaction (and, for the avoidance of doubt, such respective amounts and benefits as are due to the Executive pursuant to Section 5.4, as exceed such respective amounts and benefits as due under Section 5.2, shall become due and payable on the date of consummation of such Change in Control transaction).
5.6 Resignation of All Other Positions. Upon termination of the Executive’s employment hereunder for any reason, the Executive shall be deemed to have resigned from all positions that the Executive holds as an officer or member of the Board (or a committee thereof) of the Company or any of its affiliates.
11
5.7 Section 280G.
(a) If any of the payments or benefits received or to be received by the Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or the Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments”) constitute “parachute payments” within the meaning of Section 280G of the Code and would, but for this Section 5.7, be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then prior to making the 280G Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to the Executive of the 280G Payments after payment of the Excise Tax to (ii) the Net Benefit to the Executive if the 280G Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the 280G Payments be reduced to the minimum extent necessary to ensure that no portion of the 280G Payments is subject to the Excise Tax. “Net Benefit” shall mean the present value of the 280G Payments net of all federal, state, local, foreign income, employment, and excise taxes. Any reduction made pursuant to this Section 5.7 shall be made in a manner determined by the Company that is consistent with the requirements of Section 409A.
(b) All calculations and determinations under this Section 5.7 shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel”) whose determinations shall be conclusive and binding on the Company and the Executive for all purposes. For purposes of making the calculations and determinations required by this Section 5.7, the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and the Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 5.7. The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services.
6. Cooperation. The parties agree that certain matters in which the Executive will be involved during the Employment Term may necessitate the Executive’s cooperation in the future. Accordingly, following the termination of the Executive’s employment for any reason, to the extent reasonably requested by the Board, the Executive shall cooperate with the Company in connection with matters arising out of the Executive’s service to the Company; provided that, the Company shall make reasonable efforts to minimize disruption of the Executive’s other activities. The Company shall reimburse the Executive for reasonable expenses incurred in connection with such cooperation and, to the extent that the Executive is required to spend substantial time on such matters, the Company shall compensate the Executive at an hourly rate based on the Executive’s Base Salary on the Termination Date.
12
7. Confidential Information. The Executive understands and acknowledges that during the Employment Term, the Executive will have access to and learn about Confidential Information, as defined below.
7.1 Confidential Information Defined.
(a) Definition.
For purposes of this Agreement, “Confidential Information” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, computer software, applications, operating systems, work-in-process, databases, embedded data, compilations, metadata, technologies, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles, models, ideas, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, customer lists, client information, client lists, manufacturing information, patient lists, factory lists, distributor lists, and buyer lists of the Company or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company in confidence.
The Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.
The Executive understands and agrees that Confidential Information includes information developed by Executive in the course of employment by the Company as if the Company furnished the same Confidential Information to the Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to the Executive; provided that, such disclosure is through no direct or indirect fault of the Executive or person(s) acting on the Executive’s behalf.
(b) Company Creation and Use of Confidential Information.
The Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money, and specialized knowledge into developing its resources, research, drug development, training its employees, and improving its offerings in the field of biopharmaceuticals. The Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.
13
(c) Disclosure and Use Restrictions.
The Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate, or make available Confidential Information, or allow it to be disclosed, published, communicated, or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Executive Chairman of the Board of Directors acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media, or other resources containing any Confidential Information, or remove any such documents, records, files, media, or other resources from the premises or control of the Company, except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Executive Chairman of the Board of Directors acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent). The Executive understands that notwithstanding any other provision of this Agreement, nothing contained in this Agreement limits her ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (collectively, “Government Agencies”), or prevents the Executive from providing truthful testimony in response to a lawfully issued subpoena or court order. Further, nothing in this Agreement shall (1) prohibit the Executive from making reports of possible violations of federal law or regulation to any Government Agencies, including but not limited to the Securities and Exchange Commission, in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934, as amended, or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of federal law or regulation, or (2) require notification or prior approval by the Company of any such report; provided that the Executive is not authorized to disclose communications with counsel that were made for the purpose of receiving legal advice or that contain legal advice or that are protected by the attorney work product or similar privilege. Further, this Agreement does not limit the Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. This Agreement does not limit the Executive’s right to seek an award pursuant to Section 21F of the Securities Exchange Act of 1934. In addition, for the avoidance of doubt, pursuant to the federal Defend Trade Secrets Act of 2016, the Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (x) is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (y) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
(d) Permitted disclosures. Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. The Executive shall promptly provide written notice of any such order to Executive Chairman of the Board of Directors.
14
8. Restrictive Covenants.
8.1 Acknowledgement. The Executive understands that the nature of the Executive’s position gives the Executive access to and knowledge of Confidential Information and places the Executive in a position of trust and confidence with the Company.
The Executive further understands and acknowledges that the Company’s ability to reserve these for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that improper use or disclosure by the Executive is likely to result in unfair or unlawful competitive activity.
8.2 Non-Competition. Because of the Company’s legitimate business interest as described herein and the good and valuable consideration offered to the Executive, during the Employment Term and for the Twelve (12) months, to run consecutively, beginning on the last day of the Executive’s employment with the Company, regardless of the reason for the termination and whether employment is terminated at the option of the Executive or the Company, the Executive agrees and covenants not to engage in Prohibited Activity within the biopharmaceutical industry specific to companies engaged in complement inhibitor and leukotriene inhibitor objectives. Notwithstanding the foregoing, the non-competition restrictions shall not apply if the Company terminates Executive’s employment without cause (within the meaning of Mass. Gen. Laws Chapter 149, Sec 24L (c)) except as provided in either Section 5.2 or Section 5.4.
For purposes of this Section 8, “Prohibited Activity” is activity in which the Executive contributes the Executive’s knowledge, directly or indirectly, in whole or in part, as an employee, employer, owner, operator, manager, advisor, consultant, agent, employee, partner, director, stockholder, officer, volunteer, intern, or any other similar capacity to an entity engaged in the same or similar business as the Company, including those engaged in the business of biopharmaceutical development. Prohibited Activity also includes activity that may require or inevitably requires disclosure of trade secrets, proprietary information, or Confidential Information.
Nothing herein shall prohibit the Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation.
15
The restrictions set forth in this Section 8.2 shall in no event take effect until ten (10) business days after the Start Date (the “Noncompete Effective Date”). Executive acknowledges and agrees that the Company provided Executive with notice of the restrictions set forth in Section 8.2 at least ten (10) business days before the Noncompete Effective Date. The Executive also acknowledges that Executive was informed, pursuant to Mass. Gen. L. c. 149, 24L (the “Act”), that Executive has the right to consult with an attorney before signing this Agreement. As consideration for the covenants set forth in this Section 8.1, the Company has committed to grant the Executive the bonuses described in Section 4.3 of this Agreement, which the parties hereto agree is mutually-agreed upon consideration as defined in the Act.
This Section 8 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order. The Executive shall promptly provide written notice of any such order to the Executive Chairman of the Board of Directors.
8.3 Non-Solicitation of Employees. The Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company, or attempt to do so, during Twelve (12) months, to run consecutively, beginning on the last day of the Executive’s employment with the Company.
8.4 Non-Solicitation of Customers. The Executive understands and acknowledges that because of the Executive’s experience with and relationship to the Company, the Executive will have access to and learn about much or all of the Company’s customer information. “Customer Information” includes, but is not limited to, names, phone numbers, addresses, email addresses, order history, order preferences, chain of command, decisionmakers, pricing information, and other information identifying facts and circumstances specific to the customer and relevant to sales and/or services offered by the Company.
The Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant and irreparable harm.
The Executive agrees and covenants, during Twelve (12) months, to run consecutively, beginning on the last day of the Executive’s employment with the Company, not to directly or indirectly solicit, contact (including but not limited to email, regular mail, express mail, telephone, fax, instant message, or social media), attempt to contact, or meet with the Company’s current, former or prospective customers for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company.
16
9. Proprietary Rights.
9.1 Work Product. The Executive acknowledges and agrees that all right, title, and interest in and to all writings, works of authorship, technology, inventions, discoveries, processes, techniques, methods, ideas, concepts, research, proposals, materials, and all other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived, or reduced to practice by the Executive individually or jointly with others during the Employment Term and relate in any way to the business or contemplated business, products, activities, research, or development of the Company or result from any work performed by the Executive for the Company (in each case, regardless of when or where prepared or whose equipment or other resources is used in preparing the same), all rights and claims related to the foregoing, and all printed, physical and electronic copies, and other tangible embodiments thereof (collectively, “Work Product”), as well as any and all rights in and to US and foreign (a) patents, patent disclosures and inventions (whether patentable or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable works (including computer programs), and rights in data and databases, (d) trade secrets, know-how, and other confidential information, and (e) all other intellectual property rights, in each case whether registered or unregistered and including all registrations and applications for, and renewals and extensions of, such rights, all improvements thereto and all similar or equivalent rights or forms of protection in any part of the world (collectively, “Intellectual Property Rights”), shall be the sole and exclusive property of the Company.
For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, computer programs, computer applications, software design, work in process, databases, manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, algorithms, product plans, product designs, models, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, manufacturing information, marketing information, advertising information, clinical trial information, and sales information.
9.2 Work Made for Hire; Assignment. The Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company, for no additional consideration, the Executive’s entire right, title, and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title, or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.
9.3 Further Assurances; Power of Attorney. During and after the Employment Term, the Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect, and transfer to the Company the Work Product as well as any and all Intellectual Property Rights in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, giving testimony and executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments, and other documents and instruments as shall be requested by the Company. The Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on the Executive’s behalf in the Executive’s name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, prosecution, issuance, and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be affected by the Executive’s subsequent incapacity.
17
9.4 No License. The Executive understands that this Agreement does not, and shall not be construed to, grant the Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software, or other tools made available to the Executive by the Company.
10. Security.
10.1 Security and Access. The Executive agrees and covenants (a) to comply with all Company security policies and procedures as in force from time to time including without limitation those regarding computer equipment, telephone systems, facilities access, monitoring, key cards, access codes, Company intranet, databases, internet, social media and instant messaging systems, computer systems, email systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all other Company facilities, IT resources and communication technologies (“Facilities and Information Technology Resources”); (b) not to access or use any Facilities and Information Technology Resources except as authorized by the Company; and (iii) not to access or use any Facilities and Information Technology Resources in any manner after the termination of the Executive’s employment by the Company, whether termination is voluntary or involuntary. The Executive agrees to notify the Company promptly in the event the Executive learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction, or reverse engineering of, or tampering with any Facilities and Information Technology Resources or other Company property or materials by others.
10.2 Exit Obligations. Upon (a) voluntary or involuntary termination of the Executive’s employment or (b) the Company’s request at any time during the Executive’s employment, the Executive shall (i) provide or return to the Company any and all Company property, including keys, key cards, access cards, identification cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, PDAs, pagers, fax machines, equipment, speakers, webcams, manuals, reports, files, books, compilations, work product, email messages, recordings, tapes, disks, thumb drives or other removable information storage devices, hard drives, and data and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of the Executive, whether they were provided to the Executive by the Company or any of its business associates or created by the Executive in connection with the Executive’s employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations, and media in the Executive’s possession or control.
18
11. Non-Disparagement.
11.1 The Executive agrees and covenants that the Executive will not at any time make, publish, or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning the Company or its businesses, or any of its employees, officers, and existing and prospective customers, suppliers, investors and other associated third parties.
This Section 11.1 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order. The Executive shall promptly provide written notice of any such order to the Executive Chairman of the Board of Directors.
11.2 The Company agrees and covenants that the Company will not at any time make, publish, or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning the Executive.
This Section 11.2 does not, in any way, restrict or impede the Company from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order. The Company shall promptly provide written notice of any such order to the Executive.
12. Governing Law, Jurisdiction, and Venue. This Agreement, for all purposes, shall be construed in accordance with the laws of the state of Delaware without regard to conflicts of law principles. The parties hereby irrevocably submit to the exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.
13. Entire Agreement. Unless specifically provided herein, this Agreement contains all of the understandings and representations between the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.
14. Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Executive and by the Executive Chairman of the Board of Directors of the Company. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time.
15. Severability. Should any provisions of this Agreement be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had not been set forth herein.
19
16. Captions. Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.
17. Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
18. Section 409A.
18.1 General Compliance. This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with such intent. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any nonqualified deferred compensation payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.
18.2 Specified Employees. Notwithstanding any other provision of this Agreement, if any payment or benefit provided to the Executive in connection with the Executive’s termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the date of the Executive’s termination or, if earlier, on the Executive’s death (the “Specified Employee Payment Date”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.
18.3 Reimbursements. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:
(a) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(b) any reimbursement of an eligible expense shall be paid to the Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and
(c) any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
20
19. Successors and Assigns. This Agreement is personal to the Executive and shall not be assigned by the Executive. Any purported assignment by the Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.
20. Notice. Notices and all other communications provided for in this Agreement shall be given in writing by personal delivery, electronic delivery, or by registered mail to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):
If to the Company:
Akari Therapeutics, Plc
75-76 Wimpole Street
London W1G 9RT, United Kingdom
Attn: Executive Chairman of the Board of Directors
If to the Executive:
Address shown on the payroll records of the Company
21. Representations of the Executive. The Executive represents and warrants to the Company that:
The Executive’s acceptance of employment with the Company and the performance of the Executive’s duties hereunder will not conflict with or result in a violation of, a breach of, or a default under any contract, agreement, or understanding to which the Executive is a party or is otherwise bound.
The Executive’s acceptance of employment with the Company and the performance of the Executive’s duties hereunder will not violate any non-solicitation, non-competition, or other similar covenant or agreement of a prior employer or third-party.
22. Withholding; Tax Equalization. The Company shall have the right to withhold from any amount payable hereunder any Federal, state, and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
To the extent that any income for Executive’s services (including for service as a member of the Board of Directors) is subject to income or employee-paid social insurance taxes in the United Kingdom, the Company will pay Executive such amount of Executive’s income and employee-based social insurance taxes (including a full gross-up) as would be necessary such that the aggregate net income and social insurance tax paid by Executive is not greater than the amount incurred if services were taxed only in the United States.
21
23. Survival. Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.
24. Acknowledgement of Full Understanding. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE EXECUTIVE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE EXECUTIVE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF THE EXECUTIVE’S CHOICE BEFORE SIGNING THIS AGREEMENT.
[SIGNATURE PAGE FOLLOWS]
22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
| AKARI THERAPEUTICS, PLC | ||
| By: | /s/ Ray Prudo | |
| Name: | Ray Prudo | |
| Title: | Chairman | |
| EXECUTIVE | ||
| Signature: | /s/ Rachelle Jacques | |
| Print Name: Rachelle Jacques | ||
23
EXHIBIT A
24
STOCK OPTION AGREEMENT
United States Participants (ISO/NSO)
AGREEMENT made as of the date of the grant set forth in Exhibit A (the “Effective Date”) by and between Akari Therapeutics, Plc, a company formed under the laws of England and Wales, and having a place of business at 1460 Broadway, 16th Floor, New York, NY 10036 (the “Company”) and the individual whose name and address appears under his or her signature below (the “Participant”).
WHEREAS, the Company desires to grant to the Participant an Incentive Stock Option (“Option”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) to purchase ordinary shares, $0.0001 par value per share (the “Shares”), under and for the purposes set forth in and subject to the terms of the Company’s 2014 Equity Incentive Plan, including any amendments thereto (the “Plan”) which is attached hereto as Exhibit C; and
WHEREAS, the Company and the Participant understand and agree that any terms used and not defined herein have the same meanings as set forth in the Plan;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:
| 1. | GRANT OF OPTION. |
The Company hereby grants to the Participant, as of the Effective Date, the right and option to purchase all or any part of an aggregate of the number of Shares set forth in Exhibit A, on the terms and conditions and subject to all the limitations set forth herein, under United States securities and tax laws, and in the Plan.
If “ISO” is selected on Exhibit A hereto, this Option is intended to qualify as an Incentive Stock Option (“ISO”) as defined in Section 422 of the Code. Nevertheless, to the extent that any such ISO exceeds the $100,000 rule of Code Section 422(d), the number of shares subject to this Option in excess of such amount shall be treated as a Non-statutory Stock Option (“NSO”) pursuant to Section 6.2 of the Plan and the tax rules applicable to ISOs.
| 2. | EXERCISE PRICE. |
The exercise price of the Shares shall be the price set forth in Exhibit A, subject to adjustment, as provided in the Plan, in the event of a stock split, reverse stock split or other events affecting the holders of Shares after the date hereof (the “Exercise Price”).
| 3. | EXERCISABILITY OF OPTION; ACCELERATION. |
| (a) | This Option shall become exercisable (and the Shares issued upon exercise shall be vested) as set forth in Exhibit A, provided the Participant is an Employee, director or Consultant of the Company or of an Affiliate on the applicable vesting date. |
1
| (b) | Anything in this Agreement to the contrary notwithstanding, any unvested portion of the Option shall become fully vested and exercisable if (i) the Participant’s employment pursuant to that certain Executive Employment Agreement by and between the Company and Participant dated as of February 28, 2022 (the “Executive Employment Agreement”) is terminated by the Participant for Good Reason or by the Company without Cause, or terminates due to the Participant’s death or Disability or (ii) there occurs a Change in Control of the Company (prior to any termination of the Participant’s employment ). |
For purposes of this Agreement, “Change in Control”, “Cause”, “Good Reason” and “Disability” shall have the meanings ascribed to each such term in the Executive Employment Agreement.
| 4. | TERM OF OPTION. |
| (a) | This Option shall terminate on the date set forth in Exhibit A (the “Option Expiration Date”) but shall be subject to earlier termination as provided herein or in the Plan. |
| (b) | If the Participant ceases to be an Employee, director or Consultant of the Company or of an Affiliate for any reason other than the death or Disability of the Participant, or termination of the Participant for Cause (the “Termination Date”), the Option to the extent then vested and exercisable pursuant to Section 3 hereof as of the Termination Date, and not previously terminated in accordance with this Agreement, may be exercised within twelve (12) months after the Termination Date, or on or prior to the Option Expiration Date, whichever is earlier, but may not be exercised thereafter except as set forth below. In such event, the unvested portion of the Option shall not be exercisable and shall expire and be cancelled on the Termination Date. |
| (c) | Notwithstanding the foregoing, in the event of the Participant’s Disability or death within three months after the Termination Date, the Participant or the Participant’s Survivors may exercise the Option within one year after the Termination Date, but in no event after the Option Expiration Date. |
| (d) | In the event the Participant’s service is terminated by the Company or an Affiliate for Cause, the Participant’s right to exercise any unexercised portion of this Option even if vested shall cease immediately as of the time the Participant is notified his or her service is terminated for Cause, and this Option shall thereupon terminate. Notwithstanding anything herein to the contrary, if subsequent to the Participant’s termination, but prior to the exercise of the Option, the Participant breaches in any material respect any agreement between Participant and the Company (including, but not limited to, any assignment of intellectual property, confidentiality, non- disclosure, non-competition or non-solicitation agreement(s)), then the Participant shall immediately cease to have any rights to exercise this Option and this Option shall thereupon terminate. The Company agrees that in the event of conflict between this Agreement and Section 13.d of the Plan, this Agreement shall control with respect to any determination made subsequent to termination. |
2
| (e) | In the event of the Disability of the Participant, as determined in accordance with the Plan, the Option shall be exercisable within one year after the Participant’s termination of service due to Disability or, if earlier, on or prior to the Option Expiration Date. In such event, the Option shall be exercisable: |
| (i) | to the extent that the Option has become exercisable but has not been exercised as of the date of the Participant’s termination of service due to Disability; and |
| (ii) | in the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of the Participant’s termination of service due to Disability of any additional vesting rights that would have accrued on the next vesting date had the Participant not become Disabled. The proration shall be based upon the number of days accrued in the current vesting period prior to the date of the Participant’s termination of service due to Disability. |
| (f) | In the event of the death of the Participant while an Employee, director or Consultant of the Company or of an Affiliate, the Option shall be exercisable by the Participant’s Survivors within one year after the date of death of the Participant or, if earlier, on or prior to the Option Expiration Date. In such event, the Option shall be exercisable: |
| (i) | to the extent that the Option has become exercisable but has not been exercised as of the date of death; and |
| (ii) | in the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of death of any additional vesting rights that would have accrued on the next vesting date had the Participant not died. The proration shall be based upon the number of days accrued in the current vesting period prior to the Participant’s date of death. |
| 5. | METHOD OF EXERCISING OPTION. |
| (a) | Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company or its designee, in substantially the form of Exhibit B attached hereto (or in such other form acceptable to the Company, which may include electronic notice). Such notice shall state the number of Shares with respect to which the Option is being exercised and shall be signed by the person exercising the Option (which signature may be provided electronically in a form acceptable to the Company). |
| (b) | Payment of the Exercise Price for such Shares shall be made in accordance with Paragraph 9 of the Plan. |
| (c) | The Company shall deliver such Shares as soon as practicable after the notice shall be received, provided, however, that the Company may delay issuance of such Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including, without limitation, state securities or “blue sky” laws). |
3
| (d) | The Shares as to which the Option shall have been so exercised shall be registered in the Company’s share register in the name of the person so exercising the Option (or, if the Option shall be exercised by the Participant and if the Participant shall so request in the notice exercising the Option, shall be registered in the Company’s share register in the name of the Participant and another person jointly, with right of survivorship) and shall be delivered as provided above to or upon the written order of the person exercising the Option. |
| (e) | In the event the Option shall be exercised, pursuant to Section 4 hereof, by any person other than the Participant, such notice shall be accompanied by appropriate proof of the right of such person to exercise the Option. |
| (f) | All Shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and nonassessable. |
| 6. | PARTIAL EXERCISE. |
Exercise of this Option to the extent above stated may be made in part at any time and from time to time within the above limits, except that no fractional share shall be issued pursuant to this Option.
| 7. | NON-ASSIGNABILITY. |
| (a) | The Option shall not be transferable by the Participant otherwise than by will or by the laws of descent and distribution; or, if this Option is an NSO, then it may also be transferred pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act or the rules thereunder and may be exercised only by Optionee or his permitted assigns. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs of Optionee. |
| (b) | Except as provided above in Section 7(a), the Option shall be exercisable, during the Participant’s lifetime, only by the Participant (or, in the event of legal incapacity or incompetency, by the Participant’s guardian or representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. |
| (c) | Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 7, or the levy of any attachment or similar process upon the Option shall be null and void. |
| 8. | NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. |
The Participant shall have no rights as a stockholder with respect to Shares subject to this Agreement until registration of the Shares in the Company’s share register in the name of the Participant. Except as is expressly provided in the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to the date of such registration.
4
| 9. | ADJUSTMENTS. |
The Plan contains provisions covering the treatment of Options in a number of contingencies such as stock splits and mergers. Provisions in the Plan for adjustment with respect to stock subject to Options and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference.
| 10. | TAXES. |
| (a) | The Participant acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option shall be the Participant’s responsibility. |
| (b) | The Participant acknowledges and agrees that: |
| (i) | the Participant was free to use professional advisors of his or her choice in connection with this Agreement, has received advice from his or her professional advisors in connection with this Agreement, understands its meaning and import, and is entering into this Agreement freely and without coercion or duress; |
| (ii) | the Participant has not received and is not relying upon any advice, representations or assurances made by or on behalf of the Company or any Affiliate or any employee of or counsel to the Company or any Affiliate regarding any tax or other effects or implications of the Option, the Shares or other matters contemplated by this Agreement; and |
| (iii) | neither the Administrator, the Company, its Affiliates, nor any of its officers or directors, shall be held liable for any applicable costs, taxes, or penalties associated with the Option if, in fact, the Internal Revenue Service were to determine that the Option constitutes deferred compensation under Section 409A of the Code. |
| (c) | The Participant agrees that the Company may withhold from the Participant’s remuneration, if any, the minimum statutory amount of federal, state and local withholding taxes attributable to such amount that is considered compensation includable in such person’s gross income. At the Company’s discretion, the amount required to be withheld may be withheld in cash from such remuneration, or in kind from the Shares otherwise deliverable to the Participant on exercise of the Option. The Participant further agrees that, if the Company does not withhold an amount from the Participant’s remuneration sufficient to satisfy the Company’s income tax withholding obligation, the Participant will reimburse the Company on demand, in cash, for the amount under-withheld. |
| (d) | If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition (“Notice of Disqualifying Disposition of ISO Shares”). Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee. |
5
| 11. | PURCHASE FOR INVESTMENT. |
| (a) | Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue the Shares covered by such exercise unless the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act and until the following conditions have been fulfilled: |
| (i) | The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for their own respective accounts, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon any certificate(s) evidencing the Shares issued pursuant to such exercise: |
“The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws;” and
| (ii) | If the Company so requires, the Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Securities Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or “blue sky” laws). |
6
| 12. | RESTRICTIONS ON TRANSFER OF SHARES. |
| (a) | The Participant agrees that in the event the Company proposes to offer for sale to the public any of its equity securities and such Participant is requested by the Company and any underwriter engaged by the Company in connection with such offering to sign an agreement restricting the sale or other transfer of Shares, then it will promptly sign such agreement and will not transfer, whether in privately negotiated transactions or to the public in open market transactions or otherwise, any Shares or other securities of the Company held by him or her during such period as is determined by the Company and the underwriters, not to exceed 180 days following the closing of the offering, plus such additional period of time as may be required to comply with Marketplace Rule 2711 of the National Association of Securities Dealers, Inc. or similar rules thereto (such period, the “Lock-Up Period”). |
| (i) | Such agreement shall be in writing and in form and substance reasonably satisfactory to the Company and such underwriter and pursuant to customary and prevailing terms and conditions. |
| (ii) | Notwithstanding whether the Participant has signed such an agreement, the Company may impose stop-transfer instructions with respect to the Shares or other securities of the Company subject to the foregoing restrictions until the end of the Lock-Up Period. |
| (b) | The Participant acknowledges and agrees that neither the Company, its shareholders nor its directors and officers, has any duty or obligation to disclose to the Participant any material information regarding the business of the Company or affecting the value of the Shares before, at the time of, or following a termination of the service of the Participant by the Company, including, without limitation, any information concerning plans for the Company to make a public offering of its securities or to be acquired by or merged with or into another firm or entity. |
| 13. | NO OBLIGATION TO MAINTAIN RELATIONSHIP. |
| (a) | The Participant acknowledges that: |
| (i) | the Company is not by the Plan or this Option obligated to continue the Participant as an employee, director or Consultant of the Company or an Affiliate; |
| (ii) | the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; |
| (iii) | the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; |
| (iv) | all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the number of shares subject to each option, the option price, and the time or times when each option shall be exercisable, will be at the sole discretion of the Company; |
| (v) | the Participant’s participation in the Plan is voluntary; |
| (vi) | the value of the Option is an extraordinary item of compensation which is outside the scope of the Participant’s employment or consulting contract, if any; and |
| (vii) | the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. |
7
| 14. | NOTICES. |
| (a) | Any notices required or permitted by the terms of this Agreement or the Plan shall be given by recognized courier service, facsimile, registered or certified mail, return receipt requested, addressed as follows: |
| (i) | If to the Company: |
Akari Therapeutics, PLC
1460 Broadway, 16th Floor
New York, NY 10036
Attention: Chief Executive Officer
| (ii) | If to the Participant, at the address set forth below; |
or to such other address or addresses of which notice in the same manner has previously been given.
| (b) | Any such notice shall be deemed to have been given upon the earlier of receipt, one business day following delivery to a recognized courier service or three business days following mailing by registered or certified mail. |
| 15. | GOVERNING LAW. |
This Agreement shall be governed by and construed in accordance with the laws of England and Wales, without giving effect to the conflict of law principles thereof. For the purpose of litigating any dispute that arises under this Agreement, the parties hereby consent to exclusive jurisdiction in New York and agree that such litigation shall be conducted in the state courts of New York, New York or the federal courts of the United States for the District of New York.
| 16. | BENEFIT OF AGREEMENT. |
Subject to the provisions of the Plan and the other provisions hereof, this Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto.
| 17. | ENTIRE AGREEMENT. |
| (a) | This Agreement, including Exhibit A, which is expressly incorporated herein and made a part hereof, embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. |
| (b) | No statement, representation, warranty, covenant or agreement not expressly set forth in this Agreement shall affect or be used to interpret, change or restrict, the express terms and provisions of this Agreement, provided, however, in any event, this Agreement shall be subject to and governed by the Plan. |
8
| 18. | MODIFICATIONS AND AMENDMENTS. |
The terms and provisions of this Agreement may be modified or amended as provided in the Plan.
| 19. | WAIVERS AND CONSENTS. |
Except as provided in the Plan, the terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.
| 20. | RECOUPMENT OF AWARD. |
If the Option or any cash or share payment the Participant receives pursuant to this Agreement are subject to recovery under any law, government regulation or stock exchange listing requirement, the Option, and the cash or share payment, shall be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement) and the Board of Directors in its reasonable good faith discretion consistent with any such requirement, may require that you reimburse the Company all or part of any payment or transfer related to this Award, the Option and any cash or share payment.
| 21. | DATA PRIVACY. |
By entering into this Agreement, the Participant:
| (i) | authorizes the Company and each Affiliate, and any agent of the Company or any Affiliate administering the Plan or providing Plan recordkeeping services, to disclose to the Company or any of its Affiliates such information and data as the Company or any such Affiliate shall request in order to facilitate the grant of options and the administration of the Plan; and |
| (ii) | authorizes the Company and each Affiliate to store and transmit such information in electronic form for the purposes set forth in this Agreement. |
9
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE EXECUTED AS OF THE EFFECTIVE DATE.
| PARTICIPANT | AKARI THERAPEUTICS, PLC | |||
| /s/ Rachelle Jacques | ||||
| Signature | Signature | |||
| Name: | Rachelle Jacques | Name: | ||
| Address: | Title: | |||
10
Exhibit A
Terms of Option Grant
| 1. | Date of Grant: | ______________2022 | ||
| 2. | Maximum Number of Shares for which this Option is exercisable: | [●] | ||
| 3. | Exercise price per Share: | [market price (higher of Start Date & grant)] | ||
| 4. | Option Expiration Date: | [10th anniversary of Start Date] | ||
| 5. | Vesting Start Date: | [Start Date] | ||
| 6. | Type of Option: | |||
| x | Incentive Stock Option (“ISO”) | |||
| ¨ | Non-Statutory Stock Option (“NSO”) | |||
| 7. | Vesting Schedule: | |||
This Option shall vest ratably on a semiannual basis and become exercisable over 4 years (and the Shares issued upon exercise shall be vested) provided the Participant is an Employee, director or Consultant of the Company or of an Affiliate on the applicable vesting date, except as otherwise set forth in Section 3(b) of the Stock Option Agreement.
11
Exhibit B
NOTICE OF EXERCISE OF STOCK OPTION
[Form for Shares registered in the United States]
To: Akari Therapeutics, Plc
IMPORTANT NOTICE: This form of Notice of Exercise may only be used at such time as the Company has filed a Registration Statement with the Securities and Exchange Commission under which the issuance of the Shares for which this exercise is being made is registered and such Registration Statement remains effective.
Ladies and Gentlemen:
I hereby exercise my Stock Option to purchase ________ shares (the “Shares”) of the ordinary shares, $0.0001 par value per share, of Akari Therapeutics, Plc (the “Company”), at the exercise price of $ per share, pursuant to and subject to the terms of the Stock Option Agreement dated ___________, 20___.
I understand the nature of the investment I am making and the financial risks thereof. I am aware that it is my responsibility to have consulted with competent tax and legal advisors about the relevant national, state and local income tax and securities laws affecting the exercise of the Option and the purchase and subsequent sale of the Shares.
I am paying the option exercise price for the Shares as follows:
Please issue the Shares (check one):
¨ to me; or
¨ to me and ________________________, as joint tenants with right of
survivorship,
| at the following address: | |
12
My mailing address for shareholder communications, if different from the address listed above, is:
| Very truly yours, | |
| Participant (signature) | |
| Print Name | |
| Date |
13
Exhibit C
AKARI THERAPEUTICS, PLC
2014 EQUITY INCENTIVE PLAN
(See attached)
14
Exhibit 10.12
STOCK OPTION AGREEMENT
United States Participants (ISO/NSO)
AGREEMENT made as of the date of the grant set forth in Exhibit A (the “Effective Date”) by and between Akari Therapeutics, Plc, a company formed under the laws of England and Wales, and having a place of business at 1460 Broadway, 16th Floor, New York, NY 10036 (the “Company”) and the individual whose name and address appears under his or her signature below (the “Participant”).
WHEREAS, the Company desires to grant to the Participant an Incentive Stock Option (“Option”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) to purchase ordinary shares, $0.0001 par value per share (the “Shares”), under and for the purposes set forth in and subject to the terms of the Company’s 2014 Equity Incentive Plan, including any amendments thereto (the “Plan”) which is attached hereto as Exhibit C; and
WHEREAS, the Company and the Participant understand and agree that any terms used and not defined herein have the same meanings as set forth in the Plan;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:
| 1. | GRANT OF OPTION. |
The Company hereby grants to the Participant, as of the Effective Date, the right and option to purchase all or any part of an aggregate of the number of Shares set forth in Exhibit A, on the terms and conditions and subject to all the limitations set forth herein, under United States securities and tax laws, and in the Plan.
If “ISO” is selected on Exhibit A hereto, this Option is intended to qualify as an Incentive Stock Option (“ISO”) as defined in Section 422 of the Code. Nevertheless, to the extent that any such ISO exceeds the $100,000 rule of Code Section 422(d), the number of shares subject to this Option in excess of such amount shall be treated as a Non-statutory Stock Option (“NSO”) pursuant to Section 6.2 of the Plan and the tax rules applicable to ISOs.
| 2. | EXERCISE PRICE. |
The exercise price of the Shares shall be the price set forth in Exhibit A, subject to adjustment, as provided in the Plan, in the event of a stock split, reverse stock split or other events affecting the holders of Shares after the date hereof (the “Exercise Price”).
| 3. | EXERCISABILITY OF OPTION; ACCELERATION. |
| (a) | This Option shall become exercisable (and the Shares issued upon exercise shall be vested) as set forth in Exhibit A, provided the Participant is an Employee, director or Consultant of the Company or of an Affiliate on the applicable vesting date. |
1
| (b) | Anything in this Agreement to the contrary notwithstanding, any unvested portion of the Option shall become fully vested and exercisable if (i) the Participant’s employment pursuant to that certain Executive Employment Agreement by and between the Company and Participant dated as of February 28, 2022 (the “Executive Employment Agreement”) is terminated by the Participant for Good Reason or by the Company without Cause, or terminates due to the Participant’s death or Disability or (ii) there occurs a Change in Control of the Company (prior to any termination of the Participant’s employment ). |
For purposes of this Agreement, “Change in Control”, “Cause”, “Good Reason” and “Disability” shall have the meanings ascribed to each such term in the Executive Employment Agreement.
| 4. | TERM OF OPTION. |
| (a) | This Option shall terminate on the date set forth in Exhibit A (the “Option Expiration Date”) but shall be subject to earlier termination as provided herein or in the Plan. |
| (b) | If the Participant ceases to be an Employee, director or Consultant of the Company or of an Affiliate for any reason other than the death or Disability of the Participant, or termination of the Participant for Cause (the “Termination Date”), the Option to the extent then vested and exercisable pursuant to Section 3 hereof as of the Termination Date, and not previously terminated in accordance with this Agreement, may be exercised within twelve (12) months after the Termination Date, or on or prior to the Option Expiration Date, whichever is earlier, but may not be exercised thereafter except as set forth below. In such event, the unvested portion of the Option shall not be exercisable and shall expire and be cancelled on the Termination Date. |
| (c) | Notwithstanding the foregoing, in the event of the Participant’s Disability or death within three months after the Termination Date, the Participant or the Participant’s Survivors may exercise the Option within one year after the Termination Date, but in no event after the Option Expiration Date. |
| (d) | In the event the Participant’s service is terminated by the Company or an Affiliate for Cause, the Participant’s right to exercise any unexercised portion of this Option even if vested shall cease immediately as of the time the Participant is notified his or her service is terminated for Cause, and this Option shall thereupon terminate. Notwithstanding anything herein to the contrary, if subsequent to the Participant’s termination, but prior to the exercise of the Option, the Participant breaches in any material respect any agreement between Participant and the Company (including, but not limited to, any assignment of intellectual property, confidentiality, non- disclosure, non-competition or non-solicitation agreement(s)), then the Participant shall immediately cease to have any rights to exercise this Option and this Option shall thereupon terminate. The Company agrees that in the event of conflict between this Agreement and Section 13.d of the Plan, this Agreement shall control with respect to any determination made subsequent to termination. |
2
| (e) | In the event of the Disability of the Participant, as determined in accordance with the Plan, the Option shall be exercisable within one year after the Participant’s termination of service due to Disability or, if earlier, on or prior to the Option Expiration Date. In such event, the Option shall be exercisable: |
| (i) | to the extent that the Option has become exercisable but has not been exercised as of the date of the Participant’s termination of service due to Disability; and |
| (ii) | in the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of the Participant’s termination of service due to Disability of any additional vesting rights that would have accrued on the next vesting date had the Participant not become Disabled. The proration shall be based upon the number of days accrued in the current vesting period prior to the date of the Participant’s termination of service due to Disability. |
| (f) | In the event of the death of the Participant while an Employee, director or Consultant of the Company or of an Affiliate, the Option shall be exercisable by the Participant’s Survivors within one year after the date of death of the Participant or, if earlier, on or prior to the Option Expiration Date. In such event, the Option shall be exercisable: |
| (i) | to the extent that the Option has become exercisable but has not been exercised as of the date of death; and |
| (ii) | in the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of death of any additional vesting rights that would have accrued on the next vesting date had the Participant not died. The proration shall be based upon the number of days accrued in the current vesting period prior to the Participant’s date of death. |
| 5. | METHOD OF EXERCISING OPTION. |
| (a) | Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company or its designee, in substantially the form of Exhibit B attached hereto (or in such other form acceptable to the Company, which may include electronic notice). Such notice shall state the number of Shares with respect to which the Option is being exercised and shall be signed by the person exercising the Option (which signature may be provided electronically in a form acceptable to the Company). |
| (b) | Payment of the Exercise Price for such Shares shall be made in accordance with Paragraph 9 of the Plan. |
| (c) | The Company shall deliver such Shares as soon as practicable after the notice shall be received, provided, however, that the Company may delay issuance of such Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including, without limitation, state securities or “blue sky” laws). |
3
| (d) | The Shares as to which the Option shall have been so exercised shall be registered in the Company’s share register in the name of the person so exercising the Option (or, if the Option shall be exercised by the Participant and if the Participant shall so request in the notice exercising the Option, shall be registered in the Company’s share register in the name of the Participant and another person jointly, with right of survivorship) and shall be delivered as provided above to or upon the written order of the person exercising the Option. |
| (e) | In the event the Option shall be exercised, pursuant to Section 4 hereof, by any person other than the Participant, such notice shall be accompanied by appropriate proof of the right of such person to exercise the Option. |
| (f) | All Shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and nonassessable. |
| 6. | PARTIAL EXERCISE. |
Exercise of this Option to the extent above stated may be made in part at any time and from time to time within the above limits, except that no fractional share shall be issued pursuant to this Option.
| 7. | NON-ASSIGNABILITY. |
| (a) | The Option shall not be transferable by the Participant otherwise than by will or by the laws of descent and distribution; or, if this Option is an NSO, then it may also be transferred pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act or the rules thereunder and may be exercised only by Optionee or his permitted assigns. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs of Optionee. |
| (b) | Except as provided above in Section 7(a), the Option shall be exercisable, during the Participant’s lifetime, only by the Participant (or, in the event of legal incapacity or incompetency, by the Participant’s guardian or representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. |
| (c) | Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 7, or the levy of any attachment or similar process upon the Option shall be null and void. |
| 8. | NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. |
The Participant shall have no rights as a stockholder with respect to Shares subject to this Agreement until registration of the Shares in the Company’s share register in the name of the Participant. Except as is expressly provided in the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to the date of such registration.
4
| 9. | ADJUSTMENTS. |
The Plan contains provisions covering the treatment of Options in a number of contingencies such as stock splits and mergers. Provisions in the Plan for adjustment with respect to stock subject to Options and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference.
| 10. | TAXES. |
| (a) | The Participant acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option shall be the Participant’s responsibility. |
| (b) | The Participant acknowledges and agrees that: |
| (i) | the Participant was free to use professional advisors of his or her choice in connection with this Agreement, has received advice from his or her professional advisors in connection with this Agreement, understands its meaning and import, and is entering into this Agreement freely and without coercion or duress; |
| (ii) | the Participant has not received and is not relying upon any advice, representations or assurances made by or on behalf of the Company or any Affiliate or any employee of or counsel to the Company or any Affiliate regarding any tax or other effects or implications of the Option, the Shares or other matters contemplated by this Agreement; and |
| (iii) | neither the Administrator, the Company, its Affiliates, nor any of its officers or directors, shall be held liable for any applicable costs, taxes, or penalties associated with the Option if, in fact, the Internal Revenue Service were to determine that the Option constitutes deferred compensation under Section 409A of the Code. |
| (c) | The Participant agrees that the Company may withhold from the Participant’s remuneration, if any, the minimum statutory amount of federal, state and local withholding taxes attributable to such amount that is considered compensation includable in such person’s gross income. At the Company’s discretion, the amount required to be withheld may be withheld in cash from such remuneration, or in kind from the Shares otherwise deliverable to the Participant on exercise of the Option. The Participant further agrees that, if the Company does not withhold an amount from the Participant’s remuneration sufficient to satisfy the Company’s income tax withholding obligation, the Participant will reimburse the Company on demand, in cash, for the amount under-withheld. |
| (d) | If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition (“Notice of Disqualifying Disposition of ISO Shares”). Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee. |
5
| 11. | PURCHASE FOR INVESTMENT. |
| (a) | Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue the Shares covered by such exercise unless the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act and until the following conditions have been fulfilled: |
| (i) | The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for their own respective accounts, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon any certificate(s) evidencing the Shares issued pursuant to such exercise: |
“The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws;” and
| (ii) | If the Company so requires, the Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Securities Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or “blue sky” laws). |
| 12. | RESTRICTIONS ON TRANSFER OF SHARES. |
| (a) | The Participant agrees that in the event the Company proposes to offer for sale to the public any of its equity securities and such Participant is requested by the Company and any underwriter engaged by the Company in connection with such offering to sign an agreement restricting the sale or other transfer of Shares, then it will promptly sign such agreement and will not transfer, whether in privately negotiated transactions or to the public in open market transactions or otherwise, any Shares or other securities of the Company held by him or her during such period as is determined by the Company and the underwriters, not to exceed 180 days following the closing of the offering, plus such additional period of time as may be required to comply with Marketplace Rule 2711 of the National Association of Securities Dealers, Inc. or similar rules thereto (such period, the “Lock-Up Period”). |
| (i) | Such agreement shall be in writing and in form and substance reasonably satisfactory to the Company and such underwriter and pursuant to customary and prevailing terms and conditions. |
6
| (ii) | Notwithstanding whether the Participant has signed such an agreement, the Company may impose stop-transfer instructions with respect to the Shares or other securities of the Company subject to the foregoing restrictions until the end of the Lock-Up Period. |
| (b) | The Participant acknowledges and agrees that neither the Company, its shareholders nor its directors and officers, has any duty or obligation to disclose to the Participant any material information regarding the business of the Company or affecting the value of the Shares before, at the time of, or following a termination of the service of the Participant by the Company, including, without limitation, any information concerning plans for the Company to make a public offering of its securities or to be acquired by or merged with or into another firm or entity. |
| 13. | NO OBLIGATION TO MAINTAIN RELATIONSHIP. |
| (a) | The Participant acknowledges that: |
| (i) | the Company is not by the Plan or this Option obligated to continue the Participant as an employee, director or Consultant of the Company or an Affiliate; |
| (ii) | the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; |
| (iii) | the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; |
| (iv) | all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the number of shares subject to each option, the option price, and the time or times when each option shall be exercisable, will be at the sole discretion of the Company; |
| (v) | the Participant’s participation in the Plan is voluntary; |
| (vi) | the value of the Option is an extraordinary item of compensation which is outside the scope of the Participant’s employment or consulting contract, if any; and |
7
| (vii) | the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. |
| 14. | NOTICES. |
| (a) | Any notices required or permitted by the terms of this Agreement or the Plan shall be given by recognized courier service, facsimile, registered or certified mail, return receipt requested, addressed as follows: |
| (i) | If to the Company: |
Akari Therapeutics, PLC
1460 Broadway, 16th Floor
New York, NY 10036
Attention: Chief Executive Officer
| (ii) | If to the Participant, at the address set forth below; |
or to such other address or addresses of which notice in the same manner has previously been given.
| (b) | Any such notice shall be deemed to have been given upon the earlier of receipt, one business day following delivery to a recognized courier service or three business days following mailing by registered or certified mail. |
| 15. | GOVERNING LAW. |
This Agreement shall be governed by and construed in accordance with the laws of England and Wales, without giving effect to the conflict of law principles thereof. For the purpose of litigating any dispute that arises under this Agreement, the parties hereby consent to exclusive jurisdiction in New York and agree that such litigation shall be conducted in the state courts of New York, New York or the federal courts of the United States for the District of New York.
| 16. | BENEFIT OF AGREEMENT. |
Subject to the provisions of the Plan and the other provisions hereof, this Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto.
| 17. | ENTIRE AGREEMENT. |
| (a) | This Agreement, including Exhibit A, which is expressly incorporated herein and made a part hereof, embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. |
| (b) | No statement, representation, warranty, covenant or agreement not expressly set forth in this Agreement shall affect or be used to interpret, change or restrict, the express terms and provisions of this Agreement, provided, however, in any event, this Agreement shall be subject to and governed by the Plan. |
8
| 18. | MODIFICATIONS AND AMENDMENTS. |
The terms and provisions of this Agreement may be modified or amended as provided in the Plan.
| 19. | WAIVERS AND CONSENTS. |
Except as provided in the Plan, the terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.
| 20. | RECOUPMENT OF AWARD. |
If the Option or any cash or share payment the Participant receives pursuant to this Agreement are subject to recovery under any law, government regulation or stock exchange listing requirement, the Option, and the cash or share payment, shall be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement) and the Board of Directors in its reasonable good faith discretion consistent with any such requirement, may require that you reimburse the Company all or part of any payment or transfer related to this Award, the Option and any cash or share payment.
| 21. | DATA PRIVACY. |
By entering into this Agreement, the Participant:
| (i) | authorizes the Company and each Affiliate, and any agent of the Company or any Affiliate administering the Plan or providing Plan recordkeeping services, to disclose to the Company or any of its Affiliates such information and data as the Company or any such Affiliate shall request in order to facilitate the grant of options and the administration of the Plan; and |
| (ii) | authorizes the Company and each Affiliate to store and transmit such information in electronic form for the purposes set forth in this Agreement. |
9
IN WITNESS WHEREOF THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE EXECUTED AS OF THE EFFECTIVE DATE.
| PARTICIPANT | AKARI THERAPEUTICS, PLC | |
| /s/ Rachelle Jacques | /s/ Ray Prudo | |
| Signature | Signature | |
| Name: Rachelle Jacques | Name: Ray Prudo | |
| Address: on file with the company | Title: Chairman |
10
Exhibit A
Terms of Option Grant
| 1. | Date of Grant: | 1 June 2022 | ||
| 2. | Maximum Number of Shares for which this Option is exercisable: | 207,634,400 | ||
| 3. | Exercise price per Share: | $0.0124 | ||
| 4. | Option Expiration Date: | 28 March 2032 | ||
| 5. | Vesting Start Date: | 28 March 2022 | ||
| 6. | Type of Option: | |||
| x | Incentive Stock Option (“ISO”) | |||
| ¨ | Non-Statutory Stock Option (“NSO”) | |||
| 7. | Vesting Schedule: | |||
This Option shall vest ratably on a semiannual basis and become exercisable over 4 years (and the Shares issued upon exercise shall be vested) provided the Participant is an Employee, director or Consultant of the Company or of an Affiliate on the applicable vesting date, except as otherwise set forth in Section 3(b) of the Stock Option Agreement.
11
Exhibit B
NOTICE OF EXERCISE OF STOCK OPTION
[Form for Shares registered in the United States]
| To: | Akari Therapeutics, Plc |
IMPORTANT NOTICE: This form of Notice of Exercise may only be used at such time as the Company has filed a Registration Statement with the Securities and Exchange Commission under which the issuance of the Shares for which this exercise is being made is registered and such Registration Statement remains effective.
Ladies and Gentlemen:
I hereby exercise my Stock Option to purchase ________ shares (the “Shares”) of the ordinary shares, $0.0001 par value per share, of Akari Therapeutics, Plc (the “Company”), at the exercise price of $________ per share, pursuant to and subject to the terms of the Stock Option Agreement dated ___________, 20___.
I understand the nature of the investment I am making and the financial risks thereof. I am aware that it is my responsibility to have consulted with competent tax and legal advisors about the relevant national, state and local income tax and securities laws affecting the exercise of the Option and the purchase and subsequent sale of the Shares.
I am paying the option exercise price for the Shares as follows:
____________________________________________________________
Please issue the Shares (check one):
¨ to me; or
¨ to me and _________________________, as joint tenants with right of
survivorship,
at the following address:
_________________________________________
_________________________________________
_________________________________________
12
My mailing address for shareholder communications, if different from the address listed above, is:
_________________________________________
_________________________________________
_________________________________________
| Very truly yours, | |
| Participant (signature) | |
| Print Name | |
| Date |
13
Exhibit C
AKARI THERAPEUTICS, PLC
2014 EQUITY INCENTIVE PLAN
(See attached)
14
AKARI THERAPEUTICS, PLC
2014 EQUITY INCENTIVE PLAN
(as at May 2022, incorporating amendments to 30 June 2021)
| 1. | DEFINITIONS. |
Unless otherwise specified or unless the context otherwise requires, the following terms, as used in this Akari Therapeutics, Plc 2014 Equity Incentive Plan, have the following meanings:
| a. | Administrator means the committee to which the Board of Directors has delegated the authority to grant equity under the Plan, which shall initially be the Compensation Committee. |
| b. | Affiliate means a corporation which, is a parent or subsidiary of the Company, direct or indirect, in an unbroken chain of corporations if, each of the corporations (except for the ultimate parent corporation) owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. |
| c. | Agreement means an agreement between the Company and a Participant delivered pursuant to the Plan, in such form as the Administrator shall approve. |
| d. | Applicable Law means the requirements relating to (a) the adoption and administration of equity plans under United Kingdom corporate laws, (b) the offer and issuance of equity under United States federal securities laws and regulations and any applicable securities laws of any other jurisdiction, (c) the Code, (d) any stock exchange or quotation system on which the Common Stock is then listed or traded, and (e) any other the applicable laws or regulations. |
| e. | Board of Directors means the Board of Directors of the Company. |
| f. | Cause means, with respect to a Participant (a) dishonesty with respect to the Company or any Affiliate or commission of any act of theft or fraud, each involving the property or affairs of the Company or an Affiliate, (b) insubordination, substantial malfeasance or non-feasance of duty or the Participant’s breach of fiduciary duty, (c) unauthorized disclosure of confidential information, (d) breach by a Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or similar agreement between the Participant and the Company or any Affiliate, (e) material breach of any agreement with the Company or any Affiliate or a material violation of the Company’s or a Affiliate’s code of conduct or other written policy; (f) conviction of, or plea of guilty or nolo contendere to, any misdemeanor involving moral turpitude or any felony, other than a traffic violation; (g) willful or prolonged absence from work (other than by reason of Disability or serious medical condition of the Participant) or the Participant’s deliberate refusal or repeated failure to perform the Participant’s duties as reasonably directed by the Company; or (h) gross negligence or willful misconduct in the performance of the Participant’s service to the Company or an Affiliate; provided, however, that any provision in an agreement between a Participant and the Company or an Affiliate, which contains a conflicting definition of Cause for termination and which is in effect at the time of such termination, shall supersede this definition with respect to that Participant. The determination of the Administrator as to the existence of Cause will be conclusive on the Participant and the Company. |
| g. | Code means the United States Internal Revenue Code of 1986, as amended, including any successor statute, regulation and guidance thereto. |
| h. | Common Stock means ordinary shares of the Company, par value $0.0001 per share. |
| i. | Company means Akari Therapeutics, Plc, a company formed under the laws of England and Wales. |
| j. | Consultant means any natural person who is an advisor or consultant that provides bona fide services to the Company or its Affiliates, provided that such services are not in connection with the offer or sale of securities in a capital raising transaction, and do not directly or indirectly promote or maintain a market for the Company’s or its Affiliates’ securities. |
| k. | Disability or Disabled means the inability of a Participant to perform each of the essential duties of such Participant’s position by reason of a medically determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than twelve (12) months; provided that, with respect to rules regarding expiration of an Incentive Stock Option following termination of a Participant’s Service, Disability shall mean the inability of such Participant to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. |
| l. | Director means a member of the Board of Directors. |
| m. | Employee means any employee of the Company or of an Affiliate (including, without limitation, an employee who is also serving as an officer or Director of the Company or of an Affiliate), designated by the Administrator to be eligible to be granted one or more Stock Rights under the Plan. |
| n. | Exchange Act means the United States of America’s Securities Exchange Act of 1934, as amended, as now in effect or as hereafter amended, and any successor thereto. |
| o. | Fair Market Value of a Share of Common Stock means: |
| i. | If the Common Stock is listed on a national securities exchange or traded in the over-the-counter market and sales prices are regularly reported for the Common Stock, the closing or, if not applicable, the last price of the Common Stock on the composite tape or other comparable reporting system for the trading day on the applicable date and if such applicable date is not a trading day, the last market trading day prior to such date; |
2
| ii. | If the Common Stock is not traded on a national securities exchange but is traded on the over-the-counter market, if sales prices are not regularly reported for the Common Stock for the trading day referred to in clause (1), and if bid and asked prices for the Common Stock are regularly reported, the mean between the bid and the asked price for the Common Stock at the close of trading in the over-the-counter market for the trading day on which Common Stock was traded on the applicable date and if such applicable date is not a trading day, the last market trading day prior to such date; and |
| iii. | If the Common Stock is neither listed on a national securities exchange nor traded in the over-the-counter market, such value as the Administrator, in good faith, shall determine in compliance with Applicable Laws. |
| p. | ISO means an option intended to qualify as an incentive stock option under Section 422 of the Code. |
| q. | Non-Qualified Option means an option which is not intended to qualify as an ISO. |
| r. | Option means an ISO or Non-Qualified Option granted under the Plan. |
| s. | Participant means an Employee, Director, or Consultant of the Company or an Affiliate to whom one or more Stock Rights are granted under the Plan. As used herein, “Participant” shall include “Participant’s Survivors” where the context requires. |
| t. | Plan means this Akari Therapeutics PLC 2014 Equity Incentive Plan. |
| u. | Securities Act means the Securities Act of 1933, as amended. |
| v. | Shares means shares of the Common Stock as to which Stock Rights have been or may be granted under the Plan or any shares of capital stock into which the Shares are changed or for which they are exchanged within the provisions of Paragraph 3 of the Plan. The Shares issued under the Plan may be authorized and unissued shares or shares held by the Company in its treasury, or both. |
| w. | Stock-Based Award means a grant by the Company under the Plan of an equity award or equity based award which is not an Option or Stock Grant. |
| x. | Stock Grant means a grant by the Company of Shares under the Plan. |
| y. | Stock Right means a right to Shares or the value of Shares of the Company granted pursuant to the Plan, including an ISO, a Non-Qualified Option, a Stock Grant or a Stock-Based Award. |
| z. | Survivor means a deceased Participant’s legal representatives and/or any person or persons who acquired the Participant’s rights to a Stock Right by will or by the laws of descent and distribution. |
| 2. | PURPOSES OF THE PLAN. |
The Plan is intended to encourage ownership of Shares by Employees, Directors of and certain Consultants to the Company and its Affiliates in order to attract and retain such people, to induce them to work for the benefit of the Company or of an Affiliate and to provide additional incentive for them to promote the success of the Company or of an Affiliate. The Plan provides for the granting of ISOs, Non-Qualified Options, Stock Grants and Stock-Based Awards.
3
| 3. | SHARES SUBJECT TO THE PLAN. |
The number of Shares as to which Stock Rights (including ISOs) may be issued from time to time pursuant to this Plan shall be 400,000,000 shares of Common Stock, or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 22 of this Plan.
If an Option ceases to be outstanding, in whole or in part (other than by exercise), or if the Company shall reacquire (at not more than its original issuance price) any Shares issued pursuant to a Stock Grant or Stock-Based Award, or if any Stock Right expires or is forfeited, cancelled, or otherwise terminated or results in any Shares not being issued, the unissued or reacquired Shares which were subject to such Stock Right shall again be available for issuance from time to time pursuant to this Plan. Notwithstanding the foregoing, if a Stock Right is exercised, in whole or in part, by tender of Shares or if the Company or an Affiliate’s tax withholding obligation is satisfied by withholding Shares, the number of Shares deemed to have been issued under the Plan for purposes of the limitation set forth in Section 3(a) above shall be the number of Shares that were subject to the Stock Right or portion thereof, and not the net number of Shares actually issued.
| 4. | ADMINISTRATION OF THE PLAN. |
Subject to the provisions of the Plan, the Administrator is authorized to:
| a. | Interpret the provisions of the Plan and all Stock Rights and to make all rules and determinations which it deems necessary or advisable for the administration of the Plan; |
| b. | Determine which Employees, Directors and Consultants shall be granted Stock Rights; |
| c. | Determine the number of Shares for which a Stock Right or Stock Rights shall be granted; provided however that in no event shall Stock Rights with respect to more than 1,000,000 Shares be granted to any Participant in any fiscal year; |
| d. | Specify the terms and conditions upon which a Stock Right or Stock Rights may be granted; |
| e. | Amend any term or condition of any outstanding Stock Right, other than reducing the exercise price or purchase price, provided that (i) such term or condition as amended is not prohibited by the Plan; (ii) any such amendment shall not impair the rights of a Participant under any Stock Right previously granted without such Participant’s consent or in the event of death of the Participant the Participant’s Survivors; and (iii) any such amendment shall be made only after the Administrator determines whether such amendment would cause any adverse tax consequences to the Participant, including, but not limited to, the annual vesting limitation contained in Section 422(d) of the Code and described in Paragraph 6(B)(iv) below with respect to ISOs and pursuant to Section 409A of the Code; and |
4
| f. | Adopt any sub-plans applicable to residents of any specified jurisdiction as it deems necessary or appropriate in order to comply with or take advantage of any tax or other laws applicable to the Company or to Participants or to otherwise facilitate the administration of the Plan, which sub-plans may include additional restrictions or conditions applicable to Stock Rights or Shares issuable pursuant to a Stock Right; |
provided, however, that all such interpretations, rules, determinations, terms and conditions shall be made and prescribed in the context of not causing any adverse tax consequences under Section 409A of the Code and preserving the tax status under Section 422 of the Code of those Options which are designated as ISOs. Subject to the foregoing, the interpretation and construction by the Administrator of any provisions of the Plan or of any Stock Right granted under it shall be final, unless otherwise determined by the Board of Directors. In addition, the Board of Directors may take any action under the Plan that would otherwise be the responsibility of the Administrator.
To the extent permitted under Applicable Law, the Board of Directors or the Administrator may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any portion of its responsibilities and powers to any other person selected by it. The Board of Directors or the Administrator may revoke any such allocation or delegation at any time.
| 5. | ELIGIBILITY FOR PARTICIPATION. |
The Administrator will, in its sole discretion, name the Participants in the Plan, provided, however, that each Participant must be an Employee, Director or Consultant of the Company or of an Affiliate at the time a Stock Right is granted. Notwithstanding the foregoing, the Administrator may authorize the grant of a Stock Right to a person not then an Employee, Director or Consultant of the Company or of an Affiliate. The actual grant of such Stock Right shall be conditioned upon such person becoming eligible to become a Participant at or prior to the time of the execution of the Agreement evidencing such Stock Right. ISOs may be granted only to Employees who are deemed to be residents of the United States for tax purposes. Non-Qualified Options, Stock Grants and Stock-Based Awards may be granted to any Employee, Director or Consultant of the Company or an Affiliate. The granting of any Stock Right to any individual shall neither entitle that individual to, nor disqualify him or her from, participation in any other grant of Stock Rights or any grant under any other benefit plan established by the Company or any Affiliate for Employees, Directors or Consultants.
5
| 6. | TERMS AND CONDITIONS OF OPTIONS. |
Each Option shall be set forth in writing in an Option Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Administrator may provide that Options be granted subject to such terms and conditions, consistent with the terms and conditions specifically required under this Plan, as the Administrator may deem appropriate including, without limitation, subsequent approval by the shareholders of the Company of this Plan or any amendments thereto. The Option Agreements shall be subject to at least the following terms and conditions:
| A. | Generally: Each Option granted under the Plan shall terminate, and all rights to purchase shares of Shares thereunder shall cease, on the day before the tenth (10th) anniversary of the date of grant of such Option, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Agreement relating to such Option; provided, that in the event that the Participant is a Ten Percent Stockholder, an Option granted to such Participant that is intended to be an Incentive Stock Option shall not be exercisable after the day before the fifth (5th) anniversary of the date of grant of such Option; provided, further, that, to the extent deemed necessary or appropriate by the Board to reflect differences in local law, tax policy, or custom, with respect to any Option granted to a Participant who is a foreign national or is a natural person who is employed outside the United States, such Option may terminate, and all rights to purchase shares of Stock thereunder may cease, upon the expiration of such period longer than ten (10) years from the date of grant of such Option as the Board shall determine. |
| B. | Non-Qualified Options: Each Option intended to be a Non-Qualified Option shall be subject to the terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards for any such Non-Qualified Option: |
| i. | Exercise Price: Each Option Agreement shall state the exercise price per share of the Shares covered by each Option, which exercise price shall be determined by the Administrator and shall be at least equal to the greater of the par value or the Fair Market Value per share of Common Stock on the date of grant of the Option. |
| ii. | Number of Shares: Each Option Agreement shall state the number of Shares to which it pertains. |
| iii. | Vesting: Each Option Agreement shall state the date or dates on which it first is exercisable and the date after which it may no longer be exercised, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the occurrence of certain performance conditions or the attainment of stated goals or events. |
| iv. | Additional Conditions: Exercise of any Option may be conditioned upon the Participant’s execution of a Share purchase agreement in form satisfactory to the Administrator providing for certain protections for the Company and its other shareholders, including requirements that: |
| a. | The Participant’s or the Participant’s Survivors’ right to sell or transfer the Shares may be restricted; and |
6
| b. | The Participant or the Participant’s Survivors may be required to execute letters of investment intent and must also acknowledge that the Shares will bear legends noting any applicable restrictions. |
| v. | Term of Option: Each Option shall terminate not more than ten years from the date of the grant or at such earlier time as the Option Agreement may provide. |
| C. | ISOs: Each Option intended to be an ISO shall be issued only to an Employee who is deemed to be a resident of the United States for tax purposes, and shall be subject to the following terms and conditions, with such additional restrictions or changes as the Administrator determines are appropriate but not in conflict with Section 422 of the Code and relevant regulations and rulings of the Internal Revenue Service: |
| i. | Minimum standards: The ISO shall meet the minimum standards required of Non-Qualified Options, as described in Paragraph 6(A) above, except clause (i) and (v) thereunder. |
| ii. | Exercise Price: Immediately before the ISO is granted, if the Participant owns, directly or by reason of the applicable attribution rules in Section 424(d) of the Code: |
| a. | 10% or less of the total combined voting power of all classes of stock of the Company or an Affiliate, the exercise price per share of the Shares covered by each ISO shall not be less than 100% of the Fair Market Value per share of the Common Stock on the date of grant of the Option; or |
| b. | More than 10% of the total combined voting power of all classes of stock of the Company or an Affiliate, the exercise price per share of the Shares covered by each ISO shall not be less than 110% of the Fair Market Value per share of the Common Stock on the date of grant of the Option. |
| iii. | Term of Option: For Participants who own: |
| a. | 10% or less of the total combined voting power of all classes of stock of the Company or an Affiliate, each ISO shall terminate not more than ten years from the date of the grant or at such earlier time as the Option Agreement may provide; or |
| b. | More than 10% of the total combined voting power of all classes of stock of the Company or an Affiliate, each ISO shall terminate not more than five years from the date of the grant or at such earlier time as the Option Agreement may provide. |
7
| iv. | Limitation on Yearly Exercise: The Option Agreements shall restrict the amount of ISOs which may become exercisable in any calendar year (under this or any other ISO plan of the Company or an Affiliate) so that the aggregate Fair Market Value (determined on the date each ISO is granted) of the stock with respect to which ISOs are exercisable for the first time by the Participant in any calendar year does not exceed $100,000. Except to the extent provided in the regulations under Code Section 422, this limitation shall be applied by taking Options into account in the order in which they were granted. |
| 7. | TERMS AND CONDITIONS OF STOCK GRANTS. |
Each Stock Grant to a Participant shall state the principal terms in an Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Agreement shall be in a form approved by the Administrator and shall contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards:
| a. | Each Agreement shall state the purchase price per share, if any, of the Shares covered by each Stock Grant, which purchase price shall be determined by the Administrator but shall not be less than the minimum consideration required by Applicable Law on the date of the grant of the Stock Grant; |
| b. | Each Agreement shall state the number of Shares to which the Stock Grant pertains; and |
| c. | Each Agreement shall include the terms of any right of the Company to restrict or reacquire the Shares subject to the Stock Grant and the purchase price therefor, if any, including the time period or performance conditions or the attainment of stated goals or events upon which such rights shall accrue. |
| 8. | TERMS AND CONDITIONS OF OTHER STOCK-BASED AWARDS. |
The Administrator shall have the right to grant other Stock-Based Awards based upon the Common Stock having such terms and conditions as the Administrator may determine, including, without limitation, the grant of Shares based upon certain conditions, the grant of securities convertible into Shares and the grant of stock appreciation rights, phantom stock awards or stock units. The principal terms of each Stock-Based Award shall be set forth in an Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant. The Agreement shall be in a form approved by the Administrator and shall contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company. Each Agreement shall include the terms of any right of the Company to terminate the Stock- Based Award without the issuance of Shares, including time- based or performance-based vesting conditions or the attainment of stated goals or events upon which Shares shall be issued.
To the extent a Stock-Based Award is subject to Section 409A of the Code, such Stock Based Award shall be paid as provided in the Agreement on the earliest to occur of:
| · | death, |
8
| · | disability within the meaning of Section 409A of the Code, |
| · | separation from service with the Company and all of its Affiliates or, in the case of a Specified Employee (which for these purposes is a key employee of the Company or an Affiliate as defined in Section 416(i) of the Code without regard to paragraph (5) thereof), 6 months after a separation from service with the Company and all of its Affiliates, |
| · | a “change in control event” within the meaning of Section 409A of the Code, or |
| · | a fixed date as specified by the Administrator in the applicable Agreement. |
Payment of a Stock-Based Award subject to Section 409A of the Code shall not be accelerated, except as provided in regulations issued by the Secretary of the Treasury under Section 409A of the Code.
The Company intends that the Plan and any Stock-Based Awards granted hereunder to a United States taxpayer be exempt from the application of Section 409A of the Code, or meet the requirements of paragraphs (2), (3) and (4) of subsection (a) of Section 409A of the Code, and be operated in accordance with Section 409A of the Code, so that any compensation deferred under any Stock-Based Award (and applicable investment earnings) shall not be included in income under Section 409A of the Code. Any ambiguities in the Plan shall be construed to effect the intent as described in this Paragraph 8.
| 9. | EXERCISE OF OPTIONS AND ISSUE OF SHARES. |
An Option (or any part or installment thereof) shall be exercised by giving written notice to the Company or its designee (in a form acceptable to the Administrator, which may include electronic notice), together with provision for payment of the aggregate exercise price in accordance with this Paragraph for the Shares as to which the Option is being exercised, and upon compliance with any other condition(s) set forth in the Option Agreement. Such notice shall be signed by the person exercising the Option (which signature may be provided electronically in a form acceptable to the Administrator), shall state the number of Shares with respect to which the Option is being exercised and shall contain any representation required by the Plan or the Option Agreement. Payment of the exercise price for the Shares as to which such Option is being exercised shall be made (a) in United States dollars in cash or such other currencies as may be determined by the Administrator; or (b) at the discretion of the Administrator, through delivery of shares of Common Stock held for at least six months (if required to avoid negative accounting treatment) having a Fair Market Value equal as of the date of the exercise to the aggregate cash exercise price for the number of Shares as to which the Option is being exercised; or (c) at the discretion of the Administrator, by having the Company retain from the Shares otherwise issuable upon exercise of the Option, a number of Shares having a Fair Market Value equal as of the date of exercise to the aggregate exercise price for the number of Shares as to which the Option is being exercised; or (d) at the discretion of the Administrator, in accordance with a cashless exercise program established with a securities brokerage firm, and approved by the Administrator; or (e) at the discretion of the Administrator, by any combination of (a), (b), (c) and (d) above; or (e) at the discretion of the Administrator, payment of such other lawful consideration as the Administrator may determine. Notwithstanding the foregoing, the Administrator shall accept only such payment on exercise of an ISO as is permitted by Section 422 of the Code.
9
Upon confirmation of the exercise of the Option by the Company, the Company shall then reasonably promptly deliver the Shares as to which such Option was exercised to the Participant (or to the Participant’s Survivors, as the case may be). In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior to their issuance. The Shares shall, upon delivery, be fully paid, non-assessable Shares.
| 10. | PAYMENT IN CONNECTION WITH THE ISSUANCE OF STOCK GRANTS AND STOCK-BASED AWARDS AND ISSUE OF SHARES. |
Any Stock Grant or Stock-Based Award requiring payment of a purchase price for the Shares as to which such Stock Grant or Stock-Based Award is being granted shall be made (a) in United States dollars in cash or such other currencies as may be determined by the Administrator; or (b) at the discretion of the Administrator, through delivery of shares of Common Stock held for at least six months (if required to avoid negative accounting treatment) and having a Fair Market Value equal as of the date of payment to the purchase price of the Stock Grant or Stock-Based Award; or (c) at the discretion of the Administrator, by any combination of (a) and (b) above; or (d) at the discretion of the Administrator, by payment of such other lawful consideration as the Administrator may determine.
The Company shall when required pursuant to the applicable Agreement, reasonably promptly deliver the Shares as to which such Stock Grant or Stock-Based Award was made to the Participant (or to the Participant’s Survivors, as the case may be), subject to any escrow provision set forth in the applicable Agreement. In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior to their issuance.
| 11. | RIGHTS AS A SHAREHOLDER. |
No Participant to whom a Stock Right has been granted shall have rights as a shareholder (for example, the right to receive cash or dividend payments or distributions attributable to the Shares subject to such Stock Rights, to direct the voting of the Shares subject to such Stock Rights, or to receive notice of any meeting of the Company’s stockholders) with respect to any Shares covered by such Stock Right, except after due exercise of an Option or issuance of Shares as set forth in any Agreement, tender of the aggregate exercise or full purchase price, if any, for the Shares being purchased and registration of the Shares in the Company’s share register in the name of the Participant.
10
| 12. | ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS. |
By its terms, a Stock Right granted to a Participant shall not be transferable by the Participant other than (i) by will or by the laws of descent and distribution, or (ii) as approved by the Administrator in its discretion and set forth in the applicable Agreement, and no Stock Right may be transferred by a Participant for value. Notwithstanding the foregoing, an ISO transferred except in compliance with clause (i) above shall no longer qualify as an ISO. The designation of a beneficiary of a Stock Right by a Participant, with the prior approval of the Administrator and in such form as the Administrator shall prescribe, shall not be deemed a transfer prohibited by this Paragraph. Except as provided above during the Participant’s lifetime, a Stock Right shall only be exercisable by or issued to such Participant (or his or her legal representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of any Stock Right or of any rights granted thereunder contrary to the provisions of this Plan, or the levy of any attachment or similar process upon a Stock Right, shall be null and void.
| 13. | EFFECT ON OPTIONS OF TERMINATION OF SERVICE OTHER THAN “FOR CAUSE” OR DEATH OR DISABILITY. |
Except as otherwise provided in a Participant’s Option Agreement, in the event of a termination of service (whether as an Employee, Director or Consultant) with the Company or an Affiliate before the Participant has exercised an Option, the following rules apply:
| a. | A Participant who ceases to be an Employee, Director or Consultant of the Company or of an Affiliate (for any reason other than termination for Cause, Disability, or death for which events there are special rules in Paragraphs 14, 15, and 16, respectively), may exercise any Option granted to him or her to the extent that the Option is exercisable on the date of such termination of service, but only within such term as the Administrator has designated in a Participant’s Option Agreement. |
| b. | Except as provided in Subparagraph (c) below, or Paragraph 15 or 16, in no event may an Option intended to be an ISO, be exercised later than three months after the Participant’s termination of employment. |
| c. | The provisions of this Paragraph, and not the provisions of Paragraph 15 or 16, shall apply to a Participant who subsequently becomes Disabled or dies after the termination of employment, Director status or consultancy; provided, however, in the case of a Participant’s Disability or death within three months after the termination of employment, Director status or consultancy, the Participant or the Participant’s Survivors may exercise the Option within one year after the date of the Participant’s termination of service, but in no event after the date of expiration of the term of the Option. |
| d. | Notwithstanding anything herein to the contrary, if subsequent to a Participant’s termination of employment, termination of Director status or termination of consultancy, but prior to the exercise of an Option, the Administrator determines that, either prior or subsequent to the Participant’s termination, the Participant engaged in conduct which would constitute Cause, then such Participant shall forthwith cease to have any right to exercise any Option. |
11
| e. | A Participant to whom an Option has been granted under the Plan who is absent from the Company or an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, Director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide; provided, however, that, for ISOs, any leave of absence granted by the Administrator of greater than ninety days, unless pursuant to a contract or statute that guarantees the right to reemployment, shall cause such ISO to become a Non-Qualified Option on the 181st day following such leave of absence. |
| f. | Except as required by law or as set forth in a Participant’s Option Agreement, Options granted under the Plan shall not be affected by any change of a Participant’s status within or among the Company and any Affiliates and the Participant continues to be an Employee, Director or Consultant of the Company or any Affiliate; provided, however, if a Participant’s employment by either the Company or an Affiliate shall cease (other than to become an employee of an Affiliate or the Company) or the entity that employees the Participant is no longer deemed an Affiliate, such termination shall affect the Participant’s rights under any Option granted to such Participant in accordance with the terms of the Plan and the Participant’s Option Agreement. |
| 14. | EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR CAUSE. |
Except as otherwise provided in a Participant’s Option Agreement, the following rules apply if the Participant’s service (whether as an Employee, Director or Consultant) with the Company or an Affiliate is terminated for Cause prior to the time that all his or her outstanding Options have been exercised:
| a. | All outstanding and unexercised Options as of the time the Participant is notified his or her service is terminated for Cause will immediately be forfeited. |
| b. | Cause is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of Cause occur prior to termination. If the Administrator determines, subsequent to a Participant’s termination of service but prior to the exercise of an Option, that either prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute Cause, then the right to exercise any Option is forfeited. |
| 15. | EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR DISABILITY. |
Except as otherwise provided in a Participant’s Option Agreement, a Participant who ceases to be an Employee, Director or Consultant of the Company or of an Affiliate by reason of Disability may exercise any Option granted to such Participant to the extent that the Option has become exercisable but has not been exercised on the date of the Participant’s termination of service due to Disability. A Disabled Participant may exercise the Option only within the period ending one year after the date of the Participant’s termination of service due to Disability, notwithstanding that the Participant might have been able to exercise the Option as to some or all of the Shares on a later date if the Participant had not been terminated due to Disability and had continued to be an Employee, Director or Consultant or, if earlier, within the originally prescribed term of the Option.
12
The Administrator shall make the determination both of whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination). If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company.
| 16. | EFFECT ON OPTIONS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT. |
Except as otherwise provided in a Participant’s Option Agreement, in the event of the death of a Participant while the Participant is an Employee, Director or Consultant of the Company or of an Affiliate, such Option may be exercised by the Participant’s Survivors to the extent that the Option has become exercisable but has not been exercised on the date of death. If the Participant’s Survivors wish to exercise the Option, they must take all necessary steps to exercise the Option within one year after the date of death of such Participant, notwithstanding that the decedent might have been able to exercise the Option as to some or all of the Shares on a later date if he or she had not died and had continued to be an Employee, Director or Consultant or, if earlier, within the originally prescribed term of the Option.
| 17. | EFFECT OF TERMINATION OF SERVICE ON STOCK GRANTS AND STOCKBASED AWARDS. |
In the event of a termination of service (whether as an Employee, Director or Consultant) with the Company or an Affiliate for any reason before the Participant has accepted a Stock Grant or a Stock-Based Award and paid the purchase price, if required, such grant shall terminate.
For purposes of this Paragraph 17 and Paragraph 18 below, a Participant to whom a Stock Grant or a Stock-Based Award has been issued under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, Director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide.
In addition, for purposes of this Paragraph 17 and Paragraph 18 below, any change of employment or other service within or among the Company and any Affiliates shall not be treated as a termination of employment, Director status or consultancy so long as the Participant continues to be an Employee, Director or Consultant of the Company or any Affiliate.
13
| 18. | EFFECT ON STOCK GRANTS AND STOCK_BASED AWARDS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE. |
Except as otherwise provided in a Participant’s Agreement, in the event of a termination of service for any reason (whether as an Employee, Director or Consultant), other than for Cause for which event there are special rules in Paragraph 19 below, before all forfeiture provisions or Company rights of repurchase shall have lapsed, then the Company shall have the right to cancel or repurchase that number of Shares subject to a Stock Grant or Stock-Based Award as to which the Company’s forfeiture or repurchase rights have not lapsed.
With respect to a termination for a Disability, the Administrator shall make the determination both as to whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination). If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company.
| 19. | EFFECT ON STOCK GRANTS OR STOCK BASED-AWARDS OF TERMINATION OF SERVICE FOR CAUSE. |
Except as otherwise provided in a Participant’s Agreement, the following rules apply if the Participant’s service (whether as an Employee, Director or Consultant) with the Company or an Affiliate is terminated for Cause:
| a. | All Shares subject to any Stock Grant or Stock Based-Award that remain subject to forfeiture provisions or as to which the Company shall have a repurchase right shall be immediately forfeited to the Company as of the time the Participant is notified his or her service is terminated for Cause. |
| b. | Cause is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of Cause occur prior to termination. If the Administrator determines, subsequent to a Participant’s termination of service, that either prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute Cause, then all Shares subject to any Stock Grant or Stock Based Award that remained subject to forfeiture provisions or as to which the Company had a repurchase right on the date of termination shall be immediately forfeited to the Company. |
| 20. | PURCHASE FOR INVESTMENT. |
Unless the offering and sale of the Shares shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue Shares under the Plan unless and until the following conditions have been fulfilled:
| a. | The person(s) who receives a Stock Right shall warrant to the Company, prior to the receipt of Shares, that such person is acquiring such Shares for his or her own account, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person acquiring such Shares shall be bound by the provisions of the following legend (or a legend in substantially similar form) which shall be endorsed upon the certificate(s) evidencing the Shares issued pursuant to such exercise or such grant: |
“The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws.”
14
| b. | At the discretion of the Administrator, the Company shall have received an opinion of its U.S. counsel that the Shares may be issued in compliance with the Securities Act without registration thereunder. |
The Company may delay issuance of the Shares until completion of any action or obtaining of any consent which the Company deems necessary under any Applicable Law.
| 21. | DISSOLUTION OR LIQUIDATION OF THE COMPANY. |
Upon the dissolution or liquidation of the Company, all Options granted under this Plan which as of such date shall not have been exercised and all Stock Grants and Stock-Based Awards which have not been accepted, to the extent required under the applicable Agreement, will terminate and become null and void; provided, however, that if the rights of a Participant or a Participant’s Survivors have not otherwise terminated and expired, the Participant or the Participant’s Survivors will have the right immediately prior to such dissolution or liquidation to exercise or accept any Stock Right to the extent that the Stock Right is exercisable or subject to acceptance as of the date immediately prior to such dissolution or liquidation. Upon the dissolution or liquidation of the Company, any outstanding Stock-Based Awards shall immediately terminate unless otherwise determined by the Administrator or specifically provided in the applicable Agreement.
| 22. | ADJUSTMENTS. |
Upon the occurrence of any of the following events, a Participant’s rights with respect to any outstanding Stock Right granted to him or her hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in a Participant’s Agreement:
| A. | Stock Dividends and Stock Splits. If (i) the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, or (ii) additional shares or new or different shares or other securities of the Company or other noncash assets are distributed with respect to such shares of Common Stock, each Stock Right and the number of shares of Common Stock deliverable thereunder shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made including, in the exercise or purchase price per share, to reflect such events. The number of Shares subject to the limitations in Paragraphs 3 and 4(c) shall also be proportionately adjusted upon the occurrence of such events. |
15
| B. | Corporate Transactions. If the Company is to be consolidated with or acquired by another entity in a merger, sale of all or substantially all of the Company’s assets other than a transaction to merely change the state of incorporation or other internal reorganization of the Company (a “Corporate Transaction”), the Administrator or the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”), shall, as to outstanding Options, either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the Shares then subject to such Options either the consideration payable with respect to the outstanding shares of Common Stock in connection with the Corporate Transaction or securities of any successor or acquiring entity; or (ii) upon written notice to the Participants, provide that such Options must be exercised (either (a) to the extent then exercisable or, (b) at the discretion of the Administrator, any such Options being made partially or fully exercisable for purposes of this Subparagraph), within a specified number of days of the date of such notice, at the end of which period such Options which have not been exercised shall terminate; or (iii) terminate such Options in exchange for payment of an amount equal to the consideration payable upon consummation of such Corporate Transaction to a holder of the number of shares of Common Stock into which such Option would have been exercisable (either (A) to the extent then exercisable or, (B) at the discretion of the Administrator, any such Options being made partially or fully exercisable for purposes of this Subparagraph) less the aggregate exercise price thereof. For purposes of determining the payments to be made pursuant to Subclause (iii) above, in the case of a Corporate Transaction the consideration for which, in whole or in part, is other than cash, the consideration other than cash shall be valued at the fair value thereof as determined in good faith by the Board of Directors. |
With respect to outstanding Stock Grants, the Administrator or the Successor Board, shall make appropriate provision for the continuation of such Stock Grants on the same terms and conditions by substituting on an equitable basis for the Shares then subject to such Stock Grants either the consideration payable with respect to the outstanding Shares of Common Stock in connection with the Corporate Transaction or securities of any successor or acquiring entity. In lieu of the foregoing, in connection with any Corporate Transaction, the Administrator may provide that, upon consummation of the Corporate Transaction, each outstanding Stock Grant shall be terminated in exchange for payment of an amount equal to the consideration payable upon consummation of such Corporate Transaction to a holder of the number of shares of Common Stock comprising such Stock Grant (to the extent such Stock Grant is no longer subject to any forfeiture or repurchase rights then in effect or, at the discretion of the Administrator, all forfeiture and repurchase rights being waived upon such Corporate Transaction).
In taking any of the actions permitted under this Paragraph 22B, the Administrator shall not be obligated by the Plan to treat all Stock Rights, all Stock Rights held by a Participant, or all Stock Rights of the same type, identically.
16
| C. | Recapitalization or Reorganization. In the event of a recapitalization or reorganization of the Company, other than a Corporate Transaction pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, a Participant upon exercising an Option or accepting a Stock Grant after the recapitalization or reorganization shall be entitled to receive for the price paid upon such exercise or acceptance, if any, the number of replacement securities which would have been received if such Option had been exercised or Stock Grant accepted prior to such recapitalization or reorganization. |
| D. | Adjustments to Stock-Based Awards. Upon the happening of any of the events described in Subparagraphs A, B or C above, any outstanding Stock-Based Award shall be appropriately adjusted to reflect the events described in such Subparagraphs. The Administrator or the Successor Board shall determine the specific adjustments to be made under this Paragraph 22, including, but not limited to the effect of any Corporate Transaction, and, subject to Paragraph 4, its determination shall be conclusive. |
| E. | Modification of Options. Notwithstanding the foregoing, any adjustments made pursuant to Subparagraph A, B or C above with respect to Options shall be made only after the Administrator determines whether such adjustments would (i) constitute a “modification” of any ISOs (as that term is defined in Section 424(h) of the Code) or (ii) cause any adverse tax consequences for the holders of Options, including, but not limited to, pursuant to Section 409A of the Code. If the Administrator determines that such adjustments made with respect to Options would constitute a modification or other adverse tax consequence, it may refrain from making such adjustments, unless the holder of an Option specifically agrees in writing that such adjustment be made and such writing indicates that the holder has full knowledge of the consequences of such “modification” on his or her income tax treatment with respect to the Option. This paragraph shall not apply to the acceleration of the vesting of any ISO that would cause any portion of the ISO to violate the annual vesting limitation contained in Section 422(d) of the Code, as described in Paragraph 6(B)(iv). |
| 23. | ISSUANCES OF SECURITIES. |
Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Stock Rights. Except as expressly provided herein, no adjustments shall be made for dividends paid in cash or in property (including without limitation, securities) of the Company prior to any issuance of Shares pursuant to a Stock Right.
| 24. | FRACTIONAL SHARES. |
No fractional shares shall be issued under the Plan and the person exercising a Stock Right shall receive from the Company cash in lieu of such fractional shares equal to the Fair Market Value thereof.
17
| 25. | CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs. |
The Administrator, at the written request of any Participant, may in its discretion take such actions as may be necessary to convert such Participant’s ISOs (or any portions thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the Participant is an Employee of the Company or an Affiliate at the time of such conversion. At the time of such conversion, the Administrator (with the consent of the Participant) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Administrator in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give any Participant the right to have such Participant’s ISOs converted into Non-Qualified Options, and no such conversion shall occur until and unless the Administrator takes appropriate action. The Administrator, with the consent of the Participant, may also terminate any portion of any ISO that has not been exercised at the time of such conversion.
| 26. | WITHHOLDING. |
In the event that any U.S. federal, other country, state, or local income taxes, employment taxes, Federal Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are required by Applicable Law to be withheld from the Participant’s salary, wages or other remuneration in connection with the issuance of a Stock Right or Shares under the Plan or for any other reason required by Applicable Law, the Company may withhold from the Participant’s compensation, if any, or may require that the Participant advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Participant, the statutory minimum amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company’s Common Stock or a promissory note, is authorized by the Administrator (and permitted by law). For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner set forth under the definition of Fair Market Value provided in Paragraph 1 above, as of the most recent practicable date prior to the date of exercise. If the Fair Market Value of the shares withheld is less than the amount of payroll withholdings required, the Participant may be required to advance the difference in cash to the Company or the Affiliate employer. The Administrator in its discretion may condition the exercise of an Option for less than the then Fair Market Value on the Participant’s payment of such additional withholding.
| 27. | NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. |
Each Employee who receives an ISO must agree to notify the Company in writing immediately after the Employee makes a Disqualifying Disposition of any Shares acquired pursuant to the exercise of an ISO. A Disqualifying Disposition is defined in Section 424(c) of the Code and includes any disposition (including any sale or gift) of such Shares before the later of (a) two years after the date the Employee was granted the ISO, or (b) one year after the date the Employee acquired Shares by exercising the ISO, except as otherwise provided in Section 424(c) of the Code. If the Employee has died before such Shares are sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter.
18
| 28. | TERMINATION OF THE PLAN. |
The Plan will terminate on April 30, 2024, the date which is ten years from the earlier of the date of its adoption by the Board of Directors and the date of its approval by the shareholders of the Company. The Plan may be terminated at an earlier date by vote of the shareholders or the Board of Directors of the Company; provided, however, that any such earlier termination shall not affect any Agreements executed prior to the effective date of such termination. Termination of the Plan shall not affect any Stock Rights theretofore granted. No Stock Rights shall be granted after such termination of the Plan.
| 29. | AMENDMENT OF THE PLAN AND AGREEMENTS. |
The Plan may be amended by the shareholders of the Company. The Plan may also be amended by the Administrator, including, without limitation, to the extent necessary to qualify any or all outstanding Stock Rights granted under the Plan or Stock Rights to be granted under the Plan for favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422 of the Code or any other tax regulation of any applicable jurisdiction, and to the extent necessary to qualify the Shares issuable under the Plan for listing on any national securities exchange or quotation in any national automated quotation system of securities dealers or other exchange. Any amendment approved by the Administrator which the Administrator determines is of a scope that requires shareholder approval shall be subject to obtaining such shareholder approval. Other than as set forth in Paragraph 22 of the Plan, the exercise price of an Option may not be reduced without stockholder approval.
Any modification or amendment of the Plan shall not, without the consent of a Participant, adversely affect his or her rights under a Stock Right previously granted to him or her. With the consent of the Participant affected, the Administrator may amend outstanding Agreements in a manner which may be adverse to the Participant but which is not inconsistent with the Plan. In the discretion of the Administrator, outstanding Agreements may be amended by the Administrator in a manner which is not adverse to the Participant.
| 30. | EMPLOYMENT OR OTHER RELATIONSHIP. |
Nothing in this Plan or any Agreement shall be deemed to prevent the Company or an Affiliate from terminating the employment, consultancy or Director status of a Participant, nor to prevent a Participant from terminating his or her own employment, consultancy or Director status or to give any Participant a right to be retained in employment or other service by the Company or any Affiliate for any period of time.
| 31. | GOVERNING LAW. |
This Plan shall be construed and enforced in accordance with the laws of the United States of America.
19
Exhibit 10.13
AKARI THERAPEUTICS, PLC
2014 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT
| PARTICIPANT: | Rachelle Jacques |
| NUMBER OF RSUs: | 21,475,400 |
| DATE OF GRANT: | 1 June 2022 |
Akari Therapeutics, Plc, a public limited company formed under the laws of England and Wales (the “Company”), is pleased to confirm that the Participant has been granted a Restricted Stock Unit Award (this “Award”), effective as of the Date of Grant set forth above (the “Grant Date”). This Award is subject to the terms and conditions of this Restricted Stock Unit Agreement (this “Agreement”) and is made under the Company’s 2014 Equity Incentive Plan, as it may be amended from time to time (the “Plan”) or any successor plan, which is incorporated into and made a part of this Agreement. Any capitalized terms used in this Agreement that are otherwise not defined herein shall have the same meaning prescribed under the Plan.
1. Acceptance of Terms and Conditions. By accepting this Award, the Participant agrees to be bound by the terms and conditions of this Agreement, the Plan, and any and all conditions established by the Company in connection with Awards issued under the Plan, and understands that this Award does not confer any legal or equitable right (other than those constituting the Award itself) against the Company or any of its Affiliates, directly or indirectly, or give rise to any cause of action at law or in equity against the Company or its Subsidiaries.
2. Grant of Restricted Stock Units. Subject to the restrictions, limitations, terms and conditions specified in the Plan and this Agreement, the Company hereby grants this Award to the Participant as of the Grant Date equal to the above-stated number of Restricted Stock Units (each, an “RSU” and collectively, the “RSUs”), with each such RSU representing the right to receive one ordinary share, nominal value $0.0001 (a “Share”).
3. Vesting of Restricted Stock Units. Subject to the terms and conditions of this Agreement and the Plan, the RSUs shall vest as follows:
| Vest Date | Number of Shares |
| 1st Anniversary of the Grant Date | 10,737,700 |
| Each month thereafter before the 2nd Anniversary of the Grant Date | 894,800 |
| 2nd Anniversary of the Grant Date | 894,900 |
Any unvested RSU shall immediately be forfeited to the Company upon Grantee’s termination of employment from the Company, unless such employment is terminated as a result of an Involuntary Termination (as defined in Section 7), death or disability, in which case the right of the Participant or his or her representative to receive the benefits of the RSUs shall be governed under the terms provided in Sections 7, 8 and 9 below. All unvested RSUs shall be immediately vested upon a Change in Control, as defined in the Participant’s employment agreement with the Company dated February 28, 2022 (the “Employment Agreement”), provided the Participant is then employed by the Company or an Affiliate (except as set forth in Sections 7, 8 and 9 below).
1
4. No Dividends or Dividend Equivalents. The Participant shall not receive dividends or dividend equivalents on the RSUs.
5. Conversion of Vested Restricted Stock Units; Issuance of Shares. To the extent, if any, the RSUs are vested pursuant to the terms of this Agreement or the Plan, conditionally upon the Company’s having received from the Executive in cash within 10 days of the relevant vesting date an issue price for the relevant Shares equal to their nominal value (currently $0.0001 per Share), the Shares shall be issued to or in respect of the Participant as soon as practicable thereafter, but not more than fifteen (15) days) after the applicable vesting date. On the date Shares are to be so issued to or in respect of the Participant with respect to a vested RSU, the Company shall promptly cause to be issued in book-entry form, registered in the Participant’s (or a nominee’s) name, the appropriate number of Shares in payment of such vested RSUs. The value of RSUs shall be settled solely in Shares. Notwithstanding anything herein to the contrary, the Company shall have no obligation to issue cash or Shares in satisfaction of the RSUs unless such issuance and such payment shall comply with all relevant provisions of law and the requirements of any stock exchange.
6. Tax Withholding Obligations. The Participant shall either, as the Participant elects: (i) deposit with the Company an amount of cash equal to the amount determined by the Company to be required with respect to any minimum required withholding taxes (including income and employee FICA and Medicare taxes), or the like under any federal, state or local statute, ordinance, rule or regulation in connection with the vesting of the RSUs (the “Taxes”) or (ii) direct the Company to withhold a number of RSUs otherwise deliverable in Shares hereunder having a fair market value sufficient to satisfy the Participant’s Taxes. The Company shall not deliver any of the Shares due to Grantee upon vesting of the RSUs until and unless the Participant has made the cash deposit or direction to withhold RSUs required herein or other proper provision for required withholding of Taxes has been made.
7. Involuntary Termination. “Involuntary Termination” means with a termination of the Participant’s employment by the Company without Cause or the Participant’s resignation for Good Reason, as such terms are defined under the Employment Agreement. In the event Participant holds unvested RSUs at the time of an Involuntary Termination, the RSUs will become immediately vested upon such Involuntary Termination.
8. Disability. In the event the Participant suffers a Disability, as defined by the Employment Agreement, while employed by the Company, all then current RSUs will become immediately vested.
9. Death. In the event the Participant dies (i) while employed by the Company all then current RSUs will vest as of the date of death and all restrictions shall lapse and (ii) all vested RSUs will be immediately transferable to the named beneficiary or, if none, to the Participant’s estate.
10. Rights as Shareholder. The Participant shall have no rights as a shareholder of the Company in respect to the RSUs until and unless the RSUs have vested and ownership of Shares represented by the RSUs have been transferred to (or on behalf of) the Participant.
2
11. Transferability. Except to the extent provided in the Plan in the case of the Participant’s death, the RSUs may neither be made subject to any encumbrance nor transferred by means of sale, assignment, exchange, pledge, or otherwise.
12. Extraordinary Item. By voluntarily acknowledging and accepting this Award, the Participant acknowledges and understands that the RSUs are not part of normal or expected compensation or salary for any purposes, including, without limitation, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, service-based awards, pension or retirement benefits or similar payments.
13. No Guarantee of Continued Service. The Participant acknowledges and agrees that the vesting of RSUs pursuant to the Award Agreement is earned only by continuing as an employee of the Company or an Affiliate. The Participant further acknowledges and agrees that nothing in the Award Agreement, nor in the Plan which is incorporated in this Award Agreement by reference, shall confer upon the Participant any right with respect to continuation as an employee with the Company or an Affiliate, nor shall it interfere in any way with her right or the Company’s right to terminate the Participant’s employment relationship as per the terms of the Employment Agreement.
14. Consent to Transfer Personal Data. By entering into this Agreement, the Participant: (i) authorizes the Company and each of its Affiliates, and any agent of the Company or any subsidiary or affiliate administering the Plan or providing Plan recordkeeping services, to disclose to the Company or any of its Affiliates such information and data as the Company or any such Affiliate shall request in order to facilitate the grant of RSUs and the administration of the Plan; and (ii) authorizes the Company and each Affiliate to store and transmit such information in electronic form for the purposes set forth in this Agreement.
15. Amendment. The terms and provisions of this Agreement may be modified or amended as provided in the Plan.
16. Severability. If any provision of this Agreement is held to be invalid, illegal, or unenforceable by appropriate authority under the law of any jurisdiction applicable to this Agreement, the same shall not affect, in any respect whatsoever, the validity, legality, or enforceability of any other provision of this Agreement, and this Agreement shall continue, to the fullest extent permitted by law, as if such invalid, illegal, or unenforceable provision were omitted and/or modified by such appropriate authority so as to preserve its validity, legality, or enforceability, unless such omission or modification would substantially impair the rights or benefits under this Agreement of the Participant or the Company.
17. Recoupment of Award. If the RSUs or any cash or share payment the Participant receives pursuant to this Agreement are subject to recovery under any law, government regulation or stock exchange listing requirement, the RSUs, and the cash or share payment, shall be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement) and the Board of Directors in its reasonable good faith discretion consistent with any such requirement, may require that Participant reimburse the Company all or part of any payment or transfer related to this Award, the RSUs and any cash or share payment.
3
18. Construction. A copy of the Plan has been given to the Participant. To the extent that any provisions of this Agreement violates or is inconsistent with any provisions of the Plan, the Plan provisions shall govern and any inconsistent provisions in this Agreement shall be of no force or effect. The Participant acknowledges that the Plan may be amended, prospectively or retroactively in order to comply with the requirements of the Internal Revenue Code, and the Participant agrees to comply with the terms of the Plan as so amended from time to time.
19. Interpretations. Any dispute, disagreement or question which arises under, or as a result of, or in any way relates to the interpretation, construction or application of the terms of this Agreement or the Plan will be determined and resolved by the Committee or its authorized delegate. Such determination or resolution by the Committee or its authorized delegate will be final, binding and conclusive on all persons for all purposes.
20. Successors and Assigns. This Agreement shall be binding upon and, subject to the conditions hereof, inure to the benefit of the Company, its successors and assigns, and the Participant and his successors and assigns.
21. Entire Understanding. This Agreement embodies the entire understanding and agreement of the parties in relation to the subject matter hereof, and no promise, condition, representation or warranty, expressed or implied, not herein stated, shall bind either party hereto.
22. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of England and Wales, without giving effect to the conflict of law principles thereof. For the purpose of litigating any dispute that arises under this Agreement, the parties hereby consent to exclusive jurisdiction in New York and agree that such litigation shall be conducted in the state courts of New York, New York or the federal courts of the United States for the District of New York.
23. Satisfaction of Sign-On Grant. By signing below, the Participant agrees and acknowledges that this Award satisfies the Company’s obligation to issue the Sign-On Grant (as defined in Section 4.3(b)(i) of the Employment Agreement) and that this form of award agreement shall be used to satisfy the Company’s obligation to issue Incremental Grant 1 and Incremental Grant 2 (as such terms are defined under the Employment Agreement) to the extent provided in Section 4.3(b)(ii) and (iii) therein, as applicable.
* * *
4
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED TIDS AGREEMENT TO BE EXECUTED EFFECTIVE AS OF THE GRANT DATE.
| PARTICIPANT | AKARI THERAPEUTICS, PLC | |
| /s/ Rachelle Jacques | /s/ Ray Prudo | |
| Signature | Signature | |
| Name: Rachelle Jacques | Name: Ray Prudo | |
| Address: on file with the company | Title: Chairman |
5
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Akari Therapeutics, Plc.
London, United Kingdom
We hereby consent to the incorporation by reference in the Prospectus constituting a part of this Registration Statement of our report dated May 16, 2022, relating to the consolidated financial statements of Akari Therapeutics, Plc. appearing in the Company’s Annual Report on Form 20-F for the year ended December 31, 2021. 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/BDO USA, LLP
New York, New York
October 12, 2022