GridAI Technologies Corp S-1, filed May 12, 2025
GridAI Technologies Corp. (GRDX)
As filed with the U.S. Securities and Exchange Commission on May 12, 2025.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
ENTERO THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 2834 | 46-4993860 | ||
| (State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
777 Yamato Road, Suite 502
Boca Raton, Florida 33431
(561) 589-7020
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Richard Paolone
Interim Chief Executive Officer
777 Yamato Road, Suite 502
Boca Raton, Florida 33431
(561) 589-7020
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
|
Ross Carmel, Esq. Avital Perlman, Esq. Sichenzia Ross Ference Carmel LLP 1185 Avenue of the Americas, 31st Floor New York, New York 10036 (212) 930-9700 |
Joseph M. Lucosky, Esq. Steven Lipstein, Esq. Lucosky Brookman LLP 101 Wood Avenue South, 5th Floor Woodbridge, New Jersey 08830 (732) 395-4400 |
As soon as practicable after the effective date of this registration statement
(Approximate date of commencement of proposed sale to the public)
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 a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ | Accelerated filer | ¨ | |
| Non-accelerated filer | x | Smaller reporting company | x | |
| Emerging growth company | ¨ |
If an emerging growth company, 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 Commission, acting pursuant to section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED MAY 12, 2025 |
16,666,667 shares of Common Stock
Pre-funded Warrants to Purchase 16,666,667 shares of Common Stock
We are offering 16,666,667 shares of our common stock, par value $0.0001 per share. We estimate that the public offering price will be $0.36 per share, based on the sale price of our common stock on The Nasdaq Capital Market, or Nasdaq, on May 2, 2025.
We are also offering pre-funded warrants (the “Pre-funded Warrants”) to purchase 16,666,667 shares of our common stock to those purchasers whose purchase of shares of common stock in this offering would result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of the issued and outstanding shares of our common stock immediately following the consummation of this offering, in lieu of shares of common stock. Each Pre-funded Warrant is exercisable for one share of our common stock at an exercise price of $0.0001 per share. For each Pre-funded Warrant that we sell, the number of shares of common stock we are offering will be reduced on a one-for-one basis.
Shares of our common stock are listed on Nasdaq under the symbol “ENTO”. We do not intend to list the Pre-funded Warrants on any national securities exchange or other nationally recognized trading system.
The final public offering price of the shares of our common stock or Pre-funded Warrants will be determined through negotiation between us and the underwriter, based upon a number of factors, including our history and our prospects, the industry in which we operate, our past and present operating results, the previous experience of our executive officers and the general condition of the securities markets at the time of this offering.
We are a “smaller reporting company” as defined under the federal securities laws and, as such, we may elect to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary – Implications of Being a Smaller Reporting Company”.
Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 18 of this prospectus to read about factors you should consider before investing in our securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
| Per Share | Per Pre- funded Warrant |
Total | ||||||||||
| Public offering price | $ | $ | ||||||||||
| Underwriting discounts and commissions(1) | $ | $ | ||||||||||
| Proceeds to us, before expenses(2) | $ | $ | ||||||||||
| (1) | We have also agreed to reimburse the Underwriter for certain offering-related legal and other expenses and to pay the Underwriter at the closing of the offering a non-accountable expense allowance of up to $45,000. See “Underwriting”. |
| (2) | The amount of proceeds, before expenses, to us does not give effect to any exercise of any Pre-funded Warrants. |
We expect to deliver the securities offered hereby to investors on or about , 2025.
Sole Book-Runner
WESTPARK CAPITAL, INC.
The date of this prospectus is , 2025
TABLE OF CONTENTS
You should rely only on the information contained in or incorporated by reference in this prospectus and the information below under the captions “Information Incorporated by Reference” and “Where You Can Find More Information” before making an investment decision. Neither we nor the Underwriter have authorized anyone to provide you with information different from, or in addition to, that contained in or incorporated by reference in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We can provide no assurance as to the reliability of any other information that others may give you. Neither we nor the Underwriter is making an offer to sell or seeking offers to buy these securities in any jurisdiction where or to any person to whom the offer or sale is not permitted. The information in this prospectus is accurate only as of the date on the front cover of this prospectus, and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of such free writing prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates.
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We incorporate by reference important information into this prospectus. You may obtain the information incorporated by reference without charge by following the instructions under “Where You Can Find More Information.” You should carefully read this prospectus as well as additional information described under “Information Incorporated by Reference,” before deciding to invest in our securities.
Neither we nor the Underwriter have authorized anyone to provide you with information different from or inconsistent with the information contained in or incorporated by reference in this prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. You should assume that the information appearing in this prospectus and the documents incorporated by reference in this prospectus is accurate only as of the date of those respective documents, regardless of the time of delivery of those respective documents. Our business, financial condition, results of operations and prospects may have changed since those dates.
The information incorporated by reference or provided in this prospectus contains statistical data and estimates, including those relating to market size and competitive position of the markets in which we participate, that we obtained from our own internal estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable. While we believe our internal company research is reliable and the definitions of our market and industry are appropriate, neither this research nor these definitions have been verified by any independent source.
We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference into this prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreement, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.
We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The distribution of this prospectus and the offering of our common stock in certain jurisdictions may be restricted by law. 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 our common stock and the distribution of this prospectus outside the United States. This prospectus does not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, any securities offered by this prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.
Entero Therapeutics, Inc. and its consolidated subsidiaries are referred to herein as “Entero,” “the Company,” “we,” “us” and “our,” unless the context indicates otherwise.
This prospectus contains, or incorporates by reference, trademarks, tradenames, service marks and service names of Entero Therapeutics, Inc. and its subsidiaries.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements in this prospectus and the documents incorporated by reference that are not historical facts should be considered “Forward Looking Statements” within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Some of the forward-looking statements can be identified by the use words such as “believe,” “expect,” “may,” “estimates,” “should,” “seek,” “approximately,” “intend,” “plan,” “estimate,” “project,” “continue” or “anticipates” or similar expressions or words, or the negatives of those expressions or words. These statements may be made directly in this prospectus and they may also be incorporated by reference in this prospectus from other documents filed with the SEC, and include, but are not limited to, statements about future financial and operating results and performance, statements about our plans, objectives, expectations and intentions with respect to future operations, products and services, and other statements that are not historical facts. These forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements.
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This summary highlights selected information included elsewhere in or incorporated by reference in this prospectus and does not contain all the information that you should consider before investing in our securities. You should read the entire prospectus carefully, especially “Risk Factors” and the financial statements and related notes and other information incorporated by reference into this prospectus, before deciding whether to participate in the offering described in this prospectus.
Overview
We are engaged in the research and development of targeted, non-systemic therapies for the treatment of patients with gastrointestinal (“GI”) diseases. Non-systemic therapies are non-absorbable drugs that act locally, i.e., in the intestinal lumen, skin or mucosa, without reaching an individual’s systemic circulation. In May 2024, we changed our name from First Wave Biopharma, Inc. to Entero Therapeutics, Inc.
We are currently focused on developing the biologic Adrulipase, a recombinant lipase enzyme designed to enable the digestion of fats and other nutrients in cystic fibrosis and chronic pancreatitis patients with exocrine pancreatic insufficiency. Our prior programs consisted of Latiglutenase, a targeted oral biotherapeutic for celiac disease designed to breakdown gluten into non-immunogenic peptides; Capeserod, a selective 5-HT4 receptor partial agonist which was being developed as a gastroparesis therapeutic; and Niclosamide, an oral small molecule with anti-inflammatory properties for patients with inflammatory bowel diseases such as ulcerative colitis and Crohn’s disease. We have determined to discontinue the Latiglutenase, Capeserod and Niclosamide programs.
In March 2024, we announced the closing of a merger (the “Merger”) with ImmunogenX, Inc. (“IMGX”), a private, clinical-stage biopharmaceutical company founded in 2013, which is developing the biologic Latiglutenase for the treatment of celiac disease. As a result of the Merger, IMGX became a limited liability company and our wholly owned subsidiary ImmunogenX LLC. As consideration for the Merger we issued the former shareholders of IMGX (a) 36,830 shares of common stock of the Company and (b) 11,777.418 shares of Series G Preferred Stock. In addition, we assumed (i) all IMGX stock options immediately outstanding prior to the Merger, each becoming an option to purchase Common Stock subject to adjustment pursuant to the terms of the merger agreement (the “Assumed Options”) and (ii) all IMGX warrants immediately outstanding prior to the Merger, each becoming a warrant to purchase Common Stock subject to adjustment pursuant to the terms of the merger agreement (the “Assumed Warrants”). The Assumed Options are exercisable for an aggregate of 200,652 shares of Common Stock, have an exercise price of $0.81 and expire between February 1, 2031 and June 6, 2033. The Assumed Warrants are exercisable for an aggregate of 127,682 shares of Common Stock, have exercise prices ranging from $3.02 to $3.92 and expire between September 30, 2032 and September 6, 2033. Also in connection with the Merger we issued a consultant 18,475 shares of Common Stock and 595.808 shares of Series G Preferred Stock.
ImmunogenX, LLC is developing CypCel, a metabolic marker compound that can measure the state of small-intestinal recovery of celiac patients undergoing gluten-free diets (“GFDs”). We have initiated a plan to dispose of certain assets and liabilities of ImmunogenX, LLC, including Latiglutenase and CypCel. As of December 31, 2024, these were classified as assets and liabilities held for sale and due to the short period of time since the close of the Merger, are reported at their fair value less cost to sell. We determined that the discontinued operations of IMGX represents a strategic shift that will have a major effect on our operations and financial statements.
In March 2025, we announced that we entered into a rescission agreement (the “Rescission Agreement”), by and among the Company, ImmunogenX, LLC and the former shareholders of IMGX (the “IMGX Shareholders”). Under the terms of the Rescission Agreement, the parties have amicably determined that it is in their collective best interest to: (i) rescind the issuances of the shares of Common Stock and Series G Preferred Stock that the Company has issued to the IMGX Shareholders as part of the Merger, (ii) convey to the IMGX Shareholders all of the issued and outstanding membership interests (the “Membership Interests”) of ImmunogenX, LLC currently held by the Company, (iii) cancel the Assumed Options and Assumed Warrants, and (iv) provide for such additional agreements as are set forth in the Rescission Agreement. Also as set forth in the Rescission Agreement, following the closing, the Company will retain up to approximately $695,000 of ImmunogenX, LLC’s accounts payable (in addition to all accounts payable not related to the ImmunogenX, LLC business), and ImmunogenX, LLC will remain responsible for approximately $2,436,338 of its secured debt. The accounts payable liability of ImmunogenX, LLC retained by the Company may be further reduced from the approximately $695,000 as the Company has a right under the Rescission Agreement to negotiate the repayment of such accounts payable with the payees, with sole discretion over determining the payment amounts and timing for such payments. The Company expects that the closing of the Rescission Agreement will occur on or prior to June 30, 2025, subject to satisfaction of all conditions for closing, including obtaining shareholder approval by the Company for the transfer of the Membership Interests to the IMGX Shareholders. After the transactions contemplated by the Rescission Agreement have been consummated, ImmunogenX, LLC will no longer be a subsidiary of the Company, and the Company will no longer be holding any interest in ImmunogenX, LLC. See “Background to the Rescission Agreement” and “Reasons for Entry into the Rescission Agreement” below. If we are unable to consummate the transactions contemplated under the Rescission Agreement, it may have an adverse effect on our business, financial condition and results of operations. Specifically, in the event the transactions contemplated under the Rescission Agreement do not close, as ImmunogenX, LLC’s holding company, we will be liable for the repayment of $2,436,338 of ImmunogenX, LLC’s secured debt as well as the additional approximately $46,000 of its accounts payable. Further, if the rescission is not consummated, we may become subject to a potential new lawsuit filed by Mattress Liquidators, Inc. against ImmunogenX, LLC in the event that we are unable to meet ImmunogenX LLC’s secured debt obligations. We may also be unable to effect a conversion of the Series G Preferred Stock in cash. See “Risk Factors – If the transactions under the Rescission Agreement are not consummated, it will have a material adverse impact on our business, financial condition and results of operations.”
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We have incurred significant operating losses and negative cash flows from operations since inception. On December 31, 2024, we had cash and cash equivalents of approximately $0.2 million, and an accumulated deficit of approximately $202.4 million. We have incurred recurring losses, have experienced recurring negative operating cash flows, and require significant cash resources to execute our business plans. Subsequent to December 31, 2024, we closed on a revolving loan agreement in the principal amount of $2.0 million. Based on cash on hand at December 31, 2024, the available loan proceeds and assuming successful financing efforts, which we cannot guarantee, we anticipate having sufficient cash to fund planned operations through September 2025. Historically, our major sources of cash have been comprised of proceeds from various public and private offerings of its capital stock. We are dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute our development plans and continue operations. See “Risk Factors - Our current dependency on external funding for our operations raises a substantial doubt about our ability to continue as a going concern. If we do not continue as a going concern, investors could lose their entire investment.”
We have a history of net losses and may be unable to achieve or sustain profitability in the future. We also received a going concern qualification in our audits for the financial years ended December 31, 2024 and 2023. As of December 31, 2024 and 2023, we cash and cash equivalents of approximately $0.2 million and $3.7 million, and an accumulated deficit of approximately $202.4 million and $184.3 million, respectively. During the years ended December 31, 2024 and 2023, we incurred net losses of approximately $18.1 million and $15.8 million, respectively. We do not know if our business operations will become profitable or if we will continue to incur net losses in 2025 and beyond. We expect to incur significant future expenses as we develop and expand our business, which will make it harder for us to achieve and maintain future profitability. We may incur significant losses in the future for a few reasons, including the other risks described in this prospectus, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown events. Accordingly, we may not be able to achieve or maintain profitability. Our independent auditors, in their reports dated April 1, 2025 and March 29, 2024 with regard to our financial statements for the years ended December 31, 2024 and 2023, respectively, indicated that there was substantial doubt regarding our ability to continue as a going concern.
The number of full-time employees was reduced from 15 as of March 31, 2024 to two (2) as of May 9, 2025, with the headcount reduction arising as a result of significant capital constraints faced by the Company.
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Background to the Rescission Agreement
Following the closing of the IMGX merger, Jack Syage, one of the principals of IMGX, served as the Chief Operating Officer of the Company and as a member of the Company’s Board of Directors. On June 17, 2024, Dr. Syage transitioned from the role of Chief Operating Officer to Chief Scientific Officer.
In light of the Company’s growing financial concerns, on August 12, 2024, a Special Committee was formed to address matters including the credit agreement with Mattress Liquidators, potential financings, and IMGX-related liabilities. The Committee’s mandate included evaluating strategic alternatives and assessing the ongoing liquidity issues relating to the Company.
On August 19, 2024, the Special Committee reviewed proposals to complete a rescission of the IMGX transaction. It was determined that stockholder approval was required under applicable corporate law in order to execute a potential rescission.
Subsequently, on August 30, 2024, the Board of Directors adjusted the cash reserve for the D&O Tail policy from $600,000 to $520,000, reflecting ongoing consideration of the Company's financial position.
On or about early September 2024, the Company temporarily halted rescission discussions pending evaluation of alternative financings, including a reverse merger with Journey Therapeutics, Inc. as a means to receive net new capital to meet the ongoing obligations of the business.
On October 3, 2024, the Special Committee called a meeting to address time-sensitive rescission terms presented by Jack Syage via a letter to the Special Committee. Material terms to the offer included an upfront $500,000 cash payment to the Company to be used to stabilize the working capital position of the business, an assumption of $500,000 worth of accounts payable, an assumption of approximately $8,000,000 of secured debt obligations and two promissory notes in the amount of $250,000 and a $1,000,000 promissory note issued to the Company that would automatically convert in any subsequent financing round of at least $1,000,000 in gross proceeds $1,000,000 in favor of the Company subject to successful completion of future equity raises.
On October 4, 2024, after the Special Committee deliberation, the Company rejected Jack Syage’s offer noting that the upfront cash portion of $500,000 was deemed to be insufficient relative to the fair market value of the Latiglutenase assets Further, the Special Committee maintained the opinion that the proposed terms by Jack Syage and the purchase price was not in favor of the Company’s shareholders and there would be risk that the shareholders would not approve the transaction. The Special Committee submitted a counter proposal inclusive of greater upfront cash payments as well as the full assumption of all IMGX related debt obligations including the secured debt on the basis that the rescission should cleanly carve out the IMGX asset from the Company in order to be aligned with the best interests of the Company shareholders. The counter proposal was promptly rejected by Jack Syage due to the significant personal liability he would incur as a guarantor on the secured debt obligations.
On November 8, 2024, the Board of Directors convened regarding the potential rescission where it formally elected to move on from Jack Syage’s rescission proposal as terms and conditions could not be agreed to by both parties. Jack Syage’s final rescission offer did not include a provision requiring stockholder approval as a condition to consummate the rescission, contrary to the opinion of the Special Committee and the Company’s General Counsel. As such, the Jack Syage rescission proposal was determined to be invalid and was not reviewed further.
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In November through December 2024, the Company continued to generate net operating losses which strained liquidity. The Company sought net new capital with the intent to provide critical liquidity to continue the business operations. Discussions with prospective capital providers resumed early in the first quarter of 2025.
On December 31, 2024, Mattress Liquidators, Inc. (“Plaintiff”) filed a complaint in the District Court, Boulder County, State of Colorado against ImmunogenX, LLC, Jack A. Syage, and The Jack A. Syage and Elizabeth T. Syage Revocable Trust (“Defendants”). In the complaint, the Plaintiff complained that the Defendants did not pay the loan under the credit agreement entered into October 3, 2022, as amended on September 6, 2023 and March 13, 2024 for the principal amount of $8,212,345.17 (the “Credit Agreement”).
Plaintiff alleged that in the summer of 2024, Defendants were not repaying the loan; accordingly, on August 2, 2024, a notice of default was sent, which demanded immediately payment of the entire balance which was suspended after the Plaintiff was provided additional information. Subsequently, Plaintiff sent Defendants letters of non-compliance regarding their financial reporting obligations. Thereafter, on November 21, 2024, Plaintiff sent Defendants another notice of default and a demand for payment, which accelerated the loan obligations, demanded that Defendants cure the financial reporting defaults, and demanded that Defendants pay all loan obligations no later than December 5, 2024.
Plaintiff claimed that as of December 31, 2024, the total amount due and owing was $7,575,568.91, which consists of $7,460,245.47 in principal, $115,323.44 in accrued contract interest, and $47,069 in authorized attorneys’ fees and costs. Plaintiff asserted three causes of action. The first cause of action was asserted against ImmunogenX, LLC for alleged breach of the Credit Agreement. The other two causes of action asserted were alleged breaches of the guarantees by Jack Syage and the Elizabeth T. Syage Revocable Trust.
Beginning in December 2024 and into January 2025, discussions with prospective capital provider Corbo Capital were accelerated. Numerous discussions between James Sapirstein, the Company’s former Chairman and Chief Executive Officer, and Corbo Capital occurred whereby material terms and conditions were discussed. Notably, the parties discussed receipt of a capital injection in exchange for replacing three of the directors with appointees of the investor.
On February 7, 2025, a press release was issued announcing that Richard Paolone, Eric Corbett, and Mike Uppal, all appointees of Corbo Capital, had joined the Company’s Board of Directors following the resignation of each of Timothy Ramdeen, Alastair Riddell and Mr. Sapirstein. The press release also announced that the Company had entered into a $2 million revolving loan agreement with 1396974 BC Ltd., a private lender. The proceeds of the loan were to be used to support the impaired liquidity position of the business, mainly, payment of previous critical accounts payable as well as ongoing day to day expenditures of the business.
From February 10 through February 12, 2025, the Company’s Board of Directors held a series of meetings to review the financial status of the Company, the audit timeline, and strategic alternatives.
On February 11, 2025, the Board of Directors and management of the Company determined that the Company should consider rescinding the IMGX merger and IMGX’s focus on Latiglutenase in order to focus solely on the development of Adrulipase. Pursuing the IMGX rescission versus maintaining both programs would allow the Company to focus on its flagship drug product, restructure its balance sheet, and remove secured debt obligations which had been pushing the company toward potential bankruptcy since summer 2024. Mr. Syage affirmed that he would personally pay off a material portion of Immunogen, LLC’s secured debt and encumber his personal assets if the IMGX merger were rescinded, as he viewed this more favorably than the alternative bankruptcy where the secured lender could force Chapter 11 and liquidate the Company as it had a perfected security interest in the Latiglutenase assets and other assets of ImmunogenX, LLC.
On February 12, 2025, the Board of Directors convened a meeting to present the findings from the due diligence review and evaluate strategic options, including a potential unwinding of the IMGX merger.
On February 13, 2025, following the comprehensive review of Company documents and discussion at meetings of the Board of Directors, the Company’s representatives and the Board of Directors initiated discussions with IMGX representatives including Mr. Syage regarding the unwinding of the merger. These initial discussions focused on the potential terms and structure of a rescission agreement.
From mid-February 2025 to early March 2025, representatives of the Company and Mr. Syage, as the representative of the IMGX shareholders, engaged in negotiations regarding the terms of a potential rescission agreement. During this period, both parties exchanged proposals focusing on the return of equity, the unwinding of outstanding obligations, and provisions for future cooperation between the entities.
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On February 18, 2025, Board of Directors and the Company’s management determined that executing a rescission agreement was the best option for the shareholders of the Company. An agreement in principle was subsequently reached between Mr. Syage on behalf of the IMGX shareholders and the Company’s representatives regarding the rescission.
The Company successfully secured approval from the former IMGX shareholders in favor of the Rescission Agreement (as defined below) and the recission agreement was executed by the parties on March 24, 2025 (the “Recission Agreement”). The parties’ entry into the Rescission Agreement was reported in the Company’s Current Report on Form 8-K filed with the SEC on March 25, 2025 and also communicated through a press release.
On or around May 8, 2025, the Company distributed Amendment No. 1 to the Rescission Agreement to the IMGX shareholders to provide for an accredited investor representation by the IMGX shareholders.
Effective April 9, 2025, and executed May 8, 2025, Plaintiff and Defendants entered into a settlement agreement (“Settlement Agreement”) whereby Jack A. Syage and The Jack A. Syage and Elizabeth T. Syage Revocable Trust (the “Guarantors”) agreed to pay the Plaintiff (a) $5,500,000.00 to be applied to the obligations amounting to approximately $7.9 million owed to the Plaintiff (which amount was paid to the Plaintiff on April 9, 2025) with the Guarantors being solely responsible for payment of all obligations due to be paid to the Plaintiff. In addition, IMGX agreed to pay all of Plaintiff’s attorneys’ fees and costs incurred to date amounting to approximately $62,000. The parties to the Settlement Agreement also agreed to enter into amended and restated loan documents dated April 9, 2025 which provide for, among others, a revolving loan of $2,436,338.30(the “Commitment”) to ImmunogenX, LLC, to be repaid and the principal amount thereof reborrowed before the earliest of: (i) April 9, 2028; (ii) the date ImmunogenX, LLC prepays the revolving loan in full in accordance with amended and restated credit agreement; or (iii) the date on which the Commitment is terminated in whole pursuant to amended and restated credit agreement. Under amended and restated guarantys, the Guarantors unconditionally guaranteed the prompt payment of all monies owed by ImmunogenX, LLC to Plaintiff under the terms and conditions as stated herein. Under the Settlement Agreement, the Plaintiff agreed to release its security interest in ImmunogenX, LLC, and the parties agreed to execute a Stipulation of Dismissal with Prejudice to be filed in the action before the District Court, Boulder County, State of Colorado.
Reasons for Entry into the Rescission Agreement
The Company’s decision to pursue a rescission agreement with ImmunogenX, LLC was driven by the strategic imperative to concentrate limited financial and operational resources on Adrulipase, the Company’s primary drug candidate. The Company believes this strategic refocusing is supported by multiple business and financial considerations:
| 1. | Elimination of Secured Debt Obligations |
Upon closing, the rescission will eliminate all secured debt obligations associated with the IMGX acquisition, significantly improving our balance sheet and financial flexibility. The secured debt obligations inherited from the IMGX transaction has strained the Company’s overall liquidity position and has exposed the business to a contingent liability as a result of the Mattress Liquidators lawsuit. The rescission will not only result in the removal of the secured debt, but prevent the Company’s future exposure to potential contingent liability if ImmunogenX, LLC again defaults on the secured debt and is subject to additional lawsuits. Both of these will enable us to direct more resources towards the Adrulipase clinical development and extend our operational runway.
| 2. | Resource Allocation Constraints |
As reflected in the Company’s financial statements for the year ended December 31, 2024, the Company operates with significant financial constraints, with a market capitalization of only approximately $1.6 million and a net annual loss for the year ended December 31, 2024 of approximately $18.1 million. The Company currently generates no revenue, making efficient resource allocation critical to our survival and success. The IMGX acquisition created additional financial obligations and operational complexities that diverted corporate and capital resources away from our core Adrulipase program at a critical stage of development. The Company estimates that up to $30 million would be required to adequately complete Phase 3 trials for IMGX’s Latiglutenase asset, representing a significant capital investment for a non-core asset for the Company. Of which, the IMGX Latiglutenase asset does not have near term revenue prospects. Due to the capital constrained macroeconomic environment, the Company has elected to focus on its flagship Adrulipase program as the Board of Directors views it as the Company’s most valuable asset in its patent portfolio.
Additionally, the Company intends to streamline its patent portfolio on gut-restricted gastrointestinal clinical drug candidates, while IMGX’s Latiglutenase focus is on celiac disease. Given the Company’s core competency of advancing gut-restricted gastrointestinal clinical drug candidates, the IMGX Latiglutenase asset will compete with the Company’s core Adrulpiase program, which targets larger patient populations and, in the opinion of the Company’s Board of Directors, has clearer regulatory pathways. Due to the significant capital requirements and resource allocation constraints, the Company has determined that the most suitable course of action is to rescind the IMGX assets and focus on its core Adrulipase program.
| 3. | Historical Investment and Clinical Progress of Adrulipase |
The Company has made substantial historical investments in the development of Adrulipase (formerly known as MS1819), representing the company's most advanced clinical program. Since fiscal year 2022, approximately $7.01 million has been directly invested into the development of Adruliapse to bring the product to Phase 2 clinical trials, relative to $2.10 million of total drug advancement costs related to IMGX’s Latiglutenase. When incorporating direct and indirect drug advancement costs including corporate overhead and general administrative expenses indirectly linked to this company asset, approximately 36.1% of all drug advancement cots have been attributable to Adrulipase, versus approximately 13.7% for IMGX’s Latiglutenase. Our Phase 2 clinical trials for Adrulipase have demonstrated promising results for patients with EPI associated with cystic fibrosis and chronic pancreatitis. The cumulative research and development expenditure on Adrulipase over multiple years constitutes a significant portion of our historical spend, creating a valuable clinical and intellectual property foundation that we believe can provide future economic value.
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While the Company is satisfied with the progress of the Adrulipase asset, it notes concerns with the efficacy of the Latiglutenase asset. The Company has noted that while Phase 2 data has shown Latiglutenase’s positive impact on reducing small intestinal damage by 60–88% in celiac patients, the asset faced insufficient efficacy for FDA approval. A 2022 study found no statistically significant improvement in serology markers (tTG-IgA, DGP-IgA/IgG) compared to placebo. The Phase 3 trial design, while FDA-reviewed, required enrollment of 1,200 patients-a costly endeavor with high execution risk. Latiglutenase’s mechanism (gluten degradation in the stomach) faced skepticism due to variable patient adherence to gluten-free diets, limiting market potential. Given the material capital resources required to advance the IMGX Latiglutenase asset relative to the considerable risk of Phase 3 failure, the Company has determined that continued investment in IMGX is untenable and rescission the best course of action.
| 4. | Market Opportunity for Adrulipase |
Adrulipase addresses significant unmet medical needs in well-defined patient populations. According to the Cystic Fibrosis Foundation, in 2024 more than 40,000 people in the U.S. suffer from EPI caused by cystic fibrosis, and the National Pancreas Foundation estimates 50-80 people per 100,000 in the US (300,000-500,000 total) patients have EPI caused by chronic pancreatitis . This substantial market opportunity justifies our strategic focus on bringing Adrulipase through the clinical development pathway to potential commercialization.
| 5. | Lack of Strategic Alignment with IMGX Product Lines |
While IMGX’s technology platforms have potential value, they do not align with the Company’s core focus on developing targeted, non-systemic therapies for gastrointestinal diseases. The integration of IMGX's business required significant management attention and specialized expertise outside our core competencies. The Company’s Board of Directors’ and management’s analysis determined that the technological and operational synergies initially anticipated between Adrulipase development and IMGX’s product lines failed to materialize to the extent projected.
| 6. | Streamlined Organizational Structure |
By unwinding the IMGX acquisition, the Company can streamline its organizational structure, reducing operational complexity and administrative overhead. This organizational efficiency is particularly important given our limited headcount allowing our small team to focus exclusively on Adrulipase development milestones.
| 7. | Clearer Mission Purpose and Business Model |
The rescission will provide current shareholders and prospective investors with a clearer understanding of the Company’s business model and value proposition as a focused gastrointestinal drug development company.
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Our Product Candidates
Our Adrulipase programs are focused on the development of an oral, non-systemic, biologic capsule for the treatment of exocrine pancreatic insufficiency (“EPI”) in patients with cystic fibrosis (“CF”) and chronic pancreatitis (“CP”). Our goal is to provide CF and CP patients with a therapy to control EPI that is non-animal derived and offers the potential to dramatically reduce their daily pill burden. In July 2023, we announced topline results from our Phase 2b pilot monotherapy bridging study using a new enteric microgranule formulation of Adrulipase. Although the primary efficacy endpoint was not achieved, we believe that this may be on account of issues with quality control and clinical approach related to the study. Data from the study indicated that the enhanced Adrulipase formulation was well tolerated and demonstrated an improvement over prior formulations of Adrulipase, and there was an improvement in the CFA to therapeutic levels in cystic fibrosis patients with exocrine pancreatic insufficiency. We plan to have a meeting with the FDA to discuss the next steps in this regard. We are planning to move this program forward in 2025.
Our Latiglutenase program was focused on the development of an orally administered, minimally-absorbed, biologic for improving multiple gluten-induced symptoms and consequent quality of life (”QOL”) due to inadvertent gluten consumption in patients with celiac disease (“CeD”) by breaking down the gluten into non-immunogenic peptides. We are no longer working on this program and have initiated a plan for its disposition.
Our Capeserod program was in-licensed from Sanofi in September 2023. Sanofi conducted Phase 1 and Phase 2 Central Nervous System (“CNS”) trials with over 600 patients. In Sanofi’s CNS trials, Capeserod appeared to be well-tolerated. Research on Capeserod and subsequent artificial intelligence (“AI”) empowered analyses suggest that the drug possesses a unique mechanism of action that is applicable to several GI indications underserved by currently available therapeutics. We are no longer working on this program and have notified Sanofi on February 26, 2025 of our termination of the license agreement. We may terminate the license agreement with Sanofi by providing Sanofi with at least 60 days prior written notice; provided, however, that Sanofi shall be entitled to any and all payments due and owed to Sanofi prior to the effective date of termination. On February 26, 2025, we provided notice to Sanofi to terminate the license agreement. No payments are due to Sanofi and the Company expects the termination to be effective in April 2025.
Our Niclosamide programs leveraged proprietary oral and topical formulations to address multiple GI conditions, including inflammatory bowel diseases (“IBD”) indications. In 2022 we advanced four separate Phase 2 clinical programs of our Niclosamide formulations, including FW-COV for Severe Acute Respiratory Syndrome Coronavirus 2 (“COVID-19”) GI infections, FW-UP for ulcerative proctitis (“UP”) and ulcerative proctosigmoiditis (“UPS”), FW ICI AC for Immune Checkpoint Inhibitor associated colitis (“ICI AC”), and FW CD for Crohn’s disease. We are no longer actively pursuing these programs.
Due to capital constraints, we paused all drug development (including development related to Adrulipase) in 2024. The Company intends to use part of the net proceeds from this offering to advance the Adrulipase program through hiring personnel, on working capital, and on other direct and indirect costs required to prepare the Adrulipase program for future clinical milestones. While this part of the net proceeds will help restart the Adrulipase program, we believe that additional capital will be needed to begin a Phase 3 clinical trial for Adrulipase. In this regard, we plan to seek follow-on financing by the end of the third quarter of 2025, which will be used solely to fund the Phase 3 trials. See “Use of Proceeds”.
Our primary drug candidate and clinical program is described below.
Adrulipase
Adrulipase is the active pharmaceutical ingredient (“API”) derived from Yarrowia lipolytica, an aerobic yeast naturally found in various foods such as cheese and olive oil that is widely used as a biocatalyst in several industrial processes. Adrulipase is a secreted lipase naturally produced by Yarrowia lipolytica, known as LIP2, that we are developing through recombinant DNA technology for the treatment of EPI associated with CF and CP. Lipases are enzymes that help with the digestion of lipids and fat.
We previously held the exclusive right to commercialize Adrulipase in the U.S., Canada, South America (excluding Brazil), Asia (excluding China, Hong Kong, and Japan), Australia, New Zealand and Israel pursuant to a sublicense from Laboratories Mayoly Spindler SAS (“Mayoly”) under the Joint Research and Development Agreement (“JDLA”), which also granted us joint commercialization rights for Brazil, Italy, China and Japan. In March 2019, we purchased all rights, title and interest in and to Adrulipase from Mayoly pursuant to the Mayoly Asset Purchase Agreement (“APA”), provided, however, Mayoly retained exclusive commercial rights in France and Russia.
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Background
The pancreas is both an endocrine gland that produces several important hormones, including insulin, glucagon, and pancreatic polypeptide, as well as a digestive organ that secretes pancreatic juice containing digestive enzymes that assist with the absorption of nutrients and digestion in the small intestine.
The targeted indication of Adrulipase is the treatment of EPI, which is observed when the exocrine functions of the pancreas are below 10% of normal. The symptomatology of EPI is essentially due to the deficiency of pancreatic lipase, an enzyme that hydrolyses triglycerides into monoglycerides and free fatty acids. The pancreatic lipase enzymatic activity is hardly compensated by extra-pancreatic mechanisms, because gastric lipase has nearly no lipolytic activity in the pH range of the intestine. On the other hand, when they are impaired, the pancreatic amylase and protease (enzymes that break up carbohydrates (starches) and proteins, respectively) activities can be compensated by the salivary amylase, the intestinal glycosidase, the gastric pepsin, and the intestinal peptidases, all of which are components of the gastric juice secreted by the stomach walls. Lipid maldigestion due to lipase deficiency is responsible for weight loss, steatorrhea featured by greasy diarrhea, and fat-soluble vitamin deficiencies (i.e. A, D, E and K vitamins).
CP, the most common cause of EPI, is a long-standing inflammation of the pancreas that alters its normal structure and functions. In the U.S., its prevalence rate is 42 cases per 100,000 inhabitants, resulting in approximately 132,000 cases. Approximately 60% of patients affected with CP display EPI, resulting in approximately 90,000 patients requiring substitution therapy in the U.S. In Western societies, CP is caused by chronic alcoholic consumption in approximately 55-80% of cases. Other relatively frequent etiologies include the genetic form of the disease that is inherited as an autosomal dominant condition with variable penetrance, pancreatic trauma and idiopathic causes.
CF, another dominant etiology of EPI, is a severe genetic disease associated with chronic morbidity and life-span decrease of most affected individuals. In most Caucasian populations, CF prevalence is of 7-8 cases per 100,000 inhabitants, but is less common in other populations, resulting in more than 30,000 affected individuals in the U.S. and more than 70,000 affected individuals worldwide. CF is inherited as monogenic autosomal recessive disease due to the defect at a single gene locus that encodes the Cystic Fibrosis Transmembrane Regulator protein, or CFTR, a regulated chloride channel. Mutation of both alleles of this chloride channel gene results in the production of thick mucus, which causes a multisystem disease of the upper and lower respiratory tracts, digestive system, and the reproductive tract. The progressive destruction of the pancreas results in EPI that is responsible for malnutrition and contributes to significant morbidity and mortality. About 80-90% of patients with CF develop EPI, resulting in approximately 25,000-27,000 patients in the U.S. that require substitution therapy.
Current treatments for EPI stemming from CP and CF rely on porcine (pig derived) pancreatic enzyme replacement therapies (“PERTs”), which have been on the market since the late 1800s. PERTs are typically comprised of three digestive enzymes; lipases, proteases, and amylases. The PERT market is well established with estimated sales of approximately $2.1 billion in 2024 in the U.S. and has been growing for the past five years at a compound annual growth rate of approximately 20%. In spite of their long-term use, however, PERTs suffer from poor stability, formulation problems, possible transmission of conventional and non-conventional infectious agents due to their animal origins, and possible adverse events at high doses in patients with CF and limited effectiveness.
Pre-Clinical Program
The efficacy of Adrulipase has been investigated in normal minipigs, which are generally considered to be a relevant model for digestive drug development because of their physiological similarities with humans and their omnivorous diet. Experimental pancreatitis was induced by pancreatic duct ligation, resulting in severe EPI with baseline CFA around 60% post-ligature. CFA is a measurement obtained by quantifying the amount of fat ingested orally over a defined time period and subtracting the amount eliminated in the stool to ascertain the amount of fat absorbed by the body. Pigs were treated with either Adrulipase or enteric-coated PERTs, both administered as a single-daily dose.
At doses ranging from 10.5 to 211 mg, Adrulipase increased the CFA by +25 to +29% in comparison to baseline (p<0.05 at all doses), whereas the 2.5 mg dose had milder activity. There were similar observations in pigs receiving 100,000 U lipase of enteric-coated porcine pancreatic extract. These findings demonstrate the in vivo activity of Adrulipase in a relevant in vivo model at a level similar to the PERTs at dosages of 10.5mg or greater.
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To date, two non-clinical toxicology studies have been conducted. Both show that Adrulipase lipase is clinically well tolerated at levels up to 1,000mg/kg in rats and 250 mg/kg in minipigs up to 13 weeks. Adrulipase is therefore considered non-toxic in both rodent and non-rodent species up to a maximum feasible dose of 1,000 mg/kg/day in the rats over six months of administration.
Clinical Program
We are developing Adrulipase for two principal therapeutic indications: (i) children and adults affected by CF, and (ii) adult patients with CP. We have determined to initially pursue the adult indication in CF.
Chronic Pancreatitis
During 2010 and 2011, a phase 1/2a clinical trial of Adrulipase was conducted in conjunction with Mayoly in a single center in France. The study was an exploratory study mainly designed to investigate the safety of Adrulipase and was a randomized, double blind, placebo controlled, parallel clinical trial in 12 patients affected with CP or pancreatectomy and severe EPI. The primary efficacy endpoint of the study was defined as the relative change in steatorrhea (an established surrogate biomarker of EPI correction) in comparison to baseline. The study found that Adrulipase was well tolerated with no serious adverse events. Only two adverse events were observed: constipation (two patients out of eight with Adrulipase) and hypoglycemia (two patients out of eight with Adrulipase, and one patient out of four with placebo). A non-statistically significant difference of the primary endpoint, possibly due to the small group size, was found between the two groups both in intention-to-treat, a group that included three patients who received the in-patient facility study diet but did not fulfill the protocol’s inclusion criteria, and per-protocol analysis. This study was not designed, nor did it aim to demonstrate statistically significant changes of CFA or steatorrhea under Adrulipase.
We received regulatory approval in Australia and New Zealand in 2016, with the addition of a 2018 regulatory approval in France, to conduct a Phase 2 multi-center dose escalation study of Adrulipase in CP and pancreatectomy. The primary endpoint of this study was to evaluate the safety of escalating doses of Adrulipase in 11 CP patients. The secondary endpoint was to investigate the efficacy of Adrulipase in these patients by analysis of the CFA and its change from baseline. In September 2018, we announced that in pre-planned analyses, both the study’s primary and secondary endpoints were reached with a statistically significant (p=0.002) improvement in the CFA of 21.8%, in a per protocol analysis, with the highest evaluated dose of 2,240 mg/day of Adrulipase. The statistical significance of the trial results is typically based on widely used, conventional statistical methods that establish the p-value of the results. A p-value of 0.05 or less is required to demonstrate statistical significance. As such, these CFA levels are considered to be statistically significant.
Cystic Fibrosis Monotherapy
In October 2018, the FDA cleared our IND application for Adrulipase in patients with EPI due to CF. In December 2018, we initiated the Phase 2 OPTION Bridging Dose Study to investigate Adrulipase in CF patients with EPI and in February 2019, we dosed the first patients. The Phase 2 OPTION Bridging Dose Study investigated the safety, tolerability and efficacy of Adrulipase in a head-to-head comparison against the current PERT standard of care. The OPTION Bridging Dose Study employed a six-week non-inferiority CFA primary efficacy endpoint comparing Adrulipase to PERTs.
In September 2019, we announced positive results from the OPTION Bridging Dose Study. Results showed that the primary efficacy endpoint of CFA was comparable to the CFA in a prior Phase 2 study in patients with CP, while using the same dosage of Adrulipase. The dosage used in the OPTION Bridging Dose Study was 2.2 grams per day, which was determined in agreement with the FDA as a bridging dose from the highest safe dose used in the Phase 2 CP dose escalation study. Although the study was not powered for statistical significance, the data demonstrated meaningful results, with approximately 50% of the patients showing CFAs high enough to reach non-inferiority with standard PERTs. Additionally, the CNA was comparable between the Adrulipase and PERT arms, 93% vs. 97%, respectively, in the OPTION Bridging Dose Study. This important finding confirms that protease supplementation is not likely to be required with Adrulipase treatment. A total of 32 patients, ages 18 or older, completed the OPTION Bridging Dose Study.
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In October 2019, the Cystic Fibrosis Foundation Data Safety Monitoring Board (the “CFF DSMB”) completed its review of our final results of the OPTION Bridging Dose Study and found no concerns for Adrulipase and supported our plan to proceed to the Phase 2b OPTION 2 Trial. In December 2019, we submitted the clinical trial protocol to the existing IND at the FDA. In April 2020, we received approval to conduct the OPTION 2 Trial in Therapeutics Development Network clinical sites in the U.S.
The OPTION 2 Trial was designed to investigate the safety, tolerability and efficacy of Adrulipase (2.2 - gram and 4.4 - gram doses in enteric capsules) head-to-head versus the current standard of care, PERT pills. The OPTION 2 Trial was an open-label, crossover study, conducted in 15 sites in the U.S. and Europe. Enrollment included a total of 30 CF patients 18 years or older. Adrulipase was administered in enteric capsules to provide gastric protection and test for optimal delivery of enzyme to the duodenum. Patients were first randomized into two cohorts: the Adrulipase arm, where they received a 2.2 - gram daily oral dose of Adrulipase for three weeks; or the PERT arm, where they received their pre-study dose of PERT pills for three weeks. After three weeks, stools were collected for analysis of CFA. Patients were then crossed over for another three weeks of the alternative treatment. After three weeks of cross-over therapy, stools were again collected for analysis of CFA. A parallel group of patients was randomized and studied in the same fashion using a 4.4 - gram daily dose of Adrulipase. All patients were followed for an additional two weeks after completing both crossover treatments for post study safety observation. Patients were assessed using descriptive methods for efficacy, comparing CFA between Adrulipase and PERT arms, and for safety.
In January 2021, we announced an additional study arm in OPTION 2 Trial using an immediate release Adrulipase capsules in order to identify the optimal dose and delivery method of Adrulipase. This extension phase tested patients 18 years or older, who have already completed the crossover phase, at higher doses relative to the previously conducted OPTION Bridging Dose Study. This allowed us to compare data from the existing crossover arm using enteric (delayed release) capsules with data from the new immediate release extension arm.
In March 2021 we announced topline OPTION 2 data. The trial demonstrated that Adrulipase was well-tolerated and data from OPTION 2, and the other Adrulipase Phase 2 clinical trials, demonstrated drug activity. However, OPTION 2 did not consistently meet the primary efficacy endpoint. Some patients were able to achieve CFA at levels beyond what is required to demonstrate non-inferiority with PERT therapies, but the majority did not.
We believe that the underlying cause of the drug’s uneven performance in the OPTION 2 trial was the enteric capsule formulation. While the enteric coating protected the capsule from breaking down in the stomach acid, it also appeared to dissolve too slowly in the small intestine to release the lipase enzyme in time to aid with proper digestion and nutrient absorption.
In August 2021 we announced that we would begin development of a new enteric microgranule formulation of Adrulipase. The new formulation is planned to be administered with food as an oral capsule that dissolves in the stomach and disperses acid-resistant micro-granules that thoroughly mix with food during the digestion process. The resultant mixture then passes to the small intestine where the lipase enzyme breaks up fat molecules so that they can be absorbed. We completed the reformulation work in the second half of 2022.
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In November 2022 we announced that we had filed an IND amendment with the FDA for a Phase 2b bridging study with the new enteric microgranulation formulation of Adrulipase. The new trial is designed to investigate the safety, tolerability and efficacy of the new formulation of Adrulipase. It is an open-label study that will be conducted at three sites in the U.S. A total of 12 cystic fibrosis patients, 18 years or older are expected to be enrolled. The trial design employs a dose titration strategy. Patients will be screened at baseline to ensure that they have a coefficient of fat absorption (CFA) of at least 80%. Eligible patients will then be switched from their commercial enzyme product to Adrulipase. Each patient will be started on a low dose of Adrulipase. If the patient is not clinically controlled, the patient will be switched to a medium dose, and if not controlled on this dose, the patient will be advanced to a high dose. The titrations will be carried out over a three-week period, after which a CFA will be obtained. End of study CFAs will be compared to the baseline CFAs in a descriptive fashion. A post treatment safety visit will be conducted one week after completing the treatment period.
Following FDA review of the IND amendment, we initiated the Phase 2b pilot monotherapy trial during the first quarter of 2023 (Study AZ-CF2002) and received topline data in the third quarter of 2023. In the study, the mean coefficient of fat absorption (CFA) was 66% at the 2240 mg/day dose and 53% at the 4480 mg/day dose using a delayed-release (DR) formulation. These results did not meet the targeted CFA of greater than nor equal to 80%, which is generally considered indicative of adequate fat absorption in this patient population. Further, the extension phase of the study evaluated immediate-release (IR) formulations at 4.4 grams/day and 6.6 grams/day, which resulted in mean CFAs of 52.9% and 50.6%, respectively, which was also below the therapeutic threshold. Despite demonstrating favorable safety and tolerability, the monotherapy did not show sufficient efficacy compared to standard porcine pancreatic enzyme replacement therapy (PERT), which achieved mean CFAs of approximately 86% in previous comparator trials (e.g., Study AZ-CF2001).
Although the primary efficacy endpoint was not achieved, we believe that this may be on account of issues with quality control and clinical approach related to the study. Data from the study indicated that the enhanced Adrulipase formulation was well tolerated and demonstrated an improvement over prior formulations of Adrulipase, and there was was an improvement in the CFA to therapeutic levels in cystic fibrosis patients with exocrine pancreatic insufficiency. We planned to have a Type C meeting with the FDA in 2024 to discuss next steps for the Adrulipase program. However, due to capital constraints, we paused all drug development (including development related to Adrulipase) in 2024.
The Company intends to use part of the net proceeds from this offering to advance the Adrulipase program through hiring a Chief Medical Officer (or alternatively, a Chief Scientific Officer, depending on final internal structuring), as well as covering associated operating expenses such as personnel additions, working capital, and other direct and indirect costs required to prepare the Adrulipase program for future clinical milestones. While this part of the net proceeds will help restart the Adrulipase program, we believe that additional capital will be needed to begin a Phase 3 clinical trial for Adrulipase. In this regard, we plan to seek follow-on financing by the end of the third quarter of 2025, which will be used solely to fund the Phase 3 trials. See “Use of Proceeds”. We are planning to move this program forward in 2025 including with the intent to initiate a Ph2b clinical trial in the second half of 2025.
Combination Therapy
We launched the Phase 2 Combination Trial in Hungary in July 2019 to investigate Adrulipase, in combination with PERT, in CF patients who suffer from severe EPI but continue to experience clinical symptoms of fat malabsorption despite taking the maximum daily dose of PERTs. The Combination Trial is designed to investigate the safety, tolerability and efficacy of escalating doses of Adrulipase (700 mg, 1120 mg and 2240 mg per day, respectively), in conjunction with a stable dose of PERTs, in order to increase CFA and relieve abdominal symptoms. In October 2020, we opened a total of five clinical sites in Turkey and dosed the first patients in November 2020. In March 2021, we reached targeted minimum enrollment of 18 patents.
We announced positive interim data on the first five patients in the Combination Trial in August 2020. The primary efficacy endpoint was met, with CFAs greater than 80% for all patients across all visits. For secondary efficacy endpoints, we observed that stool weight decreased, the number of stools per day decreased, steatorrhea improved, and body weight increased. Additionally, no serious adverse events were reported.
In August 2021, we announced topline data collected from the 20 patients enrolled in the study. The data indicated that Adrulipase in combination with PERT led to clinically meaningful improvements in CFA, the primary efficacy endpoint. Patients showed an average gain of more than six percentage points from baseline, compared to the five-point improvement in CFA cited by the clinical literature as clinically significant. The study also demonstrated positive improvements in weight gain and other secondary endpoints.
We believe a combination therapy of PERT and Adrulipase has the potential to: (i) correct macronutrient and micronutrient maldigestion; (ii) eliminate abdominal symptoms attributable to maldigestion; and (iii) sustain optimal nutritional status on a normal diet in CF patients with severe EPI.
Intellectual Property Portfolio
Our goal is to obtain, maintain and enforce patent protection for our product candidates, formulations, processes, methods and any other proprietary technologies, preserve our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the United States and in other countries. Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property protection possible for our current product candidates and any future product candidates, proprietary information and proprietary technology through a combination of contractual arrangements and patents, both in the United States and abroad. However, patent protection may not afford us with complete protection against competitors who seek to circumvent our patents.
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We also depend upon the skills, knowledge, experience and know-how of our management and research and development personnel, as well as that of our advisors, consultants and other contractors. To help protect our proprietary know-how, which is not patentable, and for inventions for which patents may be difficult to enforce, we currently rely and will in the future rely on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all of our employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.
Below are details of our intellectual property portfolio:
Adrulipase
The Adrulipase program is protected by the following issued patents that we had originally licensed under the Mayoly Agreement and now own:
| • | PCT/FR2006/001352 patent family (including the patent EP2035556 and patent US8,334,130 and US8,834,867) “Method for producing lipase, transformed Yarrowia lipolytica cell capable of producing said lipase and their uses” describes a method for producing Yarrowia lipolytica acid-resistant recombinant lipase utilizing a culture medium without any products of animal origin or non-characterized mixtures such as tryptone, peptone or lactoserum, in addition to its uses. The European patents expire June 15, 2026, U.S. patent 8,334,130 expires September 11, 2028, and U.S. patent 8,834,867 expires July 17, 2026. |
In addition, PCT International application was filed in 2021 directed to our proprietary formulation of Adrulipase that has been filed in the United States and certain foreign countries. Any patents issuing from these filings will have an expected expiration in 2041.
PCT International applications were filed in 2022 and nationalized in certain foreign countries outside of the U.S to stable lipase formulations and methods of treatment. Any patents issuing from these filings will have an expected expiration in 2042. These patents are not pending in the U.S.
PCT International Application was filed in 2023 directed to Adrulipase formulations. Any patents issuing from this filing will have an expected expiration in 2043.
We also expect to receive 12-year biologic exclusivity in the United States under the Affordable Care Act and 10-year data exclusivity in the European Union for Adrulipase.
Niclosamide
Our FW-ICI-AC, FW-UP, FW-UC and FW-CD Niclosamide programs are protected by patent filings that include the following:
| • | US10,912,746; US10,905,666; US10,292,951; US10,772,854; US10,744,103; US10,799,468; US10,849,867; and related continuation applications as well as corresponding worldwide patent filings all entitled “Methods and Compositions for Treating Conditions Associated with an Abnormal Inflammatory Process.” The expiration date of the issued patents is September 1, 2036; and |
Our FW-COV Niclosamide programs are protected by patent filings that include the following:
| • | US10,980,756 and US11,564,896 and corresponding continuation applications directed to the use of Niclosamide for the treatment of COVID 19 gastrointestinal infections. The expiration of the issued patents is March 31, 2040. |
Latiglutenase
The Latiglutenase program is protected by U.S. Patent 10,434,150 that expires July 3, 2035, U.S. Patent 8,980,254 that expires April 10, 2030, and U.S. Patent 9,993,531 that expires Sept. 9, 2029.
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Legal Proceedings
Mattress Liquidators, Inc.
On December 31, 2024, Mattress Liquidators, Inc. (“Plaintiff”) filed a complaint in the District Court, Boulder County, State of Colorado against ImmunogenX, LLC, Jack A. Syage, and The Jack A. Syage and Elizabeth T. Syage Revocable Trust (“Defendants”). In the complaint, the Plaintiff complained that the Defendants did not pay the loan under the credit agreement entered into October 3, 2022, as amended on September 6, 2023 and March 13, 2024 for the principal amount of $8,212,345.17 (the “Credit Agreement”).
Plaintiff alleged that in the summer of 2024, Defendants were not repaying the loan; accordingly, on August 2, 2024, a notice of default was sent, which demanded immediately payment of the entire balance which was suspended after the Plaintiff was provided additional information. Subsequently, Plaintiff sent Defendants letters of non-compliance regarding their financial reporting obligations. Thereafter, on November 21, 2024, Plaintiff sent Defendants another notice of default and a demand for payment, which accelerated the loan obligations, demanded that Defendants cure the financial reporting defaults, and demanded that Defendants pay all loan obligations no later than December 5, 2024.
Plaintiff claimed that as of December 31, 2024, the total amount due and owing was $7,575,568.91, which consists of $7,460,245.47 in principal, $115,323.44 in accrued contract interest, and $47,069 in authorized attorneys’ fees and costs. Plaintiff asserted three causes of action. The first cause of action was asserted against ImmunogenX, LLCfor alleged breach of the Credit Agreement. The other two causes of action asserted were alleged breaches of the guarantees by Jack Syage, and the Elizabeth T. Syage Revocable Trust.
Effective April 9. 2025, and executed May 8, 2025, Plaintiff and Defendants entered into a settlement agreement (“Settlement Agreement”) whereby Jack A. Syage and The Jack A. Syage and Elizabeth T. Syage Revocable Trust (the “Guarantors”) agreed to pay the Plaintiff (a) $5,500,000.00 to be applied to the obligations amounting to approximately $7.9 million owed to the Plaintiff (which amount was paid to the Plaintiff on April 9, 2025) with the Guarantors being solely responsible for payment of all obligations due to be paid to the Plaintiff. In addition, IMGX agreed to pay all of Plaintiff’s attorneys’ fees and costs incurred to date amounting to approximately $62,000. The parties to the Settlement Agreement also agreed to enter into amended and restated loan documents dated April 9, 2025 which provide for, among others, a revolving loan of $2,436,338.30(the “Commitment”) to ImmunogenX, LLC, to be repaid and the principal amount thereof reborrowed before the earliest of: (i) April 9, 2028; (ii) the date ImmunogenX, LLC prepays the revolving loan in full in accordance with amended and restated credit agreement; or (iii) the date on which the Commitment is terminated in whole pursuant to amended and restated credit agreement. Under amended and restated guarantys, the Guarantors unconditionally guaranteed the prompt payment of all monies owed by ImmunogenX, LLC to Plaintiff under the terms and conditions as stated herein. Under the Settlement Agreement, the Plaintiff agreed to release its security interest in ImmunogenX, LLC, and the parties agreed to execute a Stipulation of Dismissal with Prejudice to be filed in the action before the District Court, Boulder County, State of Colorado.
Moreover, under the terms of the Rescission Agreement entered into in March 2025, by and among the Company, ImmunogenX, LLC, and each of the individuals or entities who are the former shareholders of ImmunogenX, LLC, upon consummation of the transactions contemplated in Rescission Agreement, the Company shall have no further duties, liabilities or obligations in connection with this complaint.
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Ellenoff Grossman & Schole LLP
On March 17, 2025, Ellenoff Grossman & Schole LLP (“EGS”) filed a lawsuit against the Company in the Supreme Court of the State of New York, County of New York seeking to recover unpaid legal fees, costs, and disbursements. EGS alleges that the Company failed to pay for legal services rendered to the Company from September 2023 through January 2025, and is claiming breach of contract, account stated, and quantum meruit. EGS seeks monetary damages in the amount of $749,301.00, with applicable interest, and costs and disbursements for the lawsuit. The Company’s answer to the complaint was due on April 3, 2025. The Company is currently evaluating the claims and defenses.
Recent Appointments and Departures of Directors and Executive Officers
In February 2025, Timothy Ramdeen, Alastair Riddell and James Sapirstein resigned as directors of the Company and the Company’s Board of Directors appointed Manpreet Uppal, Eric Corbett and Richard Joel Paolone as directors of the Company. The resignation of Mr. Ramdeen, Mr. Riddell and Mr. Saperstein was a result of our entry into a revolving loan agreement with 1396974 BC Ltd. granting them the right to replace three board members and was not a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Richard Joel Paolone was subsequently appointed as the Interim Chief Executive Officer and Chairman of the Board of Directors of the Company.
In March 2025, Sarah Romano resigned as the Chief Financial Officer of the Company, and the Company appointed Ms. Anna Skowron as its Interim Chief Financial Officer. Ms. Romano’s decision to resign was not because of any disagreement relating to the Company’s operations, policies, practices, financial reporting or controls.
Our Corporate Information
We were incorporated on January 30, 2014 in the State of Delaware under the name AzurRx BioPharma, Inc. In May 2014, we entered into a stock purchase agreement with Protea Biosciences Group, Inc. (“Protea Group”) and its wholly-owned subsidiary, Protea Biosciences, Inc. (“Protea Sub” and, together with Protea Group, “Protea”), to acquire 100% of the outstanding capital stock of AzurRx SAS (formerly ProteaBio Europe SAS), a wholly-owned subsidiary of Protea Sub, which was completed in June 2014. In October 2016, we completed an initial public offering and listed the shares of our Common Stock on the Nasdaq Capital Market.
On September 13, 2021, we completed the acquisition of First Wave Bio, Inc. (“FWB”), which became our wholly owned subsidiary. In connection with the acquisition, AzurRx BioPharma, Inc. changed its name to First Wave BioPharma, Inc.
Effective October 26, 2022, the AzurRx SAS subsidiary was dissolved.
On March 13, 2024, we completed a merger with ImmunogenX, Inc., where according to the merger plan following the First Merger, ImmunogenX, Inc. merged with and into Second Merger Sub, pursuant to which Second Merger Sub became ImmunogenX, LLC, a Delaware limited liability company, the surviving entity and a wholly owned subsidiary of the Company.
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In May 2024, we changed our name from First Wave Biopharma, Inc. to Entero Therapeutics, Inc.
In March 2025, we announced that we entered into the Rescission Agreement, by and among the Company, ImmunogenX, LLC and the IMGX Shareholders. We expect that the closing of the Rescission Agreement will occur on or prior to June 30, 2025, subject to satisfaction of all conditions for closing, including obtaining shareholder approval by the Company for the transfer of the membership interests of ImmunogenX, LLC to the IMGX Shareholders. After the transactions contemplated by the Rescission Agreement have been consummated, ImmunogenX, LLC will no longer be a subsidiary of the Company, and the Company will no longer be holding any interest in ImmunogenX, LLC.
Implications of Being a Smaller Reporting Company
We are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our shares held by non-affiliates equals or exceeds $250 million as of the prior June 30th, or (2) our annual revenues equalled or exceeded $100 million during such completed fiscal year and the market value of our shares held by non-affiliates equals or exceeds $700 million as of the prior June 30th. Such reduced disclosure and corporate governance obligations may make it more challenging for investors to analyze our results of operations and financial prospects.
Available Information
We maintain our corporate website at www.enterothera.com. Information on our website does not constitute a part of, nor is it incorporated in any way, into this prospectus and should not be relied upon in connection with making an investment decision. We make available free of charge at www.enterothera.com/investors/regulatory-filings our annual, quarterly, and current reports, and amendments to those reports if any, as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC.
Our common stock is quoted on the Nasdaq under the symbol “ENTO”. We file annual, quarterly, and current reports, proxy statements and other information with the U.S. Securities Exchange Commission (the “SEC”) and are subject to the requirements of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). These filings are available to the public on the Internet on the SEC’s website at www.sec.gov.
Our principal business address is 777 Yamato Road, Suite 502, Boca Raton, Florida 33431, and our telephone number is (561) 589-7020.
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| Securities offered | 16,666,667 shares of common stock or Pre-funded Warrants to purchase an aggregate of 16,666,667 shares of common stock. | |
| Pre-funded Warrants we are offering | We are also offering to those purchasers whose purchase of common stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock immediately following the closing of this offering, in lieu of purchasing common stock, Pre-funded Warrants to purchase an aggregate of 16,666,667 shares of our common stock. Each Pre-funded Warrant is exercisable for one share of our common stock. The purchase price of each Pre-funded Warrant is equal to the price at which a share of common stock is being sold to the public in this offering, minus $0.0001, and the exercise price of each Pre-funded Warrant is $0.0001 per share. The Pre-funded Warrants are exercisable immediately and may be exercised at any time until all of the Pre-funded Warrants are exercised in full. This offering also relates to the shares of common stock issuable upon exercise of any Pre-funded Warrants sold in this offering. For each Pre-funded Warrant that we sell, the number of shares of common stock that we are offering will be reduced on a one-for-one basis. | |
| Shares of Common stock outstanding immediately before this offering | 4,765,729 shares of common stock. | |
| Shares of Common stock to be outstanding after this offering | 21,432,396 shares of common stock (assuming no issuance or exercise of Pre-funded Warrants). | |
| Use of proceeds | Assuming that 16,666,667 shares are sold in this offering at an assumed public offering price of $0.36 per share, which was the reported closing price per share of our common stock on Nasdaq on May 2, 2025, and assuming no issuance of Pre-funded Warrants, we estimate the net proceeds of the offering, after the deduction of underwriting discounts and commission and estimated other offering expenses will be approximately $5,500,000. We intend to use the net proceeds from this offering as follows: (i) up to $1,500,000 for marketing and advertising services to communicate information about the Company to the financial community including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company, and (ii) the remaining amount for (a) repayment of certain outstanding liabilities of up to approximately $1,100,000 including paying in part or in whole accounts payable relating to ImmunogenX, LLC of approximately $695,000 which the Company has agreed to retain on its balance sheets under the Rescission Agreement, and (b) $2,900,000 to advance the development of our lead product candidate, Adrulipase. Notwithstanding the foregoing however, in the event the transactions contemplated under the Rescission Agreement are not consummated, we intend to use the net proceeds from the sale of our securities under this offering as follows: (i) up to $1,500,000 for marketing and advertising services to communicate information about the Company to the financial community including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company, (ii) up to approximately $2,000,000 for the repayment of accounts payable and debt relating to ImmunogenX, LLC subject to negotiations with vendors on a case by case basis, and (iii) balance remaining will be used to advance the development of our lead product candidate, Adrulipase. Our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds from this offering. See “Use of Proceeds”. Also see “Risk Factors” for a discussion of certain risks that may affect our intended use of the net proceeds from this offering. | |
| Risk factors | Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 18 of this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common stock. | |
| Nasdaq symbol | Shares of our common stock are listed on Nasdaq under the symbol “ENTO”. |
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Unless otherwise indicated, all information contained in this prospectus assumes the sale the shares offered hereby at an assumed public offering price of $0.36 per share and no sale of any Pre-funded Warrants. The number of shares of our common stock that are and will be outstanding immediately before and after this offering as shown above is based on 4,765,729 shares outstanding as of May 9, 2025. The number of shares outstanding as of May 9, 2025, as used throughout this prospectus, unless otherwise indicated, excludes, as of that date:
| • | 16,224 shares of common stock issuable upon the exercise of outstanding stock options with a weighted-average exercise price of $54.94 per share; |
| • | 4,927,691 shares of common stock issuable upon the exercise of outstanding warrants with a weighted-average exercise price of $6.75 per share; |
| • | 969,356 total shares authorized under the 2020 Plan’s evergreen provision, of which 150,823 were issued and outstanding and 818,533 shares were available for potential issuances; |
| • | 12,373.226 shares of common stock issuable upon conversion of 12,373.226 shares of Series G Preferred Stock; and |
| • | 113 shares of common stock issuable upon conversion of 475.56 shares of Series B Preferred Stock. |
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An investment in our securities involves a high degree of risk. You should carefully consider the following risks and all of the other information contained or incorporated by reference in this prospectus before deciding whether to invest in our securities , including the risks and uncertainties described below and under the caption “Risk Factors” in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the SEC, in each case as these risk factors are amended or supplemented by subsequent Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q. Our business, financial condition, results of operations and future prospects may be adversely affected as a result of such risks. In such an event, the market price of our common stock could decline, and you could lose part or all of your investment.
Risks Relating to this Offering and Ownership of Our Securities
Our current dependency on external funding for our operations raises a substantial doubt about our ability to continue as a going concern. If we do not continue as a going concern, investors could lose their entire investment.
The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern. We have incurred significant operating losses and negative cash flows from operations since inception. On December 31, 2024, we had cash and cash equivalents of approximately $0.2 million, and an accumulated deficit of approximately $202.4 million. We have incurred recurring losses, have experienced recurring negative operating cash flows, and require significant cash resources to execute our business plans. Subsequent to December 31, 2024, we closed on a revolving loan agreement in the principal amount of $2.0 million. Based on cash on hand at December 31, 2024 and the available loan proceeds and assuming successful financing efforts and the closing of the Rescission Agreement, which we cannot guarantee, we anticipate having sufficient cash to fund planned operations through September 2025. Historically, our major sources of cash have been comprised of proceeds from various public and private offerings of its capital stock. We are dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute our development plans and continue operations.
We have been, and are expected to continue, exploring various potential strategies available including but not limited to raising capital, restructuring our indebtedness and identifying and evaluating potential strategic alternatives but there can be no assurance that these efforts will be successful, that the Company will be able to raise necessary capital on acceptable terms, reach agreement with lenders, or that the strategic review process will result in the Company pursuing any transaction or that any transaction, if pursued, will be completed on attractive terms or at all. We are evaluating all potential strategic options, including a merger, reverse merger, sale, wind-down, liquidation and dissolution or other strategic transaction. Additionally, there can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated or lead to increased stakeholder value or that it will make any cash distributions to stockholders. Any failure in these efforts could force us to delay, limit or terminate operations, make reductions in our workforce, discontinue research and development programs, liquidate all or a portion of assets or pursue other strategic alternatives, and/or seek protection under the provisions of the U.S. Bankruptcy Code.
Without adequate working capital, we may not be able to meet our obligations and continue as a going concern. Even assuming successful financing efforts of this offering, which we cannot guarantee, these conditions raise substantial doubt about our ability to continue as a going concern one year from the date the financial statements for the year ended December 31, 2024 were issued. We believe that the net proceeds of this offering, accounting for payments made to IR Agency LLC and together with our existing cash, will enable us to fund our operations for at least ten (10) months following the completion of this offering. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect. Further, while a part of the net proceeds from this offering will help restart the Adrulipase program, we believe that additional capital will be needed to begin a Phase 3 clinical trial for Adrulipase. In this regard, we plan to seek follow-on financing by the end of the third quarter of 2025, which will be used solely to fund the Phase 3 trials. If the Company is not able to obtain necessary capital, we may be required to terminate operations, liquidate all or a portion of assets and/or seek bankruptcy protection. As a result, we have concluded that our plans at this stage do not alleviate substantial doubt about the ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Pre-funded Warrants will not be listed or quoted on any exchange.
There is no established public trading market for the Pre-funded Warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the Pre-funded Warrants on any national securities exchange or other nationally recognized trading system. Without an active market, the liquidity of the Pre-funded Warrants will be limited.
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Except as otherwise provided in the Pre-funded Warrants, holders of Pre-funded Warrants will have no rights as stockholders until such holders exercise their Pre-funded Warrants and acquire our common stock.
Except as otherwise provided in the Pre-funded Warrants, until holders of Pre-funded Warrants acquire our common stock upon exercise of the Pre-funded Warrants, holders of Pre-funded Warrants will have no rights with respect to our common stock underlying such Pre-funded Warrants. Upon exercise of the Pre-funded Warrants, the holders will be entitled to exercise the rights of a holder of our common stock only as to matters for which the record date occurs after the exercise date.
The Pre-funded Warrants are speculative in nature.
The Pre-funded Warrants offered hereby do not confer any rights of ownership of our shares of common stock on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of common stock at a fixed price. Specifically, commencing on the date of issuance, holders of the Pre-funded Warrants may acquire shares of common stock issuable upon exercise of such warrants at an exercise price of $0.0001 per share of common stock. Moreover, following this offering, the market value of the Pre-funded Warrants is uncertain, and there can be no assurance that the market value of the Pre-funded Warrants will equal or exceed their public offering price.
You will experience immediate and substantial dilution as a result of this offering.
As of December 31, 2024, our net tangible book value was approximately $(7,249,720), or approximately $(1.52) per share. Since the effective price per share of our Common Stock being offered in this offering is substantially higher than the net tangible book value per share of our Common Stock, you will suffer substantial dilution with respect to the net tangible book value of the Common Stock you purchase in this offering. Based on the assumed public offering price of $0.36 per share of Common Stock being sold in this offering and our net tangible book value per share as of December 31, 2024, if you purchase shares of Common Stock or Pre-Funded Warrants in this offering, you will suffer immediate and substantial dilution of $(0.44) per share with respect to the net tangible book value of the Common Stock. If any Pre-Funded Warrants are sold in the offering, the exercise of such Pre-Funded Warrants will increase the number of shares of common stock issued and outstanding, which will dilute the ownership interests of existing stockholders. To the extent that options that are currently outstanding are exercised, there will be further dilution to your investment. We may also issue additional common stock, options and other securities in the future that may result in further dilution of your shares of our common stock.
Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of shares of our Common Stock.
Shares of our Common Stock are currently listed on The Nasdaq Stock Market LLC. We must satisfy the continued listing requirements of Nasdaq to maintain the listing of our shares of Common Stock on The Nasdaq Stock Market LLC.
On August 17, 2023, we received a notice from the Listing Qualifications Staff (the “Staff”) of Nasdaq indicating that we were not in compliance with the $2.5 million minimum stockholders’ equity requirement for continued listing of the shares of our Common Stock on Nasdaq, as set forth in Nasdaq Listing Rule 5550(b)(1) (the “Minimum Stockholders’ Equity Rule”). In that regard, we reported a stockholders’ deficit of $881,960 in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 (we did not then, and do not now, meet the alternative compliance standards relating to the market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years). On October 2, 2023, we submitted a plan to the Staff to regain compliance with the Minimum Stockholders’ Equity Rule. On November 13, 2023, we filed our Quarterly Report on Form 10-Q for the period ended September 30, 2023, reporting total stockholders’ equity of $3,278,805 as of September 30, 2023.
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As we have previously reported, on August 24, 2023, we received a notice (the “Minimum Bid Price Notice”) from the Staff indicating that, based upon the closing bid price of the shares of our Common Stock for the last 30 consecutive business days, we were not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2). We were provided a compliance period of 180 calendar days from the date of the Notice, or until February 20, 2024, to regain compliance with the minimum bid price rule. If at any time before February 20, 2024, the closing bid price of the shares of our Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, subject to Nasdaq’s discretion to extend this period to 20 consecutive business days, Nasdaq will provide written notification that we have achieved compliance with the minimum bid price requirement, and the matter would be resolved. On January 4, 2024, we received notice from Nasdaq Listing Qualifications stating that the Staff had determined that for the prior eleven consecutive business days, from December 18, 2023, to January 3, 2024, the closing bid price of our Common Stock had been at $1.00 per share or greater, and accordingly, we had regained compliance with the Bid Price Rule.
On October 26, 2023, we received notice from the Staff of Nasdaq indicating that, in connection with our July 2023 Offering, we were not in compliance with the requirement for prior shareholder approval for transactions, other than public offerings, involving the issuance of 20% or more of the pre-transaction shares outstanding at less than the Minimum Price, defined as a price that is the lower of: (i) the Nasdaq official closing price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement; or (ii) the average Nasdaq official closing price per share of the Common Stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement. On December 12, 2023, during the Special Meeting, our stockholders ratified our entry into the July 2023 Offering as we received the affirmative vote of the majority of the votes cast by shares of our Common Stock present or represented by proxy and entitled to vote at the Special Meeting. On March 19, 2024, we received the Letter of Reprimand from the Nasdaq Listing Qualifications Staff stating that, while we failed to comply with Nasdaq’s continued listing requirements, our violation of Nasdaq Listing Rule 5635(d) does not appear to have been the result of a deliberate intent to avoid compliance, and as such, the Staff does not believe that delisting our securities is an appropriate sanction and that it is appropriate to close these matters by issuing the Letter of Reprimand.
We received a letter on September 6, 2024 from the Listing Qualifications Staff of Nasdaq indicating that, based upon the closing bid price of our Common Stock for the last 30 consecutive business days, the Company was not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided 180 days, or until March 5, 2025, to regain compliance with the minimum bid price requirement.
On March 6, 2025, we received a letter from Nasdaq advising that we had been granted a 180-day extension, or until September 1, 2025, to regain compliance with the minimum bid price requirement. If at any time prior to September 1, 2025, the bid price per share of our Common Stock closes at $1.00 or more for a minimum of 10 consecutive business days (or subject to Nasdaq’s discretion to extend this period, for more than 10 consecutive business days, but generally not more than 20 consecutive business days), we will regain compliance with the minimum bid price requirement.
The extension notice has no immediate effect on the listing the shares of our Common Stock on Nasdaq and does not affect our reporting requirements with the Securities and Exchange Commission. If we do not regain compliance with the minimum bid price requirement during the additional 180-day extension, Nasdaq will provide written notification that shares of our Common Stock will be delisted. At that time, we may appeal the delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if the Company does appeal the delisting determination by Nasdaq to the hearings panel, that such appeal would be successful. There can be no assurance that we will regain compliance with the minimum bid price requirement during the additional 180-day compliance period ending September 1, 2025 or maintain compliance with any other Nasdaq listing requirement. We intend to monitor the closing bid price of our Common Stock and may, if appropriate, consider implementing available options to regain compliance with the minimum bid price requirement.
On January 7, 2025, we received a written notice from the Listing Qualifications department of Nasdaq indicating that were not in compliance with Nasdaq continued listing requirements, due to our not holding an annual meeting of stockholders within one year of our 2023 fiscal year end. On February 21, 2025, we submitted a plan to regain compliance. On March 3, 2025, Nasdaq informed us that it has determined to grant us an extension until June 30, 2025 to regain compliance for continued listing.
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Further, our stockholders’ equity as of December 31, 2024 was ($3,876,738), which is below the $2.5 million of stockholders’ equity required under the Minimum Stockholders’ Equity Rule. In this regard, on April 11, 2025, we received notice from the Staff indicating that we were not in compliance with the minimum stockholders’ equity requirement as set forth under the Minimum Stockholders’ Equity Rule. Under the notice, we have been provided with 45 days to submit a plan to regain compliance with the stockholders’ equity requirement for Nasdaq's consideration, and if the plan is accepted, to be granted an extension period of up to 180 calendar days from the date of the deficiency notice to regain compliance. We expect to submit the compliance plan to the Staff within the prescribed time period. If the plan is not accepted or if we are unable to regain compliance within any extension period granted by Nasdaq, Nasdaq would be required to issue a delisting determination, which we expect we would be entitled to request a hearing before a Nasdaq Hearings Panel to present a plan to regain compliance and to request a further extension period to regain compliance.
There can be no assurance that we will be able to ultimately regain and sustain compliance with all applicable requirements for continued listing on Nasdaq. In 2020, the SEC approved a previously proposed Nasdaq rule change to expedite delisting of securities with a closing bid price at or below $0.10 for 10 consecutive trading days during any bid price compliance period and that have had one or more reverse stock splits with a cumulative ratio of one for 250 or more shares over the prior two-year period. In addition, if a company falls out of compliance with the $1.00 minimum bid price after completing reverse stock splits over the immediately preceding two years that cumulatively result in a ratio one for 250 shares, the company will not be able to avail itself of any bid price compliance periods under Rule 5810(c)(3)(A), and Nasdaq will instead require the issuance of a Staff delisting determination. We could appeal the determination to a hearings panel, which could grant us a 180-day exception to remain listed if it believes we would be able to achieve and maintain compliance with the bid price requirement. Following the exception, the company would be subject to the procedures applicable to a company with recurring deficiencies.
In the event that we are unable to regain and sustain compliance with all applicable requirements for continued listing on the Nasdaq, our Common Stock may be delisted from Nasdaq. If our Common Stock were delisted from Nasdaq, trading of our Common Stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQB® Venture Market or the OTC Pink Market (or the successors to the OTC Pink Market planned for July 1, 2025) maintained by OTC Markets Group, Inc. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our Common Stock on an over-the-counter market, and many investors would likely not buy or sell our Common Stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. In addition, delisting would materially and adversely affect our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our Common Stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and to raise capital.
If shares of our common stock become subject to the penny stock rules, it would become more difficult to trade our shares.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on Nasdaq or another national securities exchange and if the price of our shares of common stock is less than $5.00 per share, our common stock could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares. In addition, the regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our Common Stock.
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Our management will have broad discretion over the use of the net proceeds from this offering.
We currently intend to use the net proceeds from the sale of our securities under this offering as follows: (i) up to $1,500,000 for marketing and advertising services to communicate information about the Company to the financial community including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company, and (ii) the remaining amount for (a) repayment of certain outstanding liabilities up to $1,100,000 including paying in part or whole accounts payable relating to ImmunogenX, LLC of approximately $695,000 which the Company has agreed to retain on its balance sheets under the Rescission Agreement, and (b) $2,900,000 to advance the development of our lead product candidate, Adrulipase. Notwithstanding the foregoing however, in the event the transactions contemplated under the Rescission Agreement are not consummated, we intend to use the net proceeds from the sale of our securities under this offering as follows: (i) up to $1,500,000 for marketing and advertising services to communicate information about the Company to the financial community including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company, and (ii) approximately $2,000,000 for the repayment of accounts payable and debt relating to ImmunogenX, LLC subject to negotiations with vendors on a case by case basis, and (b) to the remainder of the proceeds to advance the development of its lead product candidate, Adrulipase.
Further, while a part of the net proceeds from this offering will help restart the Adrulipase program, we believe that additional capital will be needed to begin a Phase 3 clinical trial for Adrulipase. In this regard, we plan to seek follow-on financing by the end of the third quarter of 2025, which will be used solely to fund the Phase 3 trials. We have not reserved or allocated specific amounts for any of these purposes and we cannot specify with certainty how we will use the net proceeds. Accordingly, our management will have considerable discretion in the application of the net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. We may use the net proceeds for corporate purposes that do not increase our operating results or market value. See “Use of Proceeds”.
We will require additional financing to advance the development of our lead product candidate, Adrulipase, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital could force us to delay, limit, reduce or terminate our product development programs, potential commercialization efforts or other operations.
The development of biopharmaceutical product candidates is capital-intensive. Our operations have consumed substantial amounts of cash since inception. We intend to use part of the net proceeds from this offering to advance the Adrulipase program through hiring personnel, on working capital, and on other direct and indirect costs required to prepare the Adrulipase program for future clinical milestones. While this part of the net proceeds will help restart the Adrulipase program, we believe that additional capital will be needed to begin a Phase 3 clinical trial for Adrulipase. In this regard, we plan to seek follow-on financing by the end of the third quarter of 2025, which will be used solely to fund the Phase 3 trials. Because the design and outcome of our ongoing, anticipated and any future clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of any product candidate we develop.
Our future capital requirements depend on many factors, including:
| · | the scope, progress, results and costs of researching and developing Adrulipase and programs, and of conducting preclinical studies and clinical trials; |
| · | the timing of, and the costs involved in, obtaining marketing approvals for Adrulipase if clinical trials are successful; |
| · | the success of any future collaborations; |
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| · | the cost of commercialization activities for any approved product, including marketing, sales and distribution costs; |
| · | the cost and timing of establishing, equipping, and operating our current and planned manufacturing activities; |
| · | the cost of manufacturing Adrulipase for clinical trials in preparation for marketing approval and commercialization; |
| · | our ability to establish and maintain strategic licensing or other arrangements and the financial terms of such agreements; |
| · | the cost, timing and outcome of seeking FDA and any other regulatory approvals for any future product candidates; |
| · | the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation or other patent challenge costs and the outcome of such litigation or other patent challenges; |
| · | our ability to establish and maintain healthcare coverage and adequate reimbursement for our future products, if any; |
| · | the timing, receipt, and amount of sales of, or royalties on, our future products, if any; |
| · | the emergence of competing cancer therapies and other adverse market developments; |
| · | our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates; |
| · | the costs associated with being a public company; |
| · | our need and ability to retain key management and hire scientific, technical, medical and business personnel; |
| · | the costs associated with expanding our facilities or building out our laboratory space; and |
We do not have any committed external source of funds or other support for our development efforts. Until we can generate sufficient product revenue to finance our cash requirements, which we may never do, we expect to finance our future cash needs through a combination of public or private equity offerings and debt financings, or other capital sources such as potential collaborations, strategic alliances, licensing arrangements and other arrangements. In addition, because the design and outcome of our anticipated and any future clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of Adrulipase. Accordingly, we will be required to obtain further funding to achieve our business objectives. If we are unable to obtain such funding on favorable terms or at all, it may have an adverse effect on our business, financial condition and results of operations.
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Future sales of our common stock could lower our stock price and dilute existing stockholders.
We may, in the future, sell additional shares of common stock or other types of our securities in subsequent public or private offerings. We cannot predict the size or terms of future issuances of our securities or the effect, if any, that future sales and issuances of our securities will have on the market price of our common stock. Sales of substantial amounts of our securities, or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock. In addition, these sales may be dilutive to existing stockholders.
Risks Related to Our Business
If the transactions under the Rescission Agreement are not consummated, it will have a material adverse impact on our business, financial condition and results of operations.
In the event the transactions contemplated under the Rescission Agreement do not close, as ImmunogenX, LLC’s holding company, we will be subject to its duties, liabilities and obligations under various contractual arrangements. Specifically, in the event of default by ImmunogenX, LLC, we will be liable for the repayment of approximately $2,436,338 of ImmunogenX, LLC’s secured debt as well as the additional approximately $46,000 of its accounts payable that we did not retain under the Rescission Agreement. The accounts payable liability of ImmunogenX, LLC retained by the Company may be further reduced from the approximately $695,000 as the Company has a right under the Rescission Agreement to negotiate the repayment of such accounts payable with the payees, with sole discretion over determining the payment amounts and timing for such payments. Further, if the rescission is not consummated, and if ImmunogenX, LLC does not timely repay its loan to Mattress Liquidators, Inc., Mattress Liquidators, Inc. may file suit against us again. Finally, as our Series G Preferred Stock is redeemable for cash at the option of the holder as we have never obtained the requisite shareholder approval required to allow its conversion into shares of our common stock, we would be required to settle potential conversion of the Series G Preferred Stock at a price per share equal to the then-current fair value of the Series G Preferred Stock, which shall be the last reported closing sale price of our common stock as of the trading day immediately prior to the conversion event. If we are subject to any or all of the above, it may have an adverse effect on our business, financial condition and results of operations.
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We estimate that the net proceeds from this offering will be approximately $5.5 million (assuming the sale of the shares offered hereby at the assumed public offering price of $0.36 per share, which was the reported closing sale price of our common stock on Nasdaq on May 2, 2025, and assuming no issuance or exercise of Pre-Funded Warrants), after deducting underwriting discounts and commissions and estimated offering expenses relating to this offering.
We currently expect to use $1,500,000 of the net proceeds from this offering for marketing and advertising services provided by IR Agency LLC, which will include creating company profiles, media distribution, and building a digital community to communicate information about the Company to the financial community. Of the remaining net proceeds, we expect to use: (a) approximately $1,100,000 to repay certain outstanding liabilities including paying in part or whole accounts payable relating to ImmunogenX, LLC of approximately $695,000 which the Company has agreed to retain on its balance sheets under the Rescission Agreement, and (b) the remainder of the proceeds, approximately $2,900,000, to advance the development of our lead product candidate, Adrulipase through hiring a Chief Medical Officer (or alternatively, a Chief Scientific Officer, depending on final internal structuring), as well as covering associated operating expenses such as personnel additions, working capital, and other direct and indirect costs required to prepare the Adrulipase program for future clinical milestones. While a part of the net proceeds from this offering will help restart the Adrulipase program, we believe that additional capital will be needed to begin a Phase 3 clinical trial for Adrulipase. In this regard, we plan to seek follow-on financing by the end of the third quarter of 2025, which will be used solely to fund the Phase 3 trials.
In the event the transactions contemplated under the Rescission Agreement are not consummated, we intend to use the net proceeds from the sale of our securities under this offering as follows: (a) up to $1,500,000 for marketing and advertising services to communicate information about the Company to the financial community including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company, (b) approximately $2 million for the repayment of accounts payable and debt relating to ImmunogenX, LLC subject to negotiations with vendors on a case by case basis, and (c) the remainder of the proceeds to advance the development of our lead product candidate, Adrulipase.
We believe that the net proceeds of this offering, accounting for payments made to IR Agency LLC and together with our existing cash, will enable us to fund our operations for at least ten (10) months following the completion of this offering. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect.
Although we currently anticipate that we will use the net proceeds from this offering as described above, there may be circumstances where a reallocation of funds is necessary. The amounts and timing of our actual expenditures will depend upon numerous factors, including permits, our operating costs and the other factors described under “Risk Factors” in this prospectus. Accordingly, our management will have flexibility in applying the net proceeds from this offering. An investor will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the proceeds.
Pending these uses, we intend to invest the funds in short-term, investment grade, interest-bearing securities. It is possible that, pending their use, we may invest the net proceeds in a way that does not yield a favorable, or any, return for us.
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The following table sets forth our cash, as well as our capitalization, as of December 31, 2024, as follows:
| ● | on an actual basis; and | |
| ● | on an as adjusted basis, giving effect to the assumed sale by us of 16,666,667 shares of common stock in this offering at an assumed public offering price of $0.36 per share, after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. |
You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our audited financial statements as of and for the year ended December 31, 2024, and the related notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2024 and incorporated by reference in this prospectus.
| Actual | As Adjusted | |||||||
| Cash Unrestricted | $ | 163,476 | 5,500,000 | |||||
| Total Liabilities | $ | 27,605,144 | $ | 27,605,144 | ||||
| Series G preferred stock- Par value $0.0001 per share; 13,000 shares designated and 12,373.226 shares issued and outstanding at December 31, 2024 | $ | 61,681,100 | $ | 61,681,100 | ||||
| Stockholders’ Equity (Deficit): | ||||||||
| Series B preferred stock- Par value $0.0001 per share; 5,194.81 shares authorized; 475.56 shares issued and outstanding at December 31, 2024 | — | $ | — | |||||
| Series C preferred stock- Par value $0.0001 per share; 75,000 shares authorized; 0 shares issued and outstanding at December 31, 2024 | — | $ | — | |||||
| Series D preferred stock- Par value $0.0001 per share; 150 shares designated; 0 shares issued and outstanding at December 31, 2024 | — | $ | — | |||||
| Series E preferred stock- Par value $0.0001 per share; 150 shares designated; 0 shares issued and outstanding at December 31, 2024 | — | $ | — | |||||
| Series F preferred stock- Par value $0.0001 per share; 7,000 shares designated; 0 shares issued and outstanding at December 31, 2024 | — | $ | — | |||||
| Common stock - Par value $0.0001 per share; 100,000,000 shares authorized; 4,754,038 shares issued and outstanding at December 31, 2024. | $ | 475 | $ | 477 | ||||
| Additional paid-in capital | $ | 198,510,795 | $ | 204,010,795 | ||||
| Accumulated deficit | $ | (202,388,008 | ) | $ | (202,388,008 | ) | ||
| Total Stockholders’ Equity (Deficit) | $ | (3,876,738 | ) | $ | 1,623,262 | |||
| Total Liabilities, Mezzanine Equity and Stockholders’ Equity (Deficit) | $ | 85,409,506 | $ | 90,909,508 | ||||
The number of shares to be outstanding immediately after giving effect to this offering as shown above is based on 4,754,038 shares outstanding as of December 31, 2024, and excludes, as of such date:
| • | 16,692 shares of common stock issuable upon the exercise of outstanding stock options with a weighted-average exercise price of $54.94 per share; |
| • | 4,927,714 shares of common stock issuable upon the exercise of outstanding warrants with a weighted-average exercise price of $6.75 per share; |
| • | 334,078 total shares authorized under the 2020 Plan’s evergreen provision, of which 156,073 were issued and outstanding and 178,005 shares were available for potential issuances; |
| • | 12,373,226 shares of common stock issuable upon conversion of 12,373,226 shares of Series G Preferred Stock; and |
| • | 113 shares of common stock issuable upon conversion of 475.56 shares of Series B Preferred Stock. |
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If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the public offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock immediately after this offering. As of December 31, 2024, our historical net tangible book value was $(7,249,720), or $(1.52) per share. Our historical net tangible book value is the amount of our total tangible assets less our total liabilities. Historical net tangible book value per share represents historical net tangible book value divided by 4,754,038 shares as of December 31, 2024.
After giving effect to the assumed sale of 16,666,667 shares of our common stock at an assumed public offering price of $0.36 per share, the closing sale price per share of our common stock on the Nasdaq Capital Market on May 2, 2025, assuming no sale of any Pre-funded Warrants in this offering, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted, net tangible book value per share as of December 31, 2024, would have been approximately $(1,749,820), or approximately $(0.08) per share. This represents an immediate increase in net tangible book value per share of $1.44 to existing stockholders and an immediate dilution of approximately $(0.44) per share to new investors purchasing shares of our common stock in this offering. Dilution per share to new investors is determined by subtracting as adjusted net tangible book value per share after this offering from the assumed public offering price per share paid by new investors.
The following table illustrates this dilution on a per share basis:
| Assumed public offering price per share | $ | 0.36 | ||
| Historical net tangible book value per share as of December 31, 2024 | $ | (1.52 | ) | |
| Increase in as adjusted net tangible book value per share attributable to this offering | $ | 1.44 | ||
| As adjusted net tangible book value per share after giving effect to this offering | $ | (0.08 | ) | |
| Dilution in as adjusted net tangible book value per share to new investors in this offering | $ | (0.44 | ) |
The information above is based on 4,754,038 shares outstanding as of December 31, 2024, and excludes, as of such date:
| • | 16,692 shares of common stock issuable upon the exercise of outstanding stock options with a weighted-average exercise price of $54.94 per share; |
| • | 4,927,714 shares of common stock issuable upon the exercise of outstanding warrants with a weighted-average exercise price of $6.75 per share; |
| • | 334,078 total shares authorized under the 2020 Plan’s evergreen provision, of which 156,073 were issued and outstanding and 178,005 shares were available for potential issuances; |
| • | 12,373,226 shares of common stock issuable upon conversion of 12,373.226 shares of Series G Preferred Stock; and |
| • | 113 shares of common stock issuable upon conversion of 475.56 shares of Series B Preferred Stock. |
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We have not paid any dividends on our common stock since inception and we currently expect that, in the foreseeable future, all earnings, if any, will be retained for the development of our business and no dividends will be declared or paid. Any future dividends will be subject to the discretion of our Board of Directors and will depend upon, among other things, our earnings, if any, operating results, financial condition and capital requirements, general business conditions and other pertinent facts.
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The following is a summary of information concerning capital stock of Entero Therapeutics, Inc. (“us,” “our,” “we” or the “Company”) and certain provisions of our certificate of incorporation, as amended and restated, and amended and restated bylaws currently in effect. This summary does not purport to be complete and is qualified in its entirety by the provisions of our amended and restated certificate of incorporation, as amended (the “Charter”) and amended and restated bylaws (the “Bylaws”), each previously filed with the Securities and Exchange Commission (“SEC”) and incorporated by reference as an exhibit to the Annual Report on Form 10-K, as amended, as well as to the applicable provisions of the Delaware General Corporation Law (the “DGCL”). We encourage you to read our Charter, Bylaws and the applicable portions of the DGCL carefully.
General
Our authorized capital stock consists of:
| • | 100,000,000 shares of common stock, par value $0.0001 per share; and |
| • | 10,000,000 shares of preferred stock, par value $0.0001 per share. |
Common Stock
Holders of our common stock are entitled to one vote for each share held of record on all matters on which the holders are entitled to vote (or consent pursuant to written consent). Directors are elected by a plurality of the votes present in person or represented by proxy and entitled to vote. Our Charter and Bylaws do not provide for cumulative voting rights.
Holders of our common stock are entitled to receive, ratably, dividends only if, when and as declared by our Board of Directors out of funds legally available therefor and after provision is made for each class of capital stock having preference over the common stock.
In the event of our liquidation, dissolution or winding-up, the holders of common stock are entitled to share, ratably, in all assets remaining available for distribution after payment of all liabilities and after provision is made for each class of capital stock having preference over the common stock.
Holders of our common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.
Preferred Stock
We currently have up to 10,000,000 shares of preferred stock, par value $0.0001 per share, authorized and available for issuance in one or more series. Our Board of Directors is authorized to divide the preferred stock into any number of series, fix the designation and number of each such series, and determine or change the designation, relative rights, preferences, and limitations of any series of preferred stock. The Board of Directors may increase or decrease the number of shares initially fixed for any series, but no decrease may reduce the number below the shares then outstanding and duly reserved for issuance. Currently, 5,194.805195 shares have been initially designated as Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), 75,000 shares have been initially designated as Series C 9.00% Convertible Junior Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”), 150 shares have been initially designated as Series D Convertible Preferred Stock, par value $0.0001 per share (the “Series D Preferred Stock”), 150 shares have been initially designated as Series E Convertible Preferred Stock, par value $0.0001 per share (the “Series E Preferred Stock”), 7,000 shares have been initially designated as Series F Preferred Stock, par value $0.0001 (the “Series F Preferred Stock”) and 13,000 shares have been initially designated as Series G Preferred Stock, par value $0.0001 (the “Series G Preferred Stock”). There were 475.56 shares of Series B Preferred Stock and 12,373.226 shares of Series G Preferred Stock issued and outstanding on March 31, 2025 and there are currently no shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock issued and outstanding. This leaves 9,899,505.19 shares of preferred stock authorized but undesignated and unissued.
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Series B Preferred Stock
Under the Series B Certificate of Designation, each share of Series B Preferred Stock will be convertible, at the holder’s option at any time, into our common stock at a conversion rate equal to the quotient of (i) the $7,700 stated value (the “Series B Stated Value”) divided by (ii) the initial conversion price of $1,617.00, subject to specified adjustments for stock splits, cash or stock dividends, reorganizations, reclassifications other similar events as set forth in the Series B Certificate of Designation. In addition, if at any time after January 16, 2021, the six month anniversary of the date of the closing of our private placement transaction on July 16, 2020, the closing sale price per share of our common stock exceeds 250% of the initial conversion price, or $4,042.50, for 20 consecutive trading days, then all of the outstanding shares of Series B Preferred Stock will automatically convert (the “Automatic Conversion”) into such number of shares of our common stock as is obtained by multiplying the number of shares of Series B Preferred Stock to be so converted, plus the amount of any accrued and unpaid dividends thereon, by the Series B Stated Value per share and dividing the result by the then applicable conversion price.
The Series B Preferred Stock contains limitations that prevent the holder thereof from acquiring shares of our common stock upon conversion (including pursuant to the Automatic Conversion) that would result in the number of shares beneficially owned by such holder and its affiliates exceeding 9.99% of the total number of shares of our common stock outstanding immediately after giving effect to the conversion, which percentage may be increased or decreased at the holder’s election not to exceed 19.99%.
Each holder of shares of Series B Preferred Stock, in preference and priority to the holders of all other classes or series of our stock, is entitled to receive dividends, commencing from the date of issuance. Such dividends may be paid by us only when, as and if declared by our Board of Directors, out of assets legally available therefore, semiannually in arrears on the last day of June and December in each year, commencing December 31, 2020, at the dividend rate of 9.0% per year, which is cumulative and continues to accrue on a daily basis whether or not declared and whether or not we have assets legally available therefore. We may pay such dividends at our sole option either in cash or in kind in additional shares of Series B Preferred Stock (rounded down to the nearest whole share), provided we must pay in cash the fair value of any such fractional shares in excess of $100.00. Under the Series B Certificate of Designations, to the extent that applicable law or any of our existing contractual restrictions prohibit any required issuance of additional shares of Series B Preferred Stock as in-kind dividends or otherwise (“Additional Shares”), then appropriate adjustment to the conversion price of the Series B Preferred Stock shall be made so that the resulting number of conversion shares includes the aggregate number of shares of our common stock into which such Additional Shares would otherwise be convertible.
Under the Series B Certificate of Designation, each share of Series B Preferred Stock carries a liquidation preference equal to the Series B Stated Value (as adjusted thereunder) plus accrued and unpaid dividends thereon (the “Series B Liquidation Preference”).
The holders of the Series B Preferred Stock, voting as a separate class, will have customary consent rights with respect to certain corporate actions by us. We may not take the following actions without the prior consent of the holders of at least a majority of the Series B Preferred Stock then outstanding: (a) authorize, create, designate, establish, issue or sell an increased number of shares of Series B Preferred Stock or any other class or series of capital stock ranking senior to or on parity with the Series B Preferred Stock as to dividends or upon liquidation; (b) reclassify any shares of common stock or any other class or series of capital stock into shares having any preference or priority as to dividends or upon liquidation superior to or on parity with any such preference or priority of Series B Preferred Stock; (c) amend, alter or repeal our Charter or Bylaws and the powers, preferences, privileges, relative, participating, optional and other special rights and qualifications, limitations and restrictions thereof, which would adversely affect any right, preference, privilege or voting power of the Series B Preferred Stock; (d) issue any indebtedness or debt security, other than trade accounts payable, insurance premium financings and/or letters of credit, performance bonds or other similar credit support incurred in the ordinary course of business, or amend, renew, increase, or otherwise alter in any material respect the terms of any such indebtedness existing as of the date of first issuance of shares of Series B Preferred Stock; (e) redeem, purchase, or otherwise acquire or pay or declare any dividend or other distribution on (or pay into or set aside for a sinking fund for any such purpose) any of our capital stock; (f) declare bankruptcy, dissolve, liquidate, or wind up our affairs; (g) effect, or enter into any agreement to effect, a Change of Control (as defined in the Series B Certificate of Designations); or (h) materially modify or change the nature of our business.
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Series C Preferred Stock
Under the Series C Certificate of Designation, each share of Series C Preferred Stock will be convertible, at either the holder’s option or at our option at any time, into common stock at a conversion rate equal to the quotient of (i) the Series C Stated Value of $750 plus all accrued and accumulated and unpaid dividends on such share of Series C Preferred Stock divided by (ii) the initial conversion price of $15,750.00, subject to specified adjustments for stock splits, cash or stock dividends, reorganizations, reclassifications other similar events as set forth in the Series C Certificate of Designation.
The Series C Preferred Stock contains limitations that prevent the holders thereof from acquiring shares of our common stock upon conversion that would result in the number of shares beneficially owned by any such holder and its affiliates exceeding 9.99% of the total number of shares of our common stock outstanding immediately after giving effect to the conversion. As a result, the Series C Certificate of Designations provides for the issuance of pre-funded warrants to purchase shares of our common stock, with an exercise price of $0.001 per share and with no expiration date, if necessary to comply with this limitation.
Each holder of shares of Series C Preferred Stock, subject to the preference and priority to the holders of our Series B Preferred Stock, is entitled to receive dividends, commencing from the date of issuance of the Series C Preferred Stock. Such dividends may be paid only when, as and if declared by our Board of Directors, out of assets legally available therefore, quarterly in arrears on the last day of March, June, September and December in each year, commencing on the date of issuance, at the dividend rate of 9.0% per year. Such dividends are cumulative and continue to accrue on a daily basis whether or not declared and whether or not we have assets legally available therefore.
Under the Series C Certificate of Designation, each share of Series C Preferred Stock carries a liquidation preference equal to the Series C Stated Value plus accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon.
The holders of the Series C Preferred Stock have no voting rights. We may not take the following actions without the prior consent of the holders of at least a majority of the Series C Preferred Stock then outstanding: (a) alter or change adversely the powers, preferences or rights given to the Series C Preferred Stock or alter or amend the Series C Certificate of Designations, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation (as defined in the Series C Certificate of Designations) senior to, or otherwise pari passu with, the Series C Preferred Stock, (c) amend our certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of the Series C Preferred Stock, (d) increase the number of authorized shares of Series C Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.
Series D Preferred Stock
The following is a summary of the principal terms of the Series D Preferred Stock as set forth in the Certificate of Designation of the Series D Preferred Stock:
Dividends
The holders of Series D Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually paid on shares of Common Stock, when and if actually paid.
Voting Rights
The shares of Series D Preferred Stock has no voting rights, except the right to vote, with the holders of Common Stock, as a single class, on any resolution presented to stockholders for the purpose of obtaining approval of a proposed amendment to the Charter, to effect a reverse split of the outstanding shares of the Common Stock at a ratio to be determined (the “Reverse Split Amendment”), with each share of Series D Preferred Stock entitled to vote on an as-converted basis (whether or not such conversion shares are then convertible and disregarding any limitations on conversion) (however, in only this instance, the Series D Preferred Stock will be considered to convert at the Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) immediately preceding the execution and delivery of the purchase agreement by and among the Company and the purchaser signatories thereto, or $41.937 per share).
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As long as any shares of Series D Preferred Stock are outstanding, the Company may not, without the approval of a majority of the then outstanding shares of Series D Preferred Stock (a) alter or change adversely the powers, preferences or rights of the Series D Preferred Stock, (b) increase the number of authorized shares of Series D Preferred Stock, or (c) enter into any agreement with respect to any of the foregoing.
Liquidation
Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the then holders of the Series D Preferred Stock shall be entitled to receive out of the assets available for distribution to stockholders of the Company an amount equal to 100% of the Stated Value and no more, prior and in preference to the Common Stock.
Conversion
The Series D Preferred Stock is convertible into Common Stock at any time after the date on which the Reverse Split Amendment is filed and effective with the Secretary of State of the State of Delaware (the “Reverse Stock Split Date”) at a conversion price of $31.50, subject to adjustment as set forth in the Series D Certificate of Designation (the “Series D Conversion Price”). Upon conversion the shares of Series D Preferred Stock will resume the status of authorized but unissued shares of preferred stock of the Company.
Conversion at the Option of the Holder
The Series D Preferred Stock is convertible at the Series D Conversion Price at the option of the holder at any time and from time to time from and after the Reverse Stock Split Date.
Mandatory Conversion and Forced Conversion by the Company
On the Reverse Stock Split Date or, if certain conditions are not satisfied on such date, on the first such date that such conditions are satisfied (but within and no later than 90 trading days after the Reverse Stock Split Date), the Company may give notice requiring the holders to convert the outstanding shares of Series D Preferred Stock into shares of Common Stock at the then-effective Series D Conversion Price on the 15th day following such notice.
Any time after November 12, 2022, subject to the satisfaction of certain conditions, the Company has the right to provide written notice to the holders to cause the holders to convert all or such part of their Series D Preferred Stock as specified in such notice into shares of Common Stock at the then-effective Series D Conversion Price on the date of such notice provided that the Company may not give such a notice more than once in any 60-day period and or within 60 days of a mandatory conversion pursuant to the provisions described in the previous paragraph.
Beneficial Ownership Limitation
The Series D Preferred Stock cannot be converted to common stock if the holder and its affiliates would beneficially own more than 4.99% (or 9.99% at the election of the holder) of the outstanding common stock. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon notice to us, provided that any increase in this limitation will not be effective until 61 days after such notice from the holder to us and such increase or decrease will apply only to the holder providing such notice.
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Preemptive Rights
No holders of Series D Preferred Stock will, as holders of Series D Preferred Stock, have any preemptive rights to purchase or subscribe for our common stock or any of our other securities.
Redemption
The shares of Series D Preferred Stock are not redeemable by the Company.
Trading Market
There is no established trading market for any of the Series D Preferred Stock, and we do not expect a market to develop. We do not intend to apply for a listing for any of the Series D Preferred Stock on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Series D Preferred Stock will be limited.
Series E Preferred Stock
The following is a summary of the principal terms of the Series E Preferred Stock as set forth in the Certificate of Designation of the Series E Preferred Stock:
Dividends
The holders of Series E Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually paid on shares of common stock, when and if actually paid.
Voting Rights
The Series E Preferred Stock has no voting rights, except the right to vote, with the holders of Common Stock and holders of Series D Preferred Stock, as a single class, on the Reverse Stock Split Amendment. Each share of Series E Preferred Stock is entitled to 200,000,000 votes per share thereon; provided, that such shares of Series E Preferred Stock will, to the extent cast on the proposal to adopt and approve the Reverse Stock Split Amendment, be automatically and without further action of the holders voted in the same proportions as shares of Common Stock (excluding any shares of Common Stock that are not voted), Series D Preferred Stock and any other issued and outstanding shares of preferred stock of the Company having the right to vote thereon (other than the Series E Preferred Stock and shares of preferred stock not voted) are voted on such proposal. As an example, if 50.5% of the outstanding shares of Common Stock and Series D Preferred Stock voted at the meeting are voted in favor of the Reverse Split Amendment, the Company will count 50.5% of the votes cast by the holders of the Series E Preferred Stock as votes in favor of the Reverse Split Amendment.
As long as any shares of Series E Preferred Stock are outstanding, the Company may not, without the approval of a majority of the then outstanding shares of Series E Preferred Stock (a) alter or change adversely the powers, preferences or rights of the Series E Preferred Stock, (b) increase the number of authorized shares of Series E Preferred Stock, or (c) enter into any agreement with respect to any of the foregoing.
Liquidation
Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the then holders of the Series E Preferred Stock shall be entitled to receive out of the assets available for distribution to stockholders of the Company an amount equal to 100% of the Stated Value and no more, prior and in preference to the Common Stock.
Conversion
The Series E Preferred Stock is convertible into Common Stock at any time after the Reverse Stock Split Date at a conversion price of $31.50, subject to adjustment as set forth in the Series E Certificate of Designation (the “Series E Conversion Price”). Upon conversion the shares of Series D Preferred Stock will resume the status of authorized but unissued shares of preferred stock of the Company.
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Conversion at the Option of the Holder
The Series E Preferred Stock is convertible at the Series E Conversion Price at the option of the holder at any time and from time to time from and after the Reverse Stock Split Date.
Mandatory Conversion and Forced Conversion by the Company
On the Reverse Stock Split Date or, if certain conditions are not satisfied on such date, on the first such date that such conditions are satisfied (but within and no later than 90 trading days after the Reverse Stock Split Date), the Company may give notice requiring the holders to convert the outstanding shares of Series E Preferred Stock into shares of Common Stock at the then-effective Series E Conversion Price on the 15th day following such notice.
Any time after November 12, 2022, subject to the satisfaction of certain conditions, the Company has the right to provide written notice to the holders to cause the holders to convert all or such part of their Series E Preferred Stock as specified in such notice into shares of Common Stock at the then-effective Series E Conversion Price on the date of such notice provided that the Company may not give such a notice more than once in any 60-day period and or within 60 days of a mandatory conversion pursuant to the provisions described in the previous paragraph.
Beneficial Ownership Limitation
The Series E Preferred Stock cannot be converted to Common Stock if the holder and its affiliates would beneficially own more than 4.99% (or 9.99% at the election of the holder) of the outstanding common stock.
However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon notice to us, provided that any increase in this limitation will not be effective until 61 days after such notice from the holder to us and such increase or decrease will apply only to the holder providing such notice.
Preemptive Rights
No holders of Series E Preferred Stock will, as holders of Series E Preferred Stock, have any preemptive rights to purchase or subscribe for our common stock or any of our other securities.
Redemption
The shares of Series E Preferred Stock are not redeemable by the Company.
Trading Market
There is no established trading market for any of the Series E Preferred Stock, and we do not expect a market to develop. We do not intend to apply for a listing for any of the Series E Preferred Stock on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Series E Preferred Stock will be limited.
Series F Preferred Stock
The following is a summary of the principal terms of the Series F Preferred Stock as set forth in the Certificate of Designation of the Series F Preferred Stock:
General; Transferability. Shares of Series F Preferred Stock will be uncertificated and represented in book-entry form. No shares of Series F Preferred Stock may be transferred by the holder thereof except in connection with a transfer by such holder of any shares of Common Stock held by such holder, in which case a number of one one-thousandths (1/1,000ths) of a share of Series F Preferred Stock equal to the number of shares of Common Stock to be transferred by such holder will be automatically transferred to the transferee of such shares of Common Stock.
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Voting Rights. Each share of Series F Preferred Stock will entitle the holder thereof to 1,000,000 votes per share (and, for the avoidance of doubt, each fraction of a share of Series F Preferred Stock will have a ratable number of votes). Thus, each 0.001 of a share of Series F Preferred Stock would entitle the holder thereof to 1,000 votes. The outstanding shares of Series F Preferred Stock will vote together with the outstanding shares of Common Stock of the Company as a single class exclusively with respect to (1) any proposal (the “Reverse Stock Split Proposal”) to adopt an amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to reclassify the outstanding shares of Common Stock into a smaller number of shares of Common Stock at a ratio specified in or determined in accordance with the terms of such amendment (the “Reverse Stock Split”) and (2) any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Reverse Stock Split (the “Adjournment Proposal”). The Series F Preferred Stock will not be entitled to vote on any other matter, except to the extent required under the Delaware General Corporation Law.
Unless otherwise provided on any applicable proxy or ballot with respect to the voting on the Reverse Stock Split Proposal or the Adjournment Proposal, the vote of each share of Series F Preferred Stock (or fraction thereof) entitled to vote on the Reverse Stock Split Proposal, the Adjournment Proposal or any other matter brought before any meeting of stockholders held to vote on the Reverse Stock Split Proposal will be cast in the same manner as the vote, if any, of the share of Common Stock in respect of which such share of Series F Preferred Stock was issued as a dividend is cast on the Reverse Stock Split Proposal, the Adjournment Proposal or such other matter, as applicable, and the proxy or ballot with respect to shares of Common Stock held by any holder on whose behalf such proxy or ballot is submitted will be deemed to include all shares of Series F Preferred Stock (or fraction thereof) held by such holder. Holders of Series F Preferred Stock will not receive a separate ballot or proxy to cast votes with respect to the Series F Preferred Stock on the Reverse Stock Split Proposal, the Adjournment Proposal or any other matter brought before any meeting of stockholders held to vote on the Reverse Stock Split Proposal.
Dividend Rights. The holders of Series F Preferred Stock, as such, will not be entitled to receive dividends of any kind.
Liquidation Preference. The Series F Preferred Stock will rank senior to the Common Stock as to any distribution of assets upon a liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily (a “Dissolution”). Upon any Dissolution, each holder of outstanding shares of Series F Preferred Stock will be entitled to be paid out of the assets of the Company available for distribution to stockholders, prior and in preference to any distribution to the holders of Common Stock, an amount in cash equal to $0.0001 per outstanding share of Series F Preferred Stock.
Redemption. All shares of Series F Preferred Stock that are not present in person or by proxy at any meeting of stockholders held to vote on the Reverse Stock Split and the Adjournment Proposal as of immediately prior to the opening of the polls at such meeting (the “Initial Redemption Time”) will automatically be redeemed in whole, but not in part, by the Company at the Initial Redemption Time without further action on the part of the Company or the holder of shares of Series F Preferred Stock (the “Initial Redemption”). Any outstanding shares of Series F Preferred Stock that have not been redeemed pursuant to an Initial Redemption will be redeemed in whole, but not in part, (i) if such redemption is ordered by the Board in its sole discretion, automatically and effective on such time and date specified by the Board in its sole discretion or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing the Reverse Stock Split.
Each share of Series F Preferred Stock redeemed in any redemption described above will be redeemed in consideration for the right to receive an amount equal to $0.001 in cash for each ten whole shares of Series F Preferred Stock that are “beneficially owned” by the “beneficial owner” (as such terms are defined in the certificate of designation with respect to the Preferred Stock (the “Certificate of Designation”)) thereof as of immediately prior to the applicable redemption time and redeemed pursuant to such redemption. However, the redemption consideration in respect of the shares of Series F Preferred Stock (or fractions thereof) redeemed in any redemption described above: (i) will entitle the former beneficial owners of less than ten whole shares of Series F Preferred Stock redeemed in any redemption to no cash payment in respect thereof and (y) will, in the case of a former beneficial owner of a number of shares of Series F Preferred Stock (or fractions thereof) redeemed pursuant to any redemption that is not equal to a whole number that is a multiple of ten, entitle such beneficial owner to the same cash payment, if any, in respect of such redemption as would have been payable in such redemption to such beneficial owner if the number of shares (or fractions thereof) beneficially owned by such beneficial owner and redeemed pursuant to such redemption were rounded down to the nearest whole number that is a multiple of ten (such, that for example, the former beneficial owner of 25 shares of Series F Preferred Stock redeemed pursuant to any redemption will be entitled to receive the same cash payment in respect of such redemption as would have been payable to the former beneficial owner of 20 shares of Series F Preferred Stock redeemed pursuant to such redemption).
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The Series F Preferred Stock is not be convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Series F Preferred Stock has no stated maturity and is not be subject to any sinking fund. The Series F Preferred Stock is not subject to any restriction on the redemption or repurchase of shares by the Company while there is any arrearage in the payment of dividends or sinking fund installments.
Series G Preferred Stock
The following is a summary of the principal terms of the Series G Preferred Stock as set forth in the Certificate of Designation of the Series G Preferred Stock:
General; Transferability. Share of Series G Preferred Stock will be uncertificated and issued in book-entry form. Shares of Series G Preferred Stock may be transferred by the holders thereof without the consent of the Company, provided that such transfer is in compliance with applicable securities laws.
Conversion. Following stockholder approval of the conversion of the Series G Preferred Stock into Common Stock in accordance with the listing rules of the Nasdaq Stock Market (the “Conversion”), each share of Series G Preferred Stock will automatically convert into 1,000 shares of Common Stock, subject to certain limitations, including that a holder of Series G Preferred Stock is prohibited from converting shares of Series G Preferred Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (to be established by the holder between 4.9% and 19.9%) of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion.
The Series G Preferred Stock is redeemable for cash at the option of the holder thereof at any time following the date that is six months after the initial issuance of the Series G Preferred Stock (without regard to the lack of obtaining the requisite stockholder approval to convert the Series G Preferred Stock into Common Stock), at a price per share equal to the then-current fair value of the Series G Preferred Stock, which shall be the last reported closing sale price of the Company’s Common Stock as reported on the Nasdaq Stock Market as of the trading day immediately prior to the conversion event.
Voting Rights. Except as otherwise required by law, the Series G Preferred Stock does not have voting rights. However, as long as any shares of Series G Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then-outstanding shares of the Series G Preferred Stock, (i) alter or change adversely the powers, preferences or rights given to the Series G Preferred Stock or alter or amend the Certificate of Designation, amend or repeal any provision of, or add any provision to, the Charter or bylaws of the Company, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of preferred stock, in each case if any such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series G Preferred Stock, regardless of whether any of the foregoing actions shall be by means of amendment to the Charter or by merger, consolidation, recapitalization, reclassification, conversion or otherwise, (ii) issue further shares of Series G Preferred Stock, (iii) prior to the earlier of stockholder approval of the Conversion or the six-month anniversary of issuance, consummate either: (A) any Fundamental Transaction (as in the Certificate of Designation) or (B) any stock sale to, or any merger, consolidation or other business combination of the Company with or into, another entity in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the capital stock of the Company immediately after such transaction, or (iv) enter into any agreement with respect to any of the foregoing.
Liquidation Preference. The Series G Preferred Stock does not have a preference upon any liquidation, dissolution or winding-up of the Company.
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Dividend Rights. Holders of Series G Preferred Stock are entitled to receive dividends on shares of Series G Preferred Stock equal to, on an as-if-converted-to-Common-Stock basis, and in the same form as dividends actually paid on shares of the Common Stock.
Redemption. The shares of Series G Preferred Stock shall not be redeemable at the option of the Company or the holder thereof.
Trading Market. There is no established trading market for any of the Series G Preferred Stock, and we do not expect a market to develop. We do not intend to apply for a listing for any of the Series G Preferred Stock on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Series G Preferred Stock will be limited.
Listing
Shares of our Common Stock are listed on the Nasdaq Capital Market under the symbol “ENTO”.
Transfer Agent and Registrar
The transfer agent and registrar for our Common Stock is Colonial Stock Transfer, 66 Exchange Place, 1st Floor, Salt Lake City, Utah 84111 and its telephone number at that address is (801) 355-5740.
Description of the Pre-Funded Warrants
The following summary of certain terms and provisions of the Pre-funded Warrants that are being offered hereby is not complete and is subject to and qualified in its entirety by the provisions of the forms of Pre-funded Warrants which is filed as an exhibit to the registration statement of which this prospectus is a part. Prospective investors should carefully review the terms and provisions of the form of Pre-funded Warrant for a complete description of the terms and conditions of the Pre-funded Warrants.
The term “prefunded” refers to the fact that the purchase price of our common stock in this offering includes almost the entire exercise price that will be paid under the Pre-funded Warrants, except for a nominal remaining exercise price of $0.001 per share. The purpose of the Pre-funded Warrants is to enable investors that may have restrictions on their ability to beneficially own more than 4.99% (or, upon election of the holder, 9.99%) of our outstanding shares of common stock following the consummation of this offering the opportunity to make an investment in the Company without triggering their ownership restrictions, by receiving Pre-funded Warrants in lieu of our common stock which would result in such ownership of more than 4.99% (or 9.99%), and receive the ability to exercise their option to purchase the shares underlying the Pre-funded Warrants at such nominal price at a later date.
Duration and Exercise Price
Each Pre-funded Warrant offered hereby will have an initial exercise price of $0.001 per share. The Pre-funded Warrants will be immediately exercisable and may be exercised at any time until the Pre-funded Warrants are exercised in full. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock and the exercise price.
Exercise Limitation
The Pre-funded Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering a duly executed exercise notice accompanied by payment in full for the number of shares of common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of the Pre-funded Warrant to the extent that the holder would own more than 4.99% (or, at the election of a purchaser, 9.99%) of the outstanding common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding stock after exercising the holder’s Pre-funded Warrants up to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-funded Warrants. No fractional shares of common stock will be issued in connection with the exercise of a Pre-funded Warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price.
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Fundamental Transaction
In the event of a fundamental transaction, as described in the Pre-funded Warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding voting securities, the holders of the Pre-funded Warrants will be entitled to receive upon exercise of the Pre-funded Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Pre-funded Warrants immediately prior to such fundamental transaction, other than one in which a successor entity that is a publicly traded corporation (whose stock is quoted or listed for trading on a national securities exchange, including, but not limited to, the New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market) assumes the common warrant such that the warrant shall be exercisable for the publicly traded common stock of such successor entity.
Transferability
Subject to applicable laws, a Pre-funded Warrant may be transferred at the option of the holder upon surrender of the Pre-funded Warrant to us together with the appropriate instruments of transfer.
Exchange Listing
We do not intend to list the Pre-funded Warrants on any securities exchange or nationally recognized trading system.
No Rights as a Stockholder
Except as otherwise provided in the Pre-funded Warrants or by virtue of such holder’s ownership of, the holders of the Pre-funded Warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise their Pre-funded Warrants.
Anti-takeover Effects of Delaware Law and our Certificate of Incorporation and Bylaws
Certain provisions of Delaware law, our Charter and Bylaws discussed below may have the effect of making more difficult or discouraging a tender offer, proxy contest or other takeover attempt. These provisions are expected to encourage persons seeking to acquire control of our company to first negotiate with our Board of Directors. We believe that the benefits of increasing our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.
Delaware Anti-Takeover Law
We are subject to Section 203 of the DGCL. Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless, prior to the date of the transaction, the Board of Directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
| • | upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding specified shares; or |
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| • | at or subsequent to the date of the transaction, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. |
Section 203 defines a “business combination” to include:
| • | any merger or consolidation involving the corporation and the interested stockholder; |
| • | any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 10% or more of the assets of the corporation to or with the interested stockholder; |
| • | subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; |
| • | subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or |
| • | the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. |
In general, Section 203 defines an “interested stockholder” as any person that is:
| • | the owner of 15% or more of the outstanding voting stock of the corporation; |
| • | an affiliate or associate of the corporation who was the owner of 15% or more of the outstanding voting stock of the corporation at any time within three years immediately prior to the relevant date; or |
| • | the affiliates and associates of the above. |
Under specific circumstances, Section 203 makes it more difficult for an “interested stockholder” to effect various business combinations with a corporation for a three-year period, although the stockholders may, by adopting an amendment to the corporation’s certificate of incorporation or bylaws, elect not to be governed by this section, effective 12 months after adoption.
Our Charter and Bylaws do not exclude us from the restrictions of Section 203. We anticipate that the provisions of Section 203 might encourage companies interested in acquiring us to negotiate in advance with our Board of Directors since the stockholder approval requirement would be avoided if a majority of the directors then in office approve either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder.
Charter and Bylaws
Provisions of our Charter and Bylaws may delay or discourage transactions involving an actual or potential change of control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of the Common Stock and Pre-funded Warrants acquired in this offering. This discussion is based on the current provisions of the Internal Revenue Code of 1986, as amended, referred to as the Code, existing and proposed U.S. Treasury regulations promulgated thereunder, and administrative rulings and court decisions in effect as of the date hereof, all of which are subject to change at any time, possibly with retroactive effect. No ruling has been or will be sought from the Internal Revenue Service, or IRS, with respect to the matters discussed below, and there can be no assurance the IRS will not take a contrary position regarding the tax consequences of the acquisition, ownership or disposition of the Common Stock and Pre-funded Warrants or that any such contrary position would not be sustained by a court.
We assume in this discussion that the shares of Common Stock and Pre-funded Warrants will be held as capital assets (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxes, does not discuss the potential application of the Medicare contribution tax or the alternative minimum tax and does not address state or local taxes or U.S. federal gift and estate tax laws, except as specifically provided below with respect to non-U.S. holders, or any non-U.S. tax consequences that may be relevant to holders in light of their particular circumstances. This discussion also does not address the special tax rules applicable to particular holders, such as:
| ● | persons who acquired our Common Stock and Pre-funded Warrants as compensation for services; |
| ● | traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; |
| ● | persons that own, or are deemed to own, more than 5% of our Common Stock (except to the extent specifically set forth below); |
| ● | persons required for U.S. federal income tax purposes to conform the timing of income accruals to their financial statements under Section 451(b) of the Code (except to the extent specifically set forth below); |
| ● | persons for whom our Common Stock constitutes “qualified small business stock” within the meaning of Section 1202 of the Code or “Section 1244 stock” for purposes of Section 1244 of the Code; |
| ● | persons deemed to sell our Common Stock and Pre-funded Warrants under the constructive sale provisions of the Code; |
| ● | banks or other financial institutions; |
| ● | brokers or dealers in securities or currencies; |
| ● | tax-exempt organizations or tax-qualified retirement plans; |
| ● | pension plans; |
| ● | regulated investment companies or real estate investment trusts; |
| ● | persons that hold the Common Stock and Pre-funded Warrants as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment; |
| ● | insurance companies; |
| ● | controlled foreign corporations, passive foreign investment companies, or corporations that accumulate earnings to avoid U.S. federal income tax; and |
| ● | certain U.S. expatriates, former citizens, or long-term residents of the United States. |
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In addition, this discussion does not address the tax treatment of partnerships (including any entity or arrangement classified as a partnership for U.S. federal income tax purposes) or other pass-through entities or persons who hold shares of Common Stock through such partnerships or other entities which are pass-through entities for U.S. federal income tax purposes. If such a partnership or other pass-through entity holds shares of Common Stock and Pre-funded Warrants, the treatment of a partner in such partnership or investor in such other pass-through entity generally will depend on the status of the partner or investor and upon the activities of the partnership or other pass-through entity. A partner in such a partnership and an investor in such other pass-through entity that will hold shares of Common Stock and Pre-funded Warrants should consult his, her or its own tax advisor regarding the tax consequences of the ownership and disposition of shares of Common Stock and Pre-Funded through such partnership or other pass-through entity, as applicable.
This discussion of U.S. federal income tax considerations is for general information purposes only and is not tax advice. Prospective investors should consult their own tax advisors regarding the U.S. federal, state, local and non-U.S. income and other tax considerations of acquiring, holding and disposing of our Common Stock and Pre-funded Warrants.
For the purposes of this discussion, a “U.S. Holder” means a beneficial owner of shares of Common Stock and Pre-funded Warrants that is for U.S. federal income tax purposes (a) an individual citizen or resident of the United States, (b) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes), created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (c) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (d) a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code) has the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a domestic trust. A “Non-U.S. Holder” is, for U.S. federal income tax purposes, a beneficial owner of shares of Common Stock and Pre-funded Warrants that is not a U.S. Holder or a partnership for U.S. federal income tax purposes.
Treatment of Pre-funded Warrants
Although it is not entirely free from doubt, a pre-funded warrant should be treated as a share of Common Stock for U.S. federal income tax purposes and a holder of Pre-funded Warrants should generally be taxed in the same manner as a holder of Common Stock, as described below. Accordingly, no gain or loss should be recognized upon the exercise of a Pre-Funded Warrant and, upon exercise, the holding period of a Pre-Funded Warrant should carry over to the share of Common Stock received. Similarly, the tax basis of the Pre-Funded Warrant should carry over to the share of Common Stock received upon exercise, increased by the exercise price of $0.00001 per share. Each holder should consult his, her or its own tax advisor regarding the risks associated with the acquisition of Pre-funded Warrants pursuant to this offering (including potential alternative characterizations). The balance of this discussion generally assumes that the characterization described above is respected for U.S. federal income tax purposes.
Tax Considerations Applicable to U.S. Holders
Distributions
As discussed above, we currently anticipate that we will retain future earnings, if any, to finance the growth and development of our business and do not intend to pay cash dividends in respect of shares of Common Stock in the foreseeable future. In the event that we do make distributions on our Common Stock to a U.S. Holder, those distributions generally will constitute dividends for U.S. tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that is applied against and reduces, but not below zero, a U.S. Holder’s adjusted tax basis in our Common Stock. Any remaining excess will be treated as gain realized on the sale or exchange of shares of Common Stock as described below under the section titled “Disposition of Common Stock and Pre-funded Warrants.”
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Certain Adjustments to Pre-funded Warrants
The number of shares of Common Stock issued upon the exercise of the Pre-funded Warrants and the exercise price of Pre-funded Warrants are subject to adjustment in certain circumstances. Adjustments (or failure to make adjustments) that have the effect of increasing a U.S. Holder’s proportionate interest in our assets or earnings and profits may, in some circumstances, result in a constructive distribution to the U.S. Holder. Adjustments to the conversion rate made pursuant to a bona fide reasonable adjustment formula which has the effect of preventing the dilution of the interest of the holders of Pre-funded Warrants generally should not be deemed to result in a constructive distribution. If an adjustment is made that does not qualify as being made pursuant to a bona fide reasonable adjustment formula, a U.S. Holder of Pre-funded Warrants may be deemed to have received a constructive distribution from us, even though such U.S. Holder has not received any cash or property as a result of such adjustment. The tax consequences of the receipt of a distribution from us are described above under “Distributions.”
Disposition of Common Stock and Pre-funded Warrants
Upon a sale or other taxable disposition (other than a redemption treated as a distribution, which will be taxed as described above under “Distributions”) of shares of Common Stock and, Pre-funded Warrants, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in the Common Stock and, Pre-funded Warrants sold. Capital gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s holding period for the Common Stock and Pre-funded Warrants exceeds one year. The deductibility of capital losses is subject to certain limitations. U.S. Holders who recognize losses with respect to a disposition of shares of Common Stock and Pre-funded Warrants should consult their own tax advisors regarding the tax treatment of such losses.
Information Reporting and Backup Reporting
Information reporting requirements generally will apply to payments of distributions (including constructive distributions) on the Common Stock and Pre-funded Warrants and to the proceeds of a sale or other disposition of Common Stock and Pre-funded Warrants paid by us to a U.S. Holder unless such U.S. Holder is an exempt recipient, such as a corporation. Backup withholding will apply to those payments if the U.S. Holder fails to provide the holder’s taxpayer identification number, or certification of exempt status, or if the holder otherwise fails to comply with applicable requirements to establish an exemption.
Backup withholding is not an additional tax. Rather, any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS. U.S. Holders should consult their own tax advisors regarding their qualification for exemption from information reporting and backup withholding and the procedure for obtaining such exemption.
Tax Considerations Applicable to Non-U.S. Holders
Certain Adjustments to Warrants
As described under “—U.S. Holders—Certain Adjustments to Pre-funded Warrants,” an adjustment to the Pre-funded Warrants could result in a constructive distribution to a Non-U.S. Holder, which would be treated as described under “Distributions” below. Any resulting withholding tax attributable to deemed dividends would be collected from other amounts payable or distributable to the Non-U.S. Holder. Non-U.S. Holders should consult their tax advisors regarding the proper treatment of any adjustments to the Pre-funded Warrants.
In addition, regulations governing “dividend equivalents” under Section 871(m) of the Code may apply to the Pre-funded Warrants. Under those regulations, an implicit or explicit payment under Pre-funded Warrants that references a dividend distribution on our Common Stock would possibly be taxable to a Non-U.S. Holder as described under “Distributions” below. Such dividend equivalent amount would be taxable and subject to withholding whether or not there is actual payment of cash or other property, and the Company may satisfy any withholding obligations it has in respect of the Pre-funded Warrants by withholding from other amounts due to the Non-U.S. Holder. Non-U.S. Holders are encouraged to consult their own tax advisors regarding the application of Section 871(m) of the Code to the Pre-funded Warrants.
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Distributions
As discussed above, we currently anticipate that we will retain future earnings, if any, to finance the growth and development of our business and do not intend to pay cash dividends in respect of our Common Stock in the foreseeable future. In the event that we do make distributions on our Common Stock to a Non-U.S. Holder, those distributions generally will constitute dividends for U.S. federal income tax purposes as described in “—U.S. Holders—Distributions.” To the extent those distributions do not constitute dividends for U.S. federal income tax purposes (i.e., the amount of such distributions exceeds both our current and our accumulated earnings and profits), they will constitute a return of capital and will first reduce a Non-U.S. Holder’s basis in our Common Stock (determined separately with respect to each share of Common Stock), but not below zero, and then will be treated as gain from the sale of that share Common Stock as described below under the section titled “—Disposition of Common Stock and Pre-funded Warrants .”
Any distribution (including constructive distributions) on shares of Common Stock that is treated as a dividend paid to a Non-U.S. Holder that is not effectively connected with the holder’s conduct of a trade or business in the United States will generally be subject to withholding tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and the Non-U.S. Holder’s country of residence. To obtain a reduced rate of withholding under a treaty, a Non-U.S. Holder generally will be required to provide the applicable withholding agent with a properly executed IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate form, certifying the Non-U.S. Holder’s entitlement to benefits under that treaty. Such form must be provided prior to the payment of dividends and must be updated periodically. If a Non-U.S. Holder holds stock through a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to such agent. The holder’s agent may then be required to provide certification to the applicable withholding agent, either directly or through other intermediaries. If you are eligible for a reduced rate holding tax under an income tax treaty, you should consult with your own tax advisor to determine if you are able to obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.
We generally are not required to withhold tax on dividends paid (or constructive dividends deemed paid) to a Non-U.S. Holder that are effectively connected with the holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that the holder maintains in the United States) if a properly executed IRS Form W-8ECI, stating that the dividends are so connected, is furnished to us (or, if stock is held through a financial institution or other agent, to the applicable withholding agent). In general, such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular tax rates applicable to U.S. persons. A corporate Non-U.S. Holder receiving effectively connected dividends may also be subject to an additional “branch profits tax,” which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by an applicable treaty) on the corporate Non-U.S. Holder’s effectively connected earnings and profits, subject to certain adjustments.
See also the sections below titled “Backup Withholding and Information Reporting” and “Foreign Accounts” for additional withholding rules that may apply to dividends paid to certain foreign financial institutions or non-financial foreign entities.
Disposition of Common Stock and Pre-funded Warrants
Subject to the discussions below under the sections titled “Backup Withholding and Information Reporting” and “Foreign Accounts,” a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax with respect to gain recognized on a sale or other disposition (other than a redemption treated as a distribution, which will be taxable as described above under “Distributions”) of shares of Common Stock and , Pre-funded Warrants unless:
| ● | the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States, and if an applicable income tax treaty so provides, the gain is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States; in these cases, the Non-U.S. Holder will be taxed on a net income basis at the regular tax rates and in the manner applicable to U.S. persons, and if the Non-U.S. Holder is a corporation, an additional branch profits tax at a rate of 30%, or a lower rate as may be specified by an applicable income tax treaty, may also apply; |
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| ● | the Non-U.S. Holder is a nonresident alien present in the United States for 183 days or more in the taxable year of the disposition and certain other requirements are met, in which case the Non-U.S. Holder will be subject to a 30% tax (or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence) on the net gain derived from the disposition, which may be offset by certain U.S.-source capital losses of the Non-U.S. Holder, if any; or |
| ● | the Common Stock constitutes a U.S. real property interest because we are, or have been at any time during the five-year period preceding such disposition (or the Non-U.S. Holder’s holding period of the Common Stock and Pre-funded Warrants , if shorter), a “U.S. real property holding corporation,” unless the Common Stock is regularly traded on an established securities market, as defined by applicable Treasury Regulations, and the Non-U.S. Holder held no more than 5% of our outstanding Common Stock, directly or indirectly, during the shorter of the five-year period ending on the date of the disposition or the period that the Non-U.S. Holder held the Common Stock. Special rules may apply to the determination of the 5% threshold in the case of a holder of Pre-funded Warrants. Non-U.S. Holders are urged to consult their own tax advisors regarding the effect of holding Pre-funded Warrants on the calculation of such 5% threshold. Generally, a corporation is a “U.S. real property holding corporation” if the fair market value of its “U.S. real property interests” (as defined in the Code and applicable regulations) equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although there can be no assurance, we believe that we are not currently, and we do not anticipate becoming, a “U.S. real property holding corporation” for U.S. federal income tax purposes. No assurance can be provided that the Common Stock will be regularly traded on an established securities market for purposes of the rules described above. Non-U.S. Holders are urged to consult their own tax advisors regarding the U.S. federal income tax considerations that could result if we are, or become a “U.S. real property holding corporation.” |
See the sections titled “Backup Withholding and Information Reporting” and “Foreign Accounts” for additional information regarding withholding rules that may apply to proceeds of a disposition of the Common Stock and Pre-funded Warrants paid to foreign financial institutions or non-financial foreign entities.
Backup Withholding and Information Reporting
We must report annually to the IRS and to each Non-U.S. Holder the gross amount of the distributions (including constructive distributions) on the Common Stock and Pre-funded Warrants paid to such holder and the tax withheld, if any, with respect to such distributions. Non-U.S. Holders may have to comply with specific certification procedures to establish that the holder is not a U.S. person (as defined in the Code) in order to avoid backup withholding at the applicable rate, currently 24%, with respect to dividends (or constructive dividends) on the Common Stock and Pre-funded Warrants. Generally, a holder will comply with such procedures if it provides a properly executed IRS Form W-8BEN (or other applicable Form W-8) or otherwise meets documentary evidence requirements for establishing that it is a Non-U.S. Holder, or otherwise establishes an exemption. Dividends paid to Non-U.S. Holders subject to withholding of U.S. federal income tax, as described above under the heading “Distributions,” will generally be exempt from U.S. backup withholding.
Information reporting and backup withholding generally will apply to the proceeds of a disposition of the Common Stock and Pre-funded Warrants by a Non-U.S. Holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a Non-U.S. Holder and satisfies certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. Non-U.S. Holders should consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them.
Copies of information returns may be made available to the tax authorities of the country in which the Non-U.S. Holder resides or is incorporated under the provisions of a specific treaty or agreement.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder can be refunded or credited against the Non-U.S. Holder’s U.S. federal income tax liability, if any, provided that an appropriate claim is timely filed with the IRS.
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Foreign Accounts
The Foreign Account Tax Compliance Act, or FATCA, generally imposes a 30% withholding tax on dividends (including constructive dividends) on the Common Stock and Pre-funded Warrants if paid to a non-U.S. entity unless (i) if the non-U.S. entity is a “foreign financial institution,” the non-U.S. entity undertakes certain due diligence, reporting, withholding, and certification obligations, (ii) if the non-U.S. entity is not a “foreign financial institution,” the non-U.S. entity identifies certain of its U.S. investors, if any, or (iii) the non-U.S. entity is otherwise exempt under FATCA.
Withholding under FATCA generally will apply to payments of dividends (including constructive dividends) on our Common Stock and Pre-funded Warrants. While withholding under FATCA would have also applied to payments of gross proceeds from a sale or other disposition of the Common Stock and, Pre-funded Warrants, under proposed U.S. Treasury Regulations withholding on payments of gross proceeds is not required. Although such regulations are not final, applicable withholding agents may rely on the proposed regulations until final regulations are issued.
An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this section. Under certain circumstances, a holder may be eligible for refunds or credits of the tax. Holders should consult their own tax advisors regarding the possible implications of FATCA on their investment in the Common Stock and Pre-funded Warrants.
The preceding discussion of material U.S. federal tax considerations is for information only. It is not tax advice. Prospective investors should consult their own tax advisors regarding the particular U.S. federal, state, local and non-U.S. tax consequences of purchasing, holding and disposing of the Common Stock and Pre-funded Warrants including the consequences of any proposed changes in applicable laws.
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We have entered into an underwriting agreement with WestPark Capital, Inc., or the Underwriter, with respect to the securities subject to this offering.
Subject to certain conditions, we have agreed to sell to the Underwriter such securities listed next to its name in the below table at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus.
| Underwriter | Number of Shares | Number of Pre-funded Warrants | ||||||
| WestPark Capital, Inc. | ||||||||
| Total | ||||||||
The Underwriter is offering the shares of common stock, and Pre-Funded Warrants in lieu thereof, subject to various conditions and may reject all or part of any order. The Underwriter has advised us that they propose initially to offer the shares of common stock to the public at the public offering price set forth on the cover page of this prospectus and to dealers at a price less a concession not in excess of $ per share of common stock, or Pre-Funded Warrant in lieu thereof. After the shares of common stock and Pre-Funded Warrants are released for sale to the public, the Underwriter may change the concession at various times.
We have agreed to indemnify the Underwriter against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the Underwriter may be required to make in respect thereof.
Underwriting Discounts, Commissions and Expenses
The following table provides information regarding underwriting discounts and commissions to be paid to the Underwriter by us, before expenses. The information assumes either no exercise or full exercise of the over-allotment option we granted to the Underwriter:
| Per Share | Per Pre-funded Warrant |
Total | |||||||||||
| Offering price | $ | $ | $ | ||||||||||
| Underwriting discount and commissions (4.0%) | $ | $ | $ | ||||||||||
| Proceeds, before expense, to us | $ | $ | $ | ||||||||||
We have agreed to reimburse the Underwriter for: (i) reasonable fees and expenses of the Underwriter’s legal counsel up to $75,000. Prior to the date of this prospectus, we have paid the Underwriter an expense advance of $25,000 as a retainer for its legal counsel. Such amount will be returned to us to the extent such out-of-pocket expenses are not actually incurred in accordance with FINRA Rule 5110(g)(4)(A). We have also agreed to pay to the Underwriter at the closing of the offering a non-accountable expense allowance of $45,000.
We estimate that our total expenses of the offering, excluding the estimated underwriting discounts and commissions and excluding the non-accountable expense allowance, will be approximately $190,000.
Right of First Refusal
We have granted the Underwriter a right of first refusal, for a period commencing on March 27, 2025 and ending three months from the closing of the offering to act as sole advisor, sole investment banker, sole book-running manager and/or sole placement agent, as applicable, at the Underwriter’s sole discretion, for each and every future public and private equity or debt financing transaction or merger and acquisition transaction by us (each a “Subject Transaction”), a subsidiary or any successor, on terms and conditions customary to the Underwriter for such Subject Transactions; provided, however, if the underwriting agreement is terminated for cause by the Company, the first of first refusal shall be terminated as provided in FINRA Rule 5110(g)(5)(B). For the avoidance of doubt, pursuant to FINRA Rule 5110(g)(6)(A), the right of first refusal hereunder shall not have a duration of more than three (3) years from the commencement of sales in the Offering or the termination date of this Agreement.
Tail Financing
The Underwriter shall be entitled to a cash fee of 4% on the gross proceeds of any public or private offering or other financing or capital-raising transaction of any kind (“Tail Financing”) to the extent that such financing or capital is provided to the Company by investors whom the Underwriter had introduced to the Company during the period commencing on March 27, 2025 ending on the 90th day thereafter, inclusive and with whom the Company did not have a pre-existing relationship, if such Tail Financing is consummated at any time within the 12-month period following the expiration or termination of the Underwriter’s engagement with us. Notwithstanding the foregoing, no fee shall be payable if the Company terminates the underwriting agreement for cause pursuant to FINRA Rule 5110(g)(5)(B).
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Lock-up Agreements
Pursuant to "lock-up" agreements, we and our executive officers, directors and their affiliates have agreed, for a period of 90 days from the date of this prospectus supplement not to (i) 90 days after the date set forth on the Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) file or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company except for a registration statement on Form S-8 in connection with the registration of shares of common stock issuable under any employee equity-based compensation plan, incentive plan, stock plan, dividend reinvestment plan adopted and approved by the Board of Directors; or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clause (i), (ii), or (iii) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise.
Electronic Distribution
A prospectus in electronic format may be made available on websites or through other online services maintained by the Underwriter or by its affiliates. Other than the prospectus in electronic format, the information on the Underwriter’s website and any information contained in any other website maintained by it is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the Underwriter, and should not be relied upon by investors.
Listing
Shares of Common Stock are listed on the Nasdaq Capital Market under the symbol “ENTO”. We do not intend to apply for listing of the Pre-funded Warrants on any securities exchange or other nationally recognized trading system.
Stabilization
In connection with this offering, the underwriter may engage in stabilizing transactions, syndicate-covering transactions, penalty bids, and purchases to cover positions created by short sales.
| ● |
Stabilizing transactions permit bids to purchase securities so long as the stabilizing bids do not exceed a specified maximum and are engaged in for the purpose of preventing or retarding a decline in the market price of the securities while the offering is in progress. | |
| ● |
Syndicate covering transactions involves purchases of securities in the open market after the distribution has been completed in order to cover syndicate short positions. A naked short position is more likely to be created if the underwriter is concerned that after pricing there could be downward pressure on the price of the securities in the open market that could adversely affect investors who purchase in the offering. | |
| ● | Penalty bids permit the underwriter to reclaim a selling concession from a syndicate member when the securities originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions, and penalty bids may have the effect of raising or maintaining the market price of our securities or preventing or retarding a decline in the market price of our securities. As a result, the price of our securities in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriter make any representation or prediction as to the effect that the transactions described above may have on the price of our securities. These transactions may be affected on the Nasdaq Stock Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
Passive Market Making
In connection with this offering, the Underwriter and selling group members may engage in passive market making transactions in our securities on the Nasdaq Stock Market in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the shares and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.
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Other Relationships
The Underwriter is a full-service financial institution engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. The Underwriter may in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which it may in the future receive customary fees.
In the ordinary course of their various business activities, the Underwriter and certain of its respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments issued by us and our affiliates. If the Underwriter or its respective affiliates have a lending relationship with us, they routinely hedge their credit exposure to us consistent with their customary risk management policies. The Underwriter and its respective affiliates may hedge such exposure by entering into transactions that consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the common stock offered hereby. Any such short positions could adversely affect future trading prices of the common stock offered hereby. The Underwriter and certain of their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
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Other than in the United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Canada
Our securities may be sold only to purchasers purchasing, or deemed to be purchasing, as principals that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of our securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Regulation, or each, a Relevant Member State, an offer to the public of our securities may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of our securities may be made at any time under the following exemptions under the Prospectus Regulation, if they have been implemented in that Relevant Member State:
| (i) | to any legal entity which is a qualified investor as defined in the Prospectus Regulation; |
| (ii) | to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or |
| (iii) | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, provided that no such offer of securities shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Regulation. |
For the purposes of this provision, the expression an “offer to the public” in relation to our securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase any securities, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
United Kingdom
Each underwriter has represented and agreed that:
| (a) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (“FSMA”) received by it in connection with the issue or sale of our securities in circumstances in which Section 21(1) of the FSMA does not apply to us; and | |
| (b) | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom. |
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The validity of the issuance of securities offered by this prospectus has been passed upon for us by Sichenzia Ross Ference Carmel LLP, New York, New York. The Underwriter is being represented by Lucosky Brookman LLP in connection with this offering.
The consolidated balance sheet of the Company as of December 31, 2024, the related consolidated statements of operations, stockholders’ equity and cash flows for the period ended December 31, 2024 and the related notes, have been audited by Macias Gini & O’Connell LLP, independent registered public accounting firm, as stated in their report, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, which is incorporated herein by reference. Such financial statements have been incorporated herein by reference in reliance on the report of such firm given upon their authority as experts in accounting and auditing.
The consolidated balance sheet of the Company as of December 31, 2023, the related consolidated statements of operations, stockholders’ equity and cash flows for the period ended December 31, 2023 and the related notes, have been audited by Mazars USA LLP, independent registered public accounting firm, as stated in their report, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, which is incorporated herein by reference. Such financial statements have been incorporated herein by reference in reliance on the report of such firm given upon their authority as experts in accounting and auditing.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to “incorporate by reference” information that we file with them. Incorporation by reference allows us to disclose important information to you by referring you to those other documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We filed a registration statement on Form S-1 under the Securities Act with the SEC with respect to the securities being offered pursuant to this prospectus. This prospectus omits certain information contained in the registration statement, as permitted by the SEC. You should refer to the registration statement, including the exhibits and schedules attached to the registration statement and the information incorporated by reference, for further information about us and the securities being offered pursuant to this prospectus. Statements in this prospectus regarding the provisions of certain documents filed with, or incorporated by reference in, the registration statement are not necessarily complete, and each statement is qualified in all respects by that reference. Copies of all or any part of the registration statement, including the documents incorporated by reference or the exhibits, may be obtained upon payment of the prescribed rates at the offices of the SEC listed below in “Where You Can Find More Information.” The documents we are incorporating by reference into this prospectus are:
| ● | Our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on April 1, 2025 as amended by our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2024 filed with the SEC on April 9, 2025; | |
| ● | Our Current Reports on Form 8-K filed with the SEC on January 13, 2025, February 6, 2025, February 14, 2025, March 7, 2025, March 25, 2025 and April 14, 2025 (other than any portions thereof deemed furnished and not filed); and | |
| ● | the description of our Common Stock which is registered under Section 12(b) of the Exchange Act, in our registration statement on Form 8-A, filed on August 8, 2016, as supplemented and updated by the description of our capital stock set forth in Exhibit 4.20 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed on April 1, 2025, including any amendment or reports filed for the purposes of updating this description. |
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All documents subsequently filed by us with the SEC under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act (other than current reports on Form 8-K furnished pursuant to Item 2.02 or Item 7.01 of Form 8-K, including any exhibits included with such information, unless otherwise indicated therein) prior to the termination or completion of the offering made pursuant to this prospectus are also incorporated herein by reference and will automatically update and supersede information contained or incorporated by reference in this prospectus.
We will provide, without charge, to each person, including any beneficial owner, to whom a copy of this prospectus is delivered, upon written or oral request of such person, a copy of any or all of the documents incorporated by reference in this prospectus, other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents. Requests may be made in writing or by telephone at Entero Therapeutics, Inc., 777 Yamato Road, Suite 502, Boca Raton, Florida 33431. Our telephone number is (561) 589-7020. You may also find these documents in the “Investors” section of our website, www.enterothera.com. The information on our website is not incorporated into this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the securities offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information about us and our securities offered hereby, we refer you to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address is www.sec.gov.
We are subject to the reporting requirements of the Exchange Act, and file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over the internet on the SEC’s website. We also maintain a website at www.enterothera.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of this prospectus. You may also request a copy of these filings, at no cost, by writing to us at Entero Therapeutics, Inc., 777 Yamato Road, Suite 502, Boca Raton, Florida 33431 or calling us at (561) 589-7020.
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16,666,667 shares of Common Stock
Pre-funded Warrants to Purchase 16,666,667 Shares of Common Stock
Prospectus
Sole Bookrunner
WESTPARK CAPITAL, INC.
__________________, 2025
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth all costs and expenses, other than the Underwriter fees, expected to be incurred by us in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee and the FINRA filing fee.
| Amount Paid or to be Paid |
|||||
| SEC registration fee | $ | 918.60 | |||
| FINRA filing fee | $ | 1,400.00 | |||
| Legal fees and expenses | $ | 150,000 | |||
| Accounting fees and expenses | $ | 21,400 | |||
| Miscellaneous fees and expenses | $ | 15,000 | |||
| Total | $ | 188,718.60 |
Item 14. Indemnification of Directors and Officers
Indemnification Agreements
On March 6, 2025, we entered into indemnification agreements with each of our directors and executive officers (the “D&O Indemnification Agreements”). The D&O Indemnification Agreements provide that the Corporation will indemnify each of its directors, executive officers, and such other key employees against any and all expenses incurred by that director or executive officer because of his or her status as one of the Corporation’s directors or executive officers, to the fullest extent permitted by Delaware law and the Corporation’s amended and restated certificate of incorporation. In addition, to the fullest extent permitted by Delaware law, the Corporation will advance all expenses incurred by its directors, executive officers, and other key employees in connection with a legal proceeding involving his or her status as a director, executive officer, or key employee.
Limitation of Liability and Indemnification of Officers and Directors
Our certificate of incorporation, as amended and restated, limits the liability of directors to the maximum extent permitted by Delaware General Corporation Law (the “DGCL”). The DGCL provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors.
Our bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by law and may indemnify employees and other agents. Our bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding.
Our bylaws, subject to the provisions of the DGCL contain provisions which allow the corporation to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he or she reasonably believed was in the best interest of the corporation. Insofar as indemnification for liabilities arising under the Securities Act of 1933 as amended, or the Securities Act, may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
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The limitation of liability and indemnification provisions in our bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
At present, there is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
Item 15. Recent Sales of Unregistered Securities
In the three years preceding the filing of this registration statement, the Registrant has sold the following securities that were not registered under the Securities Act:
In March 2024, April 2024 and June 2024, we issued an aggregate of 350,000 shares of Common Stock to a consultant with a grant date fair value of approximately $1.5 million for investor relations services provided.
In July 2023 and December 2023, we issued an aggregate of 7,500 shares of Common Stock to a consultant with a grant date fair value of approximately $76,000 for investor relations services provided.
Further, in October 2022, we issued an aggregate of 7,142 shares of Common Stock to a consultant with a grant date fair value of approximately $82,000 for investor relations services provided.
In connection with the foregoing, we relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.
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Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
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** Filed herewith.
# Certain portions of this exhibit (indicated by “[*****]”) have been omitted as we have determined (1) it is not material and (2) is the type that the Company treats as private or confidential.
## Certain annexes, schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S - K. The Company agrees to furnish supplementally a copy of any omitted attachment to the SEC on a confidential basis upon request.
† Indicates a management contract or compensation plan, contract or arrangement.
(b) Financial statement schedules
Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.
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Item 17. Undertakings
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 Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and | |
| (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; |
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment 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. | |
| (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) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: |
| (i) | If the registrant is relying on Rule 430B: | |
| (a) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and | ||
| (b) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or |
| (ii) | If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
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| (5) | 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; | |
| (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. |
| (6) | 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 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. |
The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement 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.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities 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 of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boca Raton, State of Florida, on May 12, 2025.
| ENTERO THERAPEUTICS, INC. | ||
| By: | /s/ Richard Paolone | |
| Name: | Richard Paolone | |
| Title: | Interim Chief Executive Officer | |
| (Principal Executive Officer) | ||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Richard Paolone, and each one of them, as their true and lawful attorney-in-fact and agent with full power of substitution, for him/her in any and all as their true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for them and in their name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective on filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully 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 by the following persons in the capacities and on the dates indicated.
| SIGNATURE | TITLE | DATE | ||
| /s/ Richard Paolone | Interim Chief Executive Officer, Chairman and Director (Principal Executive Officer) |
May 12, 2025 | ||
| Richard Paolone | ||||
| /s/ Anna Skowron | Interim Chief Financial Officer (Principal Financial and Accounting Officer) |
May 12, 2025 | ||
| Anna Skowron | ||||
| /s/ Edward J. Borkowski | Director | May 12, 2025 | ||
| Edward J. Borkowski | ||||
| /s/ Eric Corbett | Director | May 12, 2025 | ||
| Eric Corbett | ||||
| /s/ Manpreet Uppal | Director | May 12, 2025 | ||
| Manpreet Uppal | ||||
| /s/ Jack Syage | ||||
| Jack Syage | Director | May 12, 2025 |
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Exhibit 1.1
Entero Therapeutics, Inc.
UNDERWRITING AGREEMENT
_______________, 2025
WestPark Capital, Inc.
1800 Century Park East, Suite 220
Los Angeles, CA 90067
As representative of the several underwriters named in Schedule 1 hereto
Ladies and Gentlemen:
The undersigned, Entero Therapeutics, Inc., a company incorporated under the law of the State of Delaware (the “Company”), hereby confirms its agreement (this “Agreement”) with the several underwriters named in Schedule 1 hereto for which WestPark Capital, Inc. (“WestPark”) is acting as representative (in such capacity, the “Representative” and such underwriters, including the Representative, the “Underwriters” and each an “Underwriter”), on the terms and conditions set forth herein.
1. Purchase and Sale of Securities.
1.1. Securities.
1.1.1. Firm Securities. On the basis of the representations and warranties set forth herein, and subject to the terms and conditions set forth herein, the Company agrees to issue and sell to the several Underwriters, severally and not jointly,
(a) an aggregate of [•] shares (the “Firm Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) and
(b) an aggregate of [•] pre-funded common stock purchase warrants (the “Firm Pre-Funded Warrants” and, together with the Firm Shares, the “Firm Securities”), each Firm Pre-Funded Warrant exercisable for one (1) share of Common Stock at an exercise price of $0.0001 per share.
and the Underwriters agree to purchase from the Company, severally and not jointly, the number of Firm Shares and Firm Pre-Funded Warrants set forth opposite their respective names on Schedule 1 hereto at a purchase price (net of underwriting discounts and commissions) equal to (i) $[•] per Firm Share (such purchase price being equal to [•]% of the public offering price per Firm Share) and (ii) $[•] per Pre-Funded Warrant (such purchase price being equal to [•]% of the public offering price per Firm Pre-Funded Warrant). The Firm Securities are to be offered initially to the public at the respective public offering prices set forth on the cover page of the Prospectus (as defined in Section 2.1.1 hereof).
The shares issuable upon exercise of the Firm Pre-Funded Warrants are hereinafter referred to as the “Warrant Shares”. The Firm Shares and the Firm Pre-Funded Warrants in lieu thereof are herein called, collectively, the “Securities”. The offering and sale of the Securities is hereinafter referred to as the “Offering”.
1.1.2. Payment and Delivery. Delivery and payment for the Firm Securities shall be made at 10:00 a.m., New York City time, on the first (1st) Business Day (as defined below) following the effective date (the “Effective Date”) of the Registration Statement (as defined in Section 2.1.1 below) (or the second (2nd) Business Day following the Effective Date if the Registration Statement is declared effective after 4:01 p.m., New York City time) or at such earlier time as shall be agreed upon by the Representative and the Company, at the offices of Lucosky Brookman LLP, counsel to the Underwriters, or at such other place (or remotely by facsimile or other electronic transmission) as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Securities is called the “Closing Date”. Payment for the Firm Securities shall be made on the Closing Date by wire transfer in federal (same day) funds, payable to the order of the Company upon delivery to the Representative of the Firm Shares through the facilities of the Depository Trust Company (“DTC”) for the account of the Underwriters and of certificates (in form and substance satisfactory to the Representative) representing the Firm Pre-Funded Warrants registered in such name or names and in such authorized denominations as the Representative may request in writing at least one (1) Business Day prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Securities except upon tender of payment by the Representative for all of the Firm Securities. The term “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay-at-home,” “shelter-in-place,” “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally are open for use by customers on such day.
1.2. Right of First Refusal. Subject to the right of the Company to terminate this agreement for cause pursuant to Rule 5110(g)(5)(B) of The Financial Regulatory Industry Authority, Inc. (“FINRA”), following the Closing Date, for a period of three (3) months after such Closing Date, the Company grants the Representative the right of first refusal to act as sole advisor, investment bank, book-running manager and/or placement agent, as applicable, at the Representative’s sole discretion, for each and every public and private equity or debt financing transaction or merger and acquisition transaction of the Company during such three (3) month period. The Company shall notify the Representative of its intention to pursue any such offering or transaction, including the material terms thereof, by providing written notice thereof to the Representative. If the Representative fails to accept in writing any such proposal for such public offering within five (5) Business Days after receipt of a written notice in accordance with this Section 1.2 from the Company, then the Representative will have no claim or right with respect to any such offering or transaction contained in any such notice. If, thereafter, such proposal is modified in any material respect, the Company will adopt the same procedure as with respect to the original proposed offering or transaction and the Representative shall have the right of first refusal with respect to such revised proposal. The Representative shall not have more than one opportunity to waive or terminate the right of first refusal in consideration of any payment or fee. The terms and conditions of any such engagements shall be set forth in separate agreements and may be subject to, among other things, satisfactory completion of due diligence by the Representative, market conditions, the absence of a material adverse change to the Company’s business, financial condition and prospects.
1.3. Tail Financing. Following the Closing Date, for a period of twelve (12) months after such Closing Date, the Representative shall be entitled to a cash fee equal to four percent (4%) of the gross proceeds received by the Company from the sale of any equity, debt and/or equity derivative instruments (each a “Tail Financing”) to any investor actually introduced by the Representative to the Company provided that such Tail Financing is by a party actually introduced to the Company in an offering in which the Company has direct knowledge of such party’s participation, and provided further that in the event Representative’s services are terminated by the Company for cause, the Tail Financing shall not survive such termination in compliance with FINRA Rule 5110(g)(5)(B).
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2. Representations and Warranties of the Company. The Company represents and warrants to the Underwriters as of the date of this Agreement, as of the Applicable Time (as defined below) and as of the Closing Date, as follows:
2.1. Filing of Registration Statement.
2.1.1. Pursuant to the Securities Act. The Company has filed with the U.S. Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (File No. 333-_________), including the related preliminary prospectus or prospectuses, covering the registration of the sale of the Securities under the Securities Act of 1933, as amended (the “Securities Act”). Promptly after execution and delivery of this Agreement, the Company will prepare and file a prospectus in accordance with the provisions of Rule 430A (“Rule 430A”) of the rules and regulations of the Commission under the Securities Act (the “Securities Act Regulations”) and Rule 424(b) (“Rule 424(b)”) of the Securities Act Regulations. The information included in such prospectus that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective pursuant to Rule 430A(b) is herein called the “Rule 430A Information”. Such registration statement, including the amendments thereto, the exhibits thereto and any schedules thereto, at the time it became effective, and including the Rule 430A Information, is herein called the “Registration Statement”. Any registration statement filed pursuant to Rule 462(b) of the Securities Act Regulations is herein called the “Rule 462(b) Registration Statement” and, after such filing, the term “Registration Statement” shall include the Rule 462(b) Registration Statement.
Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “Preliminary Prospectus”. The Preliminary Prospectus, subject to completion, dated ___________, 2025 that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the “Pricing Prospectus”. The final prospectus, in the form first furnished to the Underwriters for use (or made available upon request of purchasers pursuant to Rule 173 under the Securities Act Regulations) in connection with confirmation of sales of the Securities, is herein called the “Prospectus”. For purposes of this Agreement, all references to the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system or any successor system (“EDGAR”).
“Applicable Time” means _________, Eastern time, on the date of this Agreement.
“Pricing Disclosure Package” means the Pricing Prospectus and the information included in Schedule 2-A hereto, all considered together.
2.1.2. Pursuant to the Exchange Act. The Company filed with the Commission a Form 8-A (File No. 001-37853) on August 8, 2016, for the registration of the Common Stock pursuant to Section 12(b) under the Exchange Act. Such registration has become effective prior to the date hereof. The Company has taken no action designed to, or likely to have the effect of, terminating such registrations, nor has the Company received any notification that the Commission is contemplating terminating such registrations.
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2.2. No Stop Orders, etc. Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has instituted or, to the Company’s knowledge, threatened to institute, any proceedings with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information.
2.3. Disclosures in Registration Statement.
2.3.1. Compliance with Securities Act and 10b-5 Representation.
(i) Preliminary Prospectus. No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus included in the Pricing Disclosure Package, at the time of filing thereof, complied in all material respects with the Securities Act and the Securities Act Regulations, and no Preliminary Prospectus included in the Pricing Disclosure Package, at the time of filing thereof, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representative expressly for use in any Preliminary Prospectus, it being understood and agreed that the only such information furnished by any Underwriter consists solely of the following disclosure contained in the “Underwriting” section of the Prospectus: the information under the subsection “Other Relationships” (such information, the “Underwriter Information”).
(ii) Pricing Disclosure Package. The Pricing Disclosure Package as of the Applicable Time did not, and as of the Closing Date, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representative expressly for use in such Pricing Disclosure Package, it being understood and agreed that the only such information furnished by any Underwriter consists of the Underwriter Information. No statement of material fact included in the Prospectus has been omitted from the Pricing Disclosure Package and no statement of material fact included in the Pricing Disclosure Package that is required to be included in the Prospectus has been omitted therefrom.
(iii) Registration Statement and Prospectus. The Registration Statement has been declared effective by the Commission. No order suspending the effectiveness of the Registration Statement has been issued by the Commission, and no proceeding for that purpose or pursuant to Section 8A of the Securities Act against the Company or related to the Offering has been initiated or, to the knowledge of the Company, threatened by the Commission; as of the applicable effective date of the Registration Statement and any post-effective amendment thereto, the Registration Statement and any such post-effective amendment complied and as of the Closing Date will comply in all material respects with the Securities Act and the Securities Act Regulations, and did not, as of the applicable effective date, and will not, as of the Closing Date, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; and as of the date of the Prospectus and any amendment or supplement thereto and as of the Closing Date, as the case may be, the Prospectus (including the Prospectus as amended and supplemented, as applicable) complied and will comply in all material respects with the applicable provisions of the Securities Act and the Securities Act Regulations and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representative expressly for use in the Registration Statement and the Prospectus and any amendment or supplement thereto, it being understood and agreed that the only such information furnished by any Underwriter consists of the Underwriter Information.
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2.3.2. Disclosure of Agreements. The agreements and documents described in the Registration Statement, the Pricing Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained or incorporated by reference therein and there are no agreements or other documents required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement or to be incorporated by reference in the Registration Statement, the Pricing Disclosure Package or the Prospectus, that have not been so described or filed or incorporated by reference. Each agreement or other instrument (however characterized or described) to which the Company or any Subsidiary (as defined below) is a party or by which it is or may be bound or affected and (i) that is referred to or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus, or (ii) is material to the Company’s or any Subsidiary’s business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. None of such agreements or instruments has been assigned by the Company or any Subsidiary, and none of the Company, any Subsidiary nor, to the best of the Company’s knowledge, any other party is in default thereunder and, to the best of the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder. To the best of the Company’s knowledge, performance by the Company or any Subsidiary of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, ordinance, judgment, order or decree of any governmental or regulatory agency, body, authority or court, domestic or foreign, having jurisdiction over the Company or any Subsidiary or any of its assets or businesses (each, a “Governmental Entity”), including, without limitation, those relating to environmental laws and regulations, except for any such violation or violations that would not, individually or in the aggregate, have a Material Adverse Effect (as defined in Section 2.8 hereof).
2.3.3. Prior Securities Transactions. No securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any Person(s) (as defined below) controlling, controlled by or under common control with the Company, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Preliminary Prospectus. “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
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2.3.4. Regulations. The disclosures in the Registration Statement, the Pricing Disclosure Package and the Prospectus concerning the effects of federal, state, local and all foreign regulation on the Offering and the Company’s business as currently contemplated are correct in all material respects and no other such regulations are required to be disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus which are not so disclosed.
2.3.5. No Other Distribution of Offering Materials. The Company has not, directly or indirectly, distributed and will not distribute any offering material in connection with the Offering other than any Preliminary Prospectus, the Pricing Disclosure Package, the Prospectus and other materials, if any, permitted under the Securities Act and consistent with Section 3.2 below.
2.4. Commission Reporting Status. The Company has made all filings with the Commission required under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations of the Commission promulgated thereunder (the “Exchange Act Regulations”). None of the Company’s filings with the Commission contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of the time of filing of the Registration Statement, the Company was a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act Regulations.
2.5. Incorporated Documents. The documents incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus, when they were filed with the Commission conformed in all material respects to the requirements of the Exchange Act and the Exchange Act Regulations, and none of such documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
2.6. Independent Accountants. To the knowledge of the Company, each of Machias Gini & O’Connell LLP (the “Current Auditor”) and Mazars USA LLP (the “Prior Auditor” and together with the Current Auditor, the “Auditors” and each an “Auditor”), whose reports are filed with the Commission as part of the Registration Statement, the Pricing Disclosure Package and the Prospectus, is an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board. During the periods covered by the financial statements included in the Registration Statement, all auditing services and non-audit services provided to the Company by each Auditor were preapproved by the Company’s Board of Directors as and to the extent required by Section 10A(g)-(i) of the Exchange Act.
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2.7. Financial Statements, etc. The consolidated financial statements, including the notes thereto and supporting schedules included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus, fairly present in all material respects the financial position and the results of operations of the Company and its Subsidiaries as of the dates and for the periods to which they apply; and such financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by GAAP); and the supporting schedules included or incorporated by reference in the Registration Statement present fairly the information required to be stated therein. Except as included or incorporated by reference therein, no historical or pro forma financial statements are required to be included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package or the Prospectus under the Securities Act or the Securities Act Regulations. The as adjusted financial information and the related notes, if any, included or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus have been properly compiled and prepared in accordance with the applicable requirements of the Securities Act, the Securities Act Regulations, the Exchange Act or the Exchange Act Regulations and present fairly in all material respects the information shown therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. All disclosures contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus, or incorporated or deemed incorporated by reference therein, regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. Each of the Registration Statement, the Pricing Disclosure Package and the Prospectus discloses all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company and its Subsidiaries with unconsolidated entities or other Persons that may have a material current or future effect on the Company’s or any Subsidiary’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (i) neither the Company nor any of its Subsidiaries, has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions other than in the ordinary course of business, (ii)the Company or any of its Subsidiaries has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock, (iii) there has not been any change in the capital stock of the Company or any of its Subsidiaries, or, other than in the course of business, any grants under any stock compensation plan, and (iv) there has not been any material adverse change in the Company’s long-term or short-term debt. The Company is not currently contemplating to amend or restate any of the consolidated financial statements (including, without limitation, any notes or any letter of the independent accountants of the Company with respect thereto), nor is the Company currently aware of facts or circumstances which would require the Company to amend or restate any of such financial statements, in each case, in order for any of the consolidated financial statements to be in compliance with GAAP and the rules and regulations of the Commission. The Company has not been informed by its independent accountants that they recommend that the Company amend or restate any of the consolidated financial statements or that there is any need for the Company to amend or restate any of the consolidated financial statements.
2.8 Organization and Qualification. Each of the Company and its Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. All of the articles of incorporation, certificate or articles of association, bylaws or other organizational or charter documents (“Charter Documents”) of each of the Company and its Subsidiaries comply with the requirements of applicable laws of its jurisdiction of incorporation or organization and are in full force and effect. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to have a Material Adverse Effect (as defined below). As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Subsidiary, individually or taken as a whole, (ii) the transactions contemplated hereby or in any other agreements or instruments to be entered into in connection herewith or therewith or (iii) the authority or ability of the Company or any of its Subsidiaries to perform any of their respective obligations under this Agreement or in any other agreements or instruments to be entered into in connection herewith or therewith. Other than as set forth on Exhibit B hereto, the Company has no Subsidiaries. As used in this Agreement, “Subsidiaries” means any Person in which the Company, directly or indirectly, (i) owns any of the outstanding capital stock or holds any equity or similar interest of such Person or (ii) controls or operates all or any part of the business, operations or administration of such Person, and each of the foregoing, is individually referred to herein as a “Subsidiary”.
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2.9 Subsidiaries. All of the equity interests of each Subsidiary have been duly and validly authorized and issued, are owned directly or indirectly by the Company, are fully paid in accordance with its articles of association and non-assessable and are free and clear of all liens, charges, claims, pledges, security interests, encumbrances, rights of first refusal, preemptive rights or other restrictions (“Liens”). None of the outstanding share capital or equity interest in any Subsidiary was issued in violation of preemptive or similar rights of any security holder of such Subsidiary. Apart from the Subsidiaries, the Company has no direct or indirect subsidiaries or any other company over which it has direct or indirect effective control. Other than the Subsidiaries, the Company does not directly or indirectly control any entity through contractual arrangements or otherwise such that the entity would be deemed a consolidated affiliated entity whose financial results would be consolidated under GAAP with the financial results of the Company on the consolidated financial statements of the Company, regardless of whether the Company directly or indirectly owns less than a majority of the equity interests of such Person.
2.10. Corporate Power; Licenses; Consents.
2.10.1. Conduct of Business. Each of the Company and its Subsidiaries has all requisite corporate power and authority, and has all necessary authorizations, approvals, orders, licenses, certificates and permits of and from all Governmental Entities that it needs as of the date hereof to conduct its business purpose as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.10.2. Transactions Contemplated Herein. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, all exhibits and schedules hereto, and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby and thereby, as may be amended from time to time (collectively, the “Transaction Documents”), and to carry out the provisions and conditions hereof and thereof. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Company’s Board of Directors or the Company’s shareholders in connection herewith or therewith other than in connection. This Agreement and each other Transaction Document to which the Company is a party has been (or upon delivery will have been) have been or will be prior to the Closing Date, as the case may be, duly executed and delivered by the Company, and each constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its respective terms except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
2.10.3. Consents. Neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local, foreign or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents and consummation of the transactions contemplated hereby and as contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, except for the registration of the Securities under the Securities Act and such consents, approvals, authorizations, orders and registrations or qualifications (i) as have been obtained or made, or (ii) as may be required by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and under applicable state securities laws or “Blue Sky” laws in connection with the purchase and distribution of the Securities by the Underwriters.
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2.11. No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s Charter Documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar adjustments, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any Governmental Entity to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
2.12. No Defaults; Violations. Except as disclosed in the Registration Statement, the Pricing Disclosure Package or the Prospectus, no material default exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary may be bound or to which any of the properties or assets of the Company or any Subsidiary is subject. Neither the Company nor any Subsidiary is in violation of (i) any term or provision of its Charter Documents or (ii) any franchise, license, permit, applicable law, rule, regulation, judgment, order or decree of any Governmental Entity, except, in the case of clause (ii), for such violation or violations would not, individually or in the aggregate, result in a Material Adverse Effect.
2.13. No Material Adverse Change. Since the date of the most recent financial statements of the Company included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (i) there has not been any material change in the share capital (other than the issuance of shares of Common Stock in connection with share-based awards pursuant to the existing equity incentive plans described in the Registration Statement, the Pricing Disclosure Package and the Prospectus), short-term debt or long-term debt, net current assets or net assets of the Company or any of its Subsidiaries, or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of its share capital, or any material adverse change, or any development involving a prospective material adverse change, in or affecting the condition (financial or otherwise), business, properties, management, financial position, shareholders’ equity, results of operations or prospects of the Company and its Subsidiaries, taken as a whole; (ii) neither the Company nor any of its Subsidiaries has entered into or assumed any transaction or agreement (whether or not in the ordinary course of business) that is material to the Company and its Subsidiaries taken as a whole or incurred, assumed or acquired any liability or obligation, direct or contingent, that is material to the Company and its Subsidiaries taken as a whole or acquired or disposed of or agreed to acquire or dispose of any business or other asset, that is material to the Company and its Subsidiaries, taken as a whole or agreed to take any of the foregoing actions; and (iii) neither the Company nor any of its Subsidiaries has sustained any loss or interference with its business that is material to the Company and its Subsidiaries taken as a whole and that is either from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case of (i) to (iii) as otherwise disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
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2.14. Litigation; Governmental Proceedings. There has not been, and to the knowledge of the Company there is not pending or contemplated, any action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary, or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. None of the Company, any Subsidiary, or any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.
2.15. Authorized Capital; Options, etc. The Company had, at the date or dates indicated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company will have on the Closing Date the adjusted authorized, issued and outstanding stock capitalization set forth therein.
2.16. Valid Issuance of Securities, etc.
2.16.1. Outstanding Securities. As of the date hereof, the authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, 13,000 shares of Series G Preferred Stock, 5,194.81 shares of Series B Preferred Stock, 75,000 shares of Series C Preferred Stock, 150 shares of Series D Preferred Stock, 150 shares of Series E Preferred Stock and 7,000 shares of Series F Preferred Stock. All issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized shares of Common Stock conform in all material respects to all statements relating thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The offers and sales of the outstanding shares of Common Stock were at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky” laws or, based in part on the representations and warranties of the purchasers of such shares, exempt from such registration requirements. In addition, none of the Company’s or any Subsidiary’s shares, interests or capital stock is subject to (i) any preemptive rights or (ii) any other similar rights or Liens suffered or permitted by the Company or any Subsidiary, except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus. Except as set forth in, or contemplated by, the Registration Statement, the Pricing Disclosure Package and the Prospectus, on the Effective Date, as of the Applicable Time and on the Closing Date, there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares, interests or capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries; (iii) no holders of any securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Securities Act or to include any such securities in a registration statement to be filed by the Company; (iv) except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (v) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; and (vi) neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement.
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2.16.2. Securities Sold Pursuant to this Agreement. The Securities have been duly authorized for issuance and sale and, when issued and paid for, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Securities has been duly and validly taken. The Firm Pre-Funded Warrants to be purchased by the Underwriters from the Company have been duly authorized for issuance and sale to the Underwriters pursuant to this Agreement and, when issued and delivered by the Company pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued and enforceable in accordance with their terms. The Warrant Shares have been duly authorized for issuance and, when issued and delivered by the Company pursuant to the exercise of the Firm Pre-Funded Warrants against payment of the exercise price set forth therein, will be validly issued and fully paid and non-assessable. The issuance of the Warrant Shares is not subject to the preemptive or other similar rights of any holders of any security of the Company or similar contractual rights granted by the Company. The Common Stock and the Firm Pre-Funded Warrants each conform to all statements relating thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus and such description conforms to the rights set forth in the instruments defining the same. No holder of Shares or Warrant Shares will be subject to personal liability by reason of being such a holder.
2.17. Insurance. The Company and each Subsidiary carry or are entitled to the benefits of insurance, with reputable insurers, in such amounts and covering such risks which the Company believes are adequate, and all such insurance is in full force and effect. The Company has no reason to believe that it or any Subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Effect.
2.18. D&O Questionnaires. All information contained in the questionnaires (the “Questionnaires”) completed by each of the Company’s directors and officers immediately prior to the Offering (the “Insiders”) as supplemented by all information concerning the Company’s directors, officers and principal shareholders as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, as well as in the Lock-Up Agreement (as defined in Section 2.24 below), provided to the Underwriters, is complete, true and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed in the Questionnaires to become materially incomplete, inaccurate or incorrect.
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2.19. Transactions Affecting Disclosure to FINRA.
2.19.1. Finder’s Fees. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by the Company or any Insider with respect to the sale of the Securities hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its shareholders that may affect the Underwriters’ compensation, as determined by FINRA.
2.19.2. Payments within Twelve (12) Months. Except as described in the Company’s Commission filings, the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (i) any Person, as a finder’s fee, consulting fee or otherwise, in consideration of such Person raising capital for the Company or introducing to the Company Persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any Person that has any direct or indirect affiliation or association with any FINRA member, within the twelve (12) months prior to the Effective Date, other than the payment to the Underwriters as provided hereunder in connection with the Offering.
2.19.3. Use of Proceeds. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.
2.19.4. FINRA Affiliation. To the Company’s knowledge, there is no (i) officer or director of the Company, (ii) beneficial owner of 10% or more of any class of the Company’s securities or (iii) beneficial owner of the Company’s unregistered equity securities which were acquired during the 180-day period immediately preceding the date that the Registration Statement was initially filed with the Commission that is an affiliate or associated Person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
2.19.5. Information. All information provided by the Company in its FINRA questionnaire to counsel to Underwriters specifically for their use in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all material respects.
2.20. Compliance with Anti-Corruption and Anti-Bribery Laws. Neither the Company nor any of its Subsidiaries, nor any director or officer of the Company or any of its Subsidiaries, acting in their capacity as such, nor, to the best of the Company’s knowledge, any employee, representative, agent, affiliate or other Person acting on behalf of the Company or any of its Subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made or taken, or will make or take, an act in furtherance of an offer, promise or authorization of any direct or indirect unlawful payment, giving of money, property, gifts, benefit or anything else of value to any foreign or domestic government or regulatory official or employee, including of any government-owned or controlled entity or of a public international organization, or any Person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office, in order to influence official action or secure an improper advantage; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or any other applicable anti-bribery or anti-corruption law; (iv) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit; or (v) will directly or indirectly use the proceeds of the offering of the Securities by the Company hereunder in furtherance of an offer, promise or authorization of any direct or indirect unlawful payment, giving of money, property, gifts, benefit or anything else of value, to any Person in violation of any applicable anti-bribery or anti-corruption law. The Company and its Subsidiaries and affiliates have conducted their business in compliance with applicable anti-bribery and anti-corruption laws and have instituted, maintained and enforced, and will continue to maintain and enforce adequate policies and procedures designed to promote and ensure compliance with all applicable anti-bribery and anti-corruption laws. No investigation, action, suit or proceedings by or before any Governmental Entity or any arbitrator involving the Company or any of the Subsidiaries with respect to anti-bribery or anti-corruption laws is pending or, to the knowledge of the Company, threatened.
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2.21. Compliance with Sanctions Laws. Neither the Company nor any of its Subsidiaries, nor any director or officer, thereof, nor, to the knowledge of the Company or any of its Subsidiaries, any employee, representative, agent, affiliate or other Person acting on behalf of the Company or any of its Subsidiaries, is currently the subject or target of any sanctions administered or enforced by the U.S. government (including, without limitation, the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State and including, without limitation, the designation as a “specially designated national” or “blocked person”), the United Nations Security Council, the European Union (including under Council Regulation (EC) No. 194/2008), or other relevant sanctions or governmental authority (collectively, “Sanctions”), or engaged in any activities sanctionable under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, the Iran Sanctions Act, the Iran Threat Reduction and Syria Human Rights Act, or any applicable executive order, nor is the Company or any of its Subsidiaries located, organized or resident in a country, region or territory that is, or whose government is, the subject or target of Sanctions including, without limitation, Cuba, Iran, North Korea, Sudan, Syria and Crimea (each a “Sanctioned Country”); and the Company and its Subsidiaries will not, directly or indirectly, use the proceeds of the Offering, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person: (i) to fund or facilitate any activities or business of or with, or to finance any investments in, or make any payments to, any Person or in any country or territory that, at the time of such funding or facilitation, is, or whose government is, the subject or target of any Sanctions; (ii) to fund or facilitate any activities of or business or transactions in any Sanctioned Country or (iii) in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise). For the past five years, the Company and its Subsidiaries have not engaged in, are not now engaged in, and will not engage in, any dealings or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was, or whose government is or was, the subject or target of Sanctions, or with any Sanctioned Country. None of the issue and sale of the Securities, the execution, delivery and performance of this Agreement, the consummation of any other transaction contemplated hereby, or the provision of services contemplated by this Agreement to the Company will result in a violation of any Sanctions. The Company and its Subsidiaries further covenant not to engage, directly or indirectly, in any other activities that would result in a violation of Sanctions by any Person (including any Person participating in the Offering, whether as underwriter, advisor, investor or otherwise, except that in relation to any of the foregoing, the Company makes no covenant with respect to the Underwriters’ commissions after such commissions have been paid to the Underwriters).
2.22. Compliance with Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times in material compliance with applicable financial recordkeeping and reporting requirements, including, as applicable, those of the Currency and Foreign Transactions Reporting Act of 1970, as amended, and all the other applicable money laundering laws, rules and regulations of all jurisdictions where the Company or any of its Subsidiaries conducts business, and any related or similar rules, regulations or guidelines issued, administered or enforced by any Governmental Entity, including, without limitation, 18 U.S.C §§ 1956 and 1957, the USA Patriot Act of 2001, and the Bank Secrecy Act, all as amended, and any executive order, directive, or regulation pursuant to the authority of any of the foregoing, or any orders or licenses issued thereunder (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any Governmental Entity, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened. Neither the Company nor any of its Subsidiaries, nor any director or officer of the Company or any of its Subsidiaries, nor, to the best of the Company’s knowledge, any employee, representative, agent, affiliate or other Person acting on behalf of the Company or any of its Subsidiaries has violated any Anti-Money Laundering Laws.
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2.23. Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to you or to counsel to the Underwriters shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.
2.24. Lock-Up Agreements. Schedule 3 hereto contains a complete and accurate list of the Company’s officers and directors (collectively, the “Lock-Up Parties”). The Company has caused each of the Lock-Up Parties to deliver to the Representative an executed Lock-Up Agreement, in the form attached hereto as Exhibit A (the “Lock-Up Agreement”), on or prior to the execution of this Agreement.
2.25. Related Party Transactions. There are no business relationships or related party transactions involving the Company or any Subsidiary or any other Person required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus that have not been described as required.
2.26. Board of Directors. The Board of Directors of the Company is comprised of the persons disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The qualifications of the persons serving as board members and the overall composition of the Company’s Board of Directors comply with the Exchange Act, the Exchange Act Regulations, the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder (the “Sarbanes-Oxley Act”) applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors of the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Nasdaq Capital Market (the “Exchange”). In addition, at least a majority of the persons serving on the Company’s Board of Directors qualify as “independent,” as defined under the listing rules of the Exchange.
2.27. Sarbanes-Oxley Compliance.
2.27.1. Disclosure Controls. The Company has developed and currently maintains disclosure controls and procedures that comply with Rule 13a-15 or 15d-15 under the Exchange Act Regulations, and except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, such controls and procedures are effective to ensure that all material information concerning the Company will be made known on a timely basis to the individuals responsible for the preparation of the Company’s Exchange Act filings and other public disclosure documents.
2.27.2. Compliance. The Company is in material compliance with the provisions of the Sarbanes-Oxley Act applicable to it and has implemented or will implement such programs and taken reasonable steps to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all of the material provisions of the Sarbanes-Oxley Act.
2.28. Internal Controls. The Company maintains systems of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply with the requirements of the Exchange Act and have been designed by, or under the supervision of, its respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there has been (i) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (ii) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are known to the Company’s management and that have adversely affected or are reasonably likely to adversely affect the Company’ ability to record, process, summarize and report financial information; and (ii) any fraud known to the Company’s management, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
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2.29. No Investment Company Status. The Company is not and, after giving effect to the Offering and the application of the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be, required to register as an “investment company,” as such term is defined in the Investment Company Act of 1940, as amended.
2.30. Labor Relations. No labor dispute or governmental investigation or proceedings exists or, to the knowledge of the Company, is imminent with respect to labor law compliance or any of the employees of the Company or any of its Subsidiaries, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters that would reasonably be expected to have a Material Adverse Effect. The Company and its Subsidiaries are in compliance with all applicable U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
2.31. Intellectual Property Rights. To the knowledge of the Company, each of the Company and its Subsidiaries owns or possesses or has valid rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and similar rights (“Intellectual Property Rights”) necessary for the conduct of the business of the Company and its Subsidiaries as currently carried on and as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. To the knowledge of the Company, no action or use by the Company or any of its Subsidiaries necessary for the conduct of its business as currently carried on and as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus will involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property Rights of others. Neither the Company nor any of its Subsidiaries has received any notice alleging any such infringement, fee or conflict with asserted Intellectual Property Rights of others. Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect (i) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any of the Intellectual Property Rights owned by the Company or any Subsidiary; (ii) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the rights of the Company or any Subsidiary in or to any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim, that would, individually or in the aggregate, together with any other claims in this Section 2.31, reasonably be expected to result in a Material Adverse Effect; (iii) the Intellectual Property Rights owned by the Company or any Subsidiary and, to the knowledge of the Company or any Subsidiary, the Intellectual Property Rights licensed to the Company or any Subsidiary have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or in part, and there is no pending or, to the Company’s or any Subsidiary’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property Rights, and the Company or any Subsidiary is unaware of any facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this Section 2.31, reasonably be expected to result in a Material Adverse Effect; (iv) there is no pending or, to the Company’s or any Subsidiary’s knowledge, threatened action, suit, proceeding or claim by others that the Company or any Subsidiary infringes, misappropriates or otherwise violates any Intellectual Property Rights or other proprietary rights of others, the Company or any Subsidiary has not received any written notice of such claim and the Company or any Subsidiary is unaware of any other facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this Section 2.31, reasonably be expected to result in a Material Adverse Effect; and (v) to the Company’s or any Subsidiary’s knowledge, no employee of the Company or any Subsidiary is in or has ever been in violation in any material respect of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company or any Subsidiary, or actions undertaken by the employee while employed with the Company or any Subsidiary and could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect. To the Company’s or any Subsidiary’s knowledge, all material technical information developed by and belonging to the Company or any Subsidiary which has not been patented has been kept confidential. The Company or any Subsidiary is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus and are not described therein. The Registration Statement, the Pricing Disclosure Package and the Prospectus contain in all material respects the same description of the matters set forth in the preceding sentence. None of the technology employed by the Company or any Subsidiary has been obtained or is being used by the Company or any Subsidiary in violation of any contractual obligation binding on the Company or any Subsidiary or, to the Company’s knowledge, any of its officers, directors or employees, or otherwise in violation of the rights of any Persons.
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2.32. Cybersecurity; Data Protection. The Company and its Subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT Systems”) are adequate for, and operate and perform in all material respects as required in connection with the operation of the business of the Company and its Subsidiaries as currently conducted, free and clear of all material bugs, errors, defects, Trojan horses, time bombs, and other malware. The Company and its Subsidiaries have implemented and maintained commercially reasonable controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data (including all personal, personally identifiable, sensitive, confidential or regulated data (“Personal Data”)) used in connection with their businesses, and there have been no breaches, violations, outages or unauthorized uses of or accesses to same, except in each case that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or for those that have been remedied without material cost or liability or the duty to notify any other Person, nor any incidents under internal review or investigations relating to the same. The Company and its Subsidiaries are presently in material compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or Governmental Entity, internal policies and contractual obligations relating to the privacy and security of IT Systems and Personal Data and to the protection of such IT Systems and Personal Data from unauthorized use, access, misappropriation or modification, except in each case that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
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2.33. Taxes. Each of the Company and its Subsidiaries has filed all returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. Each of the Company and its Subsidiaries has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company or such respective Subsidiary, except those that are being contested in good faith or as would not have or would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. Except as disclosed in writing to the Underwriters, (i) no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company or its Subsidiaries, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company or its Subsidiaries. The term “taxes” mean all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes. Any unpaid material income and corporation tax liability of the Company for any years not finally determined have been accrued on the Company’s financial statements in accordance with the GAAP.
2.34. Compliance with Laws. Each of the Company and its Subsidiaries: (i) is and at all times has been in compliance with all statutes, rules, regulations, ordinances, judgments, orders and decrees of all Governmental Entities applicable to the Company’s and the Subsidiaries’ business (“Applicable Laws”), except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (ii) has not received any warning letter, untitled letter or other correspondence or notice from any other Governmental Entity alleging or asserting noncompliance with any Applicable Laws or any licenses, consents, certificates, approvals, clearances, authorizations, permits, orders and supplements or amendments thereto required by any such Applicable Laws (“Authorizations”); (iii) possesses all material Authorizations and such Authorizations are valid and in full force and effect and are not in material violation of any term of any such Authorizations; (iv) has not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, inquiry, arbitration or other action from any Governmental Entity or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such Governmental Entity or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (v) has not received notice that any Governmental Entity has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such Governmental Entity is considering such action; (vi) has filed, obtained, maintained or submitted all material reports, documents, forms, filings, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct on the date filed (or were corrected or supplemented by a subsequent submission); and (viii) has not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or replacement, safety alert, post-sale warning, or other notice or action relating to the alleged lack of safety or efficacy of any product or any alleged product defect or violation and, to the Company’s knowledge, no third party has initiated, conducted or intends to initiate any such notice or action.
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2.35. ERISA Compliance. The Company and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company or its “ERISA Affiliates” (as defined below) are in compliance in all material respects with ERISA. “ERISA Affiliate” means, with respect to the Company, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “Code”) of which the Company is a member. No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.
2.36. Environmental Laws. The Company and its Subsidiaries, (i) are in compliance with any and all applicable foreign, national, federal, state and local laws and regulations (including, for the avoidance of doubt, all applicable laws and regulations of the United States) relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of health and safety or the environment which are applicable to their businesses (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a Material Adverse Effect. There are no costs or liabilities associated with Environmental Laws, except for those that would, singly or in the aggregate, not have a Material Adverse Effect.
2.37. Title to Property. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company and each of its Subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company and its Subsidiaries taken as a whole, in each case free and clear of all Liens and defects that do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries; and all of the leases and subleases material to the business of the Company and its Subsidiaries, considered as one enterprise, and under which the Company or any of its Subsidiaries holds properties described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, are in full force and effect, and neither the Company nor any Subsidiary has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such Subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.
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2.38. Contracts Affecting Capital. There are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405 of the Securities Act Regulations) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s liquidity or the availability of or requirements for their capital resources required to be described or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus which have not been described or incorporated by reference as required.
2.39. Loans to Directors or Officers. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.40. Ineligible Issuer. At the time of filing the Registration Statement and any post-effective amendment thereto, at the time of effectiveness of the Registration Statement and any amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations) of the Public Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405 of the Securities Act Regulations, without taking account of any determination by the Commission pursuant to such rule that it is not necessary that the Company be considered an ineligible issuer.
2.41. Smaller Reporting Company. As of the time of filing of the Registration Statement, the Applicable Time, the date hereof and the Closing Date, the Company was and is a “smaller reporting company”, as defined in Item 10(f)(1) of Regulation S-K and Rule 12b-2 of the Exchange Act Regulations.
2.42. Testing-the-Waters Communications. The Company has not (i) alone engaged in any Testing-the-Waters Communications, other than Testing-the-Waters Communications with the written consent of the Representative and with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) authorized anyone other than the Representative to engage in Testing-the-Waters Communications. The Company confirms that the Representative has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule 2-B hereto. As of the time of each sale of the Securities in connection with the Offering when the Prospectus is not yet available to prospective purchasers, no individual Written Testing-the-Waters Communication, when considered together with the Pricing Disclosure Package, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.
2.43. Third-Party Data. Any statistical, industry-related and market-related data included in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes to be reliable and accurate or represent the Company’s good faith estimates that are made on the basis of data derived from such sources, and such data agree with the sources from which they are derived, and the Company has obtained the written consent for the use of such data from such sources to the extent required.
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2.44. Electronic Road Show. The Company has made available a Bona Fide Electronic Road Show in compliance with Rule 433(d)(8)(ii) of the Securities Act Regulations such that no filing of any “road show” (as defined in Rule 433(h) of the Securities Act Regulations) is required in connection with the Offering.
2.45. Margin Securities. The Company owns no “margin securities” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), and none of the proceeds of Offering will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the shares of Common Stock to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Federal Reserve Board.
2.46. Dividends and Distributions. Except as disclosed in the Pricing Disclosure Package, Registration Statement and the Prospectus, no Subsidiary of the Company is currently prohibited or restricted, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such Subsidiary’s capital stock (to the extent that any such prohibition or restriction on dividends and/or distributions would have a material effect to the Company), from repaying to the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s property or assets to the Company or any other Subsidiary of the Company, except as may otherwise be provided in current loan or mortgage-related documents.
2.47. Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) included or incorporated by reference in any of the Registration Statement, the Pricing Disclosure Package or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
2.48. Integration. Neither the Company, nor any of its affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act that would require the registration of any such securities issued in such prior offerings under the Securities Act.
2.49. No Broker’s Fees. There are no contracts, agreements or understandings between the Company or its Subsidiaries and any Person that would give rise to a valid claim against the Company or its Subsidiaries or any Underwriter for a brokerage commission, finder’s fee or other like payment in connection with the Offering, or any other arrangements, agreements, understandings, payments or issuance with respect to the Company and its Subsidiaries or any of their respective officers, directors, shareholders, sponsors, partners, employees, affiliates or other Person acting on their behalf that may affect the Underwriters’ compensation as determined by the FINRA.
2.50. Confidentiality and Non-Competition. To the Company’s knowledge, no director, officer, key employee or consultant of the Company is subject to any confidentiality, non-disclosure, non-competition agreement or non-solicitation agreement with any employer or prior employer that could reasonably be expected to materially affect his ability to be and act in his respective capacity of the Company or be expected to result in a Material Adverse Effect.
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2.50. Corporate Records. The minute books of the Company have been made available to the Underwriters and counsel for the Underwriters, and such books (i) contain a complete summary of all material meetings and actions of the board of directors (including each board committee) and stockholders of the Company (or analogous governing bodies and interest holders, as applicable), since the time of its respective incorporation or organization through the date of the latest meeting and action, and (ii) accurately in all material respects reflect all material transactions referred to in such minutes. There are no material transactions, agreements, dispositions or other actions of the Company that are not properly approved and/or accurately and fairly recorded in the minute books of the Company, as applicable.
2.51. Diligence Materials. The Company has provided to the Representative and counsel to the Underwriters all materials required or necessary to respond in all material respects to the diligence request submitted to the Company or counsel to the Company by the Representative.
2.52. Stabilization. Neither the Company nor, to its knowledge, any of its employees, directors or shareholders (without the consent of the Representative) has taken, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.
2.53. No Further Authorizations or Approvals Required. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for the Company’s execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby, and by the Registration Statement, the Pricing Disclosure Package or the Prospectus, except such as have been obtained or made by the Company and are in full force and effect under the Securities Act and such as may be required under applicable state securities or “blue sky” laws or FINRA or the Exchange.
2.54. Termination of Contracts. Neither the Company nor any of its Subsidiaries has sent or received any communication regarding termination of, or intent not to renew, any of the contracts or agreements specifically referred to or described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or filed as an exhibit to the Registration Statement; and no such termination or non-renewal has been threatened by the Company or any of its Subsidiaries, or to the best knowledge of the Company after due inquiry, by any other party to any such contract or agreement.
2.55. Nasdaq Deficiencies. There is no action pending by the Company or the Exchange to delist the Common Stock from the Exchange and all notifications from the Exchange regarding the Company’s deficiencies with regard to the Exchange’s listing rules have been disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus. When issued, the Shares shall be listed on the Exchange.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company shall deliver to the Representative, prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representative shall reasonably object in writing.
3.2 Federal Securities Laws.
3.2.1. Compliance. The Company, subject to Section 3.2.2, shall comply with the requirements of Rule 430A of the Securities Act Regulations, and will notify the Representative promptly, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed; (ii) of the receipt of any comments from the Commission; (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information; (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or, to the Company’s knowledge, threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Securities Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the Offering of the Securities. The Company shall effect all filings required under Rule 424(b) of the Securities Act Regulations, in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and shall take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company shall use its best efforts to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.
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3.2.2. Continued Compliance. The Company shall comply with the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Registration Statement, the Pricing Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“Rule 172”), would be) required by the Securities Act to be delivered in connection with sales of the Securities (the “Prospectus Delivery Period”), any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel to the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) amend or supplement the Pricing Disclosure Package or the Prospectus in order that the Pricing Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the Pricing Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the Securities Act or the Securities Act Regulations, the Company will promptly (i) give the Representative notice of such event; (ii) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Pricing Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representative with copies of any such amendment or supplement and (iii) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representative or counsel to the Underwriters shall reasonably object. If during the Prospectus Delivery Period the Company proposes to file any amendment or supplement to the Registration Statement or Prospectus for any other reason, the Company will (i) give the Representative notice of such event; (ii) a reasonable amount of time prior to any proposed filing or use, furnish the Representative with copies of any such amendment or supplement; and (iii) not file or use any such amendment or supplement to which the Representative or counsel to the Underwriters shall reasonably object, unless in the opinion of the Company’s outside legal counsel the filing of such amendment or supplement is necessary to correct a material misstatement or is necessary to make the statements included therein not misleading. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representative notice of any filings made pursuant to the Exchange Act or the Exchange Act Regulations within 48 hours prior to the Applicable Time. The Company shall give the Representative notice of its intention to make any such filing from the Applicable Time until the Closing Date and will furnish the Representative with copies of the related document(s) a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative or counsel to the Underwriters shall reasonably object.
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3.2.3. Exchange Act Registration. For a period of five (5) years after the date of this Agreement, the Company shall use its best efforts to maintain the registration of the shares of Common Stock under the Exchange Act, and the Company shall not voluntarily deregister the shares of Common Stock under the Exchange Act without the prior written consent of the Representative.
3.2.4. Testing-the-Waters Communications. If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company shall promptly notify the Representative and shall promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
3.3 Delivery to the Underwriters of Registration Statements. The Company has delivered or made available or shall deliver or make available to the Representative and counsel to the Underwriters, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Underwriters, without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
3.4 Delivery to the Underwriters of Prospectuses. The Company has delivered or made available or will deliver or make available to each Underwriter, without charge, as many copies of each Preliminary Prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
3.5 Effectiveness and Events Requiring Notice to the Representative. The Company will use its best efforts to cause the Registration Statement to remain effective with a current prospectus until nine (9) months from the Applicable Time, and will notify the Underwriters immediately and confirm the notice in writing: (i) of the cessation of the effectiveness of the Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (iv) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for any additional information from the Commission; and (vi) of the happening of any event during the period described in this Section 3.5 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the Pricing Disclosure Package or the Prospectus untrue or that requires the making of any changes in the Registration Statement, the Pricing Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company will make every reasonable effort to obtain promptly the lifting of such order.
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3.6 Review of Financial Statements. For a period of five (5) years after the date of this Agreement, the Company, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company’s financial statements for each of the three fiscal quarters immediately preceding the announcement of any quarterly financial information.
3.7 Listing. The Company shall use its reasonable best efforts to maintain the listing of the shares of Common Stock (including the Shares) on the Exchange, and shall not voluntarily delist the shares of Common Stock (including the Shares) on the Exchange without the prior written consent of the Representative, in each case for at least five (5) years from the date of this Agreement. The Company further agrees, if the Company applies to have the shares of Common Stock traded on any of the following markets or exchange, including the NYSE American, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing) (each “Other Trading Market”), it will then include in such application all of the Securities, and will take such other action as is necessary to cause all of such securities to be listed or quoted on such Other Trading Market as promptly as possible. The Company will then take all action reasonably necessary to continue the listing and trading of its shares of Common Stock on such Other Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of such Other Trading Market. The Company agrees to maintain the eligibility of the shares of Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.
3.8. Reports to the Representative.
3.8.1. Periodic Reports, etc. For a period of five (5) years after the date of this Agreement, the Company shall furnish or make available to the Representative copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish to the Representative: (i) a copy of each periodic report the Company shall be required to file with the Commission under the Exchange Act and the Exchange Act Regulations; (ii) a copy of every press release and every news item and article with respect to the Company or its affairs which was released by the Company; (iii) a copy of each Form 8-K prepared and filed by the Company; (iv) five copies of each registration statement filed by the Company under the Securities Act; and (v) such additional documents and information with respect to the Company and the affairs of any future subsidiaries of the Company as the Representative may from time to time reasonably request in writing; provided the Representative shall sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representative and counsel to the Underwriters in connection with the Representative’s receipt of such information. Documents filed with the Commission pursuant to its EDGAR system shall be deemed to have been delivered to the Representative pursuant to this Section 3.9.1.
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3.8.2. Transfer Agent; Transfer Sheets. For a period of five (5) years after the date of this Agreement, the Company shall retain a transfer agent and registrar acceptable to the Representative (the “Transfer Agent”) and shall furnish to the Representative at the Representative’s sole cost and expense such transfer sheets of the Company’s securities as the Representative may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and DTC. Colonial Stock Transfer Company is acceptable to the Representative to act as Transfer Agent for the shares of Common Stock.
3.8.3. Trading Reports. For a period of three (3) years after the date of this Agreement, the Company shall provide to the Representative, at the Company’s expense, such reports published by Exchange relating to price trading of the shares of Common Stock, as the Representative shall reasonably request. Documents made freely available by the Exchange through its website shall be deemed to have been delivered to the Representative pursuant to this Section 3.9.3.
3.9. Payment of Expenses.
3.9.1. The Company hereby agrees to pay on the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the shares of Common Stock to be sold in the Offering with the Commission; (b) all Public Filing System filing fees associated with the review of the Offering by FINRA; (c) all fees and expenses relating to the listing of such Securities on the Exchange and such other stock exchanges as the Company and the Representative together determine, including any fees charged by DTC for new securities; (d) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors, if any; (e) all fees, expenses and disbursements relating to the registration or qualification of the Securities under the “blue sky” laws of such states and other jurisdictions as the Representative may reasonably designate (including, without limitation, all filing and registration fees); (f) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Securities under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (g) the costs of all mailing and printing of the underwriting documents (including, without limitation, this Agreement, any blue sky surveys and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (h) the costs of preparing, printing and delivering certificates representing the Securities; (i) fees and expenses of the transfer agent for the shares of Common Stock; (j) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (k) the fees and expenses of the Company’s accountants; (l) the fees and expenses of the Company’s legal counsel and other agents and representatives; (m) fees and expenses of the counsel to the Underwriters in an amount not to exceed $75,000 and (n) the Company’s actual “road show” expenses for the Offering, if any.
The Company has paid to the Representative the sum of $25,000 (the “Advance”) against fees and expenses of legal counsel and other out-of-pocket accountable expenses anticipated to be incurred, subject to reimbursement by the Representative to the Company if not actually incurred, in accordance with FINRA Rule 5110(g)(4)(A) and Rule 5110(g)(5)(A). Such sum shall be credited against the legal fees and expenses and other out-of-pocket expenses incurred by the Representative.
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The Company hereby agrees to pay on the Closing Date to the extent not paid at the Closing Date, to the Representative, from the gross proceeds of the Offering, for accountable expenses actually incurred by the Representative in connection with the transaction. The Representative may deduct from the net proceeds of the Offering payable to the Company on the Closing Date, the expenses set forth herein to be paid by the Company to the Underwriters, less the Advance.
3.9.2. Non-Accountable Expense Allowance. The Company agrees that on the Closing Date it will pay to the Representative a non-accountable expense allowance up to $45,000.
3.10. Application of Net Proceeds. The Company shall apply the net proceeds from the Offering received by it in a manner consistent with the application thereof described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
3.11. Delivery of Earnings Statements to Security Holders. The Company shall make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth (15th) full calendar month following the date of this Agreement, an earnings statement (which need not be certified by independent registered public accounting firm unless required by the Securities Act or the Securities Act Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at least twelve (12) consecutive months beginning after the date of this Agreement. If such earnings statement is available on EDGAR, whether via filing of the Company’s Annual Report on Form 10-K or otherwise, it shall be deemed to have been delivered to the Representative pursuant to this Section 3.12.
3.12. Stabilization. Neither the Company nor, to its knowledge, any of its employees, directors or shareholders (without the consent of the Representative) has taken or shall take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.
3.13. Internal Controls. The Company shall maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
3.14. Accountants. As of the date of this Agreement, the Company shall retain an independent registered public accounting firm reasonably acceptable to the Representative, and the Company shall continue to retain a nationally recognized independent registered public accounting firm for a period of at least five (5) years after the date of this Agreement. The Representative acknowledges that the Current Auditor is acceptable to the Representative.
3.15. FINRA. The Company shall advise the Representative (who shall make an appropriate filing with FINRA) if it is or becomes aware that (i) any officer or director of the Company, (ii) any beneficial owner of 10% or more of any class of the Company’s securities or (iii) any beneficial owner of the Company’s unregistered equity securities which were acquired during the one hundred eighty (180) days immediately preceding the initial filing of the Registration Statement is or becomes an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
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3.16. No Fiduciary Duties. The Company hereby acknowledges that the Underwriters are acting solely as underwriters in connection with the offering of the Securities. The Company further acknowledges that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s-length basis and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Company, its management, stockholders, creditors or any other Person in connection with any activity that the Underwriters may undertake or have undertaken in furtherance of the offering of the Securities, either before or after the date hereof. The Underwriters hereby expressly disclaim any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company hereby confirms its understanding and agreement to that effect. The Company hereby further confirms its understanding that no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the Offering contemplated hereby or the process leading thereto, including, without limitation, any negotiation related to the pricing of the Securities; and the Company has consulted its own legal and financial advisors to the extent it has deemed appropriate in connection with this Agreement and the Offering. The Company and the Underwriters agree that they are each responsible for making their own independent judgments with respect to any such transactions, and that any opinions or views expressed by the Underwriters to the Company regarding such transactions, including but not limited to any opinions or views with respect to the price or market for the Company’s securities, do not constitute advice or recommendations to the Company. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.
3.17. Company Lock-Up Agreements.
3.17.1. Restriction on Sales of Capital Stock. The Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of ninety (90) days after the date set forth on the Prospectus (the “Lock-Up Period”), (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) file or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company except for a registration statement on Form S-8 in connection with the registration of shares of Common Stock issuable under any employee equity-based compensation plan, incentive plan, stock plan, dividend reinvestment plan adopted and approved by the Company’s Board of Directors; or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clause (i), (ii), or (iii) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise.
3.17.2. Exceptions. The restrictions contained in Section 3.17.1 shall not apply to (i) the shares of Common Stock to be sold hereunder, (ii) the issuance by the Company of the Warrant Shares or of shares of Common Stock upon the exercise of a stock option or warrant or the conversion of a security outstanding on the date hereof, of which the Representative have been advised in writing or which is disclosed in the Registration Statement, provided that such options, warrants, and securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with automatic price resets, share splits, adjustments or combinations as set forth in such securities) or to extend the term of such securities, or (iii) the issuance by the Company of stock options or shares of capital stock of the Company under any equity compensation plan of the Company, duly adopted for such purpose, by a majority of the non-employee members of the Company’s Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Company; or (iv) the issuance of securities pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith, and provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, provided that, in each of (ii), (iii) and (iv) above, the underlying shares shall be restricted from sale during the entire Lock-Up Period.
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3.18. Blue Sky Qualifications. The Company shall use its best efforts, in cooperation with the Underwriters, if necessary, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
3.19. Reporting Requirements. The Company, during the period when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and Exchange Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Securities as may be required under Rule 463 under the Securities Act Regulations.
3.20. D&O Insurance. On the date of this Agreement, the Company shall maintain officers’ and directors’ insurance for each of the officers and directors of the Company in the aggregate amount of no less than $1,000,000.
3.21. Board Composition and Board Designations. The Company shall ensure that: (i) the qualifications of the persons serving as members of the Company’s Board of Directors and the overall composition of the Company’s Board of Directors comply with the Sarbanes-Oxley Act, with the Exchange Act and with the listing rules of the Exchange or any Other Trading Market, as the case may be, in the event the Company seeks to have its Securities listed on such Other Trading Market, and (ii) if applicable, at least one member of the Audit Committee of the Company’s Board of Directors qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K under the Securities Act and the listing rules of the Exchange.
3.22. Prohibition on Press Releases and Public Announcements. At the request of the Representative, by 9:00 a.m. (New York City time) on the first trading day after the date of this Agreement, the Company shall issue a press release disclosing the material terms of the Offering. The Company and the Representative shall consult with each other in issuing any press releases with respect to the Offering, and neither the Company nor any Underwriter shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any other press release of such Underwriter, or without the prior consent of such Underwriter, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.
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3.23. Research Independence. The Company acknowledges that each Underwriter’s research analysts and research departments, if any, are required to be independent from their respective investment banking divisions and are subject to certain regulations and internal policies, and that such Underwriter’s research analysts may hold and make statements or investment recommendations and/or publish research reports with respect to the Company and/or the offering that differ from the views of its investment bankers. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against such Underwriter with respect to any conflict of interest that may arise from the fact that the views expressed by their independent research analysts and research departments may be different from or inconsistent with the views or advice communicated to the Company by such Underwriter’s investment banking divisions. The Company acknowledges that each of the Representative is a full-service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short position in debt or equity securities of the Company.
4. Conditions to Underwriters’ Obligations. The obligations of the Underwriters to purchase and pay for the Securities, as provided herein, shall be subject to (i) the continuing accuracy of the representations and warranties of the Company as of the date hereof and as of the Closing Date; (ii) the accuracy of the statements of officers of the Company made pursuant to the provisions hereof; (iii) the performance by the Company of its obligations, covenants and agreements hereunder; and (iv) the following conditions:
4.1. Regulatory Matters.
4.1.1. Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement has become effective not later than 5:00 p.m., Eastern time, on the date of this Agreement or such later date and time as shall be consented to in writing by you, and, at each of the Closing Date, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Securities Act, no order preventing or suspending the use of any Preliminary Prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated by the Commission. The Company has complied with each request (if any) from the Commission for additional information. The Prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) (without reliance on Rule 424(b)(8)) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.
4.1.2. FINRA Clearance. On or before the date of this Agreement, the Representative shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.
4.2. Company Counsel Matters.
4.2.1. Closing Date Opinion of Counsel. On the Closing Date, the Representative shall have received the favorable opinion of Sichenzia Ross Ference Carmel LLP, counsel to the Company, and a written statement providing certain “10b-5” negative assurances, dated the Closing Date and addressed to the Representative, in form and substance satisfactory to the Representative and counsel to the Underwriters.
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4.3. Comfort Letters.
4.3.1. Comfort Letter. At the time this Agreement is executed you shall have received a “cold comfort letter” from the each Auditor containing statements and information of the type customarily included in accountants’ comfort letters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus, addressed to the Representative and in form and substance satisfactory in all respects to you and counsel to the Underwriters, dated as of the date of this Agreement.
4.3.2. Bring-down Comfort Letter. At the Closing Date, the Representative shall have received from each Auditor a letter, in form and substance reasonably satisfactory to you and counsel to the Underwriters, dated as of the Closing Date, to the effect that such Auditor reaffirms the statements made in the letter furnished pursuant to Section 4.3.1.
4.4. Officers’ Certificates.
4.4.1. Officers’ Certificate. The Company shall have furnished to the Representative a certificate, dated the Closing Date, of its Chief Executive Officer and its Chief Financial Officer stating that (i) such officers have carefully examined the Registration Statement, the Pricing Disclosure Package and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of the Applicable Time and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Pricing Disclosure Package, as of the Applicable Time and as of the Closing Date, the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading, (ii) since the Effective Date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus, (iii) to the best of their knowledge after reasonable investigation, as of the Closing Date, the representations and warranties of the Company in this Agreement are true and correct in all material respects (except for those representations and warranties qualified as to materiality, which shall be true and correct in all respects, and except for those representations and warranties which refer to facts existing at a specific date, which shall be true and correct as of such date) and the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, (iv) there has not been, subsequent to the date of the most recent audited financial statements included or incorporated by reference in the Pricing Disclosure Package, any material adverse change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would reasonably be expected to involve a material adverse change or a prospective material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company, except as set forth in the Prospectus, and (v) with respect to such other matters as the Representative may reasonably require.
4.4.2. Secretary’s Certificate. At each of the Closing Date, the Representative shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date, certifying: (i) that each of the Charter and Bylaws is true and complete, has not been modified and is in full force and effect; (ii) that the resolutions of the Company’s Board of Directors relating to the Offering are in full force and effect and have not been modified; (iii) as to the accuracy and completeness of all correspondence between the Company or its counsel and the Commission; and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.
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4.5. No Material Adverse Changes. No event or condition of a type described in Section 2.13 hereof shall have occurred or shall exist, which event or condition is not described in the Pricing Disclosure Package (excluding any amendment or supplement thereto) and the Prospectus (excluding any amendment or supplement thereto) and the effect of which in the judgment of the Representative makes it impracticable or inadvisable to proceed with the Offering, sale or delivery of the Securities on the Closing Date, on the terms and in the manner contemplated by this Agreement, the Pricing Disclosure Package and the Prospectus.
4.6. No Material Misstatement or Omission. The Underwriters shall not have discovered and disclosed to the Company on or prior to the Closing Date and any Option Closing Date that the Registration Statement or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel to the Underwriters, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading, or that the Pricing Disclosure Package, any Issuer Free Writing Prospectus or the Prospectus or any amendment or supplement thereto contains an untrue statement of fact which, in the opinion of counsel to the Underwriters, is material or omits to state any fact which, in the opinion of counsel to the Underwriters, is material and is necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading.
4.7. Corporate Proceedings. All corporate proceedings and other legal matters incident to the authorization, form and validity of each of this Agreement, the Firm Shares, the Firm Pre-Funded Warrants, the Warrant Shares and each Lock-Up Agreement, the Registration Statement, the Pricing Disclosure Package and the Prospectus and all other legal matters relating to this Agreement, the Firm Shares, the Firm Pre-Funded Warrants, the Warrant Shares and each Lock-Up Agreement and the transactions contemplated hereby and thereby shall be reasonably satisfactory in all material respects to counsel to the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.
4.8. Delivery of Agreements.
4.8.1. Lock-Up Agreements. On or before the date of this Agreement, the Company shall have delivered to the Representative executed copies of the Lock-Up Agreements from each of the Lock-Up Parties.
4.8.2. Pre-Funded Warrants. On or before the Closing Date, the Company shall have delivered to the Representative executed copies of the Firm Pre-Funded Warrants.
4.9. Additional Documents. At the Closing Date, Representative shall have been furnished with such documents and opinions as they may require in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Representative and counsel to the Underwriters.
If any condition specified in this Section 4 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Representative by written notice to the Company at any time on or prior to the Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 3 (with respect to the reimbursement of out-of-pocket accountable, bona fide expenses actually incurred by the Representative) and Section 5 shall at all times be effective and shall survive such termination.
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5. Indemnification.
5.1. Indemnification of the Underwriters. The Company agrees to indemnify and hold harmless each Underwriter and its partners, members and affiliates, and their respective directors, officers, employees and agents, and each Person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses incurred in connection with any loss, claim, damage, liability, litigation, investigation, suit, action or proceeding (whether or not such Indemnified Person (as defined below) is a party thereto), whether commenced or threatened, and in connection with the enforcement of this provision with respect to any of the above, in each case, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (or any amendment or supplement thereto), any Preliminary Prospectus, any Pricing Disclosure Package (including any Pricing Disclosure Package that has subsequently been amended), any Written Testing-the-Waters Communication (as from time to time each may be amended and supplemented), any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering, including any “road show” or investor presentations made to investors by the Company (whether in person or electronically), or any application or other document or written communication executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, the Exchange or any other national securities exchange, or caused by any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representative expressly for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of Underwriter Information.
5.2. Indemnification of the Company. Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the several Underwriters, as incurred, but only with respect to untrue statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package, the Prospectus, or any Written Testing-the-Waters Communication, or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, the Underwriters’ Information.
5.3. Notice and Procedures. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnification may be sought pursuant to the preceding paragraphs of this Section 5, such person (the “Indemnified Person”) shall promptly notify the person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under the preceding paragraphs of this Section 5 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under the preceding paragraphs of this Section 5. If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person (who shall not, without the consent of the Indemnified Person, be counsel to the Indemnifying Person) to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 5 that the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be paid or reimbursed as they are incurred. Any such separate firm for any Underwriter, its affiliates, directors and officers and any control persons of such Underwriter shall be designated in writing by the Representative and any such separate firm for the Company, its directors, its officers who signed the Registration Statement and any control persons of the Company shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested that an Indemnifying Person reimburse the Indemnified Person for fees and expenses of counsel as contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by the Indemnifying Person of such request and (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement. No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (x) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.
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5.4. Contribution. If the indemnification provided for in this Section 5 shall for any reason be unavailable to or insufficient to hold harmless an Indemnified Person under Section 5.1 or 5.2 in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each Indemnifying Person shall, in lieu of indemnifying such Indemnified Person, contribute to the amount paid or payable by such Indemnified Person as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other, from the Offering of the Securities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters on the other, shall be deemed to be in the same respective proportions as the net proceeds (before deducting expenses) received by the Company from the sale of the Securities and the total underwriting discounts and commissions received by the Underwriters in connection therewith, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate offering price of the Securities. The relative fault of the Company, on the one hand, and the Underwriters on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
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5.5. Limitation on Liability. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 5.4. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in Section 5.4 shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with any such action or claim. Notwithstanding the provisions of this Section 5, in no event shall an Underwriter be required to contribute an amount in excess of $500,000 as a result of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations to contribute pursuant to this Section 5 are several in proportion to their respective purchase obligations hereunder and not joint.
5.6. Non-Exclusive Remedies. The remedies provided for in Sections 5.1 through 5.5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Person at law or in equity.
5.7. Representations, Warranties, Agreements to Survive. The indemnity and contribution provisions contained in this Section 5 and the representations, warranties and agreements of the Company contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any termination of this Agreement pursuant to Section 7, (ii) any investigation made by or on behalf of any Underwriter, any person controlling any Underwriter or any affiliate of any Underwriter, or the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Securities.
6. Default by an Underwriter.
If on the Closing Date, any Underwriter shall fail to purchase and pay for the portion of the Shares, which such Underwriter has agreed to purchase and pay for on such date (otherwise than by reason of any default on the part of the Company), the Representative, or if the Representative is the defaulting Underwriter, the non-defaulting Underwriters, shall use their commercially reasonable efforts to procure within 36 hours thereafter one or more of the other Underwriters, or any others, to purchase from the Company such amounts as may be agreed upon and upon the terms set forth herein, the Shares, which the defaulting Underwriter or Underwriters failed to purchase. If during such 36 hours the Representative shall not have procured such other Underwriters, or any others, to purchase the Shares, as the case may be, agreed to be purchased by the defaulting Underwriter or Underwriters, then:
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6.1. Default Not Exceeding 10% of Shares. If the aggregate number of the Shares with respect to which such default shall occur does not exceed 10% of the Shares covered hereby, the other Underwriters shall be obligated, severally, in proportion to the respective numbers of Shares which they are obligated to purchase hereunder, to purchase the Shares which such defaulting Underwriter or Underwriters failed to purchase.
6.2. Default Exceeding 10% of Shares. If the aggregate number of Shares with respect to which such default shall occur exceeds 10% of the Shares covered hereby, the Company or the Representative will have the right to terminate this Agreement without liability on the part of the non-defaulting Underwriters or of the Company except to the extent provided in Section 5 hereof.
6.3. Postponement of Closing Date. In the event that the Shares to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, the non-defaulting Representative or the Company shall have the right to postpone the Closing Date for a reasonable period, but not in any event exceeding five (5) Business Days, in order to effect whatever changes may thereby be made necessary in the Registration Statement, the Pricing Disclosure Package or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus that in the opinion of counsel for the Underwriters may thereby be made necessary. The term “Underwriter” includes any Person substituted for a defaulting Underwriter. Nothing contained in this Section 6 shall relieve a defaulting Underwriter of any liability it may have to the Company or any non-defaulting Underwriter for damages caused by its default.
7. Termination.
7.1. Termination Right. The Representative shall have the right to terminate this Agreement at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in your opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the New York Stock Exchange or The Nasdaq Stock Market LLC (“Nasdaq”) shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction; or (iii) if the United States shall have become involved in a new war or an increase in major hostilities; or (iv) if a banking moratorium has been declared by a New York State or federal authority; or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets; or (vi) if, the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in your opinion, make it inadvisable to proceed with the delivery of the Securities; or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder; or (viii) if, aside from the Company’s receipt of a delisting notification from Nasdaq and provided that the Company has timely submitted its request for a hearing before a Nasdaq Hearings Panel and payment of the requisite $20,000 hearing fee, the Representative shall have become aware after the date hereof of such a material adverse change in the conditions or prospects of the Company, or such adverse material change in general market conditions as in the Representative’s judgment would make it impracticable to proceed with the offering, sale and/or delivery of the Securities or to enforce contracts made by the Underwriters for the sale of the Securities.
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7.2. Expenses. Notwithstanding anything to the contrary in this Agreement, except in the case of a default by the Underwriters, pursuant to Section 6.2 above, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Representative their actual and accountable out-of-pocket expenses related to the transactions contemplated herein then due and payable ($25,000 of which has been paid prior to the date hereof). Notwithstanding the foregoing, any advance received by the Representative will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(g)(4)(A).
8. General Provisions.
8.1. Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (i) the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or e-mail attachment at the email address set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Business Day, (ii) the next Business Day after the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or e-mail attachment at the e-mail address as set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, (iii) the second (2nd) Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
8.2. Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.
8.3. Amendment. This Agreement may only be amended by a written instrument executed by each of the parties hereto.
8.4. Waiver, etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
8.5. Entire Agreement. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. Notwithstanding anything to the contrary set forth herein, it is understood and agreed by the parties hereto that all other terms and conditions of that certain engagement letter between the Company and the Representative, dated March 27, 2025, as amended on May __ 2025, shall remain in full force and effect.
8.6. Binding Effect. This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters, the Company and the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors, legal representatives, heirs and assigns, and no other Person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from any of the Underwriters.
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8.7. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
8.8. Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed and enforced in accordance with the law of the State of New York. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the Supreme Court of the State of New York, sitting in the County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 8.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor.
8.9. WAIVER OF JURY TRIAL. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
8.10. Counterparts. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
[Signature Page Follows]
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If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
Entero Therapeutics, Inc.
| By: | ||
| Richard Paolone | ||
| Interim Chief Executive Officer |
Address for Notice:
777 Yamato Road, Suite 502
Boca Raton, FL 33431
E-mail: rpaolone@enterothera.com
Attention: Richard Paolone, Interim Chief Executive Officer
with a copy to (which shall not constitute notice):
Sichenzia Ross Ference Carmel LLP
1185 Avenue of the Americas, 31st Floor
New York, NY 10036
E-mail: rcarmel@srfc.law
Attention: Ross D. Carmel, Esq.
Confirmed as of the date first written above mentioned, on behalf of itself and as Representative of the several Underwriters named in Schedule 1 hereto:
WESTPARK CAPITAL, INC.
| By: | ||
| Richard Rappaport | ||
| Chief Executive Officer |
Address for Notice:
1800 Century Park East, Suite 220
Los Angeles, CA 90067
E-mail:
Attention: Richard Rappaport, Chief Executive Officer
with a copy to (which shall not constitute notice):
Lucosky Brookman LLP
101 Wood Avenue South, 5th Floor
Woodbridge, NJ 08330
E-Mail: jlucosky@lucbro.com
Attention: Joseph M. Lucosky, Esq.
[SIGNATURE PAGE]
ENTERO THERAPEUTICS, INC. – UNDERWRITING AGREEMENT
SCHEDULE 1
| Underwriter | Number of Shares |
Number of Pre-Funded Warrants |
||||||
| WestPark Capital, Inc. | ||||||||
| TOTAL | ||||||||
SCHEDULE 2-A
Pricing Information
| Number of Shares: | |
| Number of Pre-Funded Warrants: | |
| Public Offering Price per Share: | $ |
| Public Offering per Pre-Funded Warrant: | $ |
| Underwriting Discount per Share: | $ |
| Underwriting Discount per Pre-Funded Warrant: | $ |
| Proceeds to Company per Share: | $ |
| Proceeds to Company per Pre-Funded Warrant (before expenses): | $ |
SCHEDULE 2-B
Written Testing-the-Waters Communications
None.
SCHEDULE 3
List of Lock-Up Parties
EXHIBIT A
Form of Lock-Up Agreement
_________, 2025
WestPark Capital, Inc.
1800 Century Park East, Suite 220
Los Angeles, CA 90077
As representative of the several Underwriters (as defined below)
Ladies and Gentlemen:
The undersigned understands that you propose to enter into an underwriting agreement (the “Underwriting Agreement”) , as representative (the “Representative”) of the several Underwriters named in Schedule 1 thereto (collectively, the “Underwriters”), with Entero Therapeutics, Inc., a Delaware corporation (the “Company”), providing for the public offering (the “Public Offering”) of shares of common stock of the Company, par value $0.0001 per share (the “Common Stock”) and/or Pre-Funded Warrants in lieu thereof (collectively, the “Securities”), pursuant to a registration statement on Form S-1 filed with the Securities and Exchange Commission.
In consideration of the agreement by the Underwriters to offer and sell the Securities, and of other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the undersigned agrees that, during the period beginning from the date of this agreement (this “Agreement”) and continuing to and including the date 90 days after the date set forth on the final prospectus (the “Prospectus”) used to sell the Securities in the Public Offering (the “Lock-Up Period”), the undersigned shall not, and shall not cause or direct any of its affiliates to, (i) offer, sell, contract to sell, pledge, grant any option to purchase, lend or otherwise dispose of any shares of Common Stock of the Company, or any options or warrants to purchase any shares of Common Stock of the Company, or any securities convertible into, exchangeable for or that represent the right to receive shares of Common Stock of the Company (such options, warrants or other securities, collectively, “Derivative Instruments”), including without limitation any such shares or Derivative Instruments now owned or hereafter acquired by the undersigned, (ii) engage in any hedging or other transaction or arrangement (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) which is designed to or which reasonably could be expected to lead to or result in a sale, loan, pledge or other disposition (whether by the undersigned or someone other than the undersigned), or transfer of any of the economic consequences of ownership, in whole or in part, directly or indirectly, of any shares of Common Stock of the Company or Derivative Instruments, whether any such transaction or arrangement (or instrument provided for thereunder) would be settled by delivery of shares of Common Stock or other securities, in cash or otherwise (any such sale, loan, pledge or other disposition, or transfer of economic consequences, a “Transfer”), (iii) make any demand for or exercise any right with respect to the registration of any shares of Common Stock or Derivative Instruments or (iv) otherwise publicly announce any intention to engage in any of the foregoing. The undersigned represents and warrants that the undersigned is not, and has not caused or directed any of its affiliates to be or become, currently a party to any agreement or arrangement that provides for, is designed to or which reasonably could be expected to lead to or result in any Transfer during the Lock-Up Period.
If the undersigned is not a natural person, the undersigned represents and warrants that no single natural person, entity or “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than a natural person, entity or “group” (as described above) that has executed an Agreement in substantially the same form as this Agreement, beneficially owns, directly or indirectly, 50% or more of the common equity interests, or 50% or more of the voting power, in the undersigned.
A-1
Notwithstanding the foregoing, the undersigned may (a) transfer any of the undersigned’s shares of Common Stock without the consent of the Representative:
| (i) | in transactions consisting of shares of Common Stock or such Derivative Instruments that the undersigned may purchase (A) from the Underwriters in the Public Offering or (B) in open market transactions after the date set forth on the cover of the Prospectus; |
| (ii) | as a bona fide gift or charitable contribution; |
| (iii) | to an immediate family member or a trust for the direct or indirect benefit of the undersigned or such immediate family member of the undersigned; |
| (iv) | by will or intestacy; provided that no public filing, report or announcement shall be voluntarily made and, if required, any public report or filing under Section 16 of the Exchange Act, shall clearly indicate in the footnotes thereto that the filing relates to the transfer of shares by will or intestacy; |
| (v) | pursuant to a domestic relations order, divorce decree or court order; provided that no public filing, report or announcement shall be voluntarily made and, if required, any public report or filing under Section 16 of the Exchange Act shall clearly indicate in the footnotes thereto that the filing relates to the transfer of shares pursuant to a domestic relations order, divorce decree or court order; |
| (vi) | if the undersigned is a corporation, partnership, limited liability company, trust or other business entity, (A) to another corporation, partnership, limited liability company, trust or other business entity that is an affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned, or to any investment fund or other entity controlling, controlled by, managing or managed by or under common control with the undersigned or affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), or (B) as part of a distribution to members or shareholders of the undersigned; |
| (vii) | if the undersigned is a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust; |
| (viii) | to the Company in connection with the repurchase of the undersigned’s shares in connection with the termination of the undersigned’s employment with the Company pursuant to contractual agreements with the Company; provided that no public filing, report or announcement shall be voluntarily made and, if required, any public report or filing under Section 16 of the Exchange Act shall clearly indicate in the footnotes thereto that the filing relates to the transfer of shares from the repurchase of the undersigned’s shares in connection with the termination of the undersigned’s employment with the Company pursuant to contractual agreements with the Company; |
A-2
| (ix) | through the disposition or forfeiture of the undersigned’s shares to the Company to satisfy any income, employment or tax withholding and remittance obligations of the undersigned or the employer of the undersigned in connection with the vesting of restricted stock, restricted stock units or other incentive awards settled in shares of Common Stock held by the undersigned; provided that such restricted stock, restricted stock units or other incentive awards were granted under a stock incentive plan, stock purchase plan or pursuant to a contractual employment arrangement described in the Prospectus; provided further that no public filing, report or announcement shall be voluntarily made and, if required, any public filing, report or announcement, including under Section 16 of the Exchange Act, shall clearly indicate in the footnotes thereto that the filing relates to the transfer of shares through the disposition or forfeiture of the undersigned’s shares to the Company to satisfy any income, employment or tax withholding and remittance obligations of the undersigned or the employer of the undersigned in connection with the vesting of restricted stock, restricted stock units or other incentive awards settled in shares held by the undersigned; provided further that any underlying Common Stock or Derivative Instruments shall continue to be subject to the restrictions on transfer set forth in this Agreement; |
| (x) | to the Company through the exercise of a stock option granted under a stock incentive plan or stock purchase plan or a warrant described in the Prospectus by the undersigned, and the receipt by the undersigned from the Company of shares of Common Stock upon any such exercise; provided that the underlying shares shall continue to be subject to the restrictions on transfer set forth in this Agreement; provided further that no public filing, report or announcement shall be voluntarily made and, if required, any public filing, report or announcement, including under Section 16 of the Exchange Act, shall clearly indicate in the footnotes thereto that the filing relates to the exercise of a stock option or warrant; |
| (xi) | pursuant to a bona fide third party tender offer for all outstanding Common Stock of the Company, merger, consolidation or other similar transaction involving a Change of Control of the Company and approved by the Company’s board of directors; provided that, if such Change of Control transaction is not completed, this clause (a)(xi) shall not be applicable and the undersigned’s shares shall remain subject to the restrictions contained in this Agreement; or |
| (xii) | in connection with any reclassification, repurchase, redemption, conversion or exchange of the Common Stock or outstanding preferred stock; provided that any securities of the Company received by the undersigned as a result will be subject to the restrictions set forth in this Agreement; |
or (b) establish a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of the undersigned’s shares of Common Stock; provided that (i) such plan does not provide for the transfer of shares during the Lock-Up Period and (ii) no public filing, report or announcement shall be voluntarily made and, if required, such public announcement, report or filing shall include a statement to the effect that no transfer of the undersigned’s shares of Common Stock or Derivative Instruments may be made under such plan during the Lock-Up Period.
In addition, provided in the case of clauses (a)(ii), (iii), (iv), (v), (vi) and (vii) above, it shall be a condition to such transfer that each transferee, donee or distributee sign and deliver an agreement substantially in the form of this Agreement, except in the case of clauses (a)(iv) and (v) where a court of competent jurisdiction requires such transfer or distribution be made without such a restriction; provided further that in the case of clauses (a)(i), (ii), (iii), (vi) and (vii) above, no filing under Section 16(a) of the Exchange Act (other than a required Form 5 filing that includes a statement indicating the reason for such transfer and is filed no earlier than 120 days following the date set forth on the Prospectus) or other public announcement, reporting a reduction in beneficial ownership of the undersigned’s shares of Common Stock, shall be required or shall be voluntarily made during the Lock-Up Period; provided further in the case of clauses (a)(ii), (a)(iii), (a)(iv), (a)(vi) and (a)(vii), any such transfer shall not involve a disposition for value.
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For purposes of this Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin and “Change of Control” shall mean the transfer (whether by tender offer, merger, consolidation or other similar transaction), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an Underwriter pursuant to the Public Offering), of the Company’s voting securities if, after such transfer, such person or group of affiliated persons would hold more than 50% of the voting power represented by the outstanding securities of the Company (or the surviving entity). For the avoidance of doubt, the Public Offering is not a Change of Control. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s shares of Common Stock of the Company except in compliance with the foregoing restrictions.
The undersigned acknowledges and agrees that none of the Underwriters has made any recommendation or provided any investment or other advice to the undersigned with respect to this Agreement or the subject matter hereof, and the undersigned has consulted its own legal, accounting, financial, regulatory, tax and other advisors with respect to this Agreement and the subject matter hereof to the extent the undersigned has deemed appropriate. The undersigned understands that the Company and the Underwriters are relying upon this Agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this Agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors, and assigns.
Notwithstanding anything to the contrary contained herein, this Agreement will automatically terminate and the undersigned will be released from all of his, her or its obligations hereunder upon the earliest to occur, if any, of (i) prior to the execution of the Underwriting Agreement, the Company advises the Representative in writing that it has determined not to proceed with the Public Offering, (ii) the Company files an application to withdraw the registration statement related to the Public Offering, (iii) the Underwriting Agreement is executed but is terminated (other than the provisions thereof which survive termination) prior to payment for and delivery of the Securities to be sold thereunder, and (iv) _____________, if the Underwriting Agreement has not been executed by such date.
The undersigned and the Representative hereby consent to receipt of this Agreement in electronic form and understand and agree that this Lock-Up Agreement may be signed electronically. In the event that any signature is delivered by facsimile transmission, electronic mail, or otherwise by electronic transmission evidencing an intent to sign this Agreement (including any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com), such facsimile transmission, electronic mail or other electronic transmission shall create a valid and binding obligation of the undersigned with the same force and effect as if such signature were an original. Execution and delivery of this Agreement by facsimile transmission, electronic mail or other electronic transmission is legal, valid and binding for all purposes.
This Agreement shall be governed by and construed in accordance with the law of the State of New York.
[Signature page follows]
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Very truly yours,
| IF AN INDIVIDUAL: | IF AN ENTITY: | |||
| (duly authorized signature) | (please print complete name of entity) | |||
| Name: | By: | |||
| (please print full name) | (duly authorized signature) | |||
| Name: | ||||
| (please print full name) | ||||
| Title: | ||||
| (please print full title) | ||||
| Address: | Address: | |||
| E-mail: | E-mail: | |||
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EXHIBIT B
Subsidiaries
| Name of Subsidiaries | Jurisdiction | |
B-1
Exhibit 4.19
PRE-FUNDED COMMON STOCK PURCHASE WARRANT
ENTERO THERAPEUTICS, INC.
| Warrant Shares: [·] | Issue Date: ________, 2025 |
| Initial Exercise Date: _________, 2025 |
THIS PRE-FUNDED COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date set forth above (the “Initial Exercise Date”) and until this Warrant is exercised in full (the “Termination Date”) but not thereafter, to subscribe for and purchase from Entero Therapeutics, Inc., a Delaware corporation (the “Company”), up to [·] shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock (as defined herein). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1.
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (“Bloomberg”) (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the OTCQB Venture Market (“OTCQB”) or the OTCQX Best Market (“OTCQX”) is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed on or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market (“Pink Market”) (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally are open for use by customers on such day.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
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“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Registration Statement” means the Company’s registration statement on Form S-1 (File No. 333-_________).
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Subsidiary” means the subsidiaries of the Company set forth on Exhibit 21 to the Registration Statement and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Trading Day” means a day on which the Trading Market on which the Common Stock is then listed is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).
“Transfer Agent” means __________, the current transfer agent of the Company, with a mailing address of [*], and any successor transfer agent of the Company.
“Underwriting Agreement” means the underwriting agreement, dated as of _________, 2025, among the Company and WestPark Capital, Inc. as representative of the several underwriters named therein.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Warrants” means this Pre-Funded Warrant and other Common Stock purchase warrants issued by the Company pursuant to the Registration Statement.
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Section 2. Exercise.
(a) Exercise of Warrant. Subject to the terms and conditions hereof, exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed .pdf copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) one (1) Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. The Company shall have no obligation to inquire with respect to or otherwise confirm the authenticity of the signature(s) contained on any Notice of Exercise nor the authority of the person executing such Notice of Exercise. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and this Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Trading Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof. For the avoidance of doubt, there is no circumstance that would require the Company to net cash settle this Warrant.
(b) Exercise Price. The aggregate exercise price of this Warrant, except for a nominal exercise price of $[*] per Warrant Share, was pre-funded to the Company on or prior to the Initial Exercise Date and, consequently, no additional consideration (other than the nominal exercise price of $[*] per Warrant Share) shall be required to be paid by the Holder to the Company to effect any exercise of this Warrant. The Holder shall not be entitled to the return or refund of all, or any portion, of such pre-paid aggregate exercise price under any circumstance or for any reason whatsoever, including in the event this Warrant shall not have been exercised prior to the Termination Date. The remaining unpaid exercise price per Warrant Share under this Warrant shall be $[·], subject to adjustment hereunder (the “Exercise Price”).
(c) Cashless Exercise. Subject to the terms and conditions hereof, this Warrant may be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
(B) = the Exercise Price, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of this Warrant. The Company agrees not to take any position contrary to this Section 2(c), except to the extent required by applicable law, rules or regulations.
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(d) Mechanics of Exercise.
(i) Delivery of Warrant Shares Upon Exercise. Subject to Section 2(e), the Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate representing the Warrant Shares to the address specified by the Holder in the Notice of Exercise or by book-entry, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise by the date that is the earlier of (i) one (1) Trading Day after the delivery to the Company of the Notice of Exercise (assuming the aggregate Exercise Price has been delivered to the Company, whether or in cash or by cashless exercise), (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company, and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) one (1) Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the third Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent (which may be the Transfer Agent) that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise delivered on or prior to 9:00 a.m. (New York City time) on the Initial Exercise Date, which may be delivered at any time after the time of execution of the Underwriting Agreement, the Company agrees to deliver, or cause to be delivered, the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date and the Initial Exercise Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received by such Warrant Share Delivery Date. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time will be less than the amount stated on the face hereof.
(ii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
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(iii) Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise by delivering written notice to the Company at any time prior to the delivery of such Warrant Shares (in which case any liquidated damages payable under Section 2(d)(i) shall no longer be payable).
(iv) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date (other than any such failure that is solely due to any action or inaction by the Holder with respect to such exercise), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Warrant Shares so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of this Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Warrant Shares with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of this Warrant as required pursuant to the terms hereof.
(v) No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share of Common Stock.
(vi) Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
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(e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with (i) the Holder’s Affiliates, (ii) any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates, and (iii) any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for the purposes of determination of beneficial ownership pursuant to Section 13(d) and Rule 13d-3 of the Exchange Act (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Warrant Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of Warrant Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of this Warrant that are not in compliance with the Beneficial Ownership Limitation, except to the extent the Holder has detrimentally relied on the number of outstanding shares of Common Stock that was provided in writing by the Company. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of this Warrant that are not in compliance with the Beneficial Ownership Limitation, except to the extent the Holder relies on the number of outstanding shares of Common Stock that was provided by the Company. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written request of a Holder, the Company shall within two (2) Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall not be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant. To the extent that this Warrant is not exercisable as a result of the Holder’s Beneficial Ownership Limitation, no alternate consideration is owing to the Holder.
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Section 3. Certain Adjustments.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any Warrant Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
(b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time while this Warrant is outstanding the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to all of the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to all of the holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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(d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person in which the Company is not the surviving entity, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the Company’s assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of greater than 50% of the outstanding Common Stock or greater than 50% of the voting power of the common equity of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires greater than 50% of the outstanding shares of Common Stock or greater than 50% of the voting power of the common equity of the Company (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall be succeed and be substituted for (so that from and after the occurrence or consummation of such Fundamental Transaction, each and every provision of this Warrant and the other Transaction Documents (as defined in the Underwriting Agreement) referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Successor Entity or Successor Entities, jointly and severally with the Company, may exercise every right and power of the Company and the Successor Entity or Successor Entities shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Underwriting Agreement) with the same effect as if such Successor Entity or Successor Entities had been named as the Company herein.
(e) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
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(f) Notice to Holder.
(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment; provided, however, that the Company may satisfy this notice requirement in this Section 3(f) by filing such notice with the Commission pursuant to a Current Report on Form 8-K, Quarterly Report on Form 10-Q or Annual Report on Form 10-K.
(ii) Notice to Allow Exercise by Holder. If, while this Warrant is outstanding (A) the Company declares a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company declares a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company authorizes the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company is required in connection with a Fundamental Transaction, or (E) the Company authorizes the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email address as it shall appear upon the Warrant Register of the Company, at least three calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein; and provided, further, that no notice shall be required if the information is disseminated in a press release or a document filed with the Commission.
(g) Par Value. Notwithstanding anything in this Warrant to the contrary, no adjustment shall be made to the Exercise Price to the extent such adjustment would reduce the Exercise Price below the then-current par value of the Warrant Shares.
Section 4. Transfer of Warrant.
(a) Transferability. Subject to compliance with applicable securities law, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. This Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
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(b) New Warrants. Subject to compliance with applicable securities law, this Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5. General Provisions.
(a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) or Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.
(b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of this Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
(c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized Shares.
(i) The Company covenants that, during the period this Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
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(ii) Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder as set forth in this Warrant against impairment (it being understood that this Warrant shall not in any case prevent the Company from effecting any such amendment, reorganization, transfer, consolidation, merger, dissolution, issuance or sale). Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
(iii) Before taking any action that would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
(e) Governing Law. This Warrant shall be governed by and construed in accordance with the law of the State of New York. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereof or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the courts of the State of New York or of the United States of America, in each case sitting in the City and County of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of such courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
(f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
(g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
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(h) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by e-mail, or sent by a nationally recognized overnight courier service, addressed to the Company, Attention: Interim Chief Executive Officer, e-mail address: rpaolone@enterothera.com, or such other email address or address as the Company may specify for such purposes by notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the e-mail address or address of such Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via e- mail at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the time of transmission, if such notice or communication is delivered via e-mail at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.
(i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
(j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
(k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of the Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
(l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company, on the one hand, and the Holder, on the other hand.
(m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| ENTERO THERAPEUTICS, INC. | ||
| By: | ||
| Richard Paolone | ||
| Interim Chief Executive Officer | ||
NOTICE OF EXERCISE
TO: ENTERO THERAPEUTICS, INC.
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE OF HOLDER]
Name of Investing Entity: ________________________________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________________________________
Name of Authorized Signatory: ___________________________________________________________________
Title of Authorized Signatory: ____________________________________________________________________
Date: ________________________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to exercise the Warrant to purchase Warrant Shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
| Name: | |
| (Please Print) | |
| Address: | |
| (Please Print) | |
| Phone Number: | |
| Email Address: | |
| Dated: _______________ __, ______ | |
| Holder’s Signature: | |
| Holder’s Address: |
Exhibit 5.1
May 12, 2025
Entero Therapeutics, Inc.
777 Yamato Road, Suite 502
Boca Raton, Florida 33431
RE: Entero Therapeutics, Inc. Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel to Entero Therapeutics Inc., a Delaware corporation (the “Company”), in connection with the preparation of the Company’s registration statement on Form S-1 and the preliminary prospectus forming a part of the registration statement (the “Prospectus”), under the Securities Act of 1933, as amended (the “Securities Act”), filed by the Company with the Securities and Exchange Commission (the “Commission”) and, as thereafter amended or supplemented (the “Registration Statement”). The Prospectus relates to the registration of the proposed offering of shares of common stock (the “Shares”), par value $0.0001 per share, of the Company (the “Common Stock”) or pre-funded warrants (the “Pre-Funded Warrants”), each having the right to purchase one share of Common Stock (“Pre-Funded Warrant Share”), in lieu of Shares. The proposed maximum aggregate offering price of the Shares or Pre-Funded Warrants in lieu thereof, is $6,000,000. For each Pre-Funded Warrant the Company sells, the number of Shares offered will be decreased on a one-for-one basis. The Shares, the Pre-Funded Warrants and the Pre-Funded Warrant Shares are collectively referred to as the “Securities.”
In connection with this opinion, we have examined originals or copies (certified or otherwise identified to our satisfaction) of (i) the Company’s Amended and Restated Certificate of Incorporation, as amended to date, (ii) the Company’s Amended and Restated Bylaws as currently in effect, (iii) the Registration Statement and related Prospectus, (iv) the form of underwriting agreement to be entered into by and between the Company and WestPark Capital, Inc. (the “Underwriting Agreement”), (v) the form of Pre-Funded Warrant and (vi) such corporate records, agreements, documents and other instruments, and such certificates or comparable documents of public officials or of officers and representatives of the Company, as we have deemed relevant and necessary as a basis for the opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies, and the authenticity of the originals of such latter documents. As to certain questions of fact material to this opinion, we have relied upon certificates or comparable documents of officers and representatives of the Company and have not sought to independently verify such facts.
1185 AVENUE OF THE AMERICAS | 31ST FLOOR | NEW YORK, NY | 10036
T (212) 930-9700 | F (212) 930-9725 | WWW.SRFC.LAW
Based on the foregoing, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that:
1. The Shares have been duly authorized by all necessary corporate action on the part of the Company and, when issued and sold in accordance with the Registration Statement and the Prospectus and delivered and paid for in accordance with the terms of the Underwriting Agreement, the Shares will be validly issued, fully paid and nonassessable.
2. The Pre-Funded Warrants have been duly authorized by all necessary corporate action on the part of the Company and, when issued and sold in accordance with the Registration Statement and the Prospectus and delivered and paid for in accordance with the terms of the Underwriting Agreement, the Pre-Funded Warrants will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms except as such enforceability may be limited by (i) any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally including, without limitation, fraudulent transfer or fraudulent conveyance laws; (ii) public policy considerations, statutes or court decisions that may limit rights to obtain exculpation, indemnification or contribution (including, without limitation, indemnification regarding violations of the securities laws and indemnification for losses resulting from a judgment for the payment of any amount other than in United States dollars); and (iii) general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing) and the availability of equitable remedies (including, without limitation, specific performance and equitable relief), regardless of whether considered in a proceeding in equity or at law.
3. The Pre-Funded Warrant Shares have been duly authorized by all necessary corporate action on the part of the Company and, assuming a sufficient number of authorized but unissued shares of Common Stock are available for issuance when the Pre-Funded Warrants are exercised, the Pre-Funded Warrant Shares, when and if issued upon exercise of the Pre-Funded Warrants in accordance with the terms of the Pre-Funded Warrants, will be validly issued, fully paid and nonassessable.
The opinion expressed herein is limited to the Delaware General Corporation Law and, with respect to the enforceability of the Pre-Funded Warrants and the Warrants, the laws of the State of New York, and we express no opinion as to the effect on the matters covered by this letter of the laws of any other jurisdiction.
We assume no obligation to update or supplement any of our opinions to reflect any changes of law or fact that may occur. We hereby consent to the filing of this letter as an exhibit to the Registration Statement and to the reference to our firm under the caption “Legal Matters” in the Prospectus which is a part of the Registration Statement. In giving such consents, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the Rules and Regulations of the Commission promulgated thereunder.
| Very truly yours, | |
| /s/ Sichenzia Ross Ference Carmel LLP |
1185 AVENUE OF THE AMERICAS | 31ST FLOOR | NEW YORK, NY | 10036
T (212) 930-9700 | F (212) 930-9725 | WWW.SRFC.LAW
Exhibit 10.26
AMENDMENT TO RESCISSION AGREEMENT
This Amendment to Rescission Agreement (this “Amendment”) is made and entered into effective as of ____________, 2025, by and among Entero Therapeutics Inc., a Delaware corporation (the “Company”), ImmunogenX, LLC, a Delaware limited liability company and currently a wholly owned subsidiary of the Company (“Immuno LLC”) and each of the individuals or entities (each a “Shareholder” and collectively, the “Shareholders”) who are the former shareholders of ImmunogenX, Inc. (“Immuno Corp.”). The Company, Immuno LLC and the Shareholders are referred to herein collectively as the “Parties.”
RECITALS
A. The Parties entered into that certain Rescission Agreement dated effective as of March 24, 2025 (the “Rescission Agreement”), concerning (i) the rescission of the issuances of the Shares in such amounts and as set forth on Schedule A, Columns B and C annexed to the Rescission Agreement, (ii) conveyance to the Shareholders all of the issued and outstanding Membership Interests and (iii) cancellation of the Assumed Options and Assumed Warrants. Capitalized terms used herein and not defined herein shall have the meanings given to them in the Rescission Agreement.
B. The Parties desire to amend the Rescission Agreement as set forth herein.
AGREEMENTS
NOW, THEREFORE, for and in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party hereto, the Parties hereby agree as follows:
1. Additional Shareholders Representation and Warranty. Section 5 of the Rescission Agreement is amended to add a new Section 5(f) as set forth below:
f. Each Shareholder is financially able to bear the economic risks of acquiring the Membership Units and the other transactions contemplated hereby, and has no need for liquidity in its investment in the Membership Units. Each Shareholder has such knowledge and experience in financial and business matters in general, and with respect to businesses of a nature similar to the business of Immuno LLC (after giving effect to the transactions contemplated herein), so as to be capable of evaluating the merits and risks of, and making an informed business decision with regard to, the acquisition of the Membership Units and the other transactions contemplated hereby. Each Shareholder is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act. Each Shareholder is acquiring the Membership Units solely for its own account and not with a view to or for resale in connection with any distribution or public offering thereof, within the meaning of any applicable securities laws and regulations, unless such distribution or offering is registered under the Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration is available. Each Shareholder has (i) received all the information it has deemed necessary to make an informed decision with respect to the acquisition of the Membership Units and the other transactions contemplated hereby; (ii) had an opportunity to make such investigation as it has desired pertaining to Immuno LLC (after giving effect to the transactions contemplated herein) and the acquisition of an interest therein and the other transactions contemplated hereby, and to verify the information which is, and has been, made available to them; and (iii) had the opportunity to ask questions of the Company concerning Immuno LLC (after giving effect to the transactions contemplated herein). Each Shareholder has received no public solicitation or advertisement with respect to the offer or sale of the Membership Units. Each Shareholder realizes that the Membership Units are “restricted securities” as that term is defined in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act, the resale of the Membership Units is restricted by federal and state securities laws and, accordingly, the Membership Units must be held indefinitely unless its resale is subsequently registered under the Securities Act or an exemption from such registration is available for its resale. Each Shareholder understand that any resale of the Membership Units by it must be registered under the Securities Act (and any applicable state securities law) or be effected in circumstances that, in the opinion of counsel for Immuno LLC at the time, create an exemption or otherwise do not require registration under the Securities Act (or applicable state securities laws). Each Shareholder acknowledges and consents that certificates now or hereafter issued for the Membership Units will bear a legend substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND QUALIFICATION UNDER THE STATE ACTS OR PURSUANT TO EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE EXEMPTIONS AFFORDED BY SECTION 4(1) OF THE SECURITIES ACT AND RULE 144 THEREUNDER). AS A PRECONDITION TO ANY SUCH TRANSFER, THE ISSUER OF THESE SECURITIES SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO THE AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION AND/OR SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY THERETO THAT ANY SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES LAWS.
2.Governing Law; Jurisdiction; Waiver of Jury Trial. This Amendment shall be governed by and construed under the laws of the State of New York without regard to the choice of law principles thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of New York for the adjudication of any dispute hereunder or in connection herewith or therewith or with any transaction contemplated hereby or thereby, and hereby irrevocably waives any objection that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
3. Full Force and Effect; Miscellaneous. Except as expressly amended or supplemented hereby, the Rescission Agreement is and shall remain in full force and effect in accordance with its original terms and conditions. The terms and conditions in this Amendment shall supersede, control, and govern over any contrary or inconsistent terms or conditions in the Rescission Agreement. From and after the date hereof, all references to the “Agreement” shall mean the Rescission Agreement as amended by this Amendment. This Amendment contains all of the terms, covenants, conditions, and agreements between the parties that pertain or relate to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings of the parties. This Amendment may be executed in counterparts, each of which shall constitute an original and all of which taken together shall constitute one and the same document. Counterparts to this Amendment may be delivered electronically.
[signature page follows immediately]
IN WITNESS WHEREOF the parties have executed this Amendment effective as of the day and year first above written.
| ENTERO THERAPEUTICS, INC. | ||
| By: | ||
| Name: | Richard Paolone | |
| Title: | Interim Chief Executive Officer | |
| IMMUNOGENX LLC | ||
| By: | ||
| Name: | Richard Paolone | |
| Title: | Interim Chief Executive Officer of sole Member | |
| SHAREHOLDERS: | ||
Exhibit 10.27
CONSULTING AGREEMENT
IR Agency LLC (the “Consultant” or “IR Agency”) is pleased to provide certain consulting services to Entero Therapeutics Inc (“you,” “Client” or “Company”) as more fully described in this agreement (the “Agreement”). This Agreement sets forth the terms and conditions pursuant to which Company engages Consultant to provide such services.
| 1. | Consulting Services. |
| (a) | Commencing on TBD, Consultant will provide marketing and advertising services (“Advertising” or “Services”) to communicate information about the Company (trading symbol: ENTO to the financial community including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company. |
| (b) | Consultant does not make any representation about and assumes no responsibility for the response by the market, if any, to the public release of Advertising for the Company. For avoidance of doubt, Client acknowledges that Consultant assumes no responsibility for and does not make any representation, guarantee or promise that in response to the public release of Advertising for the Company, the trading volume will increase or the trading price of [ENTO] will rise, or in the event of a increase in trading volume or rise in price, the amount or duration of any such increase in trading volume or rise in price |
| (c) | Client acknowledges that Consultant carries no professional licenses. Consultant will not participate in discussions or negotiations with potential investors. Consultant will not solicit orders, make recommendations or give investment advice. Consultant will not effect transactions of securities for potential investors or anyone else. Consultant and Client agree that Consultant is not being engaged for, and is not permitted to engage in, activities that would give rise to Consultant being required to register federally or in any state or other jurisdiction as a broker or an investment advisor. If a financial intermediary expresses interest in the Company to Consultant, Consultant will refer the intermediary to the Company. In providing services under the Agreement, Consultant agrees to comply in all materials respects with all applicable U.S. securities laws. Client acknowledges and agrees that (a) it and its affiliates each have relied and will continue to rely on the advice of its own legal, regulatory, and securities law advisors for all matters and (b) neither Client nor any of its affiliates has received, or has relied upon, the advice of Consultant or any of its affiliates or their counsel regarding legal, regulatory, or securities law matters. |
| (d) | The Services of Consultant shall not be exclusive to Client, and Client acknowledges that Consultant will be performing similar Services for other clients and Consultant shall be free to perform Services for such other persons. |
| 2. | Independent Contractor. Client and Consultant agree that Consultant shall perform its duties under this Agreement as an independent contractor. Nothing contained herein shall be considered as creating a relationship of agent-principal, employer-employee or joint venturers between Consultant and either Client. |
| 3. | Compensation. |
| (a) | As consideration for the performance of the Services hereunder, upon the date of the execution and delivery of this Agreement, Client shall pay to Consultant the sum of One Million Five Hundred Thousand Dollars by TBD in cash via Bank Wire Transfer for providing the Services for a 3 Month term starting on TBD. Such consideration shall be deemed earned in full upon receipt. |
| (b) | Unless otherwise provided in this Agreement, all other services, including out-of- scope assignments, rendered by Consultant shall be subject to additional compensation under a separate agreement between Consultant and Company. Consultant shall be responsible for all out-of-pocket expenses incurred or paid in connection with its performance of the Services hereunder. |
| 4. | Term and Termination. |
| (a) | The term of this Agreement shall commence on the start date and continue for a period of 3 Month (the “Term”) unless otherwise extended by mutual agreement of the parties (the “Extended Term”). This Agreement may be terminated, with or without cause, by either Client or Consultant at any time by written notice to the other Party. If the Agreement is terminated by Client during the Term for any reason, Client will not be entitled to return of any of the compensation. If Client files for bankruptcy, becomes insolvent or is in material breach of this Agreement (“Cause”), Consultant may terminate the Agreement and Client will not be entitled to the return of any of the compensation. If Consultant terminates the Agreement without Cause, then Consultant must return the unused portion (if any) of the Compensation. Within ten days after the termination or expiration of this Agreement, each party shall return to the other all Proprietary or Confidential Information (defined below) of the other party (and any copies thereof) in the party’s possession or, with the approval of the other party, destroy all such Proprietary or Confidential Information. |
| (b) | In the event Client elects to purchase and Consultant agrees to supply additional Services during the Term or the Extended Term of this Agreement, the terms and condition of this Agreement will apply to such additional Services. |
| 5. | Information. |
| (a) | In connection with Consultant’s performance of its Services, Consultant will rely on Company’s press releases and Company’s most recent reports, if any, filed with the Securities and Exchange Commission (collectively, the “Company Information”). In this regard, Company agrees to make all filings required by the exchange act and all other applicable laws, in each case on a timely basis in accordance with such laws. Client hereby grants to Consultant the right to use the name and service marks of Company in its Services. Company will be entitled to require that certain or all materials created by Consultant in performing its Services be submitted to Company for its review and approval, such approval not to be unreasonably withheld, conditioned or delayed. |
| (b) | Client hereby acknowledges and agrees that, in performing its Services hereunder, Consultant will be using and relying on the Company Information without independent verification thereof. Consultant will also be under no obligation to determine whether there have been, or to investigate any changes in, such information. Consultant will be entitled to submit any materials created by Consultant to Company for its review and approval, such approval not to be unreasonably withheld, conditioned, or delayed. Client represents and warrants that that the Company Information and all information provided by Company or its affiliate or representatives to Consultant shall, at the time provided, not contain any untrue statement or material fact or omit to state a material fact necessary in order to make the statement made, in light of the circumstances under which they were made, not misleading. |
| (c) | Client, by its authorization or approval of the Advertisement, represents and warrants to Consultant that, to its knowledge, the Advertisement is complete and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. Client agrees to promptly notify Consultant upon the occurrence of any material adverse change in the business or affairs of the Company or upon the occurrence of any event which causes Client to believe that the Advertisement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. |
| 6. | Securities Laws. Client represents and warrants that the Company Information and all information provided by Company or its affiliates or representatives complies in all respects with the U.S. federal and applicable state securities laws, and are not and will not be or constitute a part of any activity that is or may be deemed to be illegal under the U.S. federal or applicable state securities laws, including, without limitation, being a part of any illegal offering, illegal pump-and-dump, illegal scalping, illegal touting schemes, or an effort to assist with a violation of any court order including, but not limited to, any order banning or limiting a person’s involvement in the securities markets. |
| 7. | Work Product. All information and materials produced for Client shall be the property of Consultant, free and clear of all claims thereto by Client, and Client shall have no claim of authorship therein. Consultant shall retain all right, title, and interest in and to, including any intellectual property rights with respect to, any data, designs, processes, specifications, software, applications, course, code, object code, utilities, methodologies, know-how, materials, information and skills (and any derivative works, modifications and enhancements thereto) owned, acquired or developed by or for Consultant’s databases. |
| 8. | Confidentiality. The parties agree to hold each other's Proprietary or Confidential Information in strict confidence. “Proprietary or Confidential Information” shall include, but is not limited to, written or oral contracts, trade secrets, know-how, business methods, business policies, memoranda, reports, records, computer retained information, notes, or financial information. Proprietary or Confidential Information shall not include any information which: (i) is or becomes generally known to the public by any means other than a breach of the obligations of the receiving party; (ii) was previously known to the receiving party or rightly received by the receiving party from a third party; (iii) is independently developed by the receiving party; or (iv) is subject to disclosure under court order or other lawful process. The parties agree not to make each other's Proprietary or Confidential Information available in any form to any third party or to use each other's Proprietary or Confidential Information for any purpose other than as specified in this Agreement. Each party's Proprietary or Confidential Information shall remain the sole and exclusive property of that party. The parties agree that in the event of use or disclosure by the other party other than as specifically provided for in this Agreement, the non-disclosing party may be entitled to equitable relief. Notwithstanding termination or expiration of this Agreement, the parties acknowledge and agree that their obligations of confidentiality with respect to Proprietary or Confidential Information shall continue in effect for a total period of three (3) years from the termination date. |
| 9. | Non-Public Material Information. Consultant acknowledges that to prepare appropriate Advertising in a timely manner it may be made aware of price sensitive or confidential information that has not been publicly disclosed yet. Consultant confirms that it is fully aware of its obligations in relation to such information and will ensure that the confidentiality of such information is maintained at all times and that it, and its employees and contractors, are all fully aware of and comply with, all appropriate securities laws and regulations in relation to insider trading and related matters. |
| 10. | Covenant Not to Sue. Client agrees that it will not file any suit, claim, proceeding or complaint against Consultant arising out of or based on the failure of the trading volume of the stock to increase or price to rise, or to maintain any increase in trading volume or rise in stock price as may be occur, as a result of or in response to the public release of Advertising for the Company or Consultant’s provision of services under this Agreement. |
| 11. | Limitation of Liability. Consultant shall not be liable to Client or any other person for any damages in connection with the provision of services under the Agreement, whether because of Consultant’s negligence or otherwise, and regardless of the form of action, except in the event of Consultant’s deliberate fault or gross negligence. Nevertheless, regardless of the form of action, whether in contract, tort or otherwise, Consultant shall not be liable to Client for any lost profits, business interruption, or for any indirect, incidental, special, consequential, exemplary or punitive damages arising out of or relating to this Agreement, nor shall Consultant’s aggregate liability for any damages arising out of this Agreement exceed the compensation paid by Client to Consultant. |
| 12. | Indemnification. Client shall indemnify and hold Consultant harmless from and against any and all actions, claims, investigations (including but not limited to any formal or informal investigations brought by any state or federal regulator and any subpoenas or requests for documents, information or testimony issued in connection therewith), liabilities, losses, or damages arising from the preparation, presentation or dissemination of any Advertising covered by this Agreement including, but limited to, the costs of defense and attorneys’ fees. You will also indemnify Consultant from and against all losses, expenses (including costs and attorneys’ fees) and all manner of actions, claims and judgments sustained by or made against Consultant in connection with your use or misuse of the Service, any medium used with the Service, violation of this Agreement, or based upon any alleged violation of any statute, ordinance, code, or regulation. |
| 13. | Notices. Any notice or other communication required or permitted to be given to either party hereunder shall be in writing and shall be given to such party at such party’s address set forth below or such other address as such party may hereafter specify by notice in writing to the other party. Any such notice or other communication shall be addressed as aforesaid and given by (a) certified mail, return receipt requested, with first class postage prepaid, (b) hand delivery, or (c) via electronic communication (i.e., e-mail) or (d) reputable overnight courier. Any notice or other communication will be deemed to have been duly given (i) on the fifth (5) day after mailing, provided receipt of delivery is confirmed, if mailed by certified mail, return receipt requested, with first class postage prepaid, (ii) on the date of Service if served personally or (iii) on the business day after delivery to an overnight courier service or by sending of an electronic communication, provided the notifying party specifies next day delivery and receipt of delivery has been confirmed: |
If to the Client:
Email:
If to Consultant:
IR Agency LLC
23 Downing Street, Newark NJ 07105
E-mail: [Raf@ir.agency]
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| 14. | Waiver of Breach. Any waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by any party. |
| 15. | Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by either party hereto without the prior written consent of the other party, which will not be delayed or withheld unreasonably; provided that Client shall not be required to consent to any assignment by Consultant of its cash and compensation payable pursuant to this Agreement. Any assignment without such consent, when required, shall have no legal validity; subject to the foregoing, this Agreement and all of the provisions hereof will be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. |
| 16. | Governing Law and Jurisdiction. This Agreement shall be governed and construed under New Jersey law. The parties consent to the exclusive jurisdiction of the federal and state courts located in New Jersey, to hear and determine any dispute that may arise under this Agreement. |
| 17. | Entire Agreement. This Agreement contains the complete agreement between the parties with respect to the subject matter hereof and supersedes any prior proposals, understandings, agreements or representations by or between the parties, written or oral. |
| 18. | Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held by any court of competent jurisdiction to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. |
| 19. | Waiver and Modification. Any waiver, alteration, or modification of any of the provisions of this Agreement shall be valid only if made in writing through an amendment of this Agreement and signed by the parties hereto. |
| 20. | Acceptance. Please confirm that the foregoing is in accordance with Company’s understanding by signing and returning this Agreement, which will thereupon constitute a binding Agreement between the Company and IR Agency, LLC as of the date of your execution. The undersigned officers of IR Agency, LLC and Company represent that they have the authority to bind IR Agency and Company, respectively. This Agreement may be executed in counterparts and with electronic or facsimile signatures. |
| IR Agency LLC | ||
| By: |  |
|
| Print Name: Rafael Pereira | ||
| Entero Therapeutics Inc | ||
| By: | ||
| Print Name: | ||
| Position: | ||
| Date: | ||
IR Agency wire Instructions
Capital One Bank
Account Beneficiary- IR Agency LLC
Address: 23 Downing Street, Newark NJ 07105
Wire Acct #: 7057541044
Wire Routing #- 021407912
SWIFT# HIBKUS44
Exhibit 10.28
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the “Agreement”) is entered into effective as of April 9, 2025 (the “Effective Date”), by and between Mattress Liquidators, Inc., a Colorado corporation (“Lender”), ImmunogenX, LLC, a Delaware limited liability company (“Borrower”), Jack A. Syage (“Jack”), and The Jack A. Syage and Elizabeth T. Syage (the “Trust,” collectively with Jack are the “Guarantors”). Lender, Borrower, Jack, Trust and Guarantors are each a “Party,” and collectively, the “Parties.” The Parties agree and state as follows:
Recitals
WHEREAS, on October 3, 2022, Borrower’s predecessor in interest, ImmunogenX, Inc. (“IMGX-INC”), and Lender entered into that certain Credit Agreement (together with all amendments and modifications thereto, the “Credit Agreement”) whereby Lender agreed to make IMGX-INC a revolving loan in the principal amount of $6,000,000.00 (the “Loan”) in accordance with the terms therewith.
WHEREAS, on October 3, 2022, in order to secure the Loan and obligations under the Credit Agreement, IMGX-INC and Lender entered into that certain Commercial Security Agreement (the “Security Agreement”), pursuant to which IMGX-INC granted Lender a security interest in substantially all of IMGX-INC’s assets, including, without limitation, its inventory, chattel paper, accounts, equipment, furniture, and general intangibles as more specifically described therein.
WHEREAS, on October 3, 2022, in order to further secure the Loan and obligations under the Credit Agreement, IMGX-INC and Lender entered into that certain Patent and Trademark Security Agreement (the “IP Security Agreement”), pursuant to which IMGX-INC granted a security interest in all of IMGX-INC’s patents and trademarks.
WHEREAS, on October 3, 2022, as an additional inducement to Lender entering into the Credit Agreement, Syage executed that certain Unconditional Guaranty of Payment (the “Jack Guaranty”) which unconditionally guaranteed all of IMGX-INC’s obligations under the Credit Agreement and Loan.
WHEREAS, on October 3, 2022, as an additional inducement to Lender entering into the Credit Agreement, Syage Trust executed that certain Unconditional Guaranty of Payment (the “Trust Guaranty”) which unconditionally guaranteed all of IMGX-INC’s obligations under the Credit Agreement and Loan.
WHEREAS, on October 3, 2022, Lender perfected its security interest in IMGX-INC’s assets when it filed a UCC-1 Financing Statement with the Delaware Secretary of State at Filing No. 20228232555 (the “UCC-1”).
WHEREAS, on October 3, 2022, in order to further secure the Loan and obligations under the Credit Agreement, IMGX-INC and Lender entered into that certain Collateral Assignment of Exclusive Agreement and Security Agreement (the “Collateral Assignment of Exclusive Agreement”), pursuant to which IMGX-INC granted a security interest in that certain Exclusive Agreement between The Board of Trustees of the Leland Stanford Junior University and Alvine Pharmaceuticals, Inc., dated as of September 19, 2005.
WHEREAS, as a further inducement for Lender entering into the Credit Agreement, on October 1, 2022 IMGX-INC granted to Lender warrants to acquire 24,100 shares of its common stock pursuant to that certain Warrant to Purchase Common Stock of Immunogenx, Inc. (“2022 Warrant”).
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WHEREAS, on October 14, 2022, Lender further perfected its security interest in IMGX-INC’s intellectual property when it filed a Notice of Recordation of Assignment Document with the U.S. Patent and Trademark Office at filing number 507545387 (the “IP Assignment”).
WHEREAS, on September 6, 2023, the Credit Agreement was modified by the parties which such modification, among other things, increased the principal amount of the Loan to $7,500,000.00 (the “First Modification”).
WHEREAS, as a further inducement for Lender entering into the First Modification, on September 6, 2023 IMGX-INC granted to Lender warrants to acquire 24,100 shares of its common stock pursuant to that certain Warrant to Purchase Common Stock of Immunogenx, Inc. (“2023 Warrant”).
WHEREAS, on March 13, 2024, the Credit Agreement was subsequently modified by the parties which such modification, among other things, increased the principal amount of the Loan to $8,212,345.17 (the “Second Modification”).
WHEREAS, after execution and delivery of the Second Modification, IMGX-INC merged with and into First Wave BioPharma, Inc., a Delaware corporation, predecessor and interest to Entero Therapeutics, Inc. (“Entero”), and as part of the merger transaction IMGX-INC merged with and into IMGX-LLC, with IMGX-LLC as the surviving entity and borrower.
WHEREAS, on March 13, 2024, IMGX-LLC joined the Credit Agreement when it executed an Assumption and Joinder Agreement (the “Assumption and Joinder”).
WHEREAS, on April 1, 2024, in order to maintain perfection of its security interest in IMGXLLC’s assets, Lender filed a UCC-1 Financing Statement with the Delaware Secretary of State at Filing No. 20242140091 (the “2024 UCC-1”).
WHEREAS, the Credit Agreement, Security Agreement, IP Security, Jack Guaranty, Trust Guaranty, UCC-1, Collateral Assignment of Exclusive Agreement, IP Assignment, First Modification, Second Modification, Assumption and Joinder, 2024 UCC-1 and any other ancillary document referenced therein or related thereto are collectively referred to herein as the “Loan Documents.”
WHEREAS, in the summer and fall of 2024, the Parties had various disputes regarding their rights, obligation and performance under the Loan Documents.
WHEREAS, on December 31, 2024, Lender filed its Verified Complaint (the “Complaint”) against Borrower and Guarantors on account of their alleged defaults under the Loan Documents in the District Court for Boulder County, Colorado (the “District Court”) styled as Mattress Liquidators, Inc. v. Syage et al., Case No. 2024CV031070 (the “District Court Action”).
WHEREAS, as of March 31, 2025, the principal amount of the obligations due and owing under the Loan Documents are in an amount not less than: $7,936,338.30 (the “Obligations”). Such amounts do not include authorized interest, attorneys’ fees and costs.
WHEREAS, in the District Court Action, the Parties have disputed each other’s claims and defenses.
WHEREAS, the Parties believe there is inherent risk in continued litigation with the issues that have arisen in the District Court Action, and that the Parties desire to settle the District Court Action by entering into this Agreement.
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NOW, THEREFORE, in consideration of the foregoing, the mutual promises and covenants contained herein, and other good and valuable consideration, the adequacy and sufficiency of which is hereby acknowledged, the Parties, each intending to be legally bound, agree as follows:
Agreement
1. RECITALS. The Recitals set forth above are material and are hereby incorporated into, and made a part of, this Agreement by reference.
2. AMENDED AND RESTATED LOAN DOCUMENTS. On the Effective Date, the Parties shall enter into: (a) an amended and restated Credit Agreement attached hereto as Exhibit A, (b) an amended and restated Jack Guaranty attached hereto as Exhibit B, (c) an amended and restated Trust Guaranty attached hereto as Exhibit C, (d) amended and restated Promissory Note attached hereto as Exhibit D, (e) the Spousal Waiver attached hereto as Exhibit E, (f) the Deed of Trust attached hereto as Exhibit F, (g) an amended and restated Syage Trust Subordination Agreement attached hereto as Exhibit G, and (h) an amended and restated Felker Trust Subordination Agreement attached hereto as Exhibit H, (collectively, the “Amended and Restated Loan Documents”). Further on the Effective Date, Borrower and Guarantors agree and acknowledge that the Amended and Restated Loan Documents shall be binding upon them, their predecessors, successors, assigns, members, managers, shareholders, directors, heirs and any other party or entity claiming under Borrower or Guarantors.
3. MANDATORY PAYMENTS. On the Effective Date, Guarantors paid Lender $5,500,000.00 to be applied to the Obligations in accordance with the Amended and Restated Loan Documents. In addition to the forgoing payment, and to reimburse Lender for the attorney’s fees and costs it incurred through the date of execution of this Agreement and the Amended and Restated Loan Documents, no later than May 9, 2025: (a) Borrower shall reimburse Guarantor sixty-one thousand seven hundred eleven dollars and 50/100 ($61,711.50) for amounts previously paid to Lender no later than July 15, 2025, and (b) Guarantors shall pay Lender twenty-three thousand nine hundred ninety eight and 50/100 ($23,998.50) (collectively, the “Mandatory Payments”).
4. RELEASE OF SECURITY INTERESTS. After Lender has received (a) the Mandatory Payments, (b) the executed amended and restated Credit Agreement attached hereto as Exhibit A, (c) the executed amended and restated Jack Guaranty attached hereto as Exhibit B, (d) the executed amended and restated Trust Guaranty attached hereto as Exhibit C, (e) the executed amended and restated Promissory Note attached hereto as Exhibit D, (f) the executed Spousal Waiver attached hereto as Exhibit E, (g) the recorded version of the Deed of Trust attached hereto as Exhibit F, (h) the executed amended and restated Syage Trust Subordination Agreement attached hereto as Exhibit G, and (i) the executed amended and restated Felker Trust Subordination Agreement attached hereto as Exhibit H, Lender authorizes Borrower to file UCC termination statements to terminate Lender’s security interest in Borrower’s personal property collateral, and any terminations with respect to the IP Assignment, in each case at Borrower’s sole cost and expense.
5. RETENTION OF WARRANTS. For the avoidance of doubt, Borrower and Guarantors acknowledge and agree that Lender shall be entitled to retain all right, title and interest in, and to, the 2022 Warrant and 2023 Warrant, and that Lender’s rights therein shall be reserved to their fullest extent.
6. REPRESENTATIONS AND WARRANTIES. The Parties represent and warrant as follows:
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a. They have received, or had an opportunity to receive, independent legal advice from their respective attorneys with respect to the advisability of entering into the settlement provided for herein and with respect to the advisability of executing this Agreement;
b. They are not relying on any statements, representations, omissions, inducements, or promises of any other Party or attorney for any other Party in executing this Agreement, except as expressly stated herein;
c. They have read and had an opportunity to review with their attorneys, and know and understand, the full contents of this Agreement and are voluntarily entering into this Agreement. The Parties expressly understand and agree that this Agreement shall be binding on them, their agents, successors, assigns, affiliated entities and heirs, and no rescission, modification, or release of them from the terms of this Agreement will be made for any mistake.
7. DISMISSAL OF DISTRICT COURT ACTION. Within five (5) business days after Lender has received all documents identified in Section 4 of this Agreement and the Mandatory Payments, the Parties shall execute a Stipulation of Dismissal with Prejudice (the “Stipulation”) to be filed in the District Court Action. For the avoidance of doubt, the Stipulation shall not prejudice, alter or otherwise impair the Parties’ respective rights and obligations under this Agreement and the Amended and Restated Loan Documents with respect to any future events of default arising thereunder and all such rights are reserved to their fullest extent.
8. MUTUAL COOPERATION. The Parties agree to cooperate with one another and take any steps reasonably requested of the other Party in order to execute and fulfill the intentions and transaction under this Agreement and the Amended and Restated Loan Documents.
9. LENDER’S RELEASE OF BORROWER AND GUARANTORS. After Lender has received all documents identified in Section 4 of this Agreement and the Mandatory Payments, Lender agrees to release, remise and forever discharge Borrower and Guarantors and each of their, successors, predecessors, representatives, agents, directors, members, shareholders, attorneys, heirs and assigns from any and all claims, causes of action, manner of actions, debts, suits, rights, notes, covenants, liabilities, accounts, contracts, agreements, promises, damages, losses, attorneys’ fees, costs and expenses, and demands whether known or unknown, matured or unmatured, accrued or unaccrued, direct or indirect, suspected or unsuspected, fixed or contingent, in law or equity (collectively, the “Lender Claims”), including but not limited to any Lender Claims which could have been asserted in the District Court Action. The foregoing release shall not affect or impair, or operate as a release or abandonment of any liability, right or obligation of the Parties arising under this Agreement, the Amended and Restated Loan Documents, or any cause of action, claim or demand for breach or enforcement of this Agreement or the Amended and Restated Loan Documents.
10. BORROWER AND GUARANTORS’ RELEASE OF LENDER. On the Effective Date, Borrower and Guarantors agree to release, remise and forever discharge Lender and its successors, predecessors, representatives, agents, directors, members, shareholders, attorneys, heirs and assigns from any and all claims, causes of action, manner of actions, debts, suits, rights, notes, covenants, liabilities, accounts, contracts, agreements, promises, damages, losses, attorneys’ fees, costs and expenses, and demands whether known or unknown, matured or unmatured, accrued or unaccrued, direct or indirect, suspected or unsuspected, fixed or contingent, in law or equity (collectively, the “B/G Claims”), including but not limited to any B/G Claims which could have been asserted in the District Court Action. The foregoing release shall not affect or impair, or operate as a release or abandonment of any liability, right or obligation of the Parties arising under this Agreement, the Amended and Restated Loan Documents, or any cause of action, claim or demand for breach or enforcement of this Agreement or the Amended and Restated Loan Documents.
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11. SPECIFICALLY ENFORCEABLE. In addition to all other available remedies, this Agreement and the Amended and Restated Loan Documents shall be specifically enforceable by any Party, and in the event of the failure of any Party or Parties to comply with the terms of this Agreement and the Amended and Restated Loan Documents, equitable and/or legal relief may be sought by the Party to the defaulting or breaching Party.
12. ENTIRE AGREEMENT. This Agreement and the Amended and Restated Loan Documents constitute the entire agreement of the Parties and supersedes all prior agreements and undertaking, both written and oral, between the Parties with respect to the subject matter hereof.
13. GOVERNING LAW. This Agreement and the Amended and Restated Loan Documents shall be governed by, and construed in accordance with, the laws of the State of Colorado, regardless of the laws that might otherwise govern under applicable principles of conflicts of law. The Parties agree that they submit to the jurisdiction and venue of the District Court, in all respects, with regard to future disputes under this Agreement or the Amended and Restated Loan Documents. It is mutually agreed between the Parties to waive trial by jury in any action, proceeding or counterclaim brought by either Party against the other on any matter whatsoever arising out of, or in any way connected with this Agreement.
14. AUTHORSHIP. This Agreement and the Amended and Restated Loan Documents shall be deemed to have been drafted jointly by the Parties such that no Party shall be entitled to any legal presumption in the interpretation of this Agreement and the Amended and Restated Loan Documents on the basis of authorship.
15. NO ORAL MODIFICATION. This Agreement and the Amended and Restated Loan Documents can only be amended or modified through a written instrument signed by each of the Parties and which makes express reference of its intent to amend or modify this Agreement or the Amended and Restated Loan Documents. Without limiting the foregoing, the Parties agree that under no circumstances shall this Agreement or the Amended and Restated Loan Documents be amended or modified orally, and the Parties waive any right to rely upon or enforce any oral modification or amendment of this Agreement or the Amended and Restated Loan Documents.
16. HEADINGS. The headings and captions used in this Agreement are for ease of reference only and shall not be construed to interpret, limit, expand, qualify or otherwise modify the substantive provisions of this Agreement.
17. SEVERABILITY. If any term, condition, part or provision of this Agreement or the Amended and Restated Loan Documents is determined by any Court in any action to be invalid, unlawful, illegal, void or otherwise unenforceable, such offending term, condition, part or provision shall be stricken from this Agreement or the Amended and Restated Loan Document(s), as applicable, and the remaining terms, conditions, parts and provisions shall continue in full force and effect, provided, however, that the severing of the offending term, condition, part or provision does not defeat the essential purpose of this Agreement and the Amended and Restated Loan Document(s), as applicable.
18. WAIVER OF RIGHTS, REMEDIES. The Parties agree that any failure or delay by any Party to enforce its rights or remedies under this Agreement or the Amended and Restated Loan Documents shall not constitute a waiver or modification of any such rights or remedies.
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19. AUTHORITY. Each Party signing this Agreement in a representative capacity represents and warrants that he has the subject Party’s (and the subject Party’s parent’s, subsidiary’s, division’s and affiliate’s) authority to sign, that the subject Party (and the respective subject Party’s past, present, and future directors, officers, members, managers, shareholders, agents, contractors, representatives, successors, assigns, attorneys, affiliated entities, heirs, beneficiaries, executors and personal representatives) will be bound by the signatory’s execution of this Agreement, and that the execution and delivery of this Agreement has been duly and validly authorized and approved by all requisite corporate or other required legal action. Each signatory further represents and warrants that no further action is necessary to make this Agreement and all transactions contemplated hereby valid and binding on the Parties, and that such Party does not require any third person’s consent to enter into this Agreement, including, without limitation, the consent of any spouse or partner, insurer, assignee, licensee, secured lender, or regulatory agency.
20. NOTICES. Whenever required, the Parties shall provide notice as set forth in the Amended and Restated Loan Documents.
21. COUNTERPART EXECUTION. This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which taken together shall constitute one agreement. Each person executing this Agreement on behalf of a Party represents to the other Party that such person has the full authority and legal power to do so. The Parties hereto agree that their signatures on this Agreement may be electronic or delivered electronically and each shall have the same effect as manually executed, original transmitted signatures.
[INTENTIONAL PAGE BREAK – SIGNATURE PAGE FOLLOWS]
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WHEREFORE, the Parties have executed this Agreement as of the date set forth below, intending they be legally bound thereby.
MATTRESS LIQUIDATORS, INC.
| By: | /s/ David Dolan | |
| Its: | David Dolan | |
| Date: | 5/6/2025 |
IMMUNOGENX, LLC
| /s/ Richard Paolone | ||
| By: | Richard Paolone | |
| Its: | Chief Executive Officer | |
| Date: | 5/8/2025 | |
JACK A. SYAGE
| By: | /s/ Jack A. Syage | |
| Its: | Jack A. Syage | |
| Date: | 5/8/2025 |
THE JACK A. SYAGE AND ELIZABETH E. SYAGE REVOCABLE TRUST
| By: | /s/ Jack A. Syage | |
| Its: | Jack A. Syage | |
| Date: | 5/8/2025 |
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Exhibit 10.29
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of April 9, 2025
IMMUNOGENX,
LLC
as Borrower
and
MATTRESS
LIQUIDATORS, INC.
as Lender
TABLE OF CONTENTS
| Section | Heading | Page | |
| SECTION 1. | Definitions; Interpretation | 1 | |
| Section 1.1. | Definitions. | 1 | |
| Section 1.2. | Interpretation | 6 | |
| SECTION 2. | The Credit Facilities | 7 | |
| Section 2.1. | Revolving Loan | 7 | |
| Section 2.2. | Disbursement of Revolving Loan. | 7 | |
| Section 2.3. | Interest on the Revolving Loan and Principal Payments. | 7 | |
| Section 2.4. | Prepayments | 8 | |
| Section 2.5. | Default Rate and Late Fees. | 8 | |
| Section 2.6. | Collateral | 8 | |
| Section 2.7. | Protective Advance. | 8 | |
| SECTION 3. | Fees and Expenses. | 9 | |
| Section 3.1. | Transaction Fees and Expenses. | 9 | |
| Section 3.2. | Upfront Closing Fee | 9 | |
| Section 3.3. | Inspection Fees. | 9 | |
| SECTION 4. | Place and Application of Payments. | 9 | |
| Section 4.1. | Place of Payment | 9 | |
| Section 4.2. | Application of Payments | 9 | |
| Section 4.3. | Authorization for Direct Payment | 9 | |
| SECTION 5. | Representations and Warranties of Borrower. | 10 | |
| Section 5.1. | Organization and Qualifications | 10 | |
| Section 5.2. | Authority and Validity of Obligations | 10 | |
| Section 5.3. | Use of Proceeds; Illegal Activities; Margin Stock | 10 | |
| Section 5.4. | Financial Reports | 10 | |
| Section 5.5. | Full Disclosure | 11 | |
| Section 5.6. | Governmental Authority and Licensing | 11 | |
| Section 5.7. | Litigation and Other Controversies | 11 | |
| Section 5.8. | Taxes | 11 | |
| Section 5.9. | Approvals | 11 | |
| Section 5.10. | Compliance with Laws | 11 | |
| Section 5.11. | Other Agreements | 12 | |
| Section 5.12. | Solvency | 12 | |
| Section 5.13. | No Default | 12 | |
| Section 5.14. | Patents, Trademarks, Franchises, and Licenses | 12 | |
| Section 5.15. | Affiliate Transactions | 12 | |
| SECTION 6. | Conditions Precedent. | 12 | |
| Section 6.1. | Closing Conditions | 12 | |
| Section 6.2. | Post-Closing Matters | 13 | |
| SECTION 7. | Covenants of Borrower. | 13 | |
| Section 7.1. | Maintenance of Business | 13 | |
| Section 7.2. | Maintenance and Repair of Property | 13 | |
| Section 7.3. | Taxes and Assessments | 14 | |
| Section 7.4. | Insurance | 14 | |
| Section 7.5. | Reporting and Covenants | 15 | |
| Section 7.6. | Inspection of the Business. | 16 | |
| Section 7.7. | Borrowings and Guaranties. | 16 | |
| Section 7.8. | Compliance with Laws | 16 | |
| Section 7.9. | Environmental Matters; Reporting | 16 | |
| Section 7.10. | Change in the Nature of Business | 17 | |
| Section 7.11. | Mergers, Consolidations and Sales | 17 | |
| Section 7.12. | Burdensome Contracts With Affiliates | 17 | |
| Section 7.13. | Subordinated Debt. | 17 | |
| Section 7.14. | Distributions. | 17 | |
| Section 7.15. | Use of Proceeds. | 17 | |
| Section 7.16. | Ownership Repurchase | 17 | |
| Section 7.17. | Notification of Default | 17 | |
| Section 7.18. | Material Notices | 18 | |
| SECTION 8. | Events of Default and Remedies | 18 | |
| Section 8.1. | Events of Default. | 18 | |
| Section 8.2. | Immediate Default and Acceleration. | 20 | |
| Section 8.3. | Effect of Default. | 20 | |
| Section 8.4. | Expenses. | 21 | |
| SECTION 9. | Miscellaneous. | 21 | |
| Section 9.1. | No Waiver, Cumulative Remedies. | 21 | |
| Section 9.2. | Non-Business Days | 21 | |
| Section 9.3. | Documentary Taxes. | 21 | |
| Section 9.4. | Survival of Representations. | 21 | |
| Section 9.5. | Survival of Indemnities | 21 | |
| Section 9.6. | Notices. | 22 | |
| Section 9.7. | Counterparts | 22 | |
| Section 9.8. | Successors and Assigns. | 22 | |
| Section 9.9. | Participants. | 22 | |
| Section 9.10. | Assignments | 22 | |
| Section 9.11. | Amendments and Waivers. | 23 | |
| Section 9.12. | Headings. | 23 | |
| Section 9.13. | Costs and Expenses; Indemnification. | 23 | |
| Section 9.14. | Set-off. | 23 | |
| Section 9.15. | Entire Agreement. | 23 | |
| Section 9.16. | Governing Law. | 23 | |
| Section 9.17. | Waiver of Jury Trial | 24 | |
| Section 9.18. | Severability of Provisions. | 24 | |
| Section 9.19. | Excess Interest. | 24 | |
| Section 9.20. | Construction | 25 | |
| Section 9.21. | Further Assurance. | 25 | |
| Section 9.22. | Relationship of the Parties. | 25 | |
| Section 9.23. | Effect of Amendment and Restatement. | 25 | |
AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement is entered into as of April 9, 2025, by and between IMMUNOGENX, LLC, a Delaware limited liability company (“Borrower”), and MATTRESS LIQUIDATORS, INC., a Colorado corporation (together with its successors and assigns, “Lender”). All capitalized terms used herein without definition shall have the same meanings herein as such terms are defined in Section 1.1 hereof.
PRELIMINARY STATEMENT
WHEREAS, pursuant to the Credit Agreement, dated as of October 3, 2022, as amended by that certain Modification of Loan Documents, dated as of September 6, 2023, and as amended by that certain Second Modification of Loan Documents, dated as of March 13, 2024, between Borrower and Lender (“Existing Credit Agreement”), Lender provided to Borrower a revolving loan in the principal amount of up to Eight Million Two Hundred Twelve Thousand Three Hundred Forty-Five and 17/100 Dollars ($8,212,345.17) (“Existing Revolving Loan”).
WHEREAS, on December 31, 2024, Lender filed its Verified Complaint against Borrower and Guarantors on account of their alleged defaults under the Loan Documents in the District Court for Boulder County, Colorado styled as Mattress Liquidators, Inc. v. Syage et al., Case No. 2024CV031070 (the “District Court Action”).
WHEREAS, on May 6, 2025, Lender, Borrower and Guarantors entered into that certain Settlement Agreement (the “Settlement Agreement”), which, among other things, resolved the District Court Action as provided therein.
WHEREAS, in accordance with the Settlement Agreement, Lender and Borrower now desire to amend and restate the Existing Credit Agreement and make other changes as provided herein.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION.
Section 1.1. Definitions. The following terms when used herein shall have the following meanings:
“Advance” means a cash advance under the Note.
“Affiliate” means any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, another Person. A Person shall be deemed to control another Person for purposes of this definition if such Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of the other Person, whether through the ownership of voting securities, common directors, trustees or officers, by contract or otherwise.
“Agreement” means this Amended and Restated Credit Agreement, as the same may be amended, modified, restated or supplemented from time to time pursuant to the terms hereof.
“Amended and Restated Subordination Agreements” means those certain Amended and Restated Subordination Agreements, between each of the Syage Trust and the Felker Revocable Trust Dated July 30, 1999 and Borrower, each dated as of the date hereof and in each case as the same may be amended, modified, restated or supplemented from time to time.
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“Attorney’s Fees and Costs” means attorneys’ fees, costs and expenses, expert witness fees, investigation costs and expenses, court costs, receivership fees and costs, and disbursements.
“Borrower” means ImmunogenX, LLC, a Delaware limited liability company.
“Business Day” means any day (other than a Saturday or Sunday) on which banks are not authorized or required to close in Denver, Colorado.
“Closing Date” means the first Business Day upon which each condition described in Section 6 shall be satisfied in a manner reasonably acceptable to Lender or waived by Lender in writing.
“Commitment” means Two Million Four Hundred Thirty-Six Thousand Three Hundred Thirty-Eight and 30/100 Dollars ($2,436,338.30).
“Credit Event” means the advancing of any Loan in which the proceeds thereof have been delivered to a Borrower.
“Cure Period” is defined in Section 8.1(c).
“Deed of Trust” shall mean the Deed of Trust executed by the Syage Trust, dated as of even date herewith, as the same may be amended, modified, restated or supplemented from time to time, securing a first lien position in the Real Property.
“Default” means any event or condition the occurrence of which would, with the passage of time or the giving of notice, or both, constitute an Event of Default.
“Default Rate” is defined in Section 2.5.
“Distribution” means (a) with respect to any stock issued by such Person or any partnership, joint venture, limited liability company, membership or other interest of such Person, the retirement, redemption, purchase, or other acquisition for value of any such stock or partnership, joint venture, limited liability company, membership or other interest, (b) the declaration or payment of any dividend or other distribution on or with respect to any stock, partnership, joint venture, limited liability company, membership or other interest of such Person, and (c) any other payment by such Person with respect to such stock, partnership, joint venture, limited liability company, membership or other interest of such Person.
“Environmental Laws” is defined in Section 7.9.
“Event of Default” is defined in Section 8.1.
“Excess Interest” is defined in Section 9.19.
“Existing Credit Agreement” is defined in the Recitals.
“Existing Revolving Loan” is defined in the Recitals.
“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.
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“Guaranty” means an Amended and Restated Unconditional Guaranty of Payment, to be dated of even date herewith, to be executed by each Guarantor.
“Guarantor” means, individually, each of Syage, an individual, the Syage Trust, and any other Person who executes and delivers a Guaranty for the benefit of Lender, and “Guarantors” means, collectively, Syage, an individual, the Syage Trust, and any other Person who executes and delivers a Guaranty for the benefit of Lender.
“Hazardous Substances” means pollutants, contaminants, hazardous substances, hazardous wastes, or petroleum, and all other chemicals, wastes, substances and materials listed in, regulated by, subject to, or deemed hazardous or toxic under any Environmental Law.
“Indebtedness” means, with respect to any Person, (a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, indentures, notes, or similar instruments upon which interest payments are customarily made; (c) all obligations of such Person under conditional sale or other title retention agreements relating to the property purchased by such Person; (d) all obligations of such Person issued or assumed as the deferred purchase price of property or services purchased by such Person (other than trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person; (e) all indebtedness secured by any lien on, or payable out of the proceeds of production from property owned or acquired by such Person, whether or not the obligations secured have been approved by such Person; (f) all guarantees of such Person with respect to indebtedness of the type referred to in this definition of another Person; (g) the principal portion of all obligations of such Person under capital leases; and (h) the principal component of payments due on any capital lease or under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar or off-balance sheet financing product, other than operating leases that do not constitute any of the foregoing, during the applicable period ending on such date, determined on a consolidated basis and calculated on a consistent basis.
“Insurance” is defined in Section 7.4.
“Lender Party” is defined in Section 9.13.
“Lender” means Mattress Liquidators, Inc., a Colorado corporation.
“Loan” means, individually, a Revolving Loan, and “Loans” means, collectively, all Revolving Loans.
“Loan Availability” shall mean, at any time, the Commitment then in effect minus the outstanding balance under the Revolving Loan.
“Loan Documents” means this Agreement, the Note, each Guaranty, the Deed of Trust, the Spousal Waiver, the Amended and Restated Subordination Agreements, any other subordination agreement, and each other instrument or document to be delivered hereunder or thereunder or otherwise in connection therewith.
“Loan Party” means, Borrower and each Guarantor, and “Loan Parties” means, collectively, Borrower and Guarantors.
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“Material Adverse Effect” means (a) a material adverse change in, or material adverse effect upon, the operations, business, Property, or condition (financial or otherwise) of Borrower taken as a whole, (b) a material impairment of the ability of Borrower to perform its material obligations under any Loan Document, or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against Borrower of any Loan Document or the rights and remedies of Lender thereunder.
“Maturity Date of the Revolving Loan” means April 9, 2028.
“Maximum Rate” is defined in Section 9.19.
“Note” shall mean that certain Third Amended and Restated Revolving Loan Promissory Note, dated of even date herewith, executed by Borrower and payable to Lender, in the principal amount of the Commitment, as the same may be amended, modified, restated or supplemented from time to time.
“Note Rate” shall mean a per annum floating rate equal to the WSJ Prime Rate plus 4.50%.
“Obligations” means all obligations of Borrower to pay principal and interest on the Loans, all fees and charges payable hereunder, all Over-Advances, all protective advances, and all other obligations incurred by Borrower under any agreement between Borrower and Lender or any Affiliate of Lender with respect to the Loans and as set forth in the Loan Documents, all payment obligations of Borrower arising under or in relation to any Loan Document or any other agreement between Borrower and Lender with respect to the Loans and as set forth in the Loan Documents, in each case whether now existing or hereafter arising, due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held or acquired.
“Over-Advance” means, the amount, if any, by which the unpaid principal amount of all Loans exceeds the Commitment, which will be deemed an Advance of the Loan.
“Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof.
“Property” means, as to any Person, all types of real, personal, tangible, intangible or mixed property owned by such Person whether or not included in the most recent balance sheet of such Person and its subsidiaries.
“Real Property” shall mean the tract of land with an address of 27769 Matterhorn, Lake Arrowhead, CA 92352, owned by the Syage Trust and together with all of the Syage Trust’s right, title and interest to the following:
(a) All buildings, structures, and Improvements now or hereafter located on such tracts, as well as all rights-of-way, easements, and other appurtenances thereto;
(b) Any land lying between the boundaries of such tracts and the center line of any adjacent street, road, avenue, or alley, whether opened or proposed;
(c) All of the rents, income, receipts, revenues, issues and profits of and from such tracts and Improvements;
(d) In any (i) water and water rights (whether decreed or undecreed, tributary, nontributary or not nontributary, surface or underground, or appropriated or unappropriated); (ii) ditches and ditch rights; (iii) spring and spring rights; (iv) reservoir and reservoir rights; (v) well rights, whether adjudicated or evidenced by any well or other permit; (vi) decreed or pending plan or augmentation or water exchange plan; and (vii) shares of stock in water, ditch and canal companies and all other evidence of such rights, which are now owned or hereafter acquired by the Syage Trust and which are appurtenant to or which have been used in connection with such tracts or improvements, if any;
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(e) All oil and gas rights, minerals, trees, shrubs, flowers and landscaping features now or hereafter located on, under or above such tracts, if any, which are now owned or hereafter acquired by the Syage Trust;
(f) All machinery, apparatus, equipment, fittings, fixtures (whether actually or constructively attached, and including all trade, domestic, and ornamental fixtures) now or hereafter located in, upon, or under such tracts or improvements and used or usable in connection with any present or future operation thereof, including but not limited to all equipment for the purposes of supplying or distributing heating, air-conditioning, freezing, lighting, gas, water, air, laundry, incinerating and power equipment, all elevators and related machinery; including but not limited to engines; pipes; pumps; tanks; motors; conduits; switchboards; plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigerating, ventilating, cooking, and communications apparatus; boilers, water heaters, ranges, furnaces, and burners; appliances; vacuum cleaning systems; elevators; escalators; shades; awnings; screens; storm doors and windows; stoves; refrigerators; attached cabinets; partitions; ducts and compressors; rugs and carpets; draperies; and all additions thereto and replacements therefor;
( ) All development rights associated with such tracts, whether previously or subsequently transferred to such tracts from other real property or now or hereafter susceptible of transfer from such tracts to other real property;
(g) Any and all insurance proceeds, and any and all awards, including interest, previously and hereafter made to the Syage Trust for taking by eminent domain or by agreement in lieu of any such action of the whole or any part of the Real Property or any easements used in connection with the Real Property; and
(h) All other and greater rights and interests of every nature in such tracts and in the possession or use thereof and income therefrom, whether now owned or subsequently acquired by the Syage Trust.
“Revolving Loan” means the loan described in Section 2 of this Agreement.
“Revolving Loan Termination Date” shall mean the earliest to occur of the following: (i) the Maturity Date of the Revolving Loan; (ii) the date Borrower prepays the Revolving Loan in full in accordance with Section 2.4; or (iii) the date on which the Commitment is terminated in whole pursuant to Section 8.2 and Section 8.3.
“Syage” means Jack A. Syage.
“Syage Trust” means The Jack A. Syage and Elizabeth T. Syage Revocable Trust, dated November 30, 1999.
“Settlement Agreement” is defined in the Recitals.
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“Solvent” means, with respect to any Person, such Person (a) owns Property whose total fair salable value is greater than the amount required to pay all of its debts (including contingent, subordinated, unmatured and unliquidated liabilities); (b) owns Property whose total present fair salable value (as defined below) is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such Person as they become absolute and matured; (c) is able to pay all of its debts as they mature; (d) has capital that is not unreasonably small for its business and is sufficient to carry on its business and transactions and all business and transactions in which it is about to engage; (e) is not “insolvent” within the meaning of Section 101(32) of the United States Bankruptcy Code; and (f) has not incurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any Loan Document, or made any conveyance in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of such Person or any of its Affiliates. “Fair salable value” means the amount that could be obtained for Property within a reasonable time, either through collection or through sale under ordinary selling conditions by a capable and diligent seller to an interested unrelated buyer who is willing (but under no compulsion) to purchase.
“Spousal Waiver” that certain Spousal Waiver of Interest, dated as of the date hereof, executed and delivered by Elizabeth T. Syage (the spouse of Syage) in favor of Lender.
“Subsidiary” or “Subsidiaries” shall mean as to any Person (a) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time stock of any other class of such corporation shall have or might have voting power by reason of the happening of any contingency) is owned, directly or indirectly through Subsidiaries, by such Person and (b) any partnership, limited liability company, association, joint venture or other entity in which such Person, directly or indirectly through Subsidiaries, has more than a fifty percent (50%) interest in total equity, total income and/or total ownership interest of such entity at any time.
“Subordinated Debt” means any and all loans or advances made to Borrower by the Syage Trust, the Felker Revocable Trust Dated July 30, 1999, and any of such Borrower’s members, Affiliates of Borrower or Affiliates of Borrower’s members and any Indebtedness of Borrower (including any convertible notes and other investor notes).
“U.S. Dollars” and “$” each means the lawful currency of the United States of America.
“Uniform Commercial Code” means Article 9 of the Uniform Commercial Code for the State of Colorado as of the date of this Agreement.
“WSJ Prime Rate” means, at the time of any determination, the variable interest rate published from time to time by the Wall Street Journal as the “prime rate” as quoted in the Wall Street Journal “Money Rates” table; each change in the Wall Street Journal prime rate shall be effective on the date such change is published. If multiple prime rates are quoted in the table, then the highest prime rate will be the WSJ Prime Rate. If the Wall Street Journal prime rate is unavailable or is no longer quoted, Lender may select such replacement index as approximates the Wall Street Journal prime rate. The WSJ Prime Rate may not necessarily represent the lowest interest rate charged by Lender for commercial or other extensions of credit. The WSJ Prime Rate shall change from time to time, and such changes shall be effective without prior notice to Borrower.
Section 1.2. Interpretation. Any word herein which is expressed in the masculine, feminine or neuter gender shall be deemed to include the masculine, feminine and neuter genders. Any word herein which is expressed in the singular or plural number shall be deemed, whenever appropriate in the context, to include the singular and the plural. The words “hereof,” “herein,” and “hereunder” and words of like import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless the context in which used clearly requires otherwise, in each Loan Document, “or” has the inclusive meaning represented by the phrase “and/or”, and the words “shall” and “will” have the same meaning and effect as “must” and indicate a requirement or obligation. Use of the word “including” shall mean “including, without limitation” unless otherwise specifically expressed. All certifications made or signatures provided by any authorized representative of Borrower shall be made and given by any such person in such capacity as an officer, and not in any individual or personal capacity. All references to time of day herein are references to Denver, Colorado time unless otherwise specifically provided. All references in this Agreement or any other Loan Document to (a) the preamble or any section means, unless the context otherwise requires, the preamble or a section of this Agreement or (b) any law, rule, regulation, order, decree, requirement, policy, guideline, directive or interpretation means as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect on the determination date, including rules and regulations promulgated thereunder.
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SECTION 2. THE CREDIT FACILITIES.
Section 2.]. Revolving Loan. Subject to the terms and conditions of this Agreement and the other Loan Documents, on the Closing Date Lender agrees to make a revolving loan in U.S. Dollars in the amount of the Commitment to Borrower; provided, however, Borrower may not request Advances after the Closing Date (other than with respect to interest payable pursuant to Section 2.3(a) of this Agreement), without the prior written consent of Lender, which consent may be withheld in Lender’s sole and absolute discretion. Subject to the terms and conditions hereof, Revolving Loans may be repaid and the principal amount thereof reborrowed before the Revolving Loan Termination Date. If at any time an Over-Advance exists, Borrower shall immediately, and without the necessity of a demand by Lender, pay to Lender such amount as may be necessary to eliminate such excess, and a failure to do so shall constitute an Event of Default. In the event that the availability of the Revolving Loan hereunder expires by the terms of this Agreement, or by the terms of any agreement extending the Maturity Date of the Revolving Loan, Lender may, in its sole discretion, continue to make requested advances; however, it is expressly acknowledged and agreed that, in such event, Lender shall have the right, in its sole discretion, to decline to make any requested advance and may require payment in full of the Revolving Loan at any time and the making of any such advances shall not be construed as a waiver of such right by Lender.
Section 2.2. Disbursement of Revolving Loan. With the exception of Lender making Advances to itself pursuant to Section 2.7 and Section 4.3, Borrower may not make any Advance requests after the Closing Date.
Section 2.3. Interest on the Revolving Loan and Principal Payments.
(a) Interest. Subject in all cases to the terms and conditions of this Agreement, for the period beginning on the Closing Date and ending on the Revolving Loan Termination Date, the Revolving Loan or Revolving Loans shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) on the unpaid principal amount thereof from the date such Revolving Loan is advanced until maturity (whether by acceleration or otherwise) at a floating rate per annum equal to the Note Rate (including at the Default Rate, if applicable), payable in arrears on the 1st day of each calendar month, with payments beginning on the 1st day of the month following the Closing Date, and continuing on the 1st day of each calendar month thereafter. Borrower hereby authorizes Lender to advance monthly interest payments to itself pursuant to Section 4.3 below for any monthly payments Borrower does not make.
(b) Payment in Full on Revolving Loan Termination Date. Notwithstanding anything to the contrary contained herein or in any other Loan Document, if not sooner paid as set forth herein or in any of the other Loan Documents, the entire unpaid outstanding balance of the Revolving Loan, together with interest and any other unpaid charges, shall mature and become due and payable by Borrower on the Revolving Loan Termination Date.
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(c) Authorization to Lender. Borrower hereby requests and authorizes Lender to make advances directly to itself for monthly interest payments in accordance with Section 4.3.
Prepayments. Borrower may prepay in whole or in part any of the Revolving Loans at any time without payment of any penalty or premium. Any prepayments received in accordance with this Section will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make regularly scheduled payment due hereunder. Rather, such prepayment will reduce the principal balance due. If Borrower prepays the Revolving Loan in part or full on or before the third anniversary of the Closing Date, Borrower shall be entitled to the following discounts: (a) if paid in part or full on or before the first anniversary of the Closing Date, a 15% discount on the principal amount of such prepayment; (b) if paid in part or full after the first anniversary of the Closing Date and on or before the second anniversary of the Closing Date, a 10% discount on the principal amount of such prepayment, and (c) if paid in part or full after the second anniversary of the Closing Date, no discount on the principal amount of such prepayment. For the avoidance of doubt, Borrower shall not receive a prepayment discount on any of the accrued and unpaid interest, rather the discount shall only apply to a principal payment reduction. Notwithstanding any such repayments of Advances under the Revolving Loans, subject in all cases to the terms and conditions of this Agreement and the other Loan Documents, Borrower shall not be entitled to borrow, repay and re-borrow Advances under the Revolving Loan on a revolving basis.
Section 2.4. Default Rate and Late Fees. Notwithstanding anything to the contrary contained herein, while any Event of Default exists or at maturity or after acceleration, Borrower shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the unpaid principal amount of the Revolving Loan until paid in full at a rate per annum equal to Eighteen percent (18.0%) per annum, for so long as such Event of default shall be continuing (the “Default Rate”). No delay by Lender in electing to receive interest at the Default Rate after an Event of Default or at maturity or after acceleration shall be deemed a waiver by Lender of such right. In addition to default interest, if any regularly scheduled payment of principal or interest is ten (10) days or more late (including at maturity), Borrower will be charged a late fee equal to five percent (5.0%) of the regularly scheduled payment (including the balance at maturity, in the event of a default in the payment of the balance at maturity). While any Event of Default exists or after acceleration, interest shall be paid upon the demand of Lender. No delay by Lender in electing to receive interest at the Default Rate after an Event of Default or at the Maturity Date of the Revolving Loan shall be deemed a waiver by Lender of such right. The interest rate will not exceed the maximum rate permitted by applicable law.
Section 2.5. Collateral. The repayment of the Obligations shall be unsecured.
Section 2.6. Protective Advance. Lender may initiate an Advance in its sole discretion for any reason when an Event of Default exists or after the Revolving Loan Termination Date, without Borrower’s compliance with any of the conditions of this Agreement, and (a) disburse the proceeds directly to any Person in order to protect Lender’s interest in Collateral or to perform any of Borrower’s obligations under this Agreement, or (b) apply the proceeds to the amount of any Obligations then due and payable to Lender. Borrower shall be responsible to repay any Over-Advances arising as a result of this Section 2.7 and any such Over-Advance shall constitute Obligations due and payable to Lender hereunder.
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SECTION 3. FEES AND EXPENSES.
Section 3.1. Transaction Fees and Expenses. Borrower shall pay to Lender on the Closing Date, past due legal fees and expenses in the amount of $23,998.50, and all of Lender’s reasonable costs and expenses, including, without limitation, Lender’s reasonable Attorney’s Fees and Costs, title insurance, recording fees, Federal Express or similar express or messenger delivery costs for work done with respect to the preparation and negotiation of the Loan Documents. Borrower agrees and acknowledges that the fees outlined in this Section are earned fully as of the Closing Date and will not be subject to refund, except as required by law.
Section 3.2. Upfront Closing Fee. On the Closing Date Borrower shall pay to Lender a one-time non-refundable upfront closing fee equal to Zero and 00/100 Dollars ($0.00).
Section 3.3. Inspection Fees. At Lender’s option and request, Borrower shall pay to Lender reasonable fees and out-of-pocket costs incurred in connection with inspection of the Borrower’s facilities performed by Lender or its agents or representatives as more particularly described in Section 7.6.
SECTION 4. PLACE AND APPLICATION OF PAYMENTS.
Section 4.1. Place of Payment. All payments of principal and interest on the Loans and of all other Obligations payable by Borrower under this Agreement and the other Loan Documents shall be made by Borrower to Lender by no later than 2:00 p.m. (Denver time) on the due date thereof by ACH, wire transfer, or in person at the office of Lender located at Mattress Liquidators, Inc., Attn: David Dolan, 1435 White Hawk Ranch Drive, Boulder, CO 80303 (or such other location as Lender may designate to any Borrower) or other method as may be agreed to by Lender. Any payments received after 2:00 p.m. (Denver time) on the due date thereof shall be deemed to have been received by Lender on the next Business Day. All such payments shall be made in U.S. Dollars, in immediately available funds at the place of payment, in each case without set-off or counterclaim.
Section 4.2. Application of Payments. Anything contained herein to the contrary notwithstanding, all payments and collections received in respect of the Obligations by Lender after acceleration or the final maturity of the Obligations or termination of the Commitment as a result of an Event of Default shall be remitted to Lender and distributed as follows:
(a) first, to the payment of any outstanding reasonable costs and expenses incurred by Lender, in enforcing rights under the Loan Documents, and in any event including all reasonable costs and expenses of a character which Borrower has agreed to pay Lender;
(b) second, to the payment of any outstanding interest and fees due under the Loan Documents;
(c) third, to the payment of principal on the Note;
(d) fourth, to the payment of all other unpaid Obligations; and
(e) finally, to Borrower or whoever else may be lawfully entitled thereto.
Section 4.3. Authorization for Direct Payment. To effectuate any payment due under this Agreement, Borrower hereby requests and authorizes Lender to make advances directly to itself for payment and reimbursement of all interest, charges, actual and reasonable costs and expenses incurred by Lender in connection with the Loan, including, but not limited to, (i) interest due on the Loan, and other fees due to Lender in connection with the Loan (including, reasonable Attorney’s Fees and Costs); (ii) all filing, search, recording and registration fees and charges; (iii) all casualty, liability or other insurance premiums; and (iv) all reasonable Attorney’s Fees and Costs, including, without limitation, counsel engaged in connection with the enforcement or administration of this Agreement or any of the Loan Documents. Borrower shall be responsible to repay any Over-Advances arising as a result of this Section 4.3 and any such Over-Advance shall constitute Obligations due and payable to Lender hereunder.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER.
Borrower represents, warrants and covenants to Lender that all representations, warranties and covenants of Borrower contained in this Agreement shall be true at the time of Borrower’s execution of this Agreement, shall survive the execution, delivery and acceptance hereof by the parties hereto and the closing of the transactions described herein or related hereto, shall remain true, except where such representations or warranties expressly relate to an earlier date, until the repayment in full of all of the Obligations and termination of this Agreement. Borrower represents and warrants to Lender as follows:
Section 5.]. Organization and Qualifications. Borrower is validly existing under the laws of the State of its formation and is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it requires such licensing or qualifying, except where the failure to do so would not have a Material Adverse Effect.
Section 5.2. Authority and Validity of Obligations. Borrower has full right and authority to enter into this Agreement and the other Loan Documents to which it is a party and to perform all of its obligations hereunder and under the other Loan Documents to which it is a party. The Loan Documents delivered by Borrower have been duly authorized, executed, and delivered by Borrower and constitute valid and binding obligations of Borrower enforceable against Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors’ rights generally and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law); and this Agreement and the other Loan Documents do not, nor does the performance or observance by Borrower of any of the matters and things herein or therein provided for, (a) violate or constitute a default under any provision of law or any judgment, injunction, order or decree binding upon Borrower or any organizational documents of Borrower, or (b) violate or constitute a default under any covenant, indenture or agreement of or affecting Borrower, in each case where such violation or default, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.3. Use of Proceeds; Illegal Activities; Margin Stock. Borrower shall use the proceeds of the Revolving Loan to refinance the Existing Revolving Loan owed to Lender. Borrower covenants and agrees not to use the Revolving Loan for any other purpose, including the payment of any distributions or payments with respect to Subordinated Debt. Borrower is not engaged in any illegal activities as determined under applicable federal, state or local law, and no part of the proceeds of the Revolving Loan will be used in the furtherance of any illegal activities. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of the Revolving Loan will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock.
Section 5.4. Financial Reports. The financial statements, heretofore furnished to Lender by Borrower, fairly present in all material respects the consolidated financial condition of Borrower as at said dates and the consolidated results of its operations for the periods then ended in conformity with GAAP applied on a consistent basis. As of the dates of such financial statements, Borrower has no material obligation, contingent liability, liability for taxes or long-term lease obligation which is not reflected in such financial statements or in the notes thereto. Since the date of such statements, and as of the date of such statement(s) there will have been no material adverse change in the business, operations, property, assets or condition, financial or otherwise, of Borrower.
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Section 5.5. Full Disclosure. The written statements and information furnished to Lender in connection with the negotiation of this Agreement and the other Loan Documents and the commitments by Lender to provide all or part of the financing contemplated hereby do not, as of the date of this Agreement, contain any untrue statements of a material fact or omit to state a material fact necessary to make the material statements contained therein not misleading in light of the circumstances in which they are made, Lender acknowledging that as to any projections furnished, Borrower only represents that the same were prepared on the basis of information and estimates Borrower believed to be reasonable at the time such projections were prepared.
Section 5.6. Governmental Authority and Licensing. Borrower has received all licenses, permits, and approvals of all federal, state, and local governmental authorities, if any, necessary to conduct its business in all material respects, in each case where the failure to obtain or maintain the same could reasonably be expected to have a Material Adverse Effect. No investigation or proceeding which could reasonably be expected to result in revocation or denial of any material license, permit or approval of Borrower is pending or, to the knowledge of Borrower, threatened against Borrower unless such revocation or denial could not reasonably be expected to have a Material Adverse Effect.
Section 5.7. Litigation and Other Controversies. Except as has been disclosed to Lender in writing, there is no litigation, suit, proceeding, arbitration, governmental investigation or controversy pending, nor to the knowledge of Borrower threatened, against Borrower which if adversely determined, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.8. Taxes. All tax returns (if any) required to be filed by or on behalf of Borrower in any jurisdiction have, in fact, been filed, and all taxes, assessments, fees, and other governmental charges upon Borrower or any of its property, which are shown to be due and payable in such returns, have been paid, except such taxes, assessments, fees and governmental charges, if any, as are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and as to which adequate reserves have been provided or such tax returns for which the failure to file and such taxes, assessments, fees, and other governmental charges for which the failure to pay could not reasonably be expected to result in a Material Adverse Effect. Borrower does not know of any proposed additional tax assessment against Borrower for which adequate provisions have not been made. Adequate provisions on the books of Borrower have been made for taxes which are being contested in good faith by Borrower for all open years, and for its current fiscal period.
Section 5.9. Approvals. No authorization, consent, license or exemption from, or filing or registration with, any court or governmental department, agency or instrumentality, nor any approval or consent of any other Person, is or will be necessary for the valid execution, delivery or performance by Borrower of any Loan Document, except for the filing of financing statements as contemplated by the Loan Documents, such approvals which have been obtained prior to the date of this Agreement and remain in full force and effect or where the absence of such authorization, consent, license or exemption from, or filing or registration with, any court or governmental department, agency or instrumentality, or approval or consent of any other Person could not reasonably be expected to have a Material Adverse Effect.
Section 5.10. Compliance with Laws. Borrower is in substantial compliance with the requirements of all federal, state and local laws, rules and regulations applicable to or pertaining to its Property or business operations, except where any such non-compliance, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Borrower has received no notice from any governmental authority that its operations are not in compliance with any of the requirements of applicable federal, state or local environmental, health, and safety statutes and regulations or is the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, where any such noncompliance or remedial action, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
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Section 5.11. Other Agreements. Borrower is not in default under the terms of any covenant, indenture or agreement of or affecting Borrower, which default if uncured could reasonably be expected to have a Material Adverse Effect.
Section 5.12. Solvency. Borrower is solvent, able to pay its debts as they become due, and, assuming the availability of the credit line provided hereunder, has sufficient capital to carry on its business and all businesses in which it is about to engage. On the Closing Date, Borrower is not contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidating of all or a substantial portion of its property.
Section 5.13. No Default. No Default or Event of Default has occurred and is continuing.
Section 5.14. Patents, Trademarks, Franchises, and Licenses. Borrower owns, possesses, or has the right to use all necessary patents, licenses, franchises, trademarks, trade names, trade styles, copyrights, trade secrets, know how, and confidential commercial and proprietary information to conduct its businesses as now conducted, without conflict known to Borrower with any patent, license, franchise, trademark, trade name, trade style, copyright or other proprietary right of any other Person that could reasonably be expected to have a Material Adverse Effect.
Section 5.15. Affiliate Transactions. Borrower is not a party to any contracts or agreements with any of its Affiliates on terms and conditions which are less favorable to Borrower than generally available on an arms-length basis from unrelated third parties.
SECTION 6. CONDITIONS PRECEDENT.
Section 6.1. Closing Conditions. The obligation of Lender to advance or continue to advance the Loans shall be subject to the following conditions precedent:
(a) each of the representations and warranties set forth herein and in the other Loan Documents shall be and remain true and correct in all material respects as of said time, except to the extent the same expressly relate to an earlier date;
(b) there shall have been no material adverse change in the financial condition or operations of Borrower or any Guarantor which could reasonably be expected to result in the occurrence of a Material Adverse Effect;
(c) Lender shall have received this Agreement duly executed by Borrower;
(d) Lender shall have received the Note duly executed by Borrower;
(e) Lender shall have received a fully executed Settlement Agreement;
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(f) Lender shall have received from Borrower or such other signatory, dated as of the date hereof, duly executed Guaranty’s, a duly executed Deed of Trust, the Spousal Waiver, the Amended and Restated Subordination Agreements, and any other Loan Documents;
(g) Lender shall have received copies of Borrower’s organizational documents, certified as being true, correct and complete;
(h) Lender shall have received copies of resolutions of Borrower, authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby, together with specimen signatures of the Persons authorized to execute such documents on such Person’s behalf, all certified in each instance by an authorized representative of Borrower;
(i) Lender shall have received a copy of a certificate of good standing for Borrower (dated no earlier than thirty (30) days prior to the date hereof) from the office of the Secretary of the State of the State of its organization;
(j) Lender shall have received evidence of the binding coverage of the Insurance indicating Lender as an additional insured, mortgagee and/or lender loss payee, as its interests may appear;
(k) Lender shall have received the transaction fees called for by Section 3.1;
(l) All legal matters incident to this Agreement and the Loan Documents shall be reasonably satisfactory to Lender and its counsel; and
(m) Lender shall have received such other agreements, instruments, documents, certificates, and opinions as Lender may reasonably request.
Each Advance hereunder shall be deemed to be a representation and warranty by Borrower on the date of such Credit Event as to the facts specified in this Section.
Section 6.2. Post-Closing Matters. Borrower shall comply or cause compliance with the following post-closing matters:
(a) Not more than sixty (60) days from the date of this Agreement, Syage shall execute and deliver the Deed of Trust.
SECTION 7. COVENANTS OF BORROWER.
Borrower agrees that, so long as the Obligations remain outstanding, except to the extent compliance in any case or cases is waived in writing pursuant to the terms of Section 9.11:
Section 7.]. Maintenance of Business. Borrower shall preserve and maintain its existence. Borrower shall preserve and keep in force and effect all licenses, permits, approvals, trademarks, trade names, trade styles, copyrights, and other proprietary rights necessary to the proper conduct of its business where the failure to do so could reasonably be expected to have a Material Adverse Effect.
Section 7.2. Maintenance
and Repair of Property. Borrower shall maintain and preserve its assets in good repair, working order and condition (ordinary wear and
tear excepted), and shall from
time to time make all needful and proper repairs, renewals, replacements, additions, and betterments thereto so that at all times the
efficiency thereof shall be fully preserved and maintained, except to the extent that, in the reasonable business judgment of Borrower,
any such Property is no longer necessary for the proper conduct of Borrower’s business.
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Section 7.3. Taxes and Assessments. Borrower shall duly pay and discharge all taxes, rates, assessments, fees, and governmental charges of any kind or nature upon or against it, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves are provided therefore or would not be expected to have a Material Adverse Effect.
Section 7.4. Insurance. Borrower shall insure and keep insured, with sound and reputable insurance companies reasonably acceptable to Lender, all insurable assets owned by it which is of a character usually insured by Persons similarly situated and operating like businesses against loss or damage from such hazards and risks, and in such amounts, as are insured by Persons similarly situated; and Borrower shall insure such other hazards and risks with good and responsible insurance companies as and to the extent usually insured by Persons similarly situated and conducting similar businesses (the “Insurance”). Borrower shall, upon the request of Lender, provide a certificate setting forth in summary form the nature and extent of the Insurance. All policies of Insurance (a) shall name Lender as an additional named insured, mortgagee and/or loss payee, as its interest may appear, (b) shall insure the named insureds against all liability for loss, injury, damage or claims caused by, arising out of or in connection with the ownership, possession, operation or maintenance of such Property, (c) shall provide that if such insurance is canceled for any reason, or if such insurance is allowed to lapse for nonpayment of premiums, such cancellation or lapse shall not be effective as to Lender for thirty (30) days after receipt by Lender of written notice from the insurers of such cancellation or lapse, (d) shall be primary without right of contribution from any other insurance which may be carried by Lender, and (e) shall expressly provide that all of the provisions thereof shall operate in the same manner as if there were a separate policy covering each insured (provided that such policies shall not operate to increase the insurer’s limit of liability). Upon request, Borrower shall furnish to Lender original policies, certificates or other appropriate evidence of the Insurance coverage required hereby and evidence that the applicable premium has been paid.
Borrower hereby agrees to direct all insurers under the Insurance to pay all proceeds payable thereunder to Lender and all proceeds received by Lender shall be delivered to Borrower for the sole purpose of applying such proceeds may be applied to the Obligations in such order and manner as Lender shall reasonably determine. Upon the occurrence and during the continuance of an Event of Default, Borrower irrevocably, makes, constitutes and appoints Lender (and all authorized representatives, employees or agents designated by Lender) as Borrower’s true and lawful attorney-in-fact (and agent-in-fact) for the purpose of making, settling and adjusting claims, endorsing the name of Borrower on any check, draft, instrument or other item of payment for the proceeds of the Insurance. In the event that Lender is entitled hereunder to receive proceeds under the Insurance, Lender will have no obligation to see to the proper application of any Insurance proceeds paid over to Borrower, nor will any such proceeds received by Lender bear interest or be subject to any other charge for the benefit of Borrower. Upon the occurrence and during the continuance of any Event of Default, Lender may, prior to the application of any Insurance proceeds, commingle them with Lender’s own funds and otherwise act with regard to such proceeds as Lender may determine in Lender’s sole discretion.
If Borrower at any time or times hereafter shall fail to obtain or maintain any of the Insurance or to pay any premium in whole or in part relating thereto, then Lender, without waiving or releasing any obligation or default by Borrower hereunder, may (but shall be under no obligation to) obtain and maintain the Insurance and pay such premiums and take such other actions with respect thereto as Lender deems advisable. All sums disbursed by Lender in connection with any such actions, including without limitation (other than limitations imposed by applicable law or rule of court) reasonable Attorney’s Fees and Costs, and other charges relating thereto, shall constitute Obligations hereunder and shall be payable upon written demand by Borrower to Lender and, if not paid within twenty (20) Business Days following such written demand, shall bear interest at the Default Rate.
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If Lender shall at any time so request following any Event of Default and during the continuance of any such Event of Default, Borrower will immediately deposit with Lender an amount equal to 1/12th of the amount which Lender estimates will be required to make the next annual payments of the premium for the policies of Insurance referred to in this Section, multiplied by the number of whole and partial months which have elapsed since the most recent policy anniversary date for each such policy. Thereafter, with each monthly payment under the Note, Borrower will deposit an amount equal to 1/12th of the amount which Lender estimates will be required to pay the next required annual premium for each Insurance policy referred to in this Section. The purpose of these provisions is to provide Lender with sufficient funds on hand to pay all such premiums thirty (30) days before the date on which they become past due. Lender will apply the amounts so deposited to the payment of such Insurance premiums when due, but in no event will Lender be liable for any interest on any amounts so deposited, and the money so received may be commingled with Lender’s own funds.
Section 7.5. Reporting and Covenants. Borrower shall maintain a standard system of accounting, in accordance with GAAP, and shall furnish to Lender and its duly authorized representatives such information respecting the business and financial condition of Borrower as Lender may reasonably request in writing; and without any request, shall furnish or cause to be furnished to Lender:
(a) as soon as available, and in any event within fifteen (15) days of filing, each Guarantor shall provide to Lender a copy of their completed federal income tax return together with all schedules and exhibits and, if filed, any requests for extensions. If an extension is filed, a copy of the extension must be provided to Lender within fifteen (15) days of filing and a copy of the completed federal income tax return together with all schedules and exhibits must be provided to Lender within fifteen (15) days of filing such extended return;
(b) as soon as available, and in any event thirty (30) days after the end of each calendar year, each Guarantor shall provide to Lender an updated personal financial statement listing each such Guarantor’s assets and liabilities, including liquidity statements and contingent liabilities, in such detail as Lender may reasonably require;
(c) promptly after knowledge thereof shall have come to the attention of any responsible officer of Borrower, written notice of (i) any material change in the condition, financial or otherwise, of Borrower or any Guarantor; or (ii) any threatened or pending litigation or governmental or arbitration proceeding or labor controversy against Borrower which, if determined adversely, could reasonably be expected to have a Material Adverse Effect;
(d) Guarantors further agree, covenant, represent and warrant that, so long as any portion of the Indebtedness remains outstanding, Guarantor will not give or otherwise transfer or dispose of any material portion of any of their respective assets to any other Person for less than the fair market value of such assets; and
(e) Such other information (including non-financial information) as Lender may from time to time reasonably request.
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Section 7.6. Inspection of the Business. Borrower shall permit Lender, and its duly authorized representatives and agents, during regular business hours, to visit and inspect any of its books and financial records, to examine and make copies of its books of accounts and other financial records, and to discuss its affairs, finances, and accounts with, and to be advised as to the same by, its officers, employees, independent public accountants (and by this provision Borrower hereby authorizes such accountants to discuss with Lender the finances and affairs of Borrower), or Affiliates at such reasonable times and intervals as Lender may request and with reasonable prior written notice to Borrower; provided, however, Lender may conduct inspections without prior written notice to Borrower if an Event of Default has occurred and is continuing.
Section 7.7. Borrowings and Guaranties. Without the prior written consent of Lender, Borrower shall not issue, incur, assume, create or have outstanding any indebtedness for borrowed money, or be or become liable as endorser, guarantor, surety or otherwise for any debt, obligation or undertaking of any other Person, or otherwise agree to provide funds for payment of the obligations of another, or otherwise assure a creditor of another against loss, or apply for or become liable to the issuer of a letter of credit which supports an obligation of another, or subordinate (other than in the ordinary course of business) any claim or demand it may have to the claim or demand of any other Person; provided, however, that the foregoing shall not restrict nor operate to prevent:
(a) the Obligations of Borrower to Lender;
(b) accounts payable liabilities incurred in the ordinary course of business; and
(c) such other obligations as may be permitted by Lender in writing.
Section 7.8. Compliance with Laws. Borrower shall comply in all respects with the requirements of all federal, state, and local laws, rules, regulations, ordinances and orders applicable to or pertaining to its assets or business operations, except where the failure to do so, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 7.9. Environmental Matters; Reporting. Borrower shall carry on its business and operations so as to comply and remain in compliance with all applicable federal, state, regional, county or local laws, statutes, rules, regulations or ordinances, concerning public health, safety or the environment including, without limitation, laws or regulations relating: (a) to releases, discharges, emissions or disposals to air, water, land or groundwater; (b) to the withdrawal or use of groundwater; (c) to the use, handling or disposal of polychlorinated biphenyls (PCB’s), asbestos or urea formaldehyde; ( ) to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, its derivatives, by-products or other hydrocarbons), and any other solid, liquid or gaseous substance, exposure to which is prohibited, limited or regulated, or may or could pose a hazard to the health and safety of the occupants of any of Borrower’s properties or any property adjacent to Borrower’s properties; (e) to the exposure of persons to toxic, hazardous, or other controlled, prohibited or regulated substance; and (f) to the transportation, storage, disposal, management or release of gaseous or liquid substances, and any order, injunction, judgment, declaration, notice or demand issued thereunder (collectively, “Environmental Laws”), except to the extent any non-compliance, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
Borrower will observe and comply in all material respects with all laws, rules, regulations and orders of any government or government agency relating to health, safety, pollution, hazardous materials or other Environmental Laws to the extent noncompliance could result in a Material Adverse Effect. Borrower will give Lender prompt written notice of any (i) violation of any Environmental Laws by Borrower and/or (ii) of the commencement of any judicial or administrative proceeding relating to any Environmental Laws, in each case (x) in which an adverse determination or result could result in the revocation of any operating permits, air emission permits, water discharge permits, hazardous waste permits or other permits held by Borrower, which individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (y) which will or threatens to impose a material liability on Borrower to any Person or which will require a material expenditure by Borrower to cure any alleged violation.
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Borrower agrees to indemnify, defend and hold Lender, and its successors and assigns, harmless against and from any and all liabilities, claims and losses resulting, directly or indirectly, from a breach of this Section and Borrower will pay or reimburse Lender for all reasonable costs and expenses, including reasonable Attorney’s Fees and Costs required or requested by Lender in Lender’s reasonable discretion, to insure compliance with this Section. This obligation to indemnify shall survive the payment of all Obligations.
Section 7.10. Change in the Nature of Business. Borrower shall not engage in any business or activity if as a result the general nature of the business of Borrower would be changed in any material respect from the general nature of the business engaged in by it as of the Closing Date.
Section 7.11. Mergers, Consolidations and Sales. Borrower shall not liquidate or dissolve, merge or consolidate with or into, acquire any other business organization, or transfer, lease or otherwise dispose of all or any part of its assets, except in the ordinary course of Borrower’s business, in each case without the prior written consent of Lender, which shall not be unreasonably withheld.
Section 7.12. Burdensome Contracts With Affiliates. Borrower shall not enter into any contract, agreement or business arrangement with any of its Affiliates on terms and conditions which are less favorable to Borrower than would be generally available on an arms-length basis from unrelated third parties.
Section 7.13. Subordinated Debt. Borrower shall not, without the prior written consent of Lender, (a) amend or modify any of the terms or conditions relating to Subordinated Debt, (b) make any voluntary payment or any prepayment of Subordinated Debt of or effect any voluntary redemption thereof, or (c) make any payment on account of Subordinated Debt which is prohibited under the terms of any instrument or agreement subordinating the same to the Obligations. Borrower covenants and agrees, at Lender’s request, to enter into a subordination agreement with any subordinated debt holder.
Section 7.14. Distributions. Borrower may make Distributions so long as no Event of Default exists or would occur as a result of such payment.
Section 7.15. Use of Proceeds. Borrower shall use, or cause to be used, the credit extended under this Agreement solely for the purposes set forth in, or otherwise permitted by, Section 5.3.
Section 7.16. Ownership Repurchase. Borrower shall not purchase or repurchase, in whole or part, any owner of Borrower’s equity interests without the prior written consent of Lender.
Section 7.17. Notification of Default. Immediately upon becoming aware of the existence of any condition or event which constitutes an Event of Default, or any condition of event which would upon notice or lapse of time, or both, constitute an Event of Default, Borrower shall give Lender written notice thereof specifying the nature and duration thereof and the action being or proposed to be taken with respect thereto.
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Section 7.18. Material Notices. Borrower shall give Lender prompt written notice of any and all (i) litigation, arbitration or administrative proceedings to which affects the business operations of Borrower; (ii) other matters which have resulted in, or might result in a material adverse change in the financial condition or business operations of Borrower, and (iii) any enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Borrower or any of its properties.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
Section 8.1. Events of Default. Any one or more of the following shall constitute an “Event of Default” hereunder:
(a) default in the payment when due of all or any part of the principal or interest of the Note (whether at the stated maturity thereof or at any other time provided for in this Agreement);
(b) default in the payment of fees payable hereunder, or of any other Obligation payable hereunder or under any Loan Document, and, in each case, such default shall continue for a period of the earlier of (i) twenty (20) days following the due date thereof, or (ii) twenty (20) days following Lender’s written request for payment thereof;
(c) default in the observance or performance of any other provision hereof or of any other Loan Document or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower which is not remedied within thirty (30) days after the earlier of (i) the date on which such failure shall first become actually known to any authorized representative of Borrower, (ii) written notice thereof is given to Borrower by Lender, or (iii) such other time period as set forth in Sections 8.1(f), 8.1(g), 8.1(h) or 8.1(i) (“Cure Period”); provided that if such default is of such a nature that it is not reasonably susceptible to cure within the Cure Period, then within a reasonable time thereafter provided Borrower shall have begun to cure such default within the Cure Period and is diligently and in good faith attempting to effect such cure, the Cure Period shall be extended for up to thirty (30) additional days, but in no event shall the Cure Period be longer than sixty (60) days in the aggregate;
(d) any representation or warranty made herein or in any other Loan Document or in any certificate furnished to Lender pursuant hereto or in connection with any transaction contemplated hereby or thereby proves untrue in any material respect, and which would reasonably be expected to have a Material Adverse Effect as of the date of the issuance or making or deemed making thereof;
(e) any of the Loan Documents shall for any reason not be or shall cease to be in full force and effect or is declared to be null and void;
(f) any judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process or processes, shall be entered or filed against Borrower or against any of its assets, and, in each case, which remains undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days, unless the same are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and as to which adequate reserves have been provided;
(g) Borrower shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, unless Borrower can cause the same to be removed and cured within thirty (30) days from the date thereof, (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its assets, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any action in furtherance of any matter described in parts (i) through (v) above, or (vii) fail to contest in good faith any appointment or proceeding described in Section 8.1(h);
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(h) a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for Borrower, or any substantial part of any of its assets, or a proceeding described in Section 8.1(g)(v) shall be instituted against Borrower, and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of sixty (60) days;
(i) the death of a Guarantor, any Guarantor is not Solvent, the revocation of any Guaranty, the appointment of a receiver for any part of any Guarantor’s Property, any assignment for the benefit of creditors, any type of creditor workout, the commencement of any proceeding under any bankruptcy or insolvency laws by or against a Guarantor, or any judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process or processes, shall be entered or filed against any Guarantor or against any of its assets, and, in each case, which remains undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days, which in any case referred to above would reasonably be expected to have a Material Adverse Effect, unless the same are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and as to which adequate reserves have been provided;
(j) any adverse change in the financial condition of Borrower or any Guarantor which would reasonably be expected to have a Material Adverse Effect;
(k) the occurrence of a default or an event of default under any other loan agreement, extension of credit, security agreement, or any other agreement between any Borrower and any other lender or between any Guarantor and any other lender, which would reasonably be expected to have a Material Adverse Effect;
(l) Borrower is not Solvent;
(m) Borrower uses the Revolving Loan proceeds for any purpose other than as set forth in Section 5.3.;
(n) the occurrence of a default or an event of default under the Settlement Agreement;
(o) the failure to comply with the Section 6.2 Post-Closing conditions on or before the time periods set forth therein; and
(p) the occurrence of a default or an event of default under any other agreement between Borrower and Lender.
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Section 8.2. Immediate Default and Acceleration. Upon the occurrence of an Event of Default described in Section 8.1(g) or Section 8.1(h), the Revolving Loan and the other financial accommodations extended to Borrower by Lender pursuant to the Loan Documents shall immediately terminate and all Obligations, shall immediately become due and payable without presentment, demand, protest or notice of any kind, all of which Borrower hereby waives.
Section 8.3. Effect of Default. When any Event of Default has occurred and is continuing, after the expiration of any cure periods, Lender may, by written notice to Borrower:
(a) terminate the remaining Commitment and all other obligations of Lender hereunder on the date stated in such notice (which may be the date thereof);
(b) cease any future Advances as of the date of such Event of Default (other than Advances to Lender as set forth in Section 2.7 and Section 4.3);
(c) declare the then outstanding principal of and the accrued interest on the Note to be forthwith due and payable and thereupon all outstanding amounts, including principal and interest, shall be and become immediately due and payable together with all other amounts payable under the Loan Documents without further demand, presentment, protest or notice of any kind;
(d) with or without accelerating the maturity of the Revolving Loan, Lender may sue from time to time for any amount due under any of the Loan Documents;
(e) seek to enforce any rights and remedies set forth in this Agreement, the Note and any other of the Loan Documents against Borrower and nothing contained in this Agreement or any exercise by Lender of any right or remedy pursuant to this Agreement or any of the other Loan Documents shall modify or limit any obligations or liabilities of Borrower under this Agreement, the Note or any of the other Loan Documents;
(f) make any payment or perform any other obligation under the Loan Documents which Borrower has failed to make or perform, and Borrower hereby irrevocably appoints Lender as the true and lawful attorney-in-fact for Borrower to make any such payment and perform any such obligation in the name of Borrower. All payments made and expenses (including reasonable Attorney’s Fees and Costs) incurred by Lender in this connection, together with interest thereon at the Default Rate from the date paid or incurred until repaid, will be part of the Obligations and will be immediately due and payable by Borrower to Lender. In lieu of advancing Lender’s own funds for such purposes, Lender may use any funds of Borrower which may be in Lender’s possession, including but not limited to, insurance or condemnation proceeds and amounts deposited for taxes, insurance premiums, or other purposes;
(g) notwithstanding the availability of legal remedies, Lender will be entitled to obtain specific performance, mandatory or prohibitory injunctive relief, or other equitable relief requiring Borrower to cure or refrain from repeating any default;
(h) exercise or pursue any other remedy or cause of action permitted at law or in equity or under this Agreement or any other Loan Document, and all of Lender’s rights and remedies shall be cumulative and non-exclusive to the extent permitted by law;
(i) surrender the insurance policies maintained pursuant to the terms hereof, or any part thereof, and receive and apply any unearned premiums as a credit on the Obligations and, in connection therewith, Borrower hereby appoints Lender (or any officer of Lender) as the true and lawful agent and attorney-in-fact for Borrower (with full powers of substitution), which power of attorney shall be deemed to be a power coupled with an interest and therefore irrevocable, to collect such premiums; and
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(j) nothing contained in this Agreement or any exercise by Lender of any right or remedy pursuant to this Agreement or any of the other Loan Documents, shall modify or limit any obligations or liabilities of Borrower under the Note or any of the other Loan Documents. Borrower hereby agrees and acknowledges that Lender may seek to enforce any rights and remedies set forth in this Agreement, the Note and any other of the Loan Documents against Borrower.
Section 8.4. Expenses. Borrower agrees to pay to Lender, and any other holder of the Note outstanding hereunder, all reasonable costs and expenses reasonably incurred or paid by Lender or any such holder, including reasonable Attorney’s Fees and Costs, in connection with any Default or Event of Default hereunder or in connection with the enforcement of any of the Loan Documents (including all such costs and expenses incurred in connection with any proceeding under the United States Bankruptcy Code involving Borrower as a debtor thereunder).
SECTION 9. MISCELLANEOUS.
Section 9.1. No Waiver, Cumulative Remedies. Except as otherwise set forth in the Loan Documents, no delay or failure on the part of Lender or on the part of the holder or holders of any of the Obligations in the exercise of any power or right under any Loan Document shall operate as a waiver thereof or as an acquiescence in any Event of Default, nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof or the exercise of any other power or right. The rights and remedies hereunder of Lender and of the holder or holders of any of the Obligations are cumulative to, and not exclusive of, any rights or remedies which any of them would otherwise have.
Section 9.2. Non-Business Days. If any payment hereunder becomes due and payable on a day which is not a Business Day, the due date of such payment shall be extended to the next Business Day on which date such payment shall be due and payable. In the case of any payment of principal falling due on a day which is not a Business Day, interest on such principal amount shall continue to accrue during such extension at the rate per annum then in effect, which accrued amount shall be due and payable on the next scheduled date for the payment of interest.
Section 9.3. Documentary Taxes. Borrower agrees to pay on demand any documentary, stamp or similar taxes payable in respect of this Agreement or any other Loan Document, including interest and penalties, in the event any such taxes are assessed, irrespective of when such assessment is made and whether or not any credit is then in use or available hereunder.
Section 9.4. Survival of Representations. All representations and warranties made herein or in any other Loan Document or in certificates given pursuant hereto or thereto shall survive the execution and delivery of this Agreement and the other Loan Documents, and shall continue in full force and effect with respect to the date as of which they were made as long as any credit is in use or available hereunder.
Section 9.5. Survival of Indemnities. All indemnities and other provisions relative to reimbursement to Lender of amounts sufficient to protect the yield of Lender with respect to the Revolving Loan, including, but not limited to, Sections 8.4 and 9.13, shall survive the termination of this Agreement and the other Loan Documents and the payment of the Obligations.
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Section 9.6. Notices. Any notice required or desired to be given hereunder shall be in writing and shall be considered effective, if by personal delivery, when delivered, if by nationally recognized overnight carrier, when delivered if prior to 5:00 p.m. local time of the recipient on a Business Day, or if not, at 9:00 a.m., local time on the next Business Day, if mailed by certified mail, return receipt requested, postage prepaid, upon first attempted delivery by the U.S. Postal Service after mailing, or if by email communication with delivery confirmation, when received if prior to 5:00 p.m., local time of the recipient on a Business Day, or if not, 9:00 a.m. local time on the next Business Day, addressed as follows (or any other address that the party to be notified may have designated to the sender by like notice):
| To Borrowers: | ImmunogenX, LLC | |
| Attention: Richard Paolone | ||
| 777 Yamato Rd, Suite 502 | ||
| Boca Raton, FL 33431 | ||
| Email: rpaolone@enterothera.com | ||
| To Lender: | Mattress Liquidators, Inc. | |
| Attention: David Dolan | ||
| 1435 White Hawk Ranch Drive | ||
| Boulder, CO 80303 | ||
| Email: mattkingdolan@mattresskingcolo.com | ||
| With a copy to: | Frost Brown Todd | |
| Attention: Edward J. Adkins | ||
| 1801 California Street, Suite 2700 | ||
| Denver, CO 80202 | ||
| Email: eadkins@fbtlaw.com | ||
Section 9.7. Counterparts. This Agreement may be executed in any number of counterparts, and by the different parties hereto on separate counterpart signature pages, and all such counterparts taken together shall be deemed to constitute one and the same instrument.
Section 9.8. Successors and Assigns. This Agreement shall be binding upon Lender and Borrower and their respective successors and permitted assigns, and shall inure to the benefit of Lender and Borrower and their respective successors and assigns, including any subsequent holder of any of the Obligations. Borrower may not assign any of its rights or obligations under any Loan Document without the written consent of Lender.
Section 9.9. Participants. Lender shall have the right at its own cost to grant participations (to be evidenced by one or more agreements or certificates of participation) in the Revolving Loan held at any time and from time to time to one or more other Persons. Borrower authorizes Lender to disclose to any participant or prospective participant any financial or other information pertaining to Borrower.
Section 9.10. Assignments. Lender shall have the right at any time, to sell, assign, transfer or negotiate all or any part of its rights and obligations under the Loan Documents (including, without limitation, the indebtedness evidenced by the Note) to one or more commercial banks or other financial institutions or investors. Borrower hereby authorizes Lender to disclose to any purchaser or prospective purchaser of an interest in the Revolving Loan under this Section any financial or other information pertaining to Borrower.
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Section 9.11. Amendments and Waivers. Any provision of this Agreement or the other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by Borrower and Lender.
Section 9.12. Headings. Section headings used in this Agreement are for reference only and shall not affect the construction of this Agreement.
Section 9.13. Costs and Expenses; Indemnification. In addition to the expenses set forth in Section 3.1, Borrower agrees to pay all reasonable costs and expenses of Lender in connection with the administration of this Agreement, including, without limitation the reasonable Attorney’s Fees and Costs incurred by Lender in the exercise of any right or remedy available to it under this Agreement and reasonable Attorney’s Fees and Costs incurred by Lender, in connection with the preparation and execution of any amendment, waiver or consent to the Loan Documents related thereto. Borrower further agrees to indemnify Lender, and its directors, officers, employees, agents, attorneys, financial advisors, and consultants (each, a “Lender Party”) against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all reasonable expenses of litigation or preparation therefor, whether or not the indemnified Person is a party thereto, or any settlement arrangement arising from or relating to any such litigation) which any of them may pay or incur arising out of or relating to any Loan Document or any of the transactions contemplated thereby or the direct or indirect application or proposed application of the proceeds of the Revolving Loan, other than those which arise from (a) the gross negligence, bad faith or willful misconduct of Lender Party claiming indemnification, or (b) any material breach or material violation of the Loan Documents by Lender Party (or its agents) claiming indemnification. Borrower, upon demand by Lender at any time, shall reimburse Lender for any reasonable legal or other expenses incurred in connection with investigating or defending against any of the foregoing (including any settlement costs relating to the foregoing) except if the same is directly due to the gross negligence, bad faith or willful misconduct of the party to be indemnified. The obligations of Borrower under this Section shall survive the termination of this Agreement.
Section 9.14. Set-off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, and to the extent permitted by applicable law, upon the occurrence of any Event of Default, Lender and each subsequent holder of any Obligation is hereby authorized by Borrower at any time or from time to time, without notice to Borrower or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts, and in whatever currency denominated) and any other indebtedness at any time held or owing by Lender or that subsequent holder to or for the credit or the account of Borrower, whether or not matured, against and on account of the Obligations of Borrower to Lender or that subsequent holder under the Loan Documents.
Section 9.15. Entire Agreement. The Loan Documents constitute the entire understanding of the parties thereto with respect to the subject matter thereof and any prior agreements, whether written or oral, with respect thereto are superseded hereby.
Section 9.16. Governing Law. This Agreement and the other Loan Documents (except as otherwise specified therein), and the rights and duties of the parties hereto, shall be construed and determined in accordance with the internal laws of the State of Colorado. The parties hereby submit to the exclusive jurisdiction of the United States District Court for the District of Colorado and of any Colorado state court sitting in Boulder County, Colorado for purposes of all legal proceedings arising out of or relating to this Agreement, the other Loan Documents or the transactions contemplated hereby or thereby; provided, however, that the foregoing shall not limit Lender’s rights to bring any legal action or proceeding in any other appropriate jurisdiction in its unrestricted discretion. Each of Borrower and Lender irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.
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Section 9.17. Waiver of Jury Trial. IN CONSIDERATION OF LENDER’S DECISION TO APPROVE THE REVOLVING LOAN, LENDER AND BORROWER, HAVING BEEN REPRESENTED BY COUNSEL, EACH KNOWINGLY AND VOLUNTARILY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY LOAN DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING WILL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. BORROWER AGREES THAT IT WILL NOT ASSERT ANY CLAIM AGAINST LENDER UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES.
Section 9.18. Severability of Provisions. Any provision of this Agreement or any Loan Document which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. All rights, remedies and powers provided in this Agreement and the other Loan Documents may be exercised only to the extent that the exercise thereof does not violate any applicable mandatory provisions of law, and all the provisions of this Agreement and other Loan Documents are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement or the other Loan Documents invalid or unenforceable.
Section 9.19. Excess Interest. Notwithstanding any provision to the contrary contained herein or in any other Loan Document, no provision shall require the payment or permit the collection of any amount of interest in excess of the maximum amount of interest permitted by applicable law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the Revolving Loan or other obligations outstanding under this Agreement or any other Loan Document (“Excess Interest”). If any Excess Interest is provided for, or is adjudicated to be provided for, herein or in any other Loan Document, then in such event (a) the provisions of this Section shall govern and control, (b) Borrower or any guarantor or endorser shall not be obligated to pay any Excess Interest, (c) any Excess Interest that Lender may have received hereunder shall, at the option of Lender, be (i) applied as a credit against the then outstanding principal amount of Obligations hereunder and accrued and unpaid interest thereon (not to exceed the maximum amount permitted by applicable law), (ii) refunded to Borrower, or (iii) any combination of the foregoing, (d) the interest rate payable hereunder or under any other Loan Document shall be automatically subject to reduction to the maximum lawful contract rate allowed under applicable usury laws (the “Maximum Rate”), and this Agreement and the other Loan Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in the relevant interest rate, and (e) neither Borrower nor any guarantor or endorser shall have any action against Lender for any damages whatsoever arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any of the Obligations of Borrower is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on the Obligations of Borrower shall remain at the Maximum Rate until Lender has received the amount of interest which Lender would have received during such period on the Obligations of Borrower had the rate of interest not been limited to the Maximum Rate during such period.
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Section 9.20. Construction. Nothing contained herein shall be deemed or construed to permit any act or omission which is prohibited by the terms of any Loan Document, the covenants and agreements contained herein being in addition to and not in substitution for the covenants and agreements contained in the Loan Documents.
Section 9.21. Further Assurance. Borrower hereby covenants and agrees to execute and deliver to Lender upon request, and pay the costs of preparation thereof, all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements in this Agreement or any of the other Loan Documents.
Section 9.22. Relationship of the Parties. Nothing contained in this Agreement and no action taken by Lender pursuant hereto shall be deemed to constitute Lender and Borrower as a partnership, association, joint venture or other entity.
Section 9.23. Effect of Amendment and Restatement. Upon the execution and delivery of this Agreement and the satisfaction of the other conditions set forth in herein, the indebtedness and other liabilities of Borrower previously governed by the Existing Credit Agreement shall continue in full force and effect, but shall be governed by the terms and conditions set forth in this Agreement. Borrower hereby reaffirms its obligations, liabilities, and the validity of all covenants by Borrower contained in any and all Loan Documents. The execution and delivery of this Agreement shall not constitute a novation or repayment of the indebtedness outstanding under the Existing Credit Agreement. Borrower hereby acknowledges and agrees that any and all references in any Loan Document to the Existing Credit Agreement shall be deemed to be amended to refer to this Agreement. Borrower hereby reaffirms its obligations, liabilities and indebtedness arising under each of the Loan Documents existing on the date hereof, in each case after giving effect to the provisions of the preceding sentence.
[Signature Page to Follow]
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This Agreement is entered into between us for the uses and purposes hereinabove set forth as of the date first above written.
“BORROWER”
IMMUNOGENX, LLC,
a Delaware limited liability company
| By: | /s/ Richard Paolone | |
| Name: | Richard Paolone | |
| Title: | Authorized Representative |
[Borrower Signature Page to Amended and Restated Credit Agreement]
“LENDER”
MATTRESS LIQUIDATORS, INC.,
a Colorado corporation
| By: | /s/ David Dolan | |
| Name: | David Dolan | |
| Title: | Chief Executive Officer |
[Lender Signature Page to Amended and Restated Credit Agreement]
Exhibit 10.30
THIRD AMENDED AND RESTATED REVOLVING LOAN PROMISSORY NOTE
(“NOTE”)
| Principal Amount: $2,436,338.30 | Date of Note: April 9, 2025 |
FOR VALUE RECEIVED, on the Revolving Loan Termination Date, the undersigned, IMMUNOGENX, LLC, a Delaware limited liability company (“Borrower”), hereby promises to pay to MATTRESS LIQUIDATORS, INC., a Colorado corporation, its successors and assigns (“Lender”) in accordance with the terms of the Credit Agreement (as hereinafter defined), the principal sum of Two Million Four Hundred Thirty-Six Thousand Three Hundred Thirty-Eight and 30/100 Dollars ($2,436,338.30), or such lesser sum as may then constitute the aggregate unpaid principal amount of all Revolving Loans made by Lender to Borrower pursuant to the Credit Agreement. Revolving Loans may be borrowed, paid, reborrowed and repaid, in whole or in part, subject to the other terms, conditions and restrictions of this Note and of the Credit Agreement. Borrower further promises to pay to the order of Lender interest on the aggregate unpaid principal amount of such Revolving Loans on the dates and at the rate or rates provided for in the Credit Agreement. All payments of principal and interest shall be made in lawful currency of the United States in immediately available funds at the office of Lender, or such other place as Lender may from time to time designate in writing.
Revolving Loans made by Lender shall be evidenced by one or more loan accounts or records maintained by Lender in the ordinary course of business; provided, however, the obligation of Borrower to repay each Revolving Loan made by Lender shall be absolute and unconditional, notwithstanding any failure of Lender to keep such records or any mistake by Lender in connection with such records. The books and records of Lender showing the account between Lender and Borrower regarding the Revolving Loans and this Note shall be conclusive evidence of the items set forth therein in the absence of demonstrable error.
This Note is the Third Amended and Restated Revolving Loan Promissory Note referred to in the Amended and Restated Credit Agreement, dated as of April 9, 2025, between Borrower and Lender, as amended and as the same may be further amended, supplemented, amended and restated, or modified from time to time (“Credit Agreement”; all capitalized terms used and not otherwise defined in this Note shall have the respective meanings ascribed to them in the Credit Agreement). The Credit Agreement, among other things, contains provisions for acceleration of the maturity of this Note upon the occurrence of certain stated events, and for prepayments on account of principal of this Note and interest on this Note prior to the maturity of this Note, in each case, upon the terms and conditions specified therein.
This Note is secured by, among other things, the Guaranties.
If an Event of Default under Section 8.1(g) or Section 8.1(h) of the Credit Agreement shall occur, then this Note shall immediately become due and payable, without notice, together with reasonable Attorney’s Fees and Costs if the collection hereof is placed in the hands of an attorney to obtain or enforce payment hereof. If any other Event of Default exists under the Credit Agreement or any breach, violation, default, event of default, “Default” or “Event of Default” shall occur under any other Loan Document, which is not cured within any applicable grace or cure period, then this Note may, as provided in the Credit Agreement, be declared to be immediately due and payable, without notice, together with Attorney’s Fees and Costs, if the collection hereof is placed in the hands of an attorney to obtain or enforce payment hereof. Upon the occurrence of any Event of Default under the Credit Agreement, Lender’s obligation to make additional Revolving Loans may be terminated in the manner and with the effect as provided in the Credit Agreement.
In the event that any payment due under this Note shall not be paid when due, whether by reason of maturity, acceleration or otherwise, and this Note is placed in the hands of an attorney or attorneys for collection or for foreclosure of the collateral, or if this Note is placed in the hands of an attorney or attorneys for representation of Lender in connection with bankruptcy or insolvency proceedings relating hereto, Borrower hereby promises to pay to the order of Lender, in addition to all other amounts otherwise due on or under this Note or the Loan Documents, the costs and expenses of such collection, foreclosure and representation, including, without limitation, reasonable Attorney’s Fees and Costs (whether or not litigation shall be commenced in aid thereof).
If any part of this Note cannot be enforced, this fact will not affect the rest of this Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other Person who signs, guarantees or endorses this Note, to the extent allowed by law, waives presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) the Revolving Loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All obligations of Borrower and all rights, powers and remedies of Lender expressed herein shall be in addition to and not in limitation of those provided by law or in any written agreement or instrument (other than this Note) relating to any of the indebtedness of Borrower to Lender or the security thereof. All such parties also agree that the Loan Documents may be modified without the consent of or notice to anyone other than the party with whom the modification is made.
No waiver of any breach, Event of Default, Default or failure of condition under the terms of this Note, the Credit Agreement or the other Loan Documents shall be implied from any failure of Lender to take, or any delay by Lender in taking, action with respect to any such breach of or Event of Default, Default or failure of condition or from any previous waiver of any similar or unrelated breach of or Event of Default, Default or failure of condition. A waiver of any term of this Note, the Credit Agreement or the other Loan Documents must be made in writing and shall be limited to the express written terms of such waiver.
This Note amends and restates in its entirety and consolidates that certain Second Amended and Restated Revolving Loan Promissory Note, dated March 13, 2024, payable from Borrower to Lender in the original principal amount of Eight Million Two Hundred Twelve Thousand Three Hundred Forty-Five and 17/100 Dollars ($8,212,345.17) (“Prior Note”), and is used, not as a refinancing or refunding of or payment toward, but as a continuation of the Prior Note. Accordingly, this Note shall not be construed as a novation or extinguishment of the obligations arising under the Prior Note. Unless otherwise agreed between Borrower and Lender, interest accrued under the Prior Note prior to the date hereof remains accrued and unpaid under this Note and does not constitute any part of the principal amount of the indebtedness evidenced hereby. The indebtedness evidenced by this Note will continue to be secured by all of the collateral and other security granted to Lender under the other Loan Documents.
This Note shall be governed by and construed in accordance with the substantive laws of the State of Colorado (without reference to conflict of law principles). IN CONSIDERATION OF LENDER’S DECISION TO PROVIDE THIS NOTE AND THE REVOLVING LOAN, BORROWER AGREES TO WAIVE THE RIGHT TO A JURY TRIAL IN ANY LAWSUIT THAT MAY ARISE BETWEEN BORROWER AND LENDER.
PRIOR TO SIGNING THIS NOTE, BORROWER HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE AND BORROWER AGREES TO THE TERMS OF THIS NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS NOTE.
[Signature Page to Follow]
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“BORROWER”
IMMUNOGENX, LLC,
a Delaware limited liability company
| By: | /s/ Richard Paolone | |
| Name: | Richard Palone | |
| Title: | Authorized Representative |
[Signature Page to Third Amended and Restated Revolving Loan Promissory Note - $2,436,338.30]
Exhibit 10.31
AMENDED AND RESTATED SUBORDINATION AGREEMENT
This Amended and Restated Subordination Agreement (this “Agreement”) is dated as of April 9, 2025 by and among MATTRESS LIQUIDATORS, INC., a Colorado corporation (together with its successors and assigns, the “Lender”), THE JACK A. SYAGE AND ELIZABETH C. SYAGE REVOCABLE TRUST DATED NOVEMBER 30, 1999 (the “Subordinating Creditor”), and IMMUNOGENX, LLC, a Delaware limited liability company (together with its successors and assigns, the “Borrower”).
RECITALS
| 1. | Pursuant to an Amended and Restated Credit Agreement, dated as of April 9, 2025 by and between Borrower and Lender (as amended, supplemented, amended and restated, or modified from time to time, the “Credit Agreement”), Lender has agreed, upon the terms and subject to the conditions contained therein, to loan certain funds to Borrower (the “Loans”). |
| 2. | Pursuant to that certain Promissory Note, in the original principal amount of $500,000.00 dated as of March 13, 2024 executed by Borrower for the benefit of Subordinating Creditor, as amended, supplemented, amended and restated, or modified from time to time (“Subordinated Note”), Subordinating Creditor has agreed, upon the terms and subject to the conditions contained therein, to loan certain funds to Borrower. |
| 3. | Subordinated Creditor executed and delivered to Lender that certain Subordination Agreement, dated as of March 13, 2024, of and relating to the Subordinated Note (“Original Subordination Agreement”). |
| 4. | Pursuant to the terms of the Credit Agreement, and as a condition precedent to Lender making any advances thereunder, Lender has required that Borrower obtain the subordination of the rights of Subordinating Creditor with respect to the Subordinated Obligations (as hereafter defined) to the rights of Lender with respect to the Credit Agreement. |
| 5. | Subordinating Creditor acknowledges that it directly or indirectly benefits from the Loans as a result of being a direct or indirect shareholder of Borrower, that it has had an opportunity to review the Credit Agreement and Loan Documents and is familiar with its terms and the defined terms specifically incorporated herein. |
| 6. | In order to induce Lender to loan funds under the Credit Agreement, Borrower has requested that the Subordinating Creditor enter into this Agreement on the terms provided herein and the Subordinating Creditor has agreed to do so. |
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, desire to amend and restated the Original Subordination Agreement as follows:
1. Definitions. Terms not otherwise defined herein have the same respective meanings given to them in the Credit Agreement. In addition, the following terms shall have the following meanings:
a. “Paid in Full” and “Payment in Full” means the final payment and satisfaction in full of the Senior Debt (other than contingent obligations for which no claim has been made) and the irrevocable termination of all commitments of Lender to extend credit to the Borrower under the Credit Agreement.
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b. “Senior Debt” means all Obligations of Borrower, including, without limitation, principal, interest (at the rates (including the default rate) as set forth in the Credit Agreement, or otherwise), fees, costs, enforcement expenses (including reasonable attorneys’ fees, costs and expenses, expert witness fees, investigation costs and expenses, court costs, receivership fees and costs, and disbursements), protective advances and other reimbursement or indemnity obligations, now or hereafter owing to Lender under or with respect to the Credit Agreement or any of the other Loan Documents, together with all modifications, renewals, extensions, supplements and replacements thereof. The Senior Debt shall expressly include any and all interest accruing (at the default rate, as set forth in the Credit Agreement, or otherwise) or out-of-pocket costs or expenses incurred after the date of any filing by or against Borrower of any petition under the federal Bankruptcy Code or any other bankruptcy, insolvency, or reorganization act regardless of whether Lender’s claim therefore is allowed or allowable in the case or proceeding relating thereto.
c. “Subordinated Documents” means, collectively, the Subordinated Note and any other agreements, documents and instruments entered into, and/or delivered, by any of the parties thereto in connection with any of the Subordinated Obligations, all as originally executed and as amended, restated, extended, renewed, refinanced, replaced or otherwise modified from time to time.
d. “Subordinated Obligations” means, collectively, all principal, interest, fees, costs, enforcement expenses (including legal fees and disbursements), protective advances, and other payment, reimbursement, and indemnity obligations now or hereafter owing to Subordinating Creditor under or with respect to the Subordinated Note or any of the other Subordinated Documents.
2. No Payment on Subordinated Obligations in Certain Circumstances.
a. General. The Subordinated Obligations and any and all Subordinated Documents shall be and hereby are subordinated, and the payment thereof and thereunder is deferred until the Senior Debt has been Paid in Full. Prior to Payment in Full of the Senior Debt, Borrower shall not be permitted to pay, and Subordinating Creditor shall not be permitted to receive, (i) any payments of principal or interest with respect to the Subordinated Obligations, without the prior written consent of Lender, which may be withheld in its sole discretion, or (ii) any prepayments of any kind or nature with respect to the Subordinated Obligations, in whole or in part, without the prior written consent of Lender, which may be withheld in its sole discretion; provided that this Section 2(a) shall not prohibit the accrual of interest on the Subordinated Obligations.
b. Default on Subordinated Obligations. The failure to make a payment on any of the Subordinated Obligations shall not, subject to the terms and conditions of this Agreement, be construed as preventing the occurrence of a default or event of default under such Subordinated Obligations.
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3. Enforcement.
a. No Acceleration; No Foreclosure. No declaration that all or any portion of the unpaid principal amount of the Subordinated Obligations shall be due and payable prior to its stated maturity shall be effective, until the Senior Debt has been Paid in Full. Subordinating Creditor agrees that, until the Senior Debt has been Paid in Full, Subordinating Creditor shall not (i) accelerate, assert, collect, or enforce the Subordinated Obligations or any part thereof, (ii) take any action to foreclose or realize upon the Subordinated Obligations or any part thereof, or enforce any Subordinated Document to which it is a party, (iii) file or otherwise bring (or join with any other creditor (unless Lender shall so join) in filing or otherwise bringing) any judicial action, including initiating a filing of a petition for relief under the Bankruptcy Code, or (iv) take (or join with any other creditor (unless Lender shall so join) in taking) any action to institute any legal or equitable proceeding or take any other action to enforce any right to payment with respect to, or collect upon, any Subordinated Obligations; provided, however, that at any meeting of creditors or in the event of any bankruptcy proceeding involving the Borrower, Subordinating Creditor shall retain the right to vote and file any proof of claim and otherwise act with respect to the Subordinated Obligations (including the right to vote to accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition or extension) so long as Subordinating Creditor does not vote in a manner inconsistent with the terms of this Agreement.
b. No Action. Subordinating Creditor agrees that it will not take or omit to take any action or assert any claim with respect to any of the Subordinated Obligations until the Senior Debt has been Paid in Full. Except as otherwise set forth herein, Subordinating Creditor agrees that, Senior Debt has been Paid in Full, Subordinating Creditor shall not, without the prior written consent of Lender, which may be withheld in its sole discretion (i) use the Subordinated Obligations by way of counterclaim, setoff, recoupment or otherwise so as to diminish, discharge or otherwise satisfy, in whole or in part, any indebtedness or liability of Borrower to Subordinating Creditor, whether now existing or hereafter arising and howsoever evidenced, or (ii) exercise any right of subrogation (which right Subordinating Creditor may assert following such final payment in full), reimbursement, restitution, contribution, or indemnity whatsoever from any assets of Borrower or any guarantor of or provider of collateral security for the Senior Debt. Subordinating Creditor further waives any and all rights with respect to marshalling.
4. Payments Held in Trust. Subordinating Creditor agrees that it will hold in trust and immediately pay over to Lender, in the same form of payment received, with appropriate endorsements, for application to the Senior Debt, any amount that Borrower has paid or pays to Subordinating Creditor with respect to any of the Subordinated Obligations in contravention of this Agreement.
5. Defense to Enforcement. If Subordinating Creditor, in contravention of the terms of this Agreement, shall commence, prosecute, or participate in any suit, action, or proceeding against Borrower, then Borrower may interpose as a defense or plea the making of this Agreement, and Lender may intervene and interpose such defense or plea in its name or in the name of Borrower. If Subordinating Creditor, in contravention of the terms of this Agreement, shall attempt to collect any of the Subordinated Obligations or enforce any of the Subordinated Documents, then Lender or Borrower may, by virtue of this Agreement, restrain the enforcement thereof in the name of Lender or in the name of Borrower. If Subordinating Creditor, in contravention of the terms of this Agreement, obtains any monies or other assets of Borrower as a result of any administrative, legal, or equitable actions, or otherwise, Subordinating Creditor hereby agrees forthwith to pay, deliver, and assign to Lender, with appropriate endorsements, any such monies for application to the Senior Debt and any such other assets as collateral for the Senior Debt.
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6. Bankruptcy, etc. Except as otherwise provided herein, during the term of this Agreement, at any meeting of creditors of Borrower, or in the event of any case or proceeding, voluntary or involuntary, for the distribution, division, or application of all or part of the assets of Borrower or the proceeds thereof, whether such case or proceeding be for the liquidation, dissolution, or winding up of Borrower or its business, a receivership, insolvency, or bankruptcy case or proceeding, an assignment for the benefit of creditors, or a proceeding by or against Borrower for relief under the federal Bankruptcy Code, or any other bankruptcy, reorganization, or insolvency law, or any other law relating to the relief of debtors, readjustment of indebtedness, reorganization, arrangement, composition, or extension or marshalling of assets or otherwise, Lender is hereby irrevocably authorized at any such meeting or in any such proceeding to receive or collect any monies or other assets of Borrower distributed, and apply such monies to, or to hold such other assets or securities as collateral for, the Senior Debt, and to apply to the Senior Debt any proceeds of any realization upon such other assets that Lender in its discretion elects to effect, until the Senior Debt is Paid in Full, rendering to Subordinating Creditor any surplus to which Subordinating Creditor is then entitled.
7. Liens. The amounts owed to Lender are unsecured with respect to the Borrower and only secured by certain collateral pledged by a Guarantor.
8. Further Agreements of Subordinating Creditor.
a. Notices of Default. Subordinating Creditor will promptly provide to Lender notice of any default or event of default with respect to the Subordinated Obligations or any of the other Subordinated Documents as to which Subordinating Creditor has actual knowledge.
b. Further Assurances. Subordinating Creditor hereby agrees, upon request of Lender at any time and from time to time, to execute such other documents or instruments as may be requested by Lender to evidence the senior priority of the Senior Debt as contemplated hereby.
c. Books and Records. Subordinating Creditor further agrees to maintain on its books and records such notations as Lender may reasonably request to reflect the subordination contemplated hereby and to perfect or preserve the rights of Lender hereunder.
9. [Reserved].
10. Lender’s Freedom of Dealing. Subordinating Creditor agrees, with respect to the Senior Debt and any and all guaranties thereof, that Borrower and Lender may agree to increase the amount of the Senior Debt or otherwise modify the terms of any of the Senior Debt, and Lender may grant extensions of the time of payment or performance to and make compromises, including releases of guaranties, and settlements with Borrower and all other persons, in each case without the consent of or notice to Subordinating Creditor and without affecting the agreements of Subordinating Creditor or Borrower contained in this Agreement.
11. Modification or Sale of the Subordinated Obligations. Subject to the terms and conditions of Section 18, Subordinating Creditor agrees that it shall not, at any time while this Agreement is in effect, without the prior written consent of Lender, which may be withheld in its sole discretion, modify any of the terms of the Subordinated Obligations or the Subordinated Documents to which it is a party (except an extension of time for payment).
12. Borrower’s Obligations Absolute. Nothing contained in this Agreement shall impair, as between Borrower and Subordinating Creditor, the obligation of Borrower to pay to Subordinating Creditor all amounts payable in respect of the Subordinated Obligations as and when the same shall become due and payable in accordance with the terms thereof, all, however, subject to the rights of Lender as set forth in this Agreement.
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13. Termination of Subordination. Subject to Section 24 below, this Agreement shall continue in full force and effect, and the obligations and agreements of Subordinating Creditor and Borrower hereunder shall continue to be fully operative, until the Senior Debt has been Paid in Full.
14. Notice. Any notice required or desired to be given hereunder shall be in writing and shall be considered effective, if by personal delivery, when delivered, if by nationally recognized overnight carrier, when delivered if prior to 5:00 p.m. local time of the recipient on a Business Day, or if not, at 9:00 a.m., local time on the next Business Day, if mailed by certified mail, return receipt requested, postage prepaid, upon first attempted delivery by the U.S. Postal Service after mailing, or if by email communication with delivery confirmation, when received if prior to 5:00 p.m., local time of the recipient on a Business Day, or if not, 9:00 a.m. local time on the next Business Day, addressed as follows (or any other address that the party to be notified may have designated to the sender by like notice):
| To Lender: | Mattress Liquidators, Inc. |
| Attention: David Dolan | |
| 1435 White Hawk Ranch Drive | |
| Boulder, CO 80303 | |
| Email: mattkingdolan@mattresskingcolo.com |
| With a copy to: | Frost Brown Todd |
| Attention: Edward J. Adkins 1801 California, Suite 2700 Denver, CO 80202 | |
| Email: eadkins@fbtlaw.com |
| To Subordinating Creditor: | The Jack A. Syage and Elizabeth C. Syage Revocable Trust Dated November 30, 1999 Attention: Jack A. Syage 1600 Dove Street, Suite 330 Newport Beach, CA 92660 Email: jsyage@immunogenx.com |
| To Borrower: | ImmunogenX, LLC |
| Attention: Jack A. Syage | |
| 1600 Dove Street, Suite 330 | |
| Newport Beach, CA 92660 | |
| Email: jsyage@immunogenx.com |
or such other address or addresses as any party hereto shall have designated by written notice to the other parties hereto. Notices shall be deemed given and effective upon the earlier to occur (i) if mailed, (ii) if delivered in person or (iii) if sent by telecopier, and (iv) if sent by overnight courier, of the date when delivered to the addressee.
15. Governing Law. This Agreement and the rights and duties of the parties hereto, shall be construed and determined in accordance with the internal laws of the State of Colorado, without reference to the choice of law or conflicts of law principles. The parties hereby submit to the exclusive jurisdiction of the United States District Court for the District of Colorado and of any Colorado State court sitting in sitting in Boulder County, Colorado for purposes of all legal proceedings arising out of or relating to this Agreement, the other Loan Documents or the transactions contemplated hereby or thereby. Borrower, Lender and Subordinating Creditor irrevocably waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.
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16. Waiver of Jury Trial. LENDER, SUBORDINATING CREDITOR, AND BORROWER EACH HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF LENDER, SUBORDINATING CREDITOR, AND BORROWER HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES, OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
17. Counterparts. This Agreement may be executed in any number of counterparts, and by the different parties hereto on separate counterpart signature pages, and all such counterparts taken together shall be deemed to constitute one and the same instrument.
18. Successors and Assigns. This Agreement shall be binding upon Lender, Borrower and Subordinating Creditor and their respective successors and assigns, and shall inure to the benefit of Lender, Borrower and Subordinating Creditor and their respective successors and assigns. Borrower may not assign any of its rights or obligations hereunder without the prior written consent of Lender, which may be withheld in its sole discretion. Subordinating Creditor agrees not to sell, assign, pledge, dispose of or otherwise transfer all or any portion of the Subordinated Obligations or any Subordinated Documents (a) without giving prior written notice of such action to Lender, and (b) unless prior to the consummation of any such action, the transferee thereof shall execute and deliver to Lender an agreement substantially identical to this Agreement (but mutatis mutandis), providing for the continued subordination and forbearance of the Subordinated Obligations to the Senior Debt as provided herein and for the continued effectiveness of all of the rights of Lender arising under this Agreement. Notwithstanding the failure to execute or deliver any such agreement, the subordination effected hereby shall survive any sale, assignment, pledge, disposition or other transfer of all or any portion of the Subordinated Obligations, and the terms of this Agreement shall be binding upon the successors and assigns of Subordinating Creditor.
19. Amendments and Waivers. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by Lender, Borrower and Subordinating Creditor; provided, however, that such waiver shall be limited to the specific provision or provisions expressly so waived.
20. Headings. Section headings used in this Agreement are for reference only and shall not affect the construction of this Agreement.
21. Costs and Expenses. Borrower agrees to pay all reasonable costs and expenses of Lender in connection with the administration of this Agreement, including, without limitation the reasonable attorneys’ fees, costs and expenses, expert witness fees, investigation costs and expenses, court costs, receivership fees and costs, and disbursements incurred by Lender in the exercise of any right or remedy available to it under this Agreement.
22. Entire Agreement. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, arrangements, understandings and negotiations.
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23. Severability of Provisions. Any provision of this Agreement which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable mandatory provisions of law, and all the provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement invalid or unenforceable.
24. Reinstatement. The Senior Debt shall continue to be treated as Senior Debt and the provisions of this Agreement shall continue to govern the relative rights and priorities of Lender and Subordinating Creditor even if all or part of the Senior Debt or the security interests securing the Senior Debt are subordinated, set aside, avoided or disallowed. To the extent that Lender receives payments (whether in cash, property or securities) on the Senior Debt that are subsequently invalidated, declared to be preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the Senior Debt, or part thereof, intended to be satisfied shall be revived and continue in full force and effect as if such payments or proceeds had not been received by Lender. If any payments were received by Subordinating Creditor at a time that such payments would not have been permitted had such set aside occurred prior to such payments then such payments shall be subject to the turnover provided for herein.
25. Amendment and Restatement. This Amended and Restated Subordination Agreement amends and restates in its entirety the Original Subordination Agreement. From and after the date of this Agreement, all references to the Original Subordination Agreement in the Loan Documents shall be amended to refer to this Agreement and the Original Subordination Agreement shall be void and of no further force or effect.
[Signature pages to follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
SUBORDINATING CREDITOR:
THE JACK A. SYAGE AND ELIZABETH C. SYAGE REVOCABLE TRUST DATED NOVEMBER 30, 1999
/s/ Jack A. Syage
| Jack A. Syage, Trustee |
[Subordinating Creditor Signature page to Amended and Restated Subordination Agreement]
“BORROWER”
| IMMUNOGENX, LLC, | ||
| a Delaware limited liability company | ||
| By: | /s/ Richard Paolone | |
| Name: | Richard Paolone | |
| Title: | Authorized Representative | |
[Borrower Signature page to Amended and Restated Subordination Agreement]
“LENDER”
| MATTRESS LIQUIDATORS, INC., a Colorado corporation |
||
| By: | /s/ David Dolan | |
| Name: | David Dolan | |
| Title: | Chief Executive Officer | |
[Lender Signature page to Amended and Restated Subordination Agreement]
Exhibit 10.32
AMENDED AND RESTATED SUBORDINATION AGREEMENT
This Amended and Restated Subordination Agreement (this “Agreement”) is dated as of April 9, 2025 by and among MATTRESS LIQUIDATORS, INC., a Colorado corporation (together with its successors and assigns, the “Lender”), FELKER REVOCABLE TRUST DATED JULY 30, 1999, an individual (the “Subordinating Creditor”), and IMMUNOGENX, LLC, a Delaware limited liability company (together with its successors and assigns, the “Borrower”).
RECITALS
| 1. | Pursuant to an Amended and Restated Credit Agreement, dated as of April 9, 2025 by and between Borrower and Lender (as amended, supplemented, amended and restated, or modified from time to time, the “Credit Agreement”), Lender has agreed, upon the terms and subject to the conditions contained therein, to loan certain funds to Borrower (the “Loans”). |
| 2. | Pursuant to that certain Promissory Note, in the original principal amount of $500,000.00 dated as of March 13, 2024 executed by Borrower for the benefit of Subordinating Creditor, as amended, supplemented, amended and restated, or modified from time to time (“Subordinated Note”), Subordinating Creditor has agreed, upon the terms and subject to the conditions contained therein, to loan certain funds to Borrower. |
| 3. | Subordinated Creditor executed and delivered to Lender that certain Subordination Agreement, dated as of March 13, 2024, of and relating to the Subordinated Note (“Original Subordination Agreement”). |
| 4. | Pursuant to the terms of the Credit Agreement, and as a condition precedent to Lender making any advances thereunder, Lender has required that Borrower obtain the subordination of the rights of Subordinating Creditor with respect to the Subordinated Obligations (as hereafter defined) to the rights of Lender with respect to the Credit Agreement. |
| 5. | Subordinating Creditor acknowledges that it directly or indirectly benefits from the Loans as a result of being a direct or indirect shareholder of Borrower, that it has had an opportunity to review the Credit Agreement and Loan Documents and is familiar with its terms and the defined terms specifically incorporated herein. |
| 6. | In order to induce Lender to loan funds under the Credit Agreement, Borrower has requested that the Subordinating Creditor enter into this Agreement on the terms provided herein and the Subordinating Creditor has agreed to do so. |
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, desire to amend and restated the Original Subordination Agreement as follows:
1. Definitions. Terms not otherwise defined herein have the same respective meanings given to them in the Credit Agreement. In addition, the following terms shall have the following meanings:
a. “Paid in Full” and “Payment in Full” means the final payment and satisfaction in full of the Senior Debt (other than contingent obligations for which no claim has been made) and the irrevocable termination of all commitments of Lender to extend credit to the Borrower under the Credit Agreement.
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b. “Senior Debt” means all Obligations of Borrower, including, without limitation, principal, interest (at the rates (including the default rate) as set forth in the Credit Agreement, or otherwise), fees, costs, enforcement expenses (including reasonable attorneys’ fees, costs and expenses, expert witness fees, investigation costs and expenses, court costs, receivership fees and costs, and disbursements), protective advances and other reimbursement or indemnity obligations, now or hereafter owing to Lender under or with respect to the Credit Agreement or any of the other Loan Documents, together with all modifications, renewals, extensions, supplements and replacements thereof. The Senior Debt shall expressly include any and all interest accruing (at the default rate, as set forth in the Credit Agreement, or otherwise) or out-of-pocket costs or expenses incurred after the date of any filing by or against Borrower of any petition under the federal Bankruptcy Code or any other bankruptcy, insolvency, or reorganization act regardless of whether Lender’s claim therefore is allowed or allowable in the case or proceeding relating thereto.
c. “Subordinated Documents” means, collectively, the Subordinated Note and any other agreements, documents and instruments entered into, and/or delivered, by any of the parties thereto in connection with any of the Subordinated Obligations, all as originally executed and as amended, restated, extended, renewed, refinanced, replaced or otherwise modified from time to time.
d. “Subordinated Obligations” means, collectively, all principal, interest, fees, costs, enforcement expenses (including legal fees and disbursements), protective advances, and other payment, reimbursement, and indemnity obligations now or hereafter owing to Subordinating Creditor under or with respect to the Subordinated Note or any of the other Subordinated Documents.
2. No Payment on Subordinated Obligations in Certain Circumstances.
a. General. The Subordinated Obligations and any and all Subordinated Documents shall be and hereby are subordinated, and the payment thereof and thereunder is deferred until the Senior Debt has been Paid in Full. Prior to Payment in Full of the Senior Debt, Borrower shall not be permitted to pay, and Subordinating Creditor shall not be permitted to receive, (i) any payments of principal or interest with respect to the Subordinated Obligations, without the prior written consent of Lender, which may be withheld in its sole discretion, or (ii) any prepayments of any kind or nature with respect to the Subordinated Obligations, in whole or in part, without the prior written consent of Lender, which may be withheld in its sole discretion; provided that this Section 2(a) shall not prohibit the accrual of interest on the Subordinated Obligations.
b. Default on Subordinated Obligations. The failure to make a payment on any of the Subordinated Obligations shall not, subject to the terms and conditions of this Agreement, be construed as preventing the occurrence of a default or event of default under such Subordinated Obligations.
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3. Enforcement.
a. No Acceleration; No Foreclosure. No declaration that all or any portion of the unpaid principal amount of the Subordinated Obligations shall be due and payable prior to its stated maturity shall be effective, until the Senior Debt has been Paid in Full. Subordinating Creditor agrees that, until the Senior Debt has been Paid in Full, Subordinating Creditor shall not (i) accelerate, assert, collect, or enforce the Subordinated Obligations or any part thereof, (ii) take any action to foreclose or realize upon the Subordinated Obligations or any part thereof, or enforce any Subordinated Document to which it is a party, (iii) file or otherwise bring (or join with any other creditor (unless Lender shall so join) in filing or otherwise bringing) any judicial action, including initiating a filing of a petition for relief under the Bankruptcy Code, or (iv) take (or join with any other creditor (unless Lender shall so join) in taking) any action to institute any legal or equitable proceeding or take any other action to enforce any right to payment with respect to, or collect upon, any Subordinated Obligations; provided, however, that at any meeting of creditors or in the event of any bankruptcy proceeding involving the Borrower, Subordinating Creditor shall retain the right to vote and file any proof of claim and otherwise act with respect to the Subordinated Obligations (including the right to vote to accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition or extension) so long as Subordinating Creditor does not vote in a manner inconsistent with the terms of this Agreement.
b. No Action. Subordinating Creditor agrees that it will not take or omit to take any action or assert any claim with respect to any of the Subordinated Obligations until the Senior Debt has been Paid in Full. Except as otherwise set forth herein, Subordinating Creditor agrees that, Senior Debt has been Paid in Full, Subordinating Creditor shall not, without the prior written consent of Lender, which may be withheld in its sole discretion (i) use the Subordinated Obligations by way of counterclaim, setoff, recoupment or otherwise so as to diminish, discharge or otherwise satisfy, in whole or in part, any indebtedness or liability of Borrower to Subordinating Creditor, whether now existing or hereafter arising and howsoever evidenced, or (ii) exercise any right of subrogation (which right Subordinating Creditor may assert following such final payment in full), reimbursement, restitution, contribution, or indemnity whatsoever from any assets of Borrower or any guarantor of or provider of collateral security for the Senior Debt. Subordinating Creditor further waives any and all rights with respect to marshalling.
4. Payments Held in Trust. Subordinating Creditor agrees that it will hold in trust and immediately pay over to Lender, in the same form of payment received, with appropriate endorsements, for application to the Senior Debt, any amount that Borrower has paid or pays to Subordinating Creditor with respect to any of the Subordinated Obligations in contravention of this Agreement.
5. Defense to Enforcement. If Subordinating Creditor, in contravention of the terms of this Agreement, shall commence, prosecute, or participate in any suit, action, or proceeding against Borrower, then Borrower may interpose as a defense or plea the making of this Agreement, and Lender may intervene and interpose such defense or plea in its name or in the name of Borrower. If Subordinating Creditor, in contravention of the terms of this Agreement, shall attempt to collect any of the Subordinated Obligations or enforce any of the Subordinated Documents, then Lender or Borrower may, by virtue of this Agreement, restrain the enforcement thereof in the name of Lender or in the name of Borrower. If Subordinating Creditor, in contravention of the terms of this Agreement, obtains any monies or other assets of Borrower as a result of any administrative, legal, or equitable actions, or otherwise, Subordinating Creditor hereby agrees forthwith to pay, deliver, and assign to Lender, with appropriate endorsements, any such monies for application to the Senior Debt and any such other assets as collateral for the Senior Debt.
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6. Bankruptcy, etc. Except as otherwise provided herein, during the term of this Agreement, at any meeting of creditors of Borrower, or in the event of any case or proceeding, voluntary or involuntary, for the distribution, division, or application of all or part of the assets of Borrower or the proceeds thereof, whether such case or proceeding be for the liquidation, dissolution, or winding up of Borrower or its business, a receivership, insolvency, or bankruptcy case or proceeding, an assignment for the benefit of creditors, or a proceeding by or against Borrower for relief under the federal Bankruptcy Code, or any other bankruptcy, reorganization, or insolvency law, or any other law relating to the relief of debtors, readjustment of indebtedness, reorganization, arrangement, composition, or extension or marshalling of assets or otherwise, Lender is hereby irrevocably authorized at any such meeting or in any such proceeding to receive or collect any monies or other assets of Borrower distributed, and apply such monies to, or to hold such other assets or securities as collateral for, the Senior Debt, and to apply to the Senior Debt any proceeds of any realization upon such other assets that Lender in its discretion elects to effect, until the Senior Debt is Paid in Full, rendering to Subordinating Creditor any surplus to which Subordinating Creditor is then entitled.
7. Liens. The amounts owed to Lender are unsecured with respect to the Borrower and only secured by certain collateral pledged by a Guarantor.
8. Further Agreements of Subordinating Creditor.
a. Notices of Default. Subordinating Creditor will promptly provide to Lender notice of any default or event of default with respect to the Subordinated Obligations or any of the other Subordinated Documents as to which Subordinating Creditor has actual knowledge.
b. Further Assurances. Subordinating Creditor hereby agrees, upon request of Lender at any time and from time to time, to execute such other documents or instruments as may be requested by Lender to evidence the senior priority of the Senior Debt as contemplated hereby.
c. Books and Records. Subordinating Creditor further agrees to maintain on its books and records such notations as Lender may reasonably request to reflect the subordination contemplated hereby and to perfect or preserve the rights of Lender hereunder.
9. [Reserved].
10. Lender’s Freedom of Dealing. Subordinating Creditor agrees, with respect to the Senior Debt and any and all guaranties thereof, that Borrower and Lender may agree to increase the amount of the Senior Debt or otherwise modify the terms of any of the Senior Debt, and Lender may grant extensions of the time of payment or performance to and make compromises, including releases of guaranties, and settlements with Borrower and all other persons, in each case without the consent of or notice to Subordinating Creditor and without affecting the agreements of Subordinating Creditor or Borrower contained in this Agreement.
11. Modification or Sale of the Subordinated Obligations. Subject to the terms and conditions of Section 18, Subordinating Creditor agrees that it shall not, at any time while this Agreement is in effect, without the prior written consent of Lender, which may be withheld in its sole discretion, modify any of the terms of the Subordinated Obligations or the Subordinated Documents to which it is a party (except an extension of time for payment).
12. Borrower’s Obligations Absolute. Nothing contained in this Agreement shall impair, as between Borrower and Subordinating Creditor, the obligation of Borrower to pay to Subordinating Creditor all amounts payable in respect of the Subordinated Obligations as and when the same shall become due and payable in accordance with the terms thereof, all, however, subject to the rights of Lender as set forth in this Agreement.
13. Termination of Subordination. Subject to Section 24 below, this Agreement shall continue in full force and effect, and the obligations and agreements of Subordinating Creditor and Borrower hereunder shall continue to be fully operative, until the Senior Debt has been Paid in Full.
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14. Notice. Any notice required or desired to be given hereunder shall be in writing and shall be considered effective, if by personal delivery, when delivered, if by nationally recognized overnight carrier, when delivered if prior to 5:00 p.m. local time of the recipient on a Business Day, or if not, at 9:00 a.m., local time on the next Business Day, if mailed by certified mail, return receipt requested, postage prepaid, upon first attempted delivery by the U.S. Postal Service after mailing, or if by email communication with delivery confirmation, when received if prior to 5:00 p.m., local time of the recipient on a Business Day, or if not, 9:00 a.m. local time on the next Business Day, addressed as follows (or any other address that the party to be notified may have designated to the sender by like notice):
| To Lender: | Mattress Liquidators, Inc. |
| Attention: David Dolan | |
| 1435 White Hawk Ranch Drive | |
| Boulder, CO 80303 | |
| Email: mattkingdolan@mattresskingcolo.com |
| With a copy to: | Frost Brown Todd |
| Attention: Edward J. Adkins 1801 California, Suite 2700 Denver, CO 80202 | |
| Email: eadkins@fbtlaw.com |
| To Subordinating Creditor: | Felker Revocable Trust Dated July 30, 1999 Attention: Peter Felker 1290 Moraga Drive Los Angeles, CA 90049 Email: res19rh4@gmail.com |
| To Borrower: | ImmunogenX, LLC |
| Attention: Jack A. Syage | |
| 1600 Dove Street, Suite 330 | |
| Newport Beach, CA 92660 | |
| Email: jsyage@immunogenx.com |
or such other address or addresses as any party hereto shall have designated by written notice to the other parties hereto. Notices shall be deemed given and effective upon the earlier to occur (i) if mailed, (ii) if delivered in person or (iii) if sent by telecopier, and (iv) if sent by overnight courier, of the date when delivered to the addressee.
15. Governing Law. This Agreement and the rights and duties of the parties hereto, shall be construed and determined in accordance with the internal laws of the State of Colorado, without reference to the choice of law or conflicts of law principles. The parties hereby submit to the exclusive jurisdiction of the United States District Court for the District of Colorado and of any Colorado State court sitting in sitting in Boulder County, Colorado for purposes of all legal proceedings arising out of or relating to this Agreement, the other Loan Documents or the transactions contemplated hereby or thereby. Borrower, Lender and Subordinating Creditor irrevocably waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.
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16. Waiver of Jury Trial. LENDER, SUBORDINATING CREDITOR, AND BORROWER EACH HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF LENDER, SUBORDINATING CREDITOR, AND BORROWER HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES, OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
17. Counterparts. This Agreement may be executed in any number of counterparts, and by the different parties hereto on separate counterpart signature pages, and all such counterparts taken together shall be deemed to constitute one and the same instrument.
18. Successors and Assigns. This Agreement shall be binding upon Lender, Borrower and Subordinating Creditor and their respective successors and assigns, and shall inure to the benefit of Lender, Borrower and Subordinating Creditor and their respective successors and assigns. Borrower may not assign any of its rights or obligations hereunder without the prior written consent of Lender, which may be withheld in its sole discretion. Subordinating Creditor agrees not to sell, assign, pledge, dispose of or otherwise transfer all or any portion of the Subordinated Obligations or any Subordinated Documents (a) without giving prior written notice of such action to Lender, and (b) unless prior to the consummation of any such action, the transferee thereof shall execute and deliver to Lender an agreement substantially identical to this Agreement (but mutatis mutandis), providing for the continued subordination and forbearance of the Subordinated Obligations to the Senior Debt as provided herein and for the continued effectiveness of all of the rights of Lender arising under this Agreement. Notwithstanding the failure to execute or deliver any such agreement, the subordination effected hereby shall survive any sale, assignment, pledge, disposition or other transfer of all or any portion of the Subordinated Obligations, and the terms of this Agreement shall be binding upon the successors and assigns of Subordinating Creditor.
19. Amendments and Waivers. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by Lender, Borrower and Subordinating Creditor; provided, however, that such waiver shall be limited to the specific provision or provisions expressly so waived.
20. Headings. Section headings used in this Agreement are for reference only and shall not affect the construction of this Agreement.
21. Costs and Expenses. Borrower agrees to pay all reasonable costs and expenses of Lender in connection with the administration of this Agreement, including, without limitation the reasonable attorneys’ fees, costs and expenses, expert witness fees, investigation costs and expenses, court costs, receivership fees and costs, and disbursements incurred by Lender in the exercise of any right or remedy available to it under this Agreement.
22. Entire Agreement. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, arrangements, understandings and negotiations.
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23. Severability of Provisions. Any provision of this Agreement which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable mandatory provisions of law, and all the provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement invalid or unenforceable.
24. Reinstatement. The Senior Debt shall continue to be treated as Senior Debt and the provisions of this Agreement shall continue to govern the relative rights and priorities of Lender and Subordinating Creditor even if all or part of the Senior Debt or the security interests securing the Senior Debt are subordinated, set aside, avoided or disallowed. To the extent that Lender receives payments (whether in cash, property or securities) on the Senior Debt that are subsequently invalidated, declared to be preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the Senior Debt, or part thereof, intended to be satisfied shall be revived and continue in full force and effect as if such payments or proceeds had not been received by Lender. If any payments were received by Subordinating Creditor at a time that such payments would not have been permitted had such set aside occurred prior to such payments then such payments shall be subject to the turnover provided for herein.
25. Amendment and Restatement. This Amended and Restated Subordination Agreement amends and restates in its entirety the Original Subordination Agreement. From and after the date of this Agreement, all references to the Original Subordination Agreement in the Loan Documents shall be amended to refer to this Agreement and the Original Subordination Agreement shall be void and of no further force or effect.
[Signature pages to follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
SUBORDINATING CREDITOR:
FELKER REVOCABLE TRUST DATED JULY 30, 1999
| By: | /s/ Peter Felker | |
| Peter Felker, Trustee |
[Subordinating Creditor Signature page to Amended and Restated Subordination Agreement]
“BORROWER”
| IMMUNOGENX, LLC, | ||
| a Delaware limited liability company | ||
| By: | /s/ Richard Paolone | |
| Name: | Richard Paolone | |
| Title: | Authorized Representative | |
[Borrower Signature page to Amended and Restated Subordination Agreement]
“LENDER”
| MATTRESS LIQUIDATORS, INC., a Colorado corporation |
||
| By: | /s/ David Dolan | |
| Name: | David Dolan | |
| Title: | Chief Executive Officer | |
[Lender Signature page to Amended and Restated Subordination Agreement]
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Entero Therapeutics, Inc.
Boca Raton, FL
We consent to the incorporation by reference in this Prospectus and Registration Statement on Form S-1 of Entero Therapeutics, Inc. (the “Company”) to be filed on or about May 12, 2025 of our report dated April 1, 2025, relating to the consolidated financial statements of the Entero Therapeutics, Inc. as of and for the year ended December 31, 2024 and also relating to the adjustments to the 2023 financial statements to retrospectively apply the change in accounting for ASU 2023-7 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.
We also consent to the reference to our firm under the heading “Experts” in this Prospectus and Registration Statement.
| /s/ Macias Gini & O’Connell LLP |
| Macias Gini & O’Connell LLP |
| Melville, New York |
| May 12, 2025 |
Exhibit 23.2
 |  |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement of Entero Therapeutics, Inc. (f/k/a First Wave BioPharma, Inc.) on Form S-1 of our report dated March 29, 2024, on the consolidated financial statements of Entero Therapeutics, Inc. as of December 31, 2023 and for the year in the period ended December 31, 2023, which appears in the Annual Report on Form 10-K of Entero Therapeutics, Inc. for the year ended December 31, 2023. The report for Entero Therapeutics, Inc. includes an explanatory paragraph about the existence of substantial doubt concerning its ability to continue as a going concern. We also consent to the reference to our Firm under the caption “Experts” in the Registration Statement.
 |
/s/ Mazars USA LLP
New York, New York
May 12, 2025